As companies confront the reality that Environmental, Social, and Governance (ESG) issues are no longer optional, it is crucial that ESG initiatives are fully integrated into the overall corporate strategy. To achieve this, Board buy-in is essential. Boards and individual Board members must become well-versed in ESG and sustainability matters, recognizing their critical role in overall risk management. ESG considerations should be embedded within a company’s internal controls, incorporated into organizational strategies, and used as key metrics for internal compliance assessments.

While ESG reporting may not yet be mandatory for all companies, the landscape is evolving rapidly. For instance, certain companies must now report on climate risk disclosures. Publicly listed companies, on the other hand, already report on their environmental and social risks as required by the Nairobi Securities Exchange (NSE). Consequently, in the face of a changing business environment—where stakeholders increasingly prioritize ESG and sustainability issues—a time will come when these requirements will form the basis for investor decisions, compelling companies to align with the new realities. Otherwise, companies that fail to meet these new expectations risk being left behind.

The Board plays a foundational role in corporate governance, setting the overall strategy and ensuring that all company activities align with it. Thus, ESG issues must be discussed and embedded at the Board level and cascaded throughout the business and its functional units. For a company to be truly strategically aligned with ESG priorities, there must be effective discussions at the Board level, supported by fully functioning ESG committees dedicated to driving meaningful action.

What is an ESG Checklist?

An ESG Checklist is an essential auditing tool used to assess how well a company is complying with ESG regulations. Specifically, it helps organizations identify issues, track progress, and measure advancement toward ESG goals. For companies beginning their ESG journey, using a checklist is strongly encouraged to guide compliance efforts and ensure alignment with ESG standards.

An ESG checklist also helps Boards assess and evaluate the effectiveness of existing ESG frameworks and determine whether company processes align with overall strategic goals. By doing so, companies can standardize their processes and achieve more uniform and effective performance.

Moreover, to ensure relevance and rigor, ESG checklists should be based on global standards such as:

• Global Reporting Initiative (GRI)
• Task Force on Climate-related Financial Disclosures (TCFD)
• Sustainability Accounting Standards Board (SASB)

Using these frameworks simplifies what can otherwise be a complex process, ensuring the checklist remains relevant and material to the company's unique needs.

Who manages the Checklist?

ESG responsibilities extend across the entire organization—with every department contributing to ESG efforts—effective management requires a structured approach. While data collection for ESG reporting is often a shared responsibility, companies should establish a dedicated ESG department or team to ensure coherence and accountability. This way, the team develops ESG-aligned initiatives, leads their implementation, monitors and tracks progress, and reports to the relevant committees. Subsequently, these committees provide updates to the Board. In addition, creating a separate committee focused solely on ESG matters ensures that implementation remains action-oriented, rather than being treated as an afterthought.

What Is Included in an ESG Checklist?

The specific items included in an ESG checklist will vary depending on a company's level of ESG maturity. Nonetheless, core areas generally include:

Environmental

• Tracking, controlling, and optimizing energy consumption
• Monitoring and reducing carbon emissions
• Establishing climate change mitigation and carbon footprint reduction practices
• Implementing efficient waste management and recycling programs
• Exploring renewable energy opportunities

Social

• Health and safety practices
• Diversity, equity, and inclusion initiatives
• Employee well-being programs
• Community engagement and social impact activities
• Stakeholder communication strategies

Governance and Ethics

• Promoting strong business ethics
• Ensuring robust corporate governance practices

Stakeholder Engagement

• Protecting stakeholder rights
• Evaluating stakeholder impact

Data and Reporting

• Data collection and management systems
• Reporting frequency and formats
• Performance metrics and third-party audits

Risk Management

• Conducting risk assessments
• Integrating mitigation strategies into internal controls

Internal Training and Awareness

• Promoting a sustainability culture through company-wide training and awareness programs

Compliance and Monitoring

• Setting up systems to measure ESG performance against Key Performance Indicators (KPIs)
• Establishing mechanisms for tracking and reporting corrective actions

Conclusion

As ESG continues to reshape the corporate landscape. Accordingly, Boards must take an active role in ensuring their organizations are prepared. Developing and implementing an effective ESG checklist is a crucial first step in building resilience, maintaining investor confidence, and securing long-term sustainable success. Ultimately, Boards that prioritize ESG today will be better positioned to navigate the risks and opportunities of tomorrow.

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Article by: Shalon Amunga, ESG Associate