A crucial step in an Environmental, Social, and Governance (ESG) materiality assessment is identifying and engaging with key stakeholders. However, understanding and defining what a stakeholder is can be tricky. Succinctly, stakeholders are the individuals and groups who either affect the company or are affected by its activities. Understanding what matters most to each group is vital for determining which ESG issues—from climate change to fair labor—are truly material to the business and its operating environment. Building your list of stakeholders is truly the first step to starting your materiality study.

1. Internal Stakeholders

These groups are within the organization and provide an "inside-out" perspective on daily operations, culture, and governance.

1. Employees / Workforce

The workforce includes everyone directly employed by the company, from full-time staff to contract workers.

• Why they care: As the people who execute the company's strategy, they are most directly impacted by social issues. They are primarily focused on maintaining a safe and healthy working environment, ensuring fair wages and benefits, having opportunities for training and development, and seeing the company champion for equity and nondiscriminatory practices.


• Why they matter to success: A satisfied, engaged workforce is a company's greatest asset. Their input highlights risk to human capital management and directly impacts productivity, innovation, and retention. High employee morale and low turnover reduce operating costs and strengthen the company's capacity to execute its strategy. In fact, "70% of Gen Z and Millennials consider a company's environmental credentials or policies important when evaluating a potential employer (Deloitte 2025 Gen Z and Millennial Survey).  Without achieving the goals of your workforce, your ability to hire might be limited.

2. Management / Senior Leadership

This group consists of executives, senior leaders, and departmental heads responsible for the company's strategy, resource allocation, and daily operations.

• Why they care: Their primary focus is the long-term resilience and profitability of the business. They care about ESG issues as they relate to business strategy, financial performance, and mitigating operational risks (like supply chain disruptions or regulatory fines).


• Why they matter to success: They are responsible for integrating ESG issues into core strategy and resource allocation. Without their buy-in and direction, ESG initiatives lack the authority and funding necessary to move from concept to implementation, making their perspective vital for establishing a clear, actionable materiality matrix.

3. Board of Directors

The governing body of the company, responsible for the oversight of management and setting the overall strategic direction.

• Why they care: As fiduciaries, their main concern is corporate governance and risk oversight. They ensure the company's long-term interests are protected by focusing on issues like ethical business conduct, anti-corruption policies, board diversity, and ensuring the company is prepared for major long-term shifts like the energy transition.


• Why they matter to success: They set the "Tone at the Top" for ESG culture and compliance. Their role in oversight ensures that management is held accountable for managing material ESG risks and opportunities, which is essential for maintaining investor confidence and safeguarding the company's reputation and long-term viability.

1. External Stakeholders

These groups are outside the company but are essential for a complete picture, offering an external perspective on the company’s impact and reputation.

1. Investors & Shareholders

This includes current and prospective owners of equity (shareholders) and debt (lenders, bondholders).

• Why they care: Their main interest is the financial value of the company. They assess how ESG issues translate into financial risks and opportunities (e.g., stranded assets, potential for green innovation). They use materiality assessments to judge whether the company is effectively managing long-term risks related to climate change, carbon emissions, and corporate governance. It is important to understand that some investors have ESG requirements for their organization which will impact their ability to invest in companies that either cannot comply with or do not align with their own organization’s objectives.


• Why they matter to success: They control the capital the company needs to grow. Demonstrating effective management of ESG risks is increasingly a prerequisite for attracting and retaining investment. Their sentiment directly impacts the company's cost of capital and its valuation in the financial markets.

2. Customers / Consumers

The individuals or organizations that purchase the company's products or services.

• Why they care: Their concerns reflect market demand and brand loyalty. They want assurances regarding product safety and quality, demand transparency about ethical sourcing of materials, and are increasingly concerned with the environmental footprint and packaging of the goods they buy.


• Why they matter to success: They determine the company's revenue and market share. Ignoring their evolving demands on sustainability can lead to boycotts, brand erosion, and loss of competitive advantage. A recent study revealed that even in the current economy, 80% of consumers indicated that they were willing to pay more up to 9.7% for sustainable goods. Their feedback helps identify market opportunities for sustainable products and services, driving future sales.

3. Suppliers & Business Partners

Entities that provide the company with raw materials, goods, or services forming the value chain.

• Why they care: They are crucial because the company’s ESG impact often lies outside its direct operations. Suppliers are concerned with having fair contract terms, clear expectations for labor practices (e.g., no forced labor), and support for meeting environmental standards throughout the supply chain.


• Why they matter to success: They are critical to operational continuity and quality. Material issues in the supply chain (like human rights violations or environmental disasters) can lead to severe operational disruptions, reputational damage, and legal liability for the main company. Engaging them ensures a stable, responsible, and resilient supply chain.

4. Regulators & Government Agencies

Public bodies that create and enforce laws, standards, and reporting requirements relevant to the company.

• Why they care: Their role is to ensure the company operates lawfully and contributes to the public good. They care about compliance with environmental permits, anti-trust laws, labor regulations, and tax transparency.


• Why they matter to success: They hold the power of licensing and enforcement. Ignoring their concerns leads to fines, legal action, and potential loss of operating permits. Proactive engagement can help the company anticipate future regulatory changes, providing a head start in compliance and influencing policy in a favorable way.

5. Local Communities

The people living and working in the areas where the company's facilities, offices, or sourcing operations are located.

• Why they care: They are directly impacted by the company's physical presence. Their concerns center on the company’s immediate footprint, such as local environmental pollution (air and water quality), noise, the impact on local infrastructure, and whether the company is a responsible neighbor through local hiring and community investment.


• Why they matter to success: They can grant or revoke the company's "Social License to Operate." Community opposition, protests, or negative local sentiment can lead to delays in permits, project cancellations, or operational shutdowns. Good community relations minimize these risks and ensure the company can operate smoothly. This group can also overlap with a company’s workforce, making procuring a labor force for operation problematic if not incorporated into the materiality study.

Conclusion: Weighing Stakeholder Perspectives While every stakeholder group's input is valuable, companies often find that certain perspectives, such as those of Investors (due to financial impact) and Regulators (due to legal compliance), might carry greater immediate weight when defining materiality. However, a robust and credible ESG reporting strategy requires a holistic view. Prioritizing only those issues that affect the company's short-term finances while ignoring the critical social and environmental concerns raised by Employees, Customers, or Local Communities will inevitably lead to future risks—whether in reputation, talent retention, or operational shutdowns. Therefore, the goal of an ESG materiality assessment is to comprehensively map and weigh all stakeholder concerns to ensure that the resulting strategy addresses the full spectrum of issues critical to both the business and the world it operates in.