Governance

26 The objective of sustainability-related financial disclosures on governance is to enable users of general purpose financial reports to understand the governance processes, controls and procedures an entity uses to monitor, manage and oversee sustainability-related risks and opportunities.

27 To achieve this objective, an entity shall disclose information about:

(a) the governance body(s) (which can include a board, committee or equivalent body charged with governance) or individual(s) responsible for oversight of sustainability-related risks and opportunities. Specifically, the entity shall identify that body(s) or individual(s) and disclose information about:

(i) how responsibilities for sustainability-related risks and opportunities are reflected in the terms of reference, mandates, role descriptions and other related policies applicable to that body(s) or individual(s);

(ii) how the body(s) or individual(s) determines whether appropriate skills and competencies are available or will be developed to oversee strategies designed to respond to sustainability-related risks and opportunities;

(iii) how and how often the body(s) or individual(s) is informed about sustainability-related risks and opportunities;

(iv) how the body(s) or individual(s) takes into account sustainability-related risks and opportunities when overseeing the entity’s strategy, its decisions on major transactions and its risk management processes and related policies, including whether the body(s) or individual(s) has considered trade-offs associated with those risks and opportunities; and

(v) how the body(s) or individual(s) oversees the setting of targets related to sustainability-related risks and opportunities, and monitors progress towards those targets (see paragraph 51), including whether and how related performance metrics are included in remuneration policies.

(b) management’s role in the governance processes, controls and procedures used to monitor, manage and oversee sustainability-related risks and opportunities, including information about:

(i) whether the role is delegated to a specific management-level position or management-level committee and how oversight is exercised over that position or committee; and

(ii) whether management uses controls and procedures to support the oversight of sustainability-related risks and opportunities and, if so, how these controls and procedures are integrated with other internal functions.

Source: ISSB IFRS S1 General Requirements for Disclosure of Sustainability-Related Financial Information

ESRS 2 General disclosures

12. The requirements of this section should be read and applied in conjunction with the disclosures required by ESRS 2 on Chapter 2 Governance, Chapter 3 Strategy and Chapter 4 Impact, risk and opportunity management. The resulting disclosures shall be presented in the sustainability statement alongside the disclosures required by ESRS 2, except for ESRS 2 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking may, in accordance with ESRS2 paragraph 46, present the disclosures alongside the other disclosures required in this topical standard.

2. Governance

18. The objective of this chapter is to set disclosure requirements that enable an understanding of the governance processes, controls and procedures put in place to monitor, manage and oversee sustainability matters.
Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies

19. The undertaking shall disclose the composition of the administrative, management and
supervisory bodies, their roles and responsibilities and access to expertise and skills
with regard to sustainability matters.

20. The objective of this Disclosure Requirement is to provide an understanding of:

(a) the composition and diversity of the administrative, management and supervisory
bodies;

(b) the roles and responsibilities of the administrative, management and supervisory
bodies in exercising oversight of the process to manage material impacts, risks and
opportunities, including management’s role in these processes; and

(c) the expertise and skills of its administrative, management and supervisory bodies on
sustainability matters or access to such expertise and skills.

21. The undertaking shall disclose the following information about the composition and diversity of the members of the undertaking’s administrative, management and supervisory bodies:

(a) the number of executive and non-executive members;

(b) representation of employees and other workers;

(c) experience relevant to the sectors, products and geographic locations of the undertaking;

(d) percentage by gender and other aspects of diversity that the undertaking considers. The board's gender diversity shall be calculated as an average ratio of female to male board members; and

(e) the percentage of independent board members. For undertakings with a unitary board,
this corresponds to the percentage of independent non-executive board members. For
undertakings with a dual board, it corresponds to the percentage of independent members
of the supervisory body.

22. The undertaking shall disclose the following information about the roles and responsibilities of the administrative, management and supervisory bodies:

(a) the identity of the administrative, management and supervisory bodies (such as a
board committee or similar) or individual(s) within a body responsible for oversight of
impacts, risks and opportunities;

(b) how each body’s or individual’s responsibilities for impacts, risks and opportunities are
reflected in the undertaking’s terms of reference, board mandates and other related
policies;

(c) a description of management’s role in the governance processes, controls and
procedures used to monitor, manage and oversee impacts, risks and opportunities,
including:

i. whether that role is delegated to a specific management-level position or committee
and how oversight is exercised over that position or committee;

ii. information about the reporting lines to the administrative, management and
supervisory bodies;

iii. whether dedicated controls and procedures are applied to the management of
impacts, risks and opportunities and, if so, how they are integrated with other
internal functions; and

(d) how the administrative, management and supervisory bodies and senior executive
management oversee the setting of targets related to material impacts, risks and
opportunities, and how they monitor progress towards them.

23. The disclosure shall include a description of how the administrative, management and
supervisory bodies determine whether appropriate skills and expertise are available or will be developed to oversee sustainability matters, including:

(a) the sustainability-related expertise that the bodies, as a whole, either directly possess or can leverage, for example through access to experts or training; and

(b) how those skills and expertise relate to the undertaking's material impacts, risks and
opportunities.

Disclosure Requirement GOV-2 – Information provided to and sustainability matters
addressed by the undertaking’s administrative, management and supervisory bodies

24. The undertaking shall disclose how the administrative, management and supervisory
bodies are informed about sustainability matters and how these matters were addressed
during the reporting period.

25. The objective of this Disclosure Requirement is to provide an understanding of how
administrative, management and supervisory bodies are informed about sustainability
matters, as well as what information and matters they addressed during the reporting period. This in turn allows an understanding of whether the members of these bodies were adequately informed and whether they were able to fulfil their roles.

26. The undertaking shall disclose the following information:

(a) whether, by whom and how frequently the administrative, management and
supervisory bodies, including their relevant committees, are informed about material
impacts, risks and opportunities (see Disclosure Requirement IRO–1 - Description of
the processes to identify and assess material impacts, risks and opportunities of this
Standard), the implementation of due diligence, and the results and effectiveness of
policies, actions, metrics and targets adopted to address them;

(b) how the administrative, management and supervisory bodies consider impacts, risks
and opportunities when overseeing the undertaking’s strategy, its decisions on major
transactions, and its risk management process, including whether they have considered
trade-offs associated with those impacts, risks and opportunities; and

(c) a list of the material impacts, risks and opportunities addressed by the administrative,
management and supervisory bodies, or their relevant committees during the reporting
period.

Disclosure Requirement GOV-3 – Integration of sustainability-related
performance in incentive schemes

27. The undertaking shall disclose information about the integration of its sustainabilityrelated performance in incentive schemes.

28. The objective of this Disclosure Requirement is to provide an understanding of whether
incentive schemes are offered to members of the administrative, management and
supervisory bodies that are linked to sustainability matters.

29. The undertaking shall disclose the following information about the incentive schemes and remuneration policies linked to sustainability matters for members of the undertaking's
administrative, management and supervisory bodies, where they exist:

(a) a description of the key characteristics of the incentive schemes;

(b) whether performance is being assessed against specific sustainability-related targets
and/or impacts, and if so, which ones;

(c) whether and how sustainability-related performance metrics are considered as
performance benchmarks or included in remuneration policies;

(d) the proportion of variable remuneration dependent on sustainability-related targets and/or impacts; and

(e) the level in the undertaking at which the terms of incentive schemes are approved and
updated.

Disclosure Requirement GOV–4 - Statement on due diligence

30. The undertaking shall disclose a mapping of the information provided in its
sustainability statement about the due diligence process.

31. The objective of this Disclosure Requirement is to facilitate an understanding of the
undertaking’s due diligence process with regard to sustainability matters.

32. The main aspects and steps of due diligence referred to under ESRS 1 chapter 4 Due
diligence are related to a number of cross-cutting and topical Disclosure Requirements under the ESRS. The undertaking shall provide a mapping that explains how and where its
application of the main aspects and steps of the due diligence process are reflected in its
sustainability statement, to allow a depiction of the actual practices of the undertaking with regard to due diligence. 

33. This disclosure requirement does not mandate any specific behavioural requirements with regard to due diligence actions and does not extend or modify the role of administrative, management and supervisory bodies as mandated by other legislation or regulation. Disclosure Requirement GOV–5 - Risk management and internal controls over
sustainability reporting

34. The undertaking shall disclose the main features of its risk management and internal
control system in relation to the sustainability reporting process.

35. The objective of this Disclosure Requirement is to provide an understanding of the undertaking’s risk management and internal control processes in relation to sustainability reporting.

36. The undertaking shall disclose the following information:

(a) the scope, main features and components of the risk management and internal control
processes and systems in relation to sustainability reporting;

(b) the risk assessment approach followed, including the risk prioritisation methodology;

(c) the main risks identified and their mitigation strategies including related controls;

(d) a description of how the undertaking integrates the findings of its risk assessment and
internal controls as regards the sustainability reporting process into relevant internal
functions and processes; and

(e) a description of the periodic reporting of the findings referred to in point (d) to the
administrative, management and supervisory bodies.

Source: European Sustainability Reporting Standards: ESRS 2 General Disclosures.

Governance

1. The objective of this Standard is to specify disclosure requirements which will enable users of the undertaking’s sustainability statements to understand the undertaking’s strategy and approach, processes and procedures as well as its performance in respect of business conduct.

2. This Standard focusses on the following matters, collectively referred to in this Standard as ‘business conduct or business conduct matters’: 

(a) business ethics and corporate culture, including anti-corruption and anti-bribery, the protection of whistleblowers, and animal welfare; 

(b) the management of relationships with suppliers, including payment practices, especially with regard to late payment to small and medium-sized undertakings. 

(c) activities and commitments of the undertaking related to exerting its political influence, including its lobbying activities; Interaction with other ESRS

The content of this Standard on general disclosures as well as impact, risk and opportunity management and metrics and targets shall be read in conjunction respectively with ESRS 1 General principles and ESRS 2 General requirements.

Source: European Sustainability Disclosure Standards: ESRS G1 Business Conduct