GOV-1 – The role of the administrative, management and supervisory bodies

🗂️ ESRS 2 General Disclosures, page 6-7

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.

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.

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;

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

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.

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.

Application Requirements

AR 3. In describing the role and responsibilities of the administrative, management and supervisory bodies with regard to sustainability matters, the undertaking may specify:

(a) the aspects of sustainability over which oversight is exercised with regard to the environmental, social and governance matters the undertaking may be facing, including:

i. any assessment of and changes to sustainability-related aspects of the undertaking’s strategy and business model;

ii. the identification and assessment of material risks, opportunities and impacts;

iii. related policies and targets, action plans and dedicated resources; and

iv. sustainability reporting;

(b) the form such oversight takes for each of the above aspects: i.e., information, consultation or decision-making; and

(c) the way such oversight is organised and formalised, i.e., processes by which the administrative, management and supervisory bodies engage with these aspects of sustainability.

AR 4. In describing the undertaking’s organisation of governance regarding sustainability matters, a description of complex governance structure may be complemented by their presentation in the form of a diagram.

AR 5. The description of the level of expertise or access to expertise of the administrative, management and supervisory bodies may be substantiated by illustrating the composition of the bodies, including members on whom these bodies rely for expertise to oversee sustainability matters, and how they leverage that expertise as a body. In the description, the undertaking shall consider how the expertise and skills are relevant to the undertaking’s material impacts, risks and opportunities and whether the bodies and/or its members have access to other sources of expertise, such as specific experts and training and other educational initiatives to update and develop sustainability-related expertise within these bodies.