Directors of companies are at the heart of ESG. They not only bear responsibility for business operations, but are also tasked with integrating sustainability and social responsibility into the core of their corporate strategy.
The role of directors is even more significantly underlined by the CSRD and CSDD, two pioneering regulatory initiatives that aim to strengthen sustainability transparency and responsibility at European level.
1. What obligations does the CSRD place on directors?
The CSRD requires directors to prepare comprehensive ESG reports, including non-financial key performance indicators and sustainability reporting.
Directors' responsibilities under the CSRD include:
- Sustainability reporting: directors must ensure that the board report meets the requirements of the CSRD and contains all relevant information on sustainability issues, including objectives, policies, due diligence procedures and risks.
- Reporting on the role and expertise of directors: Directors should disclose in the report about their role and expertise with regard to ESG. In this context, they should describe their expertise and skills in relation to fulfilling that role or the access they have to such expertise and skills.
- Collective responsibility: Directors and supervisory bodies are collectively responsible for the compliance of financial statements and management reports with the CSRD. This includes both consolidated and individual reports.
The FSMA, as the supervisory authority, recently published a communication explaining the challenges of the CSRD Directive for listed companies. Companies can use this communication as inspiration to prepare for sustainability reporting.
2. What does the CSDDD mean for directors?
The CSDDD imposes new responsibilities on directors regarding due diligence processes and the integration of sustainability into the corporate strategy.
Companies are required to draft a plan to ensure that the company's business model and strategy are compatible with the transition to a sustainable economy and global warming mitigation. Directors here are tasked with overseeing these obligations.
Moreover, directors are given a duty of care. This means that when making decisions that affect the company, they must consider the sustainability implications.
3. Are these obligations legally enforceable?
The CSDDD not only imposes responsibilities but also makes them legally enforceable. Directors and similar mandate holders have a duty to include sustainability considerations in their decision-making. Failure to fulfil this obligation may result in personal liability under national regulations.
4. What does this mean for directors' liability as it currently stands?
One striking aspect of the CSDDD is the extension of the directors' liability. This directive will have to be transposed which will extend the scope of national rules regarding directors' default. In other words, if a director fails to comply with the aforementioned duty of care, this may be considered management misconduct within the meaning of the Code on Companies and Associations (CSD).
So it remains to be seen how the Belgian legislator will implement these obligations in national law.
FAQs
The Director will manage the operational activities of the ESG Issues teams and Senior Leads (Including Climate and Environment, Social, Governance), providing direction, coaching and support, as well being responsible for management of team budgets.
What is the role of the director of ESG? ›
Responsible for driving ESG risk and opportunity identification across the company, preparing ESG disclosures. Responsible for identifying, assessing, responding, managing and reporting on ESG risks within their scope and implementing appropriate risk treatment.
What is the role of governance in ESG? ›
Good governance redefined
More generally, governance in terms of the balance of power between corporate stakeholders will also have to be balanced against broader social and environmental concerns to get acceptable ESG solutions.
What is the role of leaders in ESG? ›
Leaders must articulate a clear vision for ESG integration. This includes setting specific ESG goals and aligning them with the overall business strategy. By doing so, leaders create a sense of purpose and direction for their organizations, emphasizing the importance of ESG in long-term success.
What is the role of ESG in sustainability? ›
ESG risk management supports sustainable, long-term growth by proactively evaluating potential issues; early knowledge of potential risk provides more time to adapt and develop cost-mitigating strategies.
Who should oversee ESG? ›
Overseeing the quality of both the ESG program and disclosures must be an objective process performed by an independent third party following quality control and professional standards. At the board level, this oversight resides with the audit committee.
What is the role of the ESG manager? ›
Roles and missions of the ESG Manager
Develop and manage plans to reduce and manage ESG risks and environmental impacts. Attend meetings and report to management, shareholders and the Board of Directors on ESG progress and performance. Conduct analysis and review ESG data to identify trends and risks.
What is the governance strategy of ESG? ›
The purpose of an ESG Strategy is to demonstrate the environmental, social, and governance factors that your organisation believes to be intrinsically important to consider within your current and future business operations.
What is good governance in ESG? ›
Organizations with strong ESG governance practices typically have responsible owners and leadership teams, clear ESG accountability structures, and good process controls. ESG governance also encompasses risk management, and is viewed by many investors and analysts as a proxy metric for overall management quality.
What are the ESG governance requirements? ›
Governance is linked to the environmental and social aspects of ESG in that it looks at the transparency and decision-making behind them. Examples of governance practices include: accurate reporting to stakeholders on financial performance, business strategy and operations.
The governance pillar often refers to a number of topics relating to the company's ethical values and conduct, including anti-bribery and anti-corruption, responsible tax practices, sustainability due diligence, good business conduct, and corporate governance (including the composition and remuneration of the ...
What is the role of the CEO of ESG? ›
Role of CEO in ESG [2024]
- Determine Strategy & Goals. ...
- Conduct a Materiality Evaluation. ...
- Cost Analysis. ...
- Build the ESG team. ...
- Proper Implementation & Communication. ...
- Monitor Performances & Make Adjustments.
The responsibility for ESG initiatives can fall on various shoulders, ranging from a Chief Sustainability Officer to a designated ESG Committee. The optimal structure often depends on the company's size, industry, and strategic priorities.
What is the main goal of ESG? ›
ESG stands for environmental, social and governance. These are called pillars in ESG frameworks and represent the 3 main topic areas that companies are expected to report in. The goal of ESG is to capture all the non-financial risks and opportunities inherent to a company's day to day activities.
What is the ESG strategy of sustainability? ›
What is an ESG strategy or sustainability strategy? The significance of an ESG strategy consists in prioritising a sustainable entrepreneurship concept within strategic planning by top company executives.
What is the job responsibility of ESG? ›
The Senior Environmental, Social and Governance (ESG) Officer is responsible for developing and overseeing environmental, social and corporate governance policies and procedures, as well as reviewing and appraising proposed underwriting transactions to be socially and environmentally sustainable and comply with ATI ...
What does a VP of ESG do? ›
As a Vice President, you will take an active role in helping to expand our growing Environmental, Social, and Governance (ESG) practice at Teneo, managing client accounts day-to-day and supporting broader firm and business development initiatives.
What does an ESG lead do? ›
Overview of the Position:
The ESG Standards Lead will lead the development and implementation of this ESG Reporting Standard.
