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Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

Risk Management and Sustainability/ESG Committees of the Board

Updated 11 October 2026 · Fact-checked

A risk management committee is a board committee that oversees the company's risk framework. A sustainability or ESG committee oversees environmental, social and governance strategy, targets and risks. Both assist the board, report to it and cannot take over its powers. Answer by stating the mandate, composition, reporting line and how ESG risks reach the board.

Understand Risk Management and Sustainability/ESG Committees

A board cannot examine every risk in a full meeting. So it forms committees to look at specific areas in depth and report back. The board stays accountable. The committee only assists.

The risk management committee (RMC) oversees how the company identifies, assesses, mitigates and monitors risk. This covers strategic, financial, operational, compliance, cyber and ESG-related risk. It reviews the risk policy, the risk register, the appetite the board has set and the response plans. It then reports to the board.

A sustainability or ESG committee looks at the wider ESG agenda. It reviews ESG strategy, material issues, targets such as emissions or safety goals, policies, progress and disclosures such as the BRSR. It also checks that the sustainability data in reports is credible.

The Companies Act, 2013 does not prescribe an RMC or an ESG committee in the way it prescribes the audit committee under section 177 or the nomination and remuneration committee under section 178. The RMC requirement for specified listed entities comes from SEBI's listing regulations. An ESG committee is mostly a voluntary governance choice. State this difference clearly in answers. Do not quote section numbers for these two committees.

As a company secretary, you support these committees. You help draft the terms of reference, convene meetings, prepare agenda and minutes, and make sure committee minutes reach the board. The general rules on committees still apply. For example, section 175 allows a resolution by circulation by a committee only if the draft and papers go to all members and a majority of those entitled to vote approve it. The resolution must then be noted at the next meeting.

Key rules to remember

Role of any board committee
Committee assists the board; the board remains accountable
Committees work under the board's direction and report to it. They do not replace the board.
Statutory committees for comparison (s.177)
Audit Committee: minimum 3 directors, independent directors in majority
Section 177(4)(vii) lists evaluation of internal financial controls and risk management systems in the audit committee's terms of reference. This is why risk can sit with both committees.
Statutory committees for comparison (s.178)
NRC: 3 or more non-executive directors, at least one-half independent; chairperson of the company may be a member but cannot chair it
Use as a contrast. RMC and ESG committee composition is set by SEBI rules or board choice, not by these sections.
Committee reporting
Committee minutes → placed before the board at its next meeting
This is stated in section 378U(5) for producer companies. Apply it as good practice for other companies and say so.
Committee resolution by circulation (s.175)
Draft and papers to all members + approval by majority entitled to vote + noted at next meeting
If one-third of directors require a decision at a meeting, the chairperson must put the resolution to a meeting of the Board.
Committee mandate structure
Purpose + composition + chair + quorum + meeting frequency + powers + reporting
Use this checklist when asked to draft or explain terms of reference.

How to solve Risk Management and Sustainability/ESG Committees questions

Use this method for any question on risk or ESG committees, whether it asks for a definition, a charter or a case analysis.

  1. 1Identify the committee in the question: risk management, sustainability or ESG, or a statutory committee that overlaps.
  2. 2State the source of the requirement. Say whether it is mandatory (law or listing regulations) or voluntary board practice. Cite a section only if you are certain of it.
  3. 3Describe composition: members, mix of executive and independent directors, chair, and who attends as invitee.
  4. 4List the mandate in groups: risk policy and framework, monitoring and review, ESG strategy and targets, disclosures, and reporting to the board.
  5. 5Apply the facts of the case. Link a specific risk, such as a climate event or a supply chain labour issue, to the committee that should handle it.
  6. 6Explain the reporting line: committee reviews, recommends, minutes go to the board, board decides.
  7. 7Add the company secretary's role and practical compliance points: terms of reference, agenda, minutes, disclosure in the board's report or website.
  8. 8Conclude in one line that answers the exact question asked.

Quickest way: Purpose, People, Powers, Reporting

When to use it: Use when you have little time and the question asks you to explain or compare a committee in a few lines.

  1. Purpose: one sentence on what the committee oversees.
  2. People: who sits on it and who chairs it.
  3. Powers: review, recommend, monitor. No power to override the board.
  4. Reporting: regular reports and minutes to the board.
  5. Close with one ESG-risk example to show application.

Common mistakes in Risk Management and Sustainability/ESG Committees

  • Saying the Companies Act, 2013 mandates a risk management committee or ESG committee with a specific section.

    Students mix these with the audit committee and NRC, which have clear sections.

    Fix: Say the RMC obligation arises from SEBI listing rules for specified listed entities and the ESG committee is generally voluntary. Do not invent a section number.

  • Treating the ESG committee as a replacement for the board's responsibility.

    The word 'committee' suggests delegation of the whole duty.

    Fix: State that the committee assists and the board remains accountable. A board cannot hand over its powers to a committee.

  • Confusing the risk committee with the audit committee.

    Section 177(4)(vii) gives the audit committee evaluation of risk management systems, so the two overlap.

    Fix: Explain that the audit committee evaluates the systems and controls, while the RMC owns the risk framework and monitoring. Show how they coordinate.

  • Listing only environmental topics under the ESG committee.

    ESG is often equated with climate.

    Fix: Cover all three: environment, social (workforce, safety, community, human rights) and governance (ethics, conduct, disclosure).

  • Skipping the practical points in a case answer.

    Students stop at theory.

    Fix: Add terms of reference, agenda, minutes, reporting to the board and disclosure. Examiners reward compliance and drafting detail.

  • Ignoring the process rules for committee decisions.

    Students treat committees as informal.

    Fix: Remember that a committee resolution by circulation needs the draft and papers sent to all members and majority approval, and it must be noted at a later meeting (section 175).

Worked examples

Example 1

Nilgiri Power Ltd, a listed company, faces repeated supply disruptions from extreme weather at its coastal plants. The board wants one committee to track this risk. Advise which committee should handle it and how the board will stay informed.

Show the solution
  1. Identify the issue: a climate-related operational risk that affects strategy and continuity.
  2. Choose the committee: the risk management committee should own the risk. It reviews the risk register, rates the climate risk, and checks mitigation such as backup supply and insurance.
  3. Role of the ESG committee, if the company has one: it reviews the climate strategy, targets and disclosures. It coordinates with the RMC so the same risk is not handled twice.
  4. Role of the audit committee: it evaluates the internal financial controls and risk management systems under section 177(4)(vii). It does not own the climate risk.
  5. Reporting line: the RMC reports periodically to the board. Its minutes are placed before the board, and the board decides on major steps.
  6. Company secretary's role: updates the terms of reference to name climate risk, sets the agenda and records the minutes.

Answer: The risk management committee should own the climate risk, with the ESG committee guiding strategy and disclosure and the audit committee reviewing the risk systems. All report to the board, which remains accountable and takes the final decisions.

Example 2

Explain the composition, mandate and limits of a board-level sustainability or ESG committee. Draft key terms of reference points.

Show the solution
  1. Source: this committee is usually set up voluntarily by the board. The Companies Act, 2013 does not prescribe it by section, so no section is cited.
  2. Composition: a minimum number of directors fixed by the board, ideally including independent directors and the executive head of the business. Senior sustainability and finance officers attend as invitees. The board names the chair.
  3. Mandate: review ESG strategy and material issues; set and track targets; oversee ESG policies; review sustainability disclosures such as the BRSR; review ESG risks along with the risk management committee.
  4. Terms of reference points: purpose, composition, chair, quorum, meeting frequency, powers to seek advice and information, and reporting to the board.
  5. Limits: it assists the board, acts under its direction and cannot take over the board's powers. Its minutes go to the board.
  6. Process: if a resolution is passed by circulation, the draft and papers must reach all members and a majority of those entitled to vote must approve it. The resolution is noted at the next meeting (section 175).

Answer: An ESG committee is a voluntary board committee of directors, preferably with independent members, that reviews ESG strategy, targets, risks and disclosures and reports to the board. It assists the board but does not replace it.

Exam tips

  • Write the legal source for each committee in one line: audit committee and NRC come from the Act, the RMC comes from listing rules, the ESG committee is voluntary.
  • Use a small contrast table in words (not a table): purpose, composition, reporting. This shows depth quickly.
  • In case questions, name the specific ESG risk and match it to the committee. Then state the reporting path to the board.
  • Add one company secretary point, such as terms of reference, minutes or disclosure, to earn practical-application marks.
  • Never give a section number you are unsure of. Section 177, 178 and 175 are safe for contrast and process points.

Practice questions from Board Committees

Risk Management and Sustainability/ESG Committees: frequently asked questions

Is a risk management committee required under the Companies Act, 2013?

The Act does not set a specific section for it in the way it does for the audit committee. For specified listed entities, the requirement comes from SEBI's listing regulations. Other companies may form one voluntarily.

What does an ESG committee of the board do?

It reviews ESG strategy, material issues, targets, policies and sustainability disclosures. It also works with the risk committee on ESG risks and reports to the board.

How is the risk committee different from the audit committee?

The audit committee evaluates internal financial controls and risk management systems under section 177(4)(vii), among other duties. The risk committee owns the broader risk framework and its monitoring. They should coordinate.

Can a committee take decisions that bind the board?

A committee assists the board and works under its direction. It recommends or acts within the powers given to it. The board remains accountable and cannot delegate away its core powers.