OECD

The December, 2025 edition of the Hub highlights a OECD report which examines how company boards across Asia oversee sustainability-related disclosures and how regulatory frameworks, enforcement practices, and corporate governance expectations influence the credibility of such disclosures. Covering eight Asian jurisdictions—China, Hong Kong (China), India, Indonesia, Japan, Korea, Singapore and Viet Nam—alongside France and the United Kingdom for benchmarking, the report highlights the region’s fast-evolving sustainability landscape, growing alignment with international standards, and emerging enforcement challenges such as “sustainability washing.”

 

1. The Sustainability Disclosure Ecosystem

Growing Regulatory Momentum in Asia

Across Asia, most jurisdictions have introduced mandatory sustainability-related disclosure regimes, although scope and depth vary significantly. While Singapore draws heavily on international frameworks (notably IFRS Sustainability Disclosure Standards), others like India, Japan and Hong Kong apply local standards supplemented by global best practices. The scope of disclosures typically covers:

• Metrics and data on environmental, social and governance (ESG) factors
• Value chain information
• Climate-related matters, including risk exposure, governance, strategies, and transition planning
• Forward-looking sustainability-related claims and commitments

The implementation approaches vary, with many jurisdictions using phased rollouts based on market capitalization, recognizing that large listed firms can comply sooner than smaller entities.

Assurance as a credibility tool

Assurance mechanisms—external verification and audit of sustainability reports—play an increasing role in enhancing trust. Asia is gradually moving toward internationally aligned assurance standards such as ISSA and IFRS-based assurance, though consistency remains limited. Assurance practices remain weakest in emerging markets like Indonesia and Viet Nam.

Sustainability Washing: A Broader Concept

A core contribution of the report is its definition of “sustainability washing”, which expands “greenwashing” into a broader construct. It includes two types of misleading sustainability disclosures:

• Disinformation: Intentional misrepresentation or concealment of sustainability-related facts
• Misinformation: Negligent or poorly supported disclosures due to inadequate governance systems

Sustainability washing encompasses both backward-looking reports (e.g., GHG emissions) and forward-looking claims (e.g., net-zero targets). This expanded definition recognizes complex reporting environments and the difficulty of attributing liability in good-faith yet flawed disclosures.

2. Directors’ Responsibility

Directors’ Evolving Role in ESG Governance

Boards play a crucial role in shaping strategy, oversight, and ensuring the accuracy of sustainability disclosures. As sustainability factors increasingly affect enterprise value, directors are expected to integrate these matters into:

• Risk management
• Strategic planning
• Internal control systems
• Disclosure oversight

Many Asian boards have created specialized sustainability or ESG committees. Regulatory expectations require directors to continually update their knowledge of evolving sustainability trends.

Differences in Corporate Governance Models

Jurisdictions vary in their governance orientation:

• Pluralist models (China, India, France) require directors to consider broad stakeholder interests.
• Enlightened shareholder value (ESV) models (Hong Kong, Japan, Singapore, UK) prioritize shareholders while considering stakeholders.
• Shareholder primacy (Korea) focuses narrowly on shareholder interests.

Despite these differences, directors everywhere must act in good faith, with due diligence, on an informed basis, and in the best interest of the company.

Standards of Judicial Review

Two key standards affect directors’ liability for sustainability disclosures:

1. Subjective standard (e.g., India, Viet Nam)
   • Courts defer significantly to board decisions unless there is clear negligence or bad faith.
2. Objective standard (emerging in Hong Kong and Singapore)
   • Courts evaluate whether a reasonable director would have acted differently given the circumstances.

Many jurisdictions also apply the Business Judgment Rule, which shields directors who made informed, conflict-free, and diligent decisions—even if outcomes later prove flawed.

However, as sustainability disclosures become more material to investors, directors’ failure to ensure adequate reporting systems can trigger legal liability, including Caremark-type oversight claims or “stepping stone liability” where regulatory violations lead to director accountability.

3. Enforcement of Sustainability-Related Disclosure

Private Enforcement

Private enforcement remains limited across Asia due to procedural constraints such as standing requirements, weak shareholder litigation culture, and ownership concentration. However:

• Shareholder activism is increasing. Investors have engaged in campaigns demanding better ESG disclosures.
• Shareholders may use tools such as voting, resolutions, and derivative actions to escalate concerns when engagement fails.
• Global examples (e.g., lawsuits on net-zero pledges, misleading climate-related claims) are influencing Asian strategies.

Private actions serve not only as accountability tools but as mechanisms for raising market-wide disclosure standards.

Public Enforcement

Regulators have taken a more active role in shaping compliance. Enforcement tools include:

• Infringement notices, warning letters, and advice letters
• Fines, trading suspensions, or asset freezes (e.g., India’s SEBI)
• Scrutiny of sustainability claims under advertising, consumer protection, and securities laws

Asian regulators tend to apply adaptive enforcement, using tools originally designed for financial disclosures to police sustainability disclosures. Some jurisdictions, like Australia and Hong Kong, have seen early legal cases involving climate-related misrepresentation, offering precedents for Asia.

Interface Between Different Enforcement Strategies

Private and public enforcement interact in important ways. Shareholder activism can prompt regulatory scrutiny, and regulatory actions can empower private litigation. This dynamic ecosystem supports gradual improvement in sustainability transparency.

 

4. Policy Considerations and Recommendations

The report proposes five key reform levers to improve the reliability of sustainability disclosures and strengthen board accountability:

 

1. Legislative and Regulatory Certainty
   • Clarify sustainability disclosure expectations, including definitions of sustainability washing
   • Update corporate and securities law to address emerging risks
   • Create multi-stakeholder expert committees to guide reforms
      
2. Effective Engagement with Companies
   • Regulators should use non-punitive tools (advice letters, guidance, roundtables)
   • Facilitate knowledge-sharing platforms among market participants
   • Encourage meaningful, not symbolic, sustainability communication
      
3. Multi-Layered Enforcement Toolkit
   • Combine public enforcement with private litigation and investor engagement
   • Use an escalation approach—soft guidance first, penalties where necessary
   • Enhance director liability standards for serious failures
      
4. Leveraging Technology
   • Digital tools can improve sustainability reporting, data analytics, verification, and supervisory monitoring
   • Regulators should adopt reg-tech for proactive oversight
      
5. Capacity Building
   • Train directors, senior management, auditors, and regulators
   • Improve availability of skilled sustainability professionals
   • Encourage cross-border regulatory cooperation, especially in climate-related disclosures

 

Conclusion

The report concludes that while Asia has made significant progress in sustainability disclosures, challenges remain in ensuring accuracy, comparability, and enforcement—particularly in combating sustainability washing. Strengthening board accountability is central to robust corporate governance and necessary for aligning Asian markets with global sustainability expectations. Policymakers should focus on clarifying legal requirements, improving enforcement mechanisms, and building institutional capacity to support the transition toward transparent, credible, and decision-useful sustainability reporting.