In recent times, the corporate governance landscape has experienced significant transformation worldwide. The responsibilities of company directors are being reshaped by emerging global imperatives related to sustainability. The growing demand for environmental, social, and governance (ESG) accountability has shifted sustainability reporting from the periphery of corporate disclosures to a central concern in governance and strategic management.

There is growing recognition that transparent and credible sustainability disclosures are essential to the integrity of capital markets, stakeholder trust, and long-term enterprise value.  

The enactment of the European Union’s Corporate Sustainability Reporting Directive (CSRD) marks a significant regulatory milestone in this evolution, introducing a paradigm shift in corporate reporting by embedding the principle of double materiality and expanding disclosure requirements to a broader range of enterprises.

This framework, and others like it, compel directors to assume greater responsibility for ESG transparency, thereby expanding their fiduciary and statutory duties in ways that carry both legal and reputational implications. The CSRD marks a notable departure from its predecessor, the Non-Financial Reporting Directive (NFRD), by both widening the scope of entities required to report and deepening the content and format of disclosures.

According to the European Commission (2023), the CSRD will apply to approximately 50,000 companies, up from 11,000 under the NFRD, and mandates detailed, forward-looking disclosures on sustainability risks, opportunities, governance practices, and impact indicators. In alignment with this, directors are now required to oversee the integration of ESG considerations into corporate strategy, risk management, and stakeholder engagement.

Central to the CSRD is the adoption of the double materiality concept, which obliges companies to consider both the financial impact of sustainability issues (outside-in) and their impact on the environment and society (inside-out). This reorients sustainability from a peripheral compliance function to a core element of enterprise risk management and strategic planning.

As a result, directors globally must not only ensure the formal compliance of disclosures but also demonstrate leadership in defining and operationalizing sustainability priorities. From a corporate governance perspective, the fiduciary responsibilities of directors now extend to the authenticity and credibility of ESG disclosures.

To this end, directors are increasingly expected to ensure compliance with the European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). These standards provide a unified framework for ESG reporting, enhancing comparability and decision-usefulness for investors and stakeholders.

Adherence to these standards requires directors to engage with sustainability reporting at both a conceptual and technical level, bridging gaps between finance, risk, and operational departments. Moreover, the CSRD mandates third-party assurance of sustainability disclosures, further intensifying the role of directors in guaranteeing information integrity.

 Similarly, Nigeria is progressively aligning its corporate sustainability reporting framework with global standards, notably through the adoption of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards S1 and S2.

 The Financial Reporting Council of Nigeria (FRC) has spearheaded this initiative by establishing the Adoption Readiness Working Group (ARWG) in 2023, which brings together stakeholders from various sectors to facilitate a phased and strategic implementation of these standards.

This roadmap encourages Nigerian companies, especially Public Interest Entities (PIEs), to voluntarily integrate sustainability disclosures ahead of the mandatory compliance.   This approach aims to foster a culture of transparency and accountability, equipping Nigerian businesses to meet rising investor expectations and global ESG benchmarks while mitigating risks associated with climate change and social challenges.

In tandem with regulatory developments, Nigerian corporate governance is witnessing a heightened emphasis on ESG integration, reflecting a broader shift toward sustainability as a core strategic priority. Companies listed on the Nigerian Stock Exchange are increasingly expected to implement ESG initiatives and robust reporting frameworks.

 This shift is driven by growing demands from investors, regulators, and consumers for businesses to demonstrate their contributions to positive environmental and social outcomes. Consequently, directors in Nigerian companies are now tasked with embedding ESG considerations into corporate strategy, risk management, and stakeholder engagement, thereby expanding their fiduciary duties beyond traditional financial oversight.

This evolving governance landscape underscores the necessity for directors to develop sustainability expertise and lead their organizations through the complexities of ESG compliance and reporting standards. Despite these advancements, challenges remain in Nigeria’s journey toward mandatory and credible sustainability reporting.

 Many companies are still unprepared for the comprehensive disclosure requirements that global frameworks like IFRS S1 and S2 entail, often due to limited technical capacity, fragmented ESG data management, and insufficient regulatory enforcement mechanisms.

To address these gaps, there is a pressing need for capacity building, technology adoption, and public-private collaboration to support businesses in developing integrated ESG reporting systems. Early adopters who have embraced voluntary compliance are already reaping benefits such as enhanced investor confidence and improved risk management.

However, to fully realize the strategic value of sustainability disclosures, Nigerian companies must accelerate their efforts to institutionalize ESG governance, ensuring that transparency and accountability become embedded in corporate culture and decision-making processes.

 As frameworks like the CSRD reshape the corporate reporting environment, directors must rise to the challenge by embracing their role as custodians of sustainability data and stewards of long-term enterprise value. This entails a commitment to professional development, stakeholder engagement, and the cultivation of a robust ESG reporting culture throughout the organization.

Transparent and credible sustainability disclosures are not merely a compliance exercise; they are a strategic asset that can enhance corporate legitimacy, access to capital, and stakeholder loyalty. In fulfilling this responsibility, directors are not only complying with regulations, but they are also upholding the broader principles of corporate governance, accountability, and responsible leadership in the 21st century.

Research & Advocacy Department,