Board Governance

Governance
:   
Frameworks and Standards
May 3, 2023

The role of the board of directors in relation to sustainability is becoming increasingly important as businesses recognize the need to integrate environmental, social, and governance (ESG) factors into their strategies and operations. Here are a few key aspects of the board's involvement in sustainability:

  1. Setting the sustainability agenda: The board plays a crucial role in setting the overall strategic direction of the company, including its sustainability goals and commitments. They establish policies and provide guidance to management on integrating sustainability into the company's core business strategy.
  2. Oversight and risk management: The board is responsible for overseeing the company's sustainability performance and ensuring that appropriate risk management processes are in place. This includes monitoring and assessing ESG risks and opportunities, ensuring compliance with relevant regulations and standards, and reviewing sustainability reports and disclosures.
  3. Integration into decision-making: Boards need to ensure that sustainability considerations are integrated into the company's decision-making processes. This involves assessing the potential impact of business decisions on environmental and social aspects, considering stakeholder perspectives, and weighing long-term sustainability risks and benefits alongside short-term financial considerations.
  4. Talent and executive compensation: The board is responsible for hiring and evaluating senior executives, including the CEO, and establishing their compensation packages. Linking executive compensation to sustainability performance indicators can incentivize sustainable practices and align the interests of management with the long-term sustainability goals of the company.
  5. Stakeholder engagement: Boards should actively engage with stakeholders, including shareholders, employees, customers, and communities, on sustainability issues. This can involve transparent communication, soliciting feedback, and considering diverse perspectives to ensure that the company's sustainability efforts address stakeholder expectations and concerns.
  6. Reporting and disclosure: Boards have a role in overseeing the company's sustainability reporting and disclosure practices. They should ensure that accurate and relevant information is provided to stakeholders, including ESG metrics, targets, and progress towards sustainability goals. Transparency in reporting is vital for building trust and demonstrating the company's commitment to sustainability.

Overall, the board of directors plays a critical role in guiding and overseeing a company's sustainability efforts, embedding sustainability into its strategic decision-making processes, and ensuring long-term value creation for all stakeholders.

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Frameworks and Standards

Standards

Set of criteria used by investors and other stakeholders to evaluate a company's sustainability and social responsibility practices.
Frameworks and Standards

Frameworks

A framework is a set of guidelines, principles, or best practices that provide a general structure or approach for achieving a specific goal or objective.
Frameworks and Standards

ISSB

The Trustees of the IFRS Foundation announced the formation of the International Sustainability Standards Board (ISSB) on 3 November 2021 at COP26 in Glasgow, following strong market demand for its establishment. The ISSB is developing—in the public interest—standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets.
Frameworks and Standards

ISSB and SASB

The International Sustainability Standards Board (ISSB) and the Sustainability Accounting Standards Board (SASB) represent complementary facets of the global effort to standardize sustainability reporting. The ISSB provides a global baseline for sustainability and climate-related disclosures through its S1 and S2 standards, focusing on general sustainability issues and specific climate impacts, respectively. These standards aim to enhance transparency, consistency, and comparability in reporting across all sectors. SASB, now integrated under the IFRS Foundation alongside ISSB, complements this by offering industry-specific frameworks that identify material sustainability issues relevant to different sectors, providing detailed metrics for companies to measure and report their sustainability performance. Together, ISSB's broad principles and SASB's detailed industry guidance aim to streamline sustainability reporting, making it more relevant and actionable for stakeholders worldwide.
Frameworks and Standards

TCFD

The Task Force on Climate-related Financial Disclosures was created in late 2015 to help identify information needed by the financial sector to appropriately assess and price climate-related risks.
Frameworks and Standards

SASB

SASB Standards guide the disclosure of financially material sustainability information by companies to their investors.