Consumer engagement in CSRD: Obligation or competitive advantage?

illuminem is proud to partner with AWorld in support of UN ActNow.

Sustainability is no longer just a trend. Have you heard this expression before? Did you think the person saying it truly believed it? If they were a change-maker as well as a sustainability professional, the answer would be yes. But not only sustainability professionals: an HR manager, someone in Marketing, Communications, or even Product, can believe in it and put it into practice in their daily work – provided they understand the importance of integrating sustainability into all business processes, both internally and externally.

If it is not just a trend, it is not enough to simply say that sustainability has been integrated; first, it must be demonstrated and thereafter communicated effectively, involving everyone within the company’s ecosystem. Stakeholders – often an intangible concept, yet very real and impactful – play a central role in the company’s approach to sustainability because they include employees, consumers, suppliers, communities. Stakeholders are people, and people have the power to drive markets, shift trends, and are critical across the entire value chain. They are clearly telling us that just as workers are increasingly demanding that companies show care for both people and the planet, consumers are also seeking more from their purchases, looking for sustainable alternatives, willing and wanting to be part of the change.

Are people acting as responsible consumers?

Market and consumer habits change decade after decade, year by year. Research on the current situation demonstrates data and theories (and hope) regarding how people are affected by news of climate change or by the event itself, tragic both for humans and the planet – and care more and more about human rights along the value chain (reading this, you could probably think about the fashion industry). The crisis is here, people are aware of it, and they aim to make a difference. Here are some relevant insights on their thoughts and habits:
- 72% of consumers say they purchase more green products now than they did half a decade ago
- consumers are willing to spend 9.7% more (on average) for sustainably produced or sourced goods
- 46% of consumers report that they are buying more sustainable products as a way to reduce their impact on the environment
- 80% of consumers say they are willing to pay more for sustainably produced or sourced goods

CSRD and ESRS: new era of Stakeholder Engagement

The current regulatory landscape is complex for companies operating in Europe and beyond. The Corporate Sustainability Reporting Directive (CSRD) is now fully integrated, or rather, has already become a part of strategies, decisions and reporting. Adhering to sustainability standards is no longer optional – it is a necessity. The CSRD requires companies to provide a detailed description of their stakeholder engagement processes; specifically, they must identify their primary stakeholders; structure the engagement process; explain interactions with each stakeholder category; set objectives for the engagement; and demonstrate how the outcomes of this process influence the company's strategies.

Under ESRS 2 (disclosure requirements), companies must publicly disclose how the interests and opinions of stakeholders are considered, focusing on these areas: the materiality matrix; the sustainability strategy being implemented or planned; business models and how these integrate sustainability issues.

The adoption of the double materiality principle underscores the EU's commitment to leading the global transition toward a sustainable planet and a fair economy. How does this differ from past approaches? For instance, it enables businesses to highlight the unique performance of their business models by correlating financial outcomes with ESG best practices. Double materiality serves as a “circular” tool, analyzing situations from two perspectives: external-to-internal and internal-to-external.

From an external-to-internal perspective, double materiality encourages businesses to listen closely to external stakeholders, understand their needs, turning them into opportunities to improve the business model. For example, if consumers show a growing interest in sustainability, the company can respond by introducing a new product or enhancing an existing one, complete with environmental certifications or recognizable “labels.” This positions the company as more attentive and sensitive to sustainability issues.

The European Sustainability Reporting Standards (ESRS) guide the CSRD, covering environmental, social, and governance aspects. People – stakeholders – are central to this process, especially in the Social component of ESRS, which includes: S1 - Own workforce; S2 - Workers in the value chain; S3 - Affected communities; S4 - Consumers and end-users.

ESRS S4 addresses consumer and end-user information within the value chain, focusing on: stakeholder engagement, privacy, freedom of expression, personal safety, social inclusion, and responsible marketing. This standard highlights the importance of transparency and proactive engagement with consumers and end-users. It is crucial for organizations aiming to identify, understand, and mitigate the material impacts, risks, and opportunities associated with these groups throughout the value chain. Practical applications of this multifaceted approach include consumer and end-user engagement, feedback, and representation. Surveys, forms, and ticket systems enable companies to engage with consumers, gather opinions, and provide information, ensuring active and continuous listening. This approach enhances brand positioning and reputation, driven by consumers’ trust and loyalty. Consumers, in fact, are strategic partners—not only in improving products and services but also in influencing potential buyers. Their recommendations remain the strongest marketing tool.

Market, consumers and obligations takeaways

Stakeholder engagement takes on an even more central role under the requirements of the Corporate Sustainability Reporting Directive (CSRD). The transparency demands and guidelines set forth by the European Sustainability Reporting Standards (ESRS), such as ESRS S4, establish stakeholder engagement as a cornerstone for integrating sustainability into corporate strategies. Without the active involvement of people, neither products nor services – nor the companies themselves – can truly reflect the needs, desires, and expectations of consumers.

This approach promotes greater transparency, provides valuable business insights and strengthens companies' positioning. By prioritizing these requirements and viewing them not merely as regulatory obligations but as strategic opportunities, businesses can enhance their reputation (fed by customers' trust and loyalty), drive innovation, and attract investment. They effectively respond to the demands of today’s increasingly informed and conscientious consumers. Consumers are seeking tangible value, a sense of community, and a positive impact on people and the planet, fully aware that conscious purchasing decisions can indeed make a difference.

Stakeholder Engagement: a platform to answer to companies’ need

In this context, AWorld positions itself as a strategic partner for corporate stakeholder engagement by combining authority (UN ActNow campaign) with innovation (Impact Engagement Intelligence) with the scope to meet engagement and reporting requirements outlined by regulations. The platform enables companies to actively involve consumers and end-users, investigating their interests, opinions, and expectations (ESRS S4-1, S4-2) and generating positive material impacts (ESRS S4-4). Through advanced tools like gamification and gentle nudging, AWorld encourages participation, providing qualitative and quantitative data that are essential for reporting purposes. Furthermore, it contributes to raising awareness of the Agenda 2030 goals, transforming stakeholders into ambassadors. This approach strengthens corporate positioning and delivers tangible value in terms of marketing and employer branding.

The current landscape clearly illustrates that stakeholder engagement is not an end in itself, but a means to achieve a broader (and virtuous) objective: placing sustainability at the core of corporate strategies, fulfilling regulatory requirements, and surpassing them by adopting innovative and integrated practices and activities. Businesses have the opportunity to leverage frameworks such as the ESRS to transform their operations into drivers of genuine change. Engaging consumers in this journey enables companies to position themselves as brands that combine economic value creation with a tangible commitment to sustainability, earning respect and trust within the communities where they operate.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.