The Nigeria Stock Exchange ("The Exchange" or "NSE') on Thursday 15th November 2018 issued its Sustainability Disclosure Guidelines ("The Guidelines") following approval of the Nigerian Stock Exchange on the 9th day November 2018. The Exchange recognized by the issuance of the Guidelines the impact of sustainability performance on the overall performance of businesses and seeks to encourage good corporate governance and transparency among companies or issuers listed on the Exchange. The Guidelines are part of a phased project to integrate sustainability reporting for its listed companies.

Relevance and Value Proposition

Section 1 of the Guidelines restate the justification for sustainability reporting. In addition to the growing trend towards responsible investment throughout the world, there is now recognized the need for transparency on how companies manage their Economic, Environmental, Social and Governance risks and opportunities, which are part of the value of a company. These risks and opportunities impact:

  • Access to capital
  • Resource efficiency, cost savings and productivity
  • Risk management
  • Revenue growth and market access
  • Brand value and reputation
  • License to operate
  • Human capital- Employee retention and recruitment
  • Company value as an acquisition target
  • Ability to acquire other high-quality companies

The Guidelines set out the value proposition of integrating sustainability in your organization and reporting as follows:

  • Enhanced Brand and Increased Competitive Advantage:
  • Increased Productivity and Reduced Costs
  • Improve Financial and Investment Opportunity
  • Increase Employee Retention and Recruitment
  • Compliance and Risk Management
  • Returns on Capital

The Guidelines use the word "Sustainability" as it is commonly used among companies, while the term "ESG" is used interchangeably as it is common among investors. Although the Guidelines offer no definition of those terms it states that the terms encompass the broad set of economic, environmental, social and governance considerations that can impact a company's ability to execute its business strategy and create or destroy value. It centers around "Development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

Approach to Integrating Sustainability in Organisations

Section 2 places on the Board of Directors (or those responsible for governance) and the senior executive team the duty of integrating sustainability and their principles into the processes and "DNA" of the organization through be carefully planned and implemented steps. The guidelines list the steps as follows:

  • Identify key issues & drivers
  • Develop strategy
  • Establish governance & accountability
  • Set targets & action plan
  • Monitor, report & evaluate

Principles and Core Elements

Section 3 of the Guidelines advocates for businesses to go beyond compliance and seek sustainability as part of their business operations. There are nine (9) principles and core elements under the Economic, Environmental, Social and Governance factors that serve as indicators of what constitutes responsible business conduct. These include


  • Businesses should conduct and govern themselves with Ethics, Transparency and Accountability.
  • Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner.
  • Businesses should provide products and services that are safe and contribute to sustainability throughout their life cycle.
  • Businesses should engage with and provide value to their customers and consumers in a responsible manner


  • Businesses should promote the wellbeing of all employees
  • Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.
  • Businesses should respect and promote human rights.
  • Businesses should support inclusive growth and equitable development


  • Business should respect, protect, and make efforts to restore the environment

Reporting Requirements

Section 4 of the Guidelines stipulates that all listed companies are to issue sustainability reports which can be contained in the Annual Report or issued in a separate sustainability report. The time for issuance of the report mirrors the annual report. The sustainability report shall contain information that is relevant and meaningful to stakeholders. To identify material sustainability matters, listed companies should also consider the themes and guidance provided in internationally accepted standards such as the Global Reporting Initiative (GRI) Standard. The guidelines also state the format and reporting obligations. The following key areas should be considered in the report:

  • The overall context on the internal structure, strategy, profile and governance of how the economic, environmental, social risks and opportunities are managed. While also highlighting how the organization addresses a specific disclosure theme.
  • The scope and boundaries of the report. The report could be scoped based on the physical locations of the organization (geographical boundary); entities within the organization (organizational boundary); and operations within the entire value chain.
  • The material sustainability matters and how they are identified and managed. Materiality are topics that reflect the organization's significant economic, environmental, and social impacts, or that would substantively influence the assessments and decisions of stakeholders.
  • Stakeholder inclusiveness. The organization should identify its stakeholders and explain how it has responded to their reasonable expectations and interests.

The Guidelines lists economic, social, governance and environmental performance indicators. These areas are not comprehensive, and the Guidelines encourage companies to identify and disclose additional ESG issues that are relevant and material to its business. The Companies may also refer to the Global Reporting Initiative (GRI) Standard. The Guidelines also encourages reporting companies to consider getting their reports assured or independently verified against international standards.

Apart from expectation of compliance by all issuers, the Exchange shall publish annually the names of issuers who submit their sustainability reports in accordance with these Guidelines and may introduce sustainability ratings and indices, to assess and track the performance of listed companies who make sustainability disclosures.

An Assessment

It can be said that the NSE is a trailblazer by the issuance of the Guideline. Many countries with advanced capital market are still struggling with introduction of any form of mandated disclosure of material sustainability data. Of significance are the new disclosures now required under the performance indicators such as suppliers' relations management and ethics as well as human rights. These new disclosures would impose burden on companies to ensure that their suppliers both local and foreign meet sustainability standards. Apart from setting standards for suppliers, more concrete actions such as independent auditing of suppliers may be required to discharge the burden. The human rights disclosure is now a major issue. Questions may arise as to what is to be disclosed. Is the action of third party in breach of human rights disclosable?

For all the innovation and fun fare around the Guidelines there are areas of potential uncertainty, ambiguity and conflict. There is no definition of materiality in the Guidelines and it seems that the reporting company or issuer is to determine materiality which may import a subjective standard. Perhaps the standard for determining insider information in insider trading could have been stipulated so that materiality is price sensitive. Apart from publication of list of those in compliance and the potential rating and indices to be established by the Exchange in future, there is no provision for mandatory sanctions. While such an approach depends on the market disciplining those not in compliance through investor decisions, given our largely unsophisticated investor population, it is doubtful if market forces alone will ensure compliance. Until the Exchange can quantify compliance through a rating system as it has promised in the Guidelines, even institutional investors would be struggling on how to price the risk. It is also not clear whether breach of the Guidelines can ground private litigation thereby transferring enforcement to the investors.


The Guidelines were put in place the NSE to promote and enforce a system of accountability and transparency through sustainability disclosure. Given that Nigeria is still a developing economy and does not have on the Exchange the top polluters in the world today, it is intriguing that it has placed itself as a forerunner in the sustainable development race.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.