Chapter 4 - Responsibilites

Question 1

Duties of Directors

Answer 1

• Safeguard company assets
• Prepare and submit FSs
• Keep proper accounting records
• Promote success of company
• Ensure company compliance with laws and regulations

Question 2

What is Section 414A of Companies Act 2006

Answer 2

• Certain companies need to produce a strategic report
• Needs to include a statement (S172(1)), explaining director’s compliance with section of Act
• Statement includes company’s operations impact on environment, meaning that there is a mandatory sustainability disclosure

Question 3

Environmental focuses

Answer 3

• Reduce environmental footprint
• Counter climate change impact
• Sustainability-related dependencies need to be considered

Question 3

Social focuses

Answer 3

• Focus on well-being and operational impact of society/stakeholders
• Positive work environment
• Reliance on healthy, diverse workforce for business needs

Question 4

Governance focuses

Answer 4

• Practices implemented from top down
• Providing goods/services sustainably
• Offer good long-term working conditions
• Reliance of good reputation & regulation compliance

Question 5

Describe ESG dependencies

Answer 5

• Impact of ESG on organisation e.g. diversity, levels of resources
• Disclosure useful to investors - understand how ESG-risks are managed
• Links to financial materiality

Question 6

Describe ESG impacts

Answer 6

• Impact of organisation on ESG e.g. waste, H&S policy, greenhouse gas emissions
• Disclosure is useful for broader stakeholders (employees and consumers), which details impacts on Environment and Society
• Can be material due to impact on reputation

Question 7

How does Sustainability impact AA?

Answer 7

• Risk management
• Expectation of financial risks (physical and transition) embedded into governance and risk management
• Assurance
• Info regarding ESG and sustainability needs to be credible
• Law & Regulation
• Companies encouraged to be open about ESG performance
• Further transparency expected as development continues

Question 8

TCFD methodology

Answer 8

Task Force on Climate-related Financial Disclosures:
- Governance - Processes, controls & procedures that manage, monitor and oversee risks/opportunities
- Strategy used to manage risks/opportunities
- Risk Management - identifying, assessing, prioritising and monitoring risks/opportunities
- Metrics & Targets - Data used to measure, monitor and manage risks/opportunities

Question 9

Risks due to Net Zero transition

Answer 9

• May limit/prohibit usage of fossil fuels
• FS may have stranded assets
• Can affect going concern

Question 10

What is a stranded Asset?

Answer 10

Asset that has undergone an unanticipated/premature write-down, devaluation of conversion to a liability.