| The company has arrangements in place to identify and engage with its material stakeholder groups and to manage its relationships with such groups. |
A. Explanation
Every company has a number of stakeholders. These are parties who may be affected by the company’s activities (such as investors, employees and the community), or whose actions can affect the ability of the company to conduct its activities (such as customers, suppliers and regulators).
This Provision states that the company should identify and engage with its important stakeholders.
Engagement is important because companies conduct their business in an interconnected and interdependent world, in which there is increasing scrutiny of the sustainability and integrity of their operations. Such scrutiny comes not just from shareholders, but all the stakeholders.
Companies that act inappropriately could suffer penalties, loss of business and even legitimacy. Conversely, those that collaborate and mobilise their stakeholders in a positive way can reap reputational and financial rewards.
However, it is not practical for a company to treat every single stakeholder on the same basis. As such, the requirements call for the identification of, and engagement with, “material” stakeholder groups. This means that stakeholders need to be identified and prioritised, and their respective concerns and interests be determined and addressed.
One of the Board’s key roles is to ensure that the company’s obligations to shareholders and other stakeholders are understood and met. This includes ensuring that the key stakeholders whose perceptions and actions can affect the company’s reputation and operations are identified, prioritised and managed.
B. Practice Guidance
C. Related Rules and Regulations
- MR 711A and CR 711A: Sustainability Report.
- MR 711B and CR 711B: Sustainability Report.
- MR Practice Note 7.6 and CR Practice Note 7F: Sustainability Reporting Guide.
D. CG Guides
- Board Guide 7.1: Introduction [Stakeholder Engagement].
- Board Guide 7.2: Shareholders [Stakeholder Engagement].
- Board Guide 7.3: Shareholder Advisors [Stakeholder Engagement].
- Board Guide 7.4: Credit Rating Agencies [Stakeholder Engagement].
- Board Guide 7.5: Professional Bodies and Trade Associations [Stakeholder Engagement].
- Board Guide 7.6: Regulators [Stakeholder Engagement].
- Board Guide 7.7: Revenue Authorities [Stakeholder Engagement].
- Board Guide 7.8: Employees [Stakeholder Engagement].
- Board Guide 7.9: Suppliers [Stakeholder Engagement].
- Board Guide 7.10: Customers [Stakeholder Engagement].
- Board Guide 7.11: Media [Stakeholder Engagement].
- Board Guide 7.12: Community [Stakeholder Engagement].
- Sustainability Guide for Boards 4.1 Execution is Key [Execution]
- Sustainability Guide for Boards 4.2 Engage Stakeholders [Execution]
- Sustainability Guide for Boards 4.3 Assess Materiality [Execution]
E. Related Articles
- “Shareholders: Reclaiming their power and rights” by David A. Smith. (326KB)
- “Shareholders vs stakeholders: For whose benefits” by K. Sadashiv. (393KB)
- “Engaging stakeholders, creating impact” by Seah Kian Peng. (326KB)
- “For whom shall boards govern” by Lawrence Loh. (373KB)
- “Impact of sustainability trends on business” by K Sadashiv. (368KB)
- “How can we do business when nature is no longer free and unlimited?” by Constant Van Aerschot. (256KB)
- “What’s the big deal about sustainability” by Lawrence Loh. (144KB)