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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board's Accountability on ESG

Dhruv Chemicals Ltd, a listed company, publishes a sustainability report stating that its engagement with communities 'significantly improved lives'. It gives no data, no method and no stakeholder feedback, and the board approved the report without verification. Later, regulators and investors question the claim. Which assessment is most accurate?

The board failed its accountability by approving an unsubstantiated claim, which exposes the company to a greenwashing allegation. Boards must ensure ESG disclosures are backed by data, a clear methodology and preferably assurance, whether the report is mandatory or voluntary.

  1. ANo issue arises, as narrative claims need no evidence
  2. BThe board failed its accountability by approving an unsubstantiated claim, risking a greenwashing allegation; it should have required data, methodology and assuranceCorrect
  3. CThe only fault lies with the investors for questioning the claim
  4. DThe claim is acceptable because the report is voluntary and boards carry no responsibility for voluntary reports

Explanation

Boards are accountable for the accuracy and credibility of ESG disclosures, whether mandatory or voluntary. A broad claim with no data, method or verification invites greenwashing concerns. Sound practice requires measurable evidence, a stated method, stakeholder feedback and ideally independent assurance before approval. Voluntary status does not remove accountability for misleading statements.

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