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

Meridian Textiles Ltd's board approves a new strategy but takes no decision on climate-related risks, saying sustainability is a matter for the operations team alone. Which view best reflects the board's role on ESG?

The board holds ultimate responsibility for overseeing material ESG risks and opportunities. Management and committees may implement and report on them, but the board cannot hand over accountability entirely to operations, so oversight and integration of ESG into strategy remain its duty.

  1. AESG oversight can be fully delegated to operations with no board involvement
  2. BThe board holds ultimate responsibility for overseeing ESG risks and opportunities, even when management implements themCorrect
  3. COnly the statutory auditor is accountable for ESG matters
  4. DESG is a shareholder matter and not the board's concern

Explanation

Good governance places oversight of material ESG risks and strategy with the board. Management may implement, but accountability stays with the board. Delegating entirely to operations, as in the first option, abdicates that oversight.

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