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The Code defines “sustainability” to mean conducting operations in a manner that meets existing needs without compromising future needs, and calls for company strategy to promote sustainability. It also recommends actions to be taken by the Board to enhance the well-being of the economy, society and the environment. The Code contains provisions that are mandatory minimum standards, as well as those upon which the ‘apply or explain’ standard is imposed.


Mandatory duties of the board of a listed company (the Board) that require full compliance include a duty on the Board to ensure that:

  • The Board protects, enhances and invests in the well-being of the economy, society and the environment.

  • The Issuer, with shareholder approval, develops formal and transparent policies and procedures on corporate disclosure, including disclosure on ESG concerns.

  • The Board develops a Code of Ethics and Conduct (which includes sustainability) and promotes its application by all directors, management and employees.

  • The Board, in accounting, considers not only the financial performance but also the impact of the company’s operations on society and the environment.


For other duties, Issuers are to explain instances of non-application of the recommendations set out in the Code, and set out the steps being taken towards full application of the relevant requirements. These include duties on the Board to:

  • Provide disclosures on compliance with laws, regulations and standards; ethical leadership, conflict of interest, corporate social responsibility and citizenship.

  • Promote integrated reporting that provides material information on the commercial, social and environmental context within which the organisation operates.

  • Incorporate ethical and sustainability risks and opportunities in the risk management process, and establish an effective risk management framework which is inclusive of key risks, foreseeable risks, and environmental and social risks and issues. 


To provide bite and an avenue for enforcement of the Code, the Capital Markets (Securities) (Public Offers, Listing and Disclosures) (Amendment) Regulations, 2016 (the CMA 2016 Regulations) now make it mandatory for every Issuer to disclose in its annual report whether it is applying the recommended corporate governance practices, and where it is not, to indicate the steps being taken to achieve the application of such practices.

The CMA 2016 Regulations enhance the requirement for corporate governance by prescribing the composition of Boards, including the establishment of committees and the number of appointments applicable to a chief executive officer or chairperson of a listed company. The Board of a listed company must consist of executive and majority non-executive directors (who, together with the independent directors, constitute at least one third of the board), and the chairperson must be independent. The performance of the Board (including its chairperson, chief executive officer and company secretary) and committees of the Board must be evaluated on an annual basis. Any person appointed as a chairperson or executive director cannot serve in that capacity in more than two listed companies at the same time. The Regulations also prohibit the appointment of a body corporate as an alternative director. To ensure that shareholder participation is encouraged, and to protect their interests, the Board is required to facilitate the effective exercise of the rights of shareholders and to ensure that there is equitable treatment for all holders of the same class of issued shares.

Mid this year, the Nairobi Securities Exchange (the NSE) published its draft ESG Disclosures Guidance Manual (NSE Guidance Manual) for NSE listed companies, which provides direction to listed companies on how to collect, analyse and publicly disclose and report ESG performance consistently, transparently and based on a principled approach that satisfies the expectations of stakeholders. The NSE Guidance Manual recommends the application of the Global Reporting Initiative (GRI) Sustainability Reporting Standards, 2018 as the common framework for ESG reporting by Kenyan-listed companies. The NSE Guidance Manual is aimed at assisting listed companies to meet the reporting requirements of the Code.

The NSE Guidance Manual also identifies the integration of sustainability into business strategies as a core component of good corporate governance practices, and the Board is expected to ensure that the long-term sustainability of the organisation is assured. Recommendations are made for the appointment of a focal point for sustainability within the listed company (the sustainability manager), although the Board retains overall accountability for ESG performance and disclosure to stakeholders.

To enhance the credibility of the publicly disclosed ESG information, the NSE Guidance Manual identifies the International Standards on Assurance Engagements (ISAE) 3000 as the suitable standard, but recommends that a listed company must first pass its own self-assessment before procuring external assurance services.

There are also sector-level differences emerging with regards to ESG reporting requirements. This is, for example, in the case of institutions licensed under the Banking Act, such as commercial banks and mortgage finance companies (Institutions). The Central Bank of Kenya (the CBK) has more recently (in October of this year), published guidance on climate-related risk management (the Guidance). The Guidance requires Institutions (whether publicly listed or not), to monitor and report (both internally as well as externally, to the CBK), exposures to climate-related risks. These Institutions are also to develop an appropriate approach to disclosing, climate-related information to stakeholders to enhance transparency. The Guidance highlights the Task Force on Climate related Financial Disclosures’ recommendations as a desirable framework for institutions to benchmark their disclosure frameworks.


Putting it all together

Any Issuer must understand these transparency and disclosure requirements of the Code, as read with the CMA 2016 Regulations, as they relate to sustainability and ESG concerns, and put in place policies, procedures and controls that enable it to establish and regularly review compliance with the Code and the CMA 2016 Regulations. The prescriptions on the compositions of the Board, attempts to limit instances of conflict of interest, and the requirements for ESG transparency and disclosure are expected to enhance the protection of the interests of shareholders and those of other stakeholders that are impacted by the operations and activities of the Issuer.

In addition, an Issuer must also be cognisant of the sector-specific requirements on climate and sustainability-related reporting set out by other regulators, such as the CBK, as highlighted above.

There are overlaps and elements of duplication between the Corporate Governance Reporting Template published by the CMA and the NSE Guidance Manual (should it be approved for use), and Issuers will likely have difficulty addressing these inconsistencies, although compliance with the Code has been anchored by the CMA 2016 Regulations and is likely to prevail in the event of doubt.

Developments in Kenya so far indicate that, as far as ESG is concerned, D is for disclosure. Requirements on both public and private entities are bound to become increasingly detailed as the legal and regulatory framework continues to rapidly take shape. 


Ndolo is Managing Partner and Wambua a Partner, Environmental Law | CDH Kenya.


D is for disclosure

Sammy Ndolo and Clarice Wanbua

A Review of Corporate Sustainability Reporting Requirements for Listed Companies in Kenya

Companies in Kenya have made sound progress on the disclosure of information relating to sustainability, often referred to as environmental, social, and governance (ESG) concerns, and many of the larger companies have been publishing annual sustainability reports and other ESG-relevant content. This is largely attributable to changes in the law following the enactment of the Code of Corporate Governance for Issuers of Securities to the Public, 2015, the Capital Markets (Securities) (Public Offers, Listing and Disclosures) (Amendment) Regulations, 2016, and the Companies Act, 2015, in which greater attention is paid to corporate sustainability disclosure, as well as company efforts to keep in line with global sustainability trends.  

What the law says
Under the Companies Act, 2015, directors of a company (whether public or private) are required to have regard for the impact of the operations of the company on the community and the environment. This is an improvement on the previous and now repealed Companies Act, 1948, which did not make provision for environmental concerns. However, although the Companies Act, 2015 recognises impacts to the environment, its provisions do not go far enough to provide clarity on the director duties and standards to be applied in this regard.

The Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (the Code), contains more far-reaching provisions on ESG issues and the duty for corporate disclosure. The Code repealed the Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya, 2002. The Code applies to, among others, listed companies in Kenya (Issuers). 

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