- ESG reporting stopped being a communications exercise and became a filing. IFRS S1 and S2 apply to reporting periods beginning on or after 1 January 2024, and 36 jurisdictions have adopted them or are finalizing the steps to.
- In Kenya the deadline has already passed. The Nairobi Securities Exchange issued its ESG Disclosures Guidance Manual in November 2021 with a one-year grace period, so listed companies have been expected to disclose in their integrated reports since 2022.
- Assurance is the part boards keep underestimating. 97% of companies now disclose sustainability information and 75% obtain assurance on at least some of it. Audit firms perform 59% of those engagements.
- Board ESG credentials have risen faster than board ESG competence. The share of Fortune 100 directors with ESG credentials went from 29% to 43% in five years, which is a real improvement and still not the same as expertise in the issues that are financially material to your particular company.
- The board's job is not to write the report. It is to be able to defend it. Those require different things, and most board agendas are built for the first.
There is a question that separates boards which oversee ESG reporting from boards which receive it: could you defend this number in a room that does not already believe you? Where it came from, who calculated it, what it excludes, and why last year's version was different. Most directors have never been asked. The ones who have tend to describe it as the moment the topic changed shape.
In our work with senior leadership teams across East Africa over the past decade, the pattern in the boardroom has been consistent. Sustainability arrives on the agenda as a presentation, lands near the end of a long meeting, and gets received rather than tested. Nobody is being negligent. The report is thorough, the management team is competent, and there is no obvious reason to interrogate it. That is precisely the problem, because the standards this reporting now sits under were written on the assumption that somebody does.
What Changed in ESG Reporting, and When
For about fifteen years, sustainability reporting was a voluntary genre. A company chose a framework, chose its indicators, chose its boundaries, and published something defensible on its own terms. Comparison between two companies was close to impossible, which suited almost everyone involved.
That arrangement ended in stages. The International Sustainability Standards Board issued IFRS S1 and IFRS S2, which apply to annual reporting periods beginning on or after 1 January 2024. The IFRS Foundation's jurisdictional profiles, published in June 2025, put 36 jurisdictions in the category of having adopted the standards, otherwise using them, or being in the process of finalizing the steps to introduce them. The direction is toward sustainability information that sits alongside financial statements and is expected to behave like them.
Kenya moved earlier than most of the region. The Nairobi Securities Exchange published its ESG Disclosures Guidance Manual in November 2021 and gave listed companies a one-year period to prepare, after which ESG disclosures were expected in annual integrated reports. That expectation has been in force since 2022. It sits on top of the Capital Markets Authority's Code of Corporate Governance Practices for Issuers of Securities, which operates on an apply-or-explain basis and makes the board, not the sustainability function, the party that has to account for the position taken.
The NSE ESG Disclosures Guidance Manual, issued in November 2021, gave listed companies one year from issuance to familiarize themselves with the reporting steps before ESG and sustainability disclosures were expected in their annual integrated reports. For a Kenyan listed company, this has been a filing expectation since 2022 rather than a matter of appetite.
Worth noting for anyone still working from older material: Kenya's Companies Act is the Act of 2015, not 2017. The 2017 date circulates widely in ESG commentary and appears to have entered the literature through a single secondary source. It is a small thing, and it is the kind of small thing an assurance provider notices.
What the Board Owns and What Management Owns
The most common failure in board ESG oversight is not inattention. It is role confusion, where directors either rubber stamp what management produced or drift into doing management's job by debating emissions methodology in a two-hour meeting. PwC's guidance on ESG and the role of the board makes the same observation from the opposite direction: boards under sustained financial pressure tend to collapse the long-horizon question into the short one, and sustainability is the first item to lose.
The split that works is the one that already governs financial reporting. Management identifies, prioritizes, manages and discloses. The board educates itself, integrates the topic into its own processes, oversees the risks and the management incentives attached to them, and ratifies what goes out. Deloitte's Center for Board Effectiveness sets out much the same division in its guidance on the role of the board in overseeing ESG, working from defining the oversight structure through to establishing formal ESG responsibility inside management and aligning the plan with strategic goals and KPIs.
Read the two tracks as a sequence rather than a hierarchy. Management identifies the material risks, and the board has to be educated enough to know whether the list is plausible. Once those risks are prioritized, the board either pulls that prioritization into strategy and capital allocation or leaves it decorative. Ownership and KPIs are assigned downstairs; whether those are the KPIs that matter, and whether anyone's pay depends on them, is a board question. Then management discloses, and the board ratifies.
Ratification is where boards discover what they do and do not know, and signing off a disclosure you cannot interrogate is a governance position whether or not it was chosen deliberately.
Structurally, most boards land on one of two arrangements: a dedicated sustainability or ESG committee, or explicit allocation of ESG oversight to the audit and risk committee. Dedicated committees have grown quickly. On Fortune 100 boards they went from 22 in 2018 to 89 by 2023. The arrangement matters less than whether the committee has a standing agenda item, access to the underlying data, and the ability to ask management something it did not prepare for.
In Kenya the committee question is not entirely open. Reviewing the NSE manual, Dr. Kariuki Muigua notes that it requires boards of listed companies to see that ESG is integrated into strategy, operations and performance management, and to constitute a board committee overseeing sustainability matters including the reporting process itself. A listed Kenyan board without a named committee holding that remit is departing from the guidance, which under an apply-or-explain regime is a position it has to be prepared to state.
ESG Credentials Versus ESG Competence
Boards have got visibly better at this on paper. Research from NYU Stern's Center for Sustainable Business found that the share of Fortune 100 directors with ESG credentials rose from 29% in 2018 to 43% by 2023. That is a substantial shift in five years and it is genuinely good news.
NYU Stern's Center for Sustainable Business reports that Fortune 100 directors holding ESG credentials rose from 29% in 2018 to 43% in 2023, while board sustainability committees over the same period grew from 22 to 89. Credentials and committees both roughly doubled. Whether the underlying decisions changed at the same rate is a separate question, and a harder one to measure.
The catch is in what a credential counts as. The same research group's earlier work on board expertise in financially material ESG matters drew a distinction that has held up: broad ESG background on a resume is not the same as expertise in the specific issues that are financially material to that specific company. A director with a decade of community investment experience is genuinely credentialed and may still have nothing useful to say about water risk in a beverage business.
This is the regional version of the same problem, and it is sharper here. Across much of East Africa the pool of directors with sustainability backgrounds is small and heavily concentrated in development finance and NGO leadership. Those are real credentials. They are also a poor match for a manufacturer whose material exposure is energy cost, water security and a supply chain it cannot see past the second tier. Boards recruit the credential that is available rather than the expertise the risk register calls for, and then treat the seat as filled.
Five Ways to Build Board ESG Expertise
Until recently the default answer was to hire an advisor. That is a reasonable first move and a poor standing arrangement. The Conference Board has made the point that permanent reliance on external specialists can become counterproductive, because a board that only ever hears the topic through a consultant never develops the instinct to ask the second question.
Five approaches build the capability inside the room:
- Pair directors with internal experts. Put a director alongside the person who actually assembles the data, not the executive who presents it. The learning runs both ways and the director acquires a working sense of where the numbers are soft.
- Hold one open session a year on where you are not compliant. Most ESG board sessions cover progress. A session explicitly about gaps produces different information, and it tells management that raising a problem is survivable.
- Ask the CEO for the short-term wins as well as the long ones. Sustainability arguments that only pay off in a decade do not survive a bad quarter. A standing item on what the program delivered this year keeps it attached to the business.
- Fund director education properly. Programs and seminars on sustainability reporting are now widely available, including regionally. Treating them as a training budget line rather than a favor changes who attends.
- Recruit against the risk register. Identify the two or three ESG issues that are financially material to this company, then appoint against those. A board-ready operations executive who understands energy may be worth more than a sustainability generalist.
The fifth is the one that gets skipped, because it requires the board to have decided what is material before it recruits. Most do it in the other order.
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ESG Assurance and What It Covers
The shift most boards have not priced in is assurance. Sustainability data that used to be reviewed internally is increasingly checked by an external party who has no stake in the answer.
The scale of this is already substantial. IFAC and AICPA & CIMA's benchmark The State of Play, covering reporting year 2024, found 97% of companies disclosing sustainability information and 75% obtaining assurance on at least some of it. Audit firms performed 59% of assurance engagements globally, and roughly a third of companies referenced ISSB Standards use or planned adoption, double the previous year.
The IFAC and AICPA & CIMA State of Play benchmark for reporting year 2024 found that 97% of companies disclosed sustainability information, 75% obtained assurance on at least some of their disclosures, and audit firms carried out 59% of those engagements. The phrase doing the work is "at least some". Partial assurance on selected metrics is the norm, which means a board can be told the report is assured while the numbers it is most exposed on are outside the scope.
That last point deserves a direct question at the next meeting: which specific disclosures are inside the assurance scope, and which are outside it. Boards routinely hear that the report has been assured and do not establish what was assured, and the difference is where the liability lives.
Two further distinctions are worth a director's time. Limited assurance, which is what most engagements provide, is materially weaker than the reasonable assurance applied to financial statements; it concludes that nothing came to the practitioner's attention, not that the numbers are right. And an assurance provider who is not your audit firm is not bound by the same independence regime, which is a governance question rather than a technical one.
Six Questions a Director Should Be Able to Answer
The practical test of board oversight is not whether the board discussed ESG. It is whether a director, asked without notice, can answer these:
| Question | What a weak answer sounds like | What you are testing |
|---|---|---|
| Which ESG issues are financially material to us? | "All of them, we take it seriously." | Whether a materiality assessment exists and the board has seen it |
| Who produced these numbers? | "Sustainability puts the report together." | Whether there is a controlled process or a spreadsheet owner |
| What is inside the assurance scope? | "The report is externally assured." | Whether the board knows which disclosures are unverified |
| What changed since last year, and why? | "We improved our methodology." | Whether restatements are tracked and explained |
| Whose pay depends on any of this? | "It is part of the balanced scorecard." | Whether targets have consequences |
| What did we decline to disclose? | "We disclose everything material." | Whether omissions were a decision or an oversight |
A board that can answer all six is doing oversight. A board that can answer the first two is doing attendance.
Three Common Board Oversight Failures
The presentation trap
ESG reaches the board as a polished deck delivered by the person responsible for the outcome it reports. No other material risk is governed this way. The audit committee does not take the finance team's word for the accounts, and the fix is the same: at least once a year, the board should hear from whoever assembles the underlying data without the executive layer in between.
The strategy-alignment trap
The board satisfies itself that ESG is "aligned with strategy" and treats that as oversight complete. Alignment is a statement about intentions. Harvard Business Review's work on the board's role in sustainability makes the harder point that boards frequently obstruct their own stated commitments by continuing to run incentives and capital allocation on short-term value, which no alignment statement corrects.
The delegation trap
Oversight is handed to a committee, and the rest of the board stops engaging on the basis that it is covered. Committees do the work; the full board still ratifies. 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 ratify, not to produce. Management identifies material issues, prioritizes them, manages them and drafts the disclosure. The board educates itself well enough to judge whether that list is plausible, integrates it into strategy and capital allocation, oversees the risks and the incentives attached to them, and signs off. The practical test is whether a director could defend a published number without management in the room.
Is ESG reporting mandatory for companies listed in Kenya?
Effectively yes, and it has been since 2022. The Nairobi Securities Exchange issued its ESG Disclosures Guidance Manual in November 2021 and gave listed companies one year to prepare, after which ESG and sustainability disclosures were expected in annual integrated reports. It sits alongside the Capital Markets Authority's Code of Corporate Governance Practices for Issuers of Securities, which works on an apply-or-explain basis, so a board that departs from a provision has to say so and say why.
When did IFRS S1 and S2 take effect and how widely are they adopted?
Both standards apply to annual reporting periods beginning on or after 1 January 2024. The IFRS Foundation's jurisdictional profiles, published in June 2025, counted 36 jurisdictions that had adopted the ISSB Standards, were otherwise using them, or were finalizing the steps to introduce them. Uptake in company reporting is running behind adoption by regulators, with roughly a third of companies referencing ISSB use or planned adoption in 2024.
Does a board need a separate ESG or sustainability committee?
Not necessarily. Both arrangements work: a dedicated committee, or explicit allocation of ESG oversight to the audit and risk committee. Dedicated committees have grown quickly, from 22 to 89 across Fortune 100 boards between 2018 and 2023. What matters more than the structure is whether the committee has a standing agenda item, direct access to the underlying data, and enough independence to ask management something it did not prepare for.
What does it mean when a sustainability report is externally assured?
Usually less than it sounds. Most engagements provide limited assurance, which concludes that nothing came to the practitioner's attention, rather than the reasonable assurance applied to financial statements. Assurance also commonly covers selected metrics rather than the whole report. IFAC and AICPA & CIMA found 75% of companies obtained assurance on at least some disclosures in 2024, with audit firms performing 59% of engagements. Boards should establish which specific disclosures sit inside the scope and which sit outside it.
How can directors build genuine ESG expertise rather than credentials?
Recruit against the issues that are financially material to your particular company rather than against the label. Research from NYU Stern found Fortune 100 directors with ESG credentials rose from 29% in 2018 to 43% in 2023, but a credential in one ESG domain says little about competence in another. Pair directors with the people who assemble the data rather than the executives who present it, hold at least one annual session on where the organization is not compliant, and fund director education as a budget line rather than a favor.
Conclusion
None of this asks a board to become a second sustainability department. It asks for the habits the audit committee already has, applied to a subject that arrived faster than the training did: read the underlying data at least once a year, establish what the assurance actually covers, and put restatements on the agenda as a standing item rather than an exception. Boards that start there usually find the first cycle uncomfortable and the second unremarkable.
Which of your published sustainability figures has never once been questioned by a director?
If you are building the board and executive capability to answer that comfortably, our Business Strategy and Operational Excellence program is designed for it. Book a free strategy call and we will map out where your governance currently stops.
