Accomplishing a board’s oversight role on sustainability reporting


Recently, ESG has increasingly featured on most board agendas. ILLUSTRATION | SHUTTERSTOCK

Every board has a vital role in an organisation’s sustainability journey. From a leadership perspective, as the highest decision-making body, the board needs to take responsibility for ESG risks and opportunities impacting an organisation.

Recently, ESG has increasingly featured on most board agendas, following the recognition that ESG risks are essentially business risks that drive stakeholder expectations and influence regulatory actions globally.

In fulfilling this mandate, boards have had to re-organise their governance structures, including designing a bespoke management structure, and ensuring an end-to-end embedding and integration of ESG across their organisations. One equally important aspect of the board’s oversight role is around reporting.

The sustainability reporting landscape has continued evolving with regulatory actions to hold businesses accountable to stakeholders.

Also, investors are beginning to pay attention to these reports to understand an organisation’s long-term value creation and how it links to future financial viability.

To fulfil their oversight role on sustainability reporting, boards should understand the reporting standards and frameworks the organisation uses as part of the ESG disclosure strategy and why those standards or frameworks were selected by management.

The boards should assess the specified standards or frameworks for alignment with the organisation’s operating context, the demands of its stakeholders and the regulatory requirements for compliance.

Choosing the proper standards and frameworks helps to build trust and transparency with stakeholders and enables the board to focus on relevant performance metrics driving the overall ESG strategy.

In addition, the boards must set a governance structure that supports continuous reporting on sustainability and ensures they receive regular feedback and engagement from management on the set goals, targets and timelines for achieving them, unlike a situation where sustainability goals are only discussed or evaluated once a year during annual reporting.

Through regular engagement with management, the board challenges and holds management accountable for strategic priorities based on agreed timelines.

Another aspect of the board’s role is providing assurance on the performance measures reported by management. The board can obtain assurance through a mix of internal audit teams reporting to the board and independent external assurance providers on specific measures that help manage risks like greenwashing.

Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics.