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

Mehta Textiles Ltd, a listed company, has a Board that approves strategy and annual budgets but has never discussed climate or social risks, saying these are matters for the sustainability team. Which statement best reflects the Board's position on ESG oversight?

The Board stays accountable for overseeing material ESG risks and opportunities. Management can run the day-to-day programmes, but the Board must integrate ESG into strategy and risk oversight, because accountability for stakeholder interests and long-term value cannot be fully delegated.

  1. AESG oversight can be fully delegated to management, with no Board involvement
  2. BThe Board remains accountable for overseeing material ESG risks and opportunities as part of its governance role, even if management implements themCorrect
  3. CESG is the sole responsibility of the statutory auditor
  4. DThe Board need only consider ESG when shareholders vote on it

Explanation

Boards are responsible for strategy, risk oversight and stakeholder interests, so material ESG issues fall within their accountability. Management may implement initiatives, but oversight cannot be delegated away. The option saying full delegation is wrong because accountability stays with the Board.

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