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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Sustainability Audit, ESG Rating and Emerging Mandates from Government and Regulators

Ravi, the Company Secretary of Lotus Foods Ltd, tells the board that ESG ratings are best used as one input and not as a substitute for the company's own disclosures. Which reason best supports this advice?

Ratings should be treated as one input because they reflect the provider's own methodology and may not fully capture issues material to the specific company. They do not replace the company's own disclosures such as BRSR, and they are neither binding on investors nor auditor reports.

  1. ARatings are legally binding on investors
  2. BRatings reflect a provider's own methodology and may not capture company-specific material issues fullyCorrect
  3. CRatings replace the need for BRSR filing
  4. DRatings are prepared by the company's statutory auditor

Explanation

Ratings embody a provider's chosen methodology and may miss issues that are material to a specific company, so they supplement, not replace, the company's own reporting. They are not binding on investors, do not replace BRSR, and are not prepared by statutory auditors.

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