Management is responsible for the following:
> managing the company as to achieve company’s objectives
assessing business risks to those objectives being achieved
safeguarding the company’s assets
keeping proper accounting records
preparing company’s financial statements and delivering them to the registrar
ensuring the company complies with applicable laws and regulations
Who’s responsibility is it to manage the company
It is the directors’ job to manage the business so that its objectives are achieved. This may mean producing suitable returns for shareholders or the achievement of other targets.
It also means assessing what business risks face the company and devising the necessary strategies to deal with them.
What are the director’s responsibilities under the Companies Act 2006
Generally: act in the way most likely to promote the success of the company for the benefit of tied members as a whole
> safeguarding assets
>books and records of the company
>preparation and delivery of company financial statements
>
Directors duties: safeguarding of assets
Reasonable steps need to be taken by the directors for the prevention and detection of fraud and other irregularities. This includes implementation of systems and controls to safeguard the company’s assets and ensuring that the systems and controls work effectively.
> safekeeping of documents of title to land and buildings and other assets
> the setting of authority limits, ie the limitation of what any individual can do without consulting someone else
> implementing other procedures to prevent fraud and reduce the likelihood of error
Directors duties: books and records of the company
Directors are legally responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company
This requires records of the following,
> the cash payments and receipts
>what the payments and receipts relate to
>assets (including non-current assets and inventory)
> the liabilities
>ensure that the financial statements comply with the companies act 2006
Directors duties: preparation and delivery of company financial statements
Directors are obligated under company law to prepare financial statements for each financial period (typically one year) that give a true and fair view of the affairs of the company at the end of the accounting and profit and loss period
In preparing those financial statements, directors are required to,
>select suitable accounting policies and apply them consistently
>make judgements and estimates that are reasonable and prudent
>comply with applicable accounting standards
> prepare financial standards on the going concern basis unless it is inappropriate to presume that the company will continue in business
It’s the responsibility of management to ensure that the company complies with the laws and regulations which have an impact on its operations.
This includes laws and regulations concerning the following:
> money laundering
health and safety
public liability
employer’s liability
PAYE and payroll matters
Sustainability definition
Meeting the needs of the present without compromising the abaility of future generations to meet their own needs
The dual of sustainability should be considered in terms of
Impacts and dependencies
ESG definition
Environmental, social and governance, approaches sustainability through a corporate lens and considers the effects of these issues on business and enterprise values(rather than on society more broadly)
ESG impacts and dependencies
Impacts: in sustainability terms, this relates to the way an organisation and its operations can effect ESG issues ( positive and negative impacts of an organisation on ESG)
Dependencies: the impact that ESG has on an organisation
Examples of impacts (ESG)
Worker rights, human rights, health and safety policy, waste, greeenhouse gas emissions, water usage, land usage and biodiversity
Who is disclosure of information on impacts (ESG) useful for
Broader stakeholders, including consumers, civil society and employees. The decisions they make are more attuned to information on how an organisation is impacting on livelihoods for example, deforestation, equality and health.
An organisation’s impacts can also be financially material due to reputational impacts such as reduced consumer demand or removal of license to operate
Examples of dependencies (ESG) that may affect an organisation
Worker health, workplace diversity, climatic conditions, resource availability, regulation, consumer expectations, other stakeholder expectations and risks to organisational reputation
Disclosure of information on dependencies is useful for
Investors, who want to assess how well a company is managing its exposure to long term ESG risks and hence assess the value of the company to inform investment decisions. This directly relates to financial materiality
Organisation environmental aims
Counter the impact of climate change and reduce an organisation’s impact on the environment (environmental footprint). Also, consider dependencies that could be sustainability-related. (Eg availability of finite resources for operations)
Organisation’s social aims
Consider the well being and impact of their operations on society and their stakeholders and creating a good working environment for its employees. Consider the organisation’s reliance on a healthy and diverse workforce for ongoing operations
Organisation’s governance aims
Implement good governance practices from the top down, so it is well positioned to meet environmental and social requirements by providing its good and services in a sustainable way and offers employees with good working conditions in the long term. Understand the organisation’s dependence on a sound reputation and compliance with regulations.
Physical risks definition
Risks which arise form the physical effects of climate change, such as extreme temperatures, wildfires and flooding.
Transition risks definition
Risks which relate to social and economic shifts to a low-carbon economy, such as changes to policy, regulation, technology and markets.
Scenario analysis definition
A process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Instead, scenarios provide a way for organisations to consider how the future might look if certain trends continue or certain conditions are met. Eg the impact on sn organisation of different increases in global temperatures.
Net zero definition
The global reduction of greenhouse gas emissions so they match methods of absorbing carbon dioxide from the atmosphere.
All types of sustainability and ESG information is affected by the need for credibility when disclosed to stakeholders, for example, for
> financial markets, both debt and equity, in attesting information relating to sustainability, and its consequences, and thereby reducing the risk for investors
government in supporting compliance with laws and regulations by preparing or attesting information relating to sustainability
employees, to provide confidence in systems, establish progress against targets and improve confidence
communities, to estabilish credibility with neighbours and local organisations
Paris agreement definition
An international treaty on climate change generally regarded as the framework for international action towards mitigating climate change and its impacts. The Paris agreement set the ambition of reaching net zero by 2050 with a maximum of 2 degrees celcius global temperature change, with the preferred goal of 1.5 degrees above pre-industrial levels
