Page 26 - CMA Journal (May-June 2025)

Focus Section

Key Elements of an Effective
Board-Level ESG Policy
The sustainability agenda can be more
effectively achieved through a
board-level policy that encompasses the
following elements:
1. Linking the Mission, Vision, and
Values - A company’s mission and
vision statements, along with its
core values, form the foundation
upon which it operates. Embedding
sustainability into these principles is
crucial for integrating sustainable
practices across the business. To
achieve this, companies should
review and revise their existing mission and vision to
include sustainability. 5. Action Plan, KPIs, and Significant Issues -
Management must inform the board of any
2. Risk Management - Companies typically have risk
management programs in place to identify, analyze, significant matters related to company operations.
Additionally, material ESG issues should be brought
and assess the criticality and impact of business risks,
to the board’s attention—this includes updates on
including performing scenario analyses for better
the ESG policy, progress on KPIs and milestones,
estimation.
instances of non-compliance and penalties imposed
It is important that companies also evaluate the by regulatory bodies, and updates on CSR activities.
potential impact of ESG-related risks on their future These aspects should be adequately addressed in
business, profits, cash flows, and market the ESG policy.
positioning—and devise action plans accordingly.
6. Board Composition and ESG Oversight - To ensure
3. Ethical Culture - An important role of the board is to effective governance of the ESG framework, it is
ensure that ethical values and culture are promoted essential that the company’s board includes a
and practiced across the company. This includes diverse mix of members—such as independent and
areas such as transparency in business dealings, data female directors—who possess the required
confidentiality, anti-bribery, anti-harassment, and competence, experience, and exposure to support
anti-sexual harassment policies. The objective and drive ESG initiatives.
should be for all employees to understand and
adhere to these ethical values. Ideally, these values Conclusion
should be consolidated into a code of conduct that The ESG policy serves as a guiding document that not
all employees sign, demonstrating their commit- only aligns a company’s internal processes with ESG
ment to uphold them. From the ESG lens, this reflects standards but also enables transparent communication
compliance with social standards. Ensuring these with external stakeholders such as business partners,
aspects are covered in the ESG policy will support customers, and investors. This supports inquiries related
adherence to social compliance requirements. to ESG indicators and demonstrates the company’s
4. Whistleblowing Program - A whistleblowing commitment to meeting its ESG KPIs. Furthermore, a
program is a vital component of governance. It helps robust ESG policy framework lays the foundation for
identify wrongdoing within the company and across meeting future requirements related to independently
its value chain. This program encourages employees, audited sustainability statements.
business partners, vendors, and suppliers to report About the Author: The author is a Fellow Chartered Accountant
any misconduct they observe or experience, with the and a Fellow Cost and Management Accountant with a keen interest
assurance of confidentiality. It also serves as a in governance and ESG. He is currently associated with Yunus Textile
platform to report ESG-related concerns. Mills Limited (part of YBG) as Head of Internal Audit, where he
reports to the Board on matters related to controls and governance.

24 ICMA’s Chartered Management Accountant, May-June 2025