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CMA Final Paper 20A study materials
CMA Final Paper 20A study resources

CMA Final Paper 20A: Governance and Sustainability

CMA Final Paper 20A · Work through your exam, one topic at a time.

All guide sections

Governance and Sustainability

Governance questions test the allocation of board power and the disclosure consequences; sustainability questions test whether you can link ESG commitments to measurement, assurance and reporting rather than slogans.

Governance rules

  • Companies Act, 2013: independent directors under section 149(6); at least one woman director for prescribed classes; audit committee under section 177; nomination and remuneration committee; related-party transactions under section 188 require approval and arm's-length pricing.
  • SEBI LODR, 2015: board composition, audit committee and risk management committee requirements for listed entities; material related-party transactions need shareholder approval; insider-trading rules prohibit trading on unpublished price-sensitive information.
  • OECD principles and the UK Cadbury code are reference points for board independence, accountability and transparency.

Sustainability

  • Triple bottom line: profit, people, planet. ESG factors are financially material when they affect cash flows, risk or cost of capital.
  • Frameworks: GRI for impact reporting, SASB for industry-specific financial materiality, TCFD for climate risk, integrated reporting's six capitals, and SEBI's BRSR for the top 1,000 listed entities.
  • Section 135: CSR spend is 2% of average net profits of the three preceding financial years; unspent amounts follow the ongoing-project or transfer rules.

Worked example

Average net profits for the three preceding years are ₹80 crore. CSR obligation = 2% × ₹80 crore = ₹1.60 crore. If the company spends ₹1.20 crore, the ₹40 lakh shortfall must be transferred to an Unspent CSR Account within 30 days where it relates to an ongoing project, and spent within the project period; otherwise it goes to a notified fund within six months. The board report must explain the shortfall.

Traps

  • Treating CSR as public relations rather than a statutory obligation.
  • Claiming green credentials without data, boundaries or assurance (greenwashing).
  • Confusing independent directors with non-executive directors.
  • Ignoring related-party transaction thresholds and shareholder approval.