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

Orchid Steel Ltd's board reviews its annual Business Responsibility and Sustainability Report (BRSR) before publication, but the sustainability head privately knows that a reported emissions figure is unverified and likely understated. The directors, without enquiry, approve it. What is the best assessment?

The board has failed in its duty of care and diligence. Directors approving sustainability disclosures must satisfy themselves about the reliability of the data, for example through assurance or enquiry, and cannot rely on blind approval, so accountability rests with the board and not just the executive.

  1. ANo issue, because ESG data is voluntary and cannot create liability
  2. BThe board has failed in its duty of care and diligence, as it should have questioned and satisfied itself on data reliability before approvalCorrect
  3. COnly the sustainability head is accountable
  4. DLiability arises only if shareholders vote against the report

Explanation

Directors must exercise due and reasonable care, skill and diligence. Approving disclosures without enquiring into data reliability exposes them to accountability and risk of misleading disclosure. Shifting blame solely to the executive ignores board responsibility for the report.

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