Page 579 - COSO Guidance

2. Strategy and objective-setting for ESG-related risks

Stakeholder engagement
Different stakeholders may have different perceptions of value and different
expectations of an entity’s roles and obligations. Within sustainability, Guidance
the concept of stakeholder engagement refers to the process used
by an organization to engage relevant stakeholders for the purpose of Conduct engagement
achieving agreed outcomes. The process can be used to help all parties with internal and
better understand the business context, including issues or risks that may external stakeholders
otherwise be overlooked by risk management practitioners, sustainability to understand
practitioners and the business. It provides outside perspectives of events emerging ESG trends
and enables entities to question and challenge assumptions.
Stakeholder engagement can also:
• Offer perspectives on the issues or impacts of greatest concern
• Inform the relative importance of issues and impacts

• Provide data, information and expertise on a particular issues or trend
• Inform, validate and add credibility to the prioritization process and results
Many large organizations collect stakeholder input as a matter of regular operations. Risk management
practitioners can review stakeholder feedback periodically and leverage this information to:
• Explore how stakeholder feedback highlights issues that could pose threats to achieving an organization’s
strategy and objectives
• Confirm existing risks and identify new or emerging risks
• Identify what additional stakeholder engagement would benefit ERM activities, including engaging stakeholder
groups omitted from existing efforts or engaging stakeholders in discussions

“Stakeholders are defined as those individuals, groups of individuals or organizations who affect and/or
could be affected by an organization’s activities, products or services.” 49

Entities usually define their own stakeholder groups; however, these typically include customers, communities,
suppliers, shareholders, employees, government, unions, investors, media and non-profit organizations.
Companies can use the AA1000 Stakeholder Engagement Standard (2015) to assess, design, implement and
communicate an approach to stakeholder engagement. The following example demonstrates one way entities
can use existing feedback processes to identify ESG-related risks.

Other ESG-specific resources
Risk management and sustainability practitioners can also leverage a variety
of ESG-specific resources to enhance their understanding of ESG-related Guidance
impacts and dependencies. For example, leveraging the Greenhouse Gas
Protocol can help an entity calculate its carbon footprint and, in doing so, Conduct analysis
better understand the entity’s exposure to climate-related risk. Table 2.8 leveraging ESG-specific
includes a list of open-source tools or resources that organizations can use resources
to better understand specific ESG issues in the business context.

32 Enterprise Risk Management | Applying enterprise risk management to environmental, social and governance-related risks • October 2018