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Stakeholder Engagement: How to Plan It, Run It and Show the Board Listened

Stakeholder engagement is the work of finding out what the people affected by your business think, and letting it change what you do. Employees, customers, suppliers, lenders, the local community and regulators all have a stake in a company's decisions, and in the UK the directors of every company are under a legal duty to have regard to most of them. Done badly, engagement is a survey sent once a year and a paragraph in the annual report. Done well, it is a short, repeatable process that turns up risks before they become problems. This page sets out the legal position, a six-step plan any business can use, the methods that work for each group, and how to record it.

Why stakeholder engagement is a legal matter in the UK

Section 172(1) of the Companies Act 2006 says a director must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so they must have regard to six matters: the long-term consequences of decisions, the interests of employees, the need to foster relationships with suppliers, customers and others, the impact on the community and the environment, the company's reputation for high standards of business conduct, and the need to act fairly between members.

A director cannot have regard to the interests of employees or suppliers without knowing what those interests are. That is the practical case for engagement: it is how a board gets the information the duty assumes it has. Our page on directors' duties under the Companies Act 2006 covers the full set of duties, and shareholder vs stakeholder model explains the thinking behind section 172's "enlightened shareholder value" approach.

Since 2019, large companies have had to report on it. Their strategic report must include a section 172(1) statement describing how the directors had regard to these matters. The size thresholds rose for financial years starting on or after 6 April 2025: a company is now large if it exceeds two of £54 million turnover, a £27 million balance sheet total and 250 employees. Listed companies following the UK Corporate Governance Code also have to explain how the board engages with the workforce, either through a director appointed from the workforce, a formal workforce advisory panel, a designated non-executive director, or another arrangement they can justify. Our UK Corporate Governance Code page covers that provision.

Smaller companies have the same section 172 duty but no reporting requirement. For them, a light version of the process below is still the evidence that directors did their job if a decision is ever challenged.

Step 1: List your stakeholders

Start broad. Write down every group that affects the business or is affected by it. For most firms the list includes employees (and their representatives), customers, suppliers and contractors, shareholders and lenders, regulators, the local community, and in some sectors campaign groups or the media. Split large groups where their interests differ: office staff and warehouse staff, retail and trade customers, a strategic supplier and a long tail of small ones.

Step 2: Map them by influence and interest

The standard tool is a two-by-two grid with influence on one axis and interest on the other. It gives four approaches:

Be careful with "low influence". Groups with little power, such as agency workers or a supplier's own staff, are often the ones where the worst risks sit, which is why modern slavery and supply chain rules exist. Influence tells you how to engage, not whether a group matters.

Step 3: Decide what you need to learn

Engagement without a question produces noise. Before contacting anyone, write down the decisions coming up in the next year and what you need to know from each group to make them well: a site closure, a price change, a new supplier code, a move to hybrid working, a net zero target. This is also where engagement links to a materiality assessment, which uses stakeholder input to decide which environmental and social issues matter most to the business.

Step 4: Choose the method for each group

• Employees: pulse surveys, a workforce forum or advisory panel, skip-level meetings, recognised trade unions, exit interviews. Anonymous channels matter, including a whistleblowing policy for the things people will not say in a meeting.
• Customers: complaints data (already collected, rarely analysed), interviews with key accounts, satisfaction scores, user panels.
• Suppliers: supplier days, payment-practice feedback, a direct line for a supplier to raise concerns about your buyers, shared audits.
• Investors and lenders: AGMs, results meetings, one-to-one meetings with the chair on governance.
• Communities: open meetings before planning applications, a named contact at each site, partnerships with local organisations.
• Regulators: consultation responses, scheduled meetings, prompt and open reporting of problems.

Two-way methods (meetings, panels, interviews) tell you why; one-way methods (surveys, data) tell you how many. Use both for the groups in the top-right of the grid.

Step 5: Feed it into decisions

This is the step most companies miss. The test of engagement is whether anything changed. Put a short stakeholder section into board papers for significant decisions: who was consulted, what they said, and how it was weighed. The Financial Reporting Council and investor groups have repeatedly criticised section 172 statements that list engagement activities without saying what the board did with them. One clear example, such as "after the workforce panel raised concerns about shift patterns, the rollout was delayed and the rota redesigned", is worth more than a page of meeting counts.

Step 6: Report back and record

Tell the people you engaged what happened as a result, even when the answer is no. People stop taking part when their input disappears. Then keep a simple record: an engagement log by group, the issues raised, and the decision each one fed into. For a large company this record is the raw material for the section 172(1) statement; for a smaller one it is the evidence that the duty was met.

Using a recognised standard

Companies that want an external framework often use the AA1000 Stakeholder Engagement Standard, published by AccountAbility, which sets out how to define the purpose and scope of engagement, plan it, carry it out and review it. Sustainability reporting frameworks such as GRI also expect a report to explain how stakeholders were identified and engaged. Neither is required by UK law, but both give a structure that auditors and investors recognise.

Common mistakes

• Consulting after the decision. If the outcome is fixed, say so and call it communication, not consultation.
• Only hearing the loudest groups. Big customers and investors find their own way to the board; staff on short contracts and small suppliers do not.
• Treating the survey as the strategy. A score tells you there is a problem, not what it is.
• No owner. Give each stakeholder group a named executive who is responsible for the relationship and reports on it.

Stakeholder engagement sits alongside a written code of conduct and a CSR strategy as the basic kit of a responsible business. For more on governance and ethics, return to the e-Business Ethics home page.

Sources: Companies Act 2006, section 172; Companies (Miscellaneous Reporting) Regulations 2018; Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024; UK Corporate Governance Code. Checked 6 October 2026.