- From 2027, the ESG report describes the board too. An ESG report sets out how a company performs on environmental, social and governance issues. Under IFRS S1, which Kenyan public interest entities must apply from 1 January 2027, it must also explain how the board oversees that work: who is responsible, whether they have the skills, how often they are briefed, and whether pay is tied to the targets.
- Management prepares the report; the board answers for it. Management finds the issues, assigns owners and drafts the disclosure. The board checks that the picture is credible, builds it into strategy and pay, and approves what is published.
- Kenyan boards have started on structure but not on consequences. ICPAK's 2026 readiness assessment found boards increasingly naming someone to oversee sustainability, while linking pay to sustainability targets scored just 1.15 out of 4.
- The right expertise matters more than the right credentials. A sustainability background on a CV is not the same as the ability to question this company's own risks, such as its energy costs or water supply. Recruit and train for the issues that affect your business.
- Know what the independent check covers. Most sustainability assurance is "limited", a lighter review than a financial audit, and it often covers only selected figures. Ask which numbers sit outside it.
- Six questions show whether oversight is real. Without notice, a director should be able to say which issues matter, who produced the figures, what the assurance covers, what changed since last year, whose pay depends on the targets, and what the company chose not to disclose.
Most boards treat the company's ESG report as management's document. From 2027, many Kenyan boards will have to describe their own part in it. An ESG report, also called a sustainability report, sets out how a company performs on environmental, social and governance issues: for example its carbon emissions and energy use, how it treats its employees and suppliers, and how it is run. ESG reporting is the work of measuring those things and publishing the results each year, usually alongside the financial statements, so that investors, lenders, regulators and customers can see risks the accounts alone do not show.
In the East African organizations we work with, that report usually reaches the board in much the same way: as a presentation near the end of a long meeting, received with thanks and rarely questioned. Nobody is being negligent; the report is usually thorough and the management team competent. The difficulty is that the new reporting standards ask the company to describe how its board oversees this work, so the board's own habits become part of what is reported.
Those standards are IFRS S1 and S2, the global sustainability reporting standards issued by the International Sustainability Standards Board. In Kenya they become mandatory for public interest entities, which include listed companies, banks, insurers, pension schemes and deposit-taking SACCOs, for accounting periods beginning on or after 1 January 2027. The report will have to say who on the board oversees sustainability, how the board knows it has the skills to do so, how often it is briefed, and whether anyone's pay depends on the targets. A board that has received the report without ever testing it will find very little to write. This article sets out where the board's job begins and ends, and how to tell whether a board is overseeing its ESG report or only receiving it.
What Changed in ESG Reporting for Kenyan Boards
For most of the past two decades, sustainability reporting was voluntary. Each company chose its framework, its indicators and what to leave out, so two reports could rarely be compared. Stock exchanges published menus to choose from. Nasdaq's ESG Reporting Guide 2.0 (2019), for instance, suggested 30 metrics, ten under each heading:
- Environmental: greenhouse gas emissions, emissions intensity, energy use, energy intensity, energy mix, water use, environmental operations, board oversight of climate, management oversight of climate, and climate risk mitigation.
- Social: CEO pay ratio, gender pay ratio, employee turnover, gender diversity, temporary worker ratio, non-discrimination, injury rate, global health and safety, child and forced labor, and human rights.
- Governance: board diversity, board independence, incentive pay, collective bargaining, supplier code of conduct, ethics and anti-corruption, data privacy, ESG reporting, disclosure practices, and external assurance.
Several of those metrics concern the board directly. Voluntary menus like this one are now giving way to rules, and in Kenya each step has put more of the weight on the board:
- 2015, the CMA governance code. The Capital Markets Authority's Code of Corporate Governance Practices for Issuers of Securities to the Public requires boards to make sure the company's strategy promotes sustainability, and to disclose its ESG policies and how they are carried out in the annual report and on the website. The code works on an "apply or explain" basis: a board may depart from a provision, but it must disclose the departure and say why.
- 2021, the NSE manual. The Nairobi Securities Exchange's ESG Disclosures Guidance Manual states that the board "retains overall accountability for ESG performance and disclosure to stakeholders." It gave listed companies one year to prepare, after which an ESG report was expected in the annual integrated report.
- 2027, IFRS S1 and S2. The Institute of Certified Public Accountants of Kenya (ICPAK) adoption roadmap makes the IFRS sustainability standards mandatory for public interest entities from 2027, for other large companies from 2028 and for smaller ones from 2029.
The NSE manual is specific about what the board chair should say. Its sample outline for an ESG report opens with the chair's message, which should set out the steps the board has taken to embed a culture of sustainability in the organization. A chair who cannot name those steps has nothing to sign.
Source: Nairobi Securities Exchange, ESG Disclosures Guidance Manual (2021)
Kenya is not moving alone. The IFRS Foundation counts more than 45 jurisdictions adopting or preparing to use the standards, among them Tanzania, Uganda, Rwanda and Ethiopia. A group operating across East Africa will report to the same standard in more and more of its markets.
The change that matters most for directors is what IFRS S1 asks a company to disclose about governance. It must identify the body that oversees sustainability risks and opportunities, usually the board or one of its committees, and describe:
- how that responsibility appears in the body's terms of reference and mandates;
- how it decides whether it has the skills to oversee the strategy, or how it will develop them;
- how, and how often, it is informed about sustainability risks and opportunities;
- how it takes them into account in strategy, major transactions and risk management;
- how it oversees targets, and whether related performance measures are part of pay.
In other words, the board's oversight becomes part of the published report. ICPAK's 2026 readiness report scored 385 Kenyan public interest entities on these and other disclosure items, on a scale of 0 to 4. Governance was the strongest of the four areas the standards cover, a lead ICPAK attributes to boards increasingly naming someone to own sustainability oversight. The best-scored items were how often and in what format the board takes up sustainability, at 1.87, and its role in strategy and target-setting, at 1.81. The weakest of the governance items was linking incentives to sustainability targets, at 1.15.
Average Readiness Score on Board Oversight Disclosures, Kenyan Public Interest Entities, 2026
Five IFRS S1 and S2 governance items, 385 entities scored on a 0 to 4 scale. Source: ICPAK, Kenya IFRS S1 & S2 Readiness Report, 2026 edition
Board engagement 1.87, strategy and target-setting 1.81, responsible board or committee 1.74, roles and mandates 1.71, incentives 1.15.
Scores are averages on ICPAK's 0 to 4 scale, not percentages. The dashed line at 2.0 is where ICPAK's "Developing" band begins.
Put simply, Kenyan boards have set up oversight faster than they have attached consequences to it. Every item still sits below 2, and the one that ties sustainability to anyone's pay is furthest behind.
What the Board Owns and What Management Owns
The most common failure in board ESG oversight is not neglect. It is confusion about roles. Some boards approve whatever management brings; others drift into management's work and spend a two-hour meeting debating how emissions are calculated. The split that works is the one that already governs financial reporting: management prepares, and the board challenges and approves.
| Stage | What management does | What the board does |
|---|---|---|
| Finding the issues | Identifies the ESG risks and opportunities that could affect the business | Learns enough to judge whether that list is credible |
| Setting priorities | Ranks the issues and proposes where to act | Builds the priorities into strategy and capital spending |
| Running the work | Gives each issue an owner and performance measures | Oversees the risks and decides whose pay depends on the measures |
| Reporting | Drafts the disclosure | Approves it and answers for it in public |
Read each row across: every board task depends on the management task beside it, and is a point where the board can test what it is given or simply accept it. Approval is where boards find out what they actually know. Signing a disclosure you cannot question is still a decision, just not a deliberate one.
For listed companies in Kenya, the structure is largely set. The NSE manual expects the board to form a committee that oversees sustainability, including the reporting process. Where a separate committee is not practical, the strategy committee can take it on with clear ESG terms of reference. The manual also expects the CEO to chair a management committee on ESG, ideally meeting quarterly, and to appoint a sustainability manager to run the work.
Choosing a committee structure is the easy part. Whichever one you choose, it works only if three things are true:
- Sustainability has a standing place on the agenda. It comes up at every committee meeting, not only when the report is due.
- Directors can see the underlying data. They have access to the figures behind the report, not only management's summary of them.
- Directors are independent enough to ask hard questions. They can ask management something it did not prepare for.
The harder part is having directors who know which questions to ask.
ESG Credentials Versus ESG Competence
An ESG credential and ESG competence are easy to confuse, but they are different things:
- An ESG credential is something a director can point to on a CV: a qualification, a former role or a board seat in a sustainability field, such as years in development finance or running a foundation.
- ESG competence is the ability to oversee the particular sustainability risks that could affect this company's results: reading its emissions figures, questioning its water data, or judging whether a supply chain target is realistic.
A director can hold the first without the second. Ten years in community investment is a real credential, and it may still leave a director with little to add on water risk at a brewery.
The distinction matters because boards tend to count credentials. NYU Stern's Center for Sustainable Business reviewed all 1,161 directors on Fortune 100 boards in 2023 and found that 43% held at least one ESG credential, a sharp rise since 2018, and the number of those boards with a sustainability or ESG committee went from 22 to 89. Yet only two of the 1,161 directors had credentials in water, a material risk for several of the manufacturers, retailers, and food and beverage companies on the list.
Climate is the topic IFRS S2 is built around, yet NYU Stern counted just 22 directors with climate change credentials among Fortune 100 board members in 2023, up from three in 2018. That is fewer than 2% of the seats at the largest US companies, so climate expertise is scarce everywhere, not only on Kenyan boards.
Source: NYU Stern Center for Sustainable Business, Fortune 100 Board Members Lacking ESG Credentials
In Kenya the gap is sharper. In our experience, the pool of directors with sustainability backgrounds is small and drawn heavily from development finance and NGO leadership. Those are valuable credentials, but they are a poor match for a manufacturer whose material risks are energy costs, water security and a supply chain it cannot see beyond its direct suppliers. Boards appoint the credential that is available rather than the expertise the risk register calls for, and then treat the seat as filled.
Kenya's governance code already sets a floor for director learning. The CMA code asks every board member to complete at least twelve hours of board development a year, and the nomination committee to review the board's mix of skills annually and disclose it in the annual report. Pointing some of those hours at sustainability reporting costs a board nothing new.
Building that competence is its own project. The test of whether a board has it comes when someone independent checks the report.
Is your board ready to test the figures it signs off?
Our Strategic Planning program works with boards and executive teams on governance that holds up under scrutiny: deciding which issues matter, setting clear ownership, and the questions directors should ask before they approve a report rather than after. Request a proposal.
ESG Assurance and What It Covers
Assurance is an independent check of reported figures, the sustainability equivalent of an audit, and it is the change most boards have not yet planned for. IFAC and AICPA & CIMA's benchmark study, The State of Play, found that 97% of large companies across the G20 disclosed sustainability information in 2024 and 75% obtained assurance on at least some of it, up from 73% the year before. Audit firms carried out 59% of those engagements.
Two points about those figures deserve a director's attention:
- Most assurance is limited, not reasonable. IFAC reports that most engagements were at the limited level. Limited assurance concludes only that nothing came to the reviewer's attention suggesting the figures are wrong. Reasonable assurance, the level applied to financial statements, concludes positively that they are fairly stated and takes considerably more work.
- Assurance often covers selected figures, not the whole report. A board can be told the report is assured while the numbers it is most exposed on sit outside the scope.
Kenya is building its own regime. ICPAK has adopted ISSA 5000, the international standard for sustainability assurance, which applies to reporting periods beginning on or after 15 December 2026.
ICPAK's national roadmap phases assurance in. It starts with limited assurance and moves toward reasonable assurance, with a transition period before reasonable assurance covers Scope 3, the emissions in a company's supply chain and in the use of its products. Boards have a few reporting cycles to build their controls before the checks get harder.
Source: ICPAK, Kenya IFRS S1 & S2 Readiness Report, 2026 Edition
The practical question for the next board meeting is simple: which of our disclosures are inside the assurance scope, and which are not? Boards often hear that the report has been assured without establishing what was assured, and the difference is where the exposure lies.
Six Questions a Director Should Be Able to Answer
The test of board oversight is not whether ESG was on the agenda. It is whether a director, asked without notice, could answer these six questions:
| Question | What a weak answer sounds like | What you are testing |
|---|---|---|
| Which ESG issues are financially material to us? | "All of them. We take sustainability seriously." | Whether a materiality assessment exists and the board has seen it |
| Who produced these numbers, and how? | "The sustainability team puts the report together." | Whether there is a controlled process or one person's spreadsheet |
| Which figures are inside the assurance scope? | "The report is externally assured." | Whether the board knows which disclosures nobody has checked |
| What changed since last year, and why? | "We improved our methodology." | Whether changes to past figures are tracked and explained |
| Whose pay depends on any of this? | "It is part of the balanced scorecard." | Whether targets carry consequences |
| What did we decide not to disclose? | "We disclose everything material." | Whether omissions were a decision or an oversight |
A board that can answer all six is overseeing its report. A board that can answer only the first two is attending meetings about it.
Three Common Board Oversight Failures
The presentation trap
ESG reaches the board as a polished deck, presented by the executive whose performance it measures. No other material risk is governed this way: the audit committee does not take the finance team's word for the accounts. The fix is the same as in finance: at least once a year, the board or its committee should hear directly from whoever assembles the data.
The strategy-alignment trap
The board agrees that ESG is "aligned with strategy" and treats that as oversight done. Alignment describes intentions. Writing in Harvard Business Review, Robert Eccles and colleagues at Oxford's Saïd Business School argued that boards often hold their companies back through an outdated emphasis on short-term value. A board that keeps setting pay and capital spending on short-term numbers will undo its own sustainability commitments, whatever the alignment statement says.
The delegation trap
Oversight is given to a committee, and the rest of the board stops engaging because the topic is covered. The committee does the detailed work, but the full board still approves the report. A director who has not read the disclosure because a committee exists has still signed it.
Frequently Asked Questions
What is the board's role in ESG reporting?
To oversee and approve the report, not to write it. Management identifies the issues that matter, gives each an owner and performance measures, and drafts the disclosure. The board learns enough to judge whether that list is credible, builds it into strategy and capital spending, decides whose pay depends on the targets, and approves what is published. A practical test is whether a director, asked without notice, could answer the six questions in this article.
Is ESG reporting mandatory for companies in Kenya?
Increasingly, yes. Since late 2022, the Nairobi Securities Exchange has expected listed companies to include an ESG report in their annual integrated report, and the CMA governance code asks boards to disclose their ESG policies and how they are carried out. ICPAK's roadmap then makes the IFRS S1 and S2 standards mandatory for public interest entities for accounting periods beginning on or after 1 January 2027, for other large companies from 2028 and for smaller ones from 2029.
What does IFRS S1 require a company to disclose about its board?
It must name the body that oversees sustainability risks and opportunities, usually the board or one of its committees, and explain five things: how that responsibility appears in its terms of reference, how it decides whether it has the right skills, how and how often it is informed, how it takes sustainability into account in strategy, major transactions and risk management, and how it oversees targets, including whether related performance measures are part of pay.
Does a board need a separate ESG committee?
For listed companies in Kenya, the NSE manual expects a board committee that oversees sustainability, including the reporting process. Where a separate committee is not practical, the strategy committee can take it on with clear ESG terms of reference. The structure matters less than three conditions: sustainability has a standing place on the agenda, directors can see the figures behind the report, and they are independent enough to ask management questions it did not prepare for.
What is the difference between an ESG credential and ESG competence?
A credential is something a director can point to on a CV, such as a qualification or a former role in a sustainability field. Competence is the ability to oversee the particular risks that could affect this company's results. NYU Stern found 43% of Fortune 100 directors held an ESG credential in 2023, but only two of 1,161 had credentials in water. In Kenya, the CMA code asks boards to review their skills mix every year and disclose it.
What does it mean when a sustainability report is assured?
That an independent party, often an audit firm, has checked some or all of its figures. It is usually less than it sounds: most engagements give limited assurance, which concludes only that nothing suggested the figures are wrong, and many cover selected figures rather than the whole report. IFAC found 75% of large companies obtained assurance on at least some disclosures in 2024. In Kenya, ICPAK has adopted the ISSA 5000 assurance standard and plans a move from limited toward reasonable assurance.
Conclusion
The board does not need to become a second sustainability department. It needs to treat the ESG report the way the audit committee treats the accounts: look at the data behind it, know which figures were checked independently, and ask why anything changed from last year.
From 2027, a Kenyan public interest entity's report must say how often its board is briefed on sustainability. Going by last year's board minutes, what would that sentence honestly say?
If you want your board ready for that question, our Strategic Planning program can help. Request a proposal and we will show you where your board's oversight stands today.
