Is It OK to Publish a Sustainability Statement Without a Governance Chapter? Pandora’s 2024 Report Sparks Debate

A missing governance chapter in Pandora’s 2024 sustainability report has raised questions about the credibility and completeness of ESG disclosures.

As companies navigate their first year of CSRD compliance, Pandora’s decision to exclude a Governance chapter from its ESRS-aligned Sustainability Statement has ignited debate. The company asserts that governance had no material impacts, risks, or opportunities (IROs) in its Double Materiality Assessment (DMA). But does this omission highlight a flaw in Pandora’s reporting, a failure of auditing, or an issue with how DMA is applied?

Governance: Immaterial or Simply Misdirected?

While governance was omitted from the Sustainability Statement, Pandora dedicated 11 pages to the topic in its Annual Report. This raises an immediate contradiction: if governance is immaterial, why report extensively on it elsewhere? Annual reports are meant to focus on material aspects—so if governance is relevant for shareholders, does that not imply materiality?

The logical gap here is hard to ignore. If the rationale for excluding governance from the Sustainability Statement is that it does not meet the materiality threshold, then why is it still a prominent feature in other corporate disclosures? If governance information is included because of regulatory or shareholder expectations, then by definition, it holds material significance.

The Double Materiality Assessment (DMA) Conundrum

Pandora followed a structured DMA process, incorporating external and internal stakeholder input, overseen by its Sustainability Board and Board of Directors. However, the conclusion that governance posed no material IROs is surprising, particularly given the company’s scale and industry.

Governance is typically expected to be material for large multinational corporations. The company’s only justification for governance immateriality is: “These sub-topics are less material or immaterial from a sustainability perspective, based on current practice and assessments.” But this raises more questions than it answers:

• What “current practices” are being referenced?
• Does this imply that Pandora has such strong governance structures that governance-related risks are fully mitigated?
• Or does it reflect an overly conservative or restrictive interpretation of double materiality?

Explaining why a topic is not material is not required under ESRS (except for E1), but providing a robust explanation would enhance transparency and trust.

What Do ESG Analysts and Investors Think?

Some argue that governance should always be material, alongside climate (E1) and workforce (S1). ESG risk analysts, particularly those working from an investor perspective, emphasize that sustainability reporting serves as a tool for companies to demonstrate risk mitigation efforts. Since ESG analysts typically do not rely solely on a company’s DMA but instead use sector-based materiality benchmarks, a lack of governance disclosure could be perceived as an indication of inadequate risk management. Without visibility into governance measures, analysts might assume the company has governance-related vulnerabilities, which could reflect poorly on its leadership and oversight structures.

From this perspective, it’s not about whether governance is formally labeled “material”—it’s about whether stakeholders can assess governance risks based on the information provided. If investors and analysts lack visibility, they may assume governance risks are unmanaged. Pandora is presumably dodging this bullet by disclosing governance matters elsewhere in their report.

Is This Just an ESRS Technicality?

Another angle considers the structure of the ESRS itself. Some governance topics are mandatory for all companies under ESRS 2, including board structure, due diligence, stakeholder engagement, and risk management. Other governance topics—such as political lobbying, bribery, and supply chain practices—are subject to materiality assessment. It is possible that Pandora’s governance-related disclosures were split across ESRS 2 and the management review part of the Annual Report, rather than excluded altogether.

If that’s the case, does it make sense to critique Pandora for not putting governance into the Sustainability Statement, or does this simply reflect the evolving nature of ESRS implementation?

The Role of Auditors: Should We Trust Their Judgment?

Pandora’s Sustainability Statement received limited assurance, meaning auditors reviewed and signed off on the process that led to governance being deemed immaterial. Given that auditors currently are on the side of caution, this could indicate that governance genuinely did not meet Pandora’s materiality threshold.

However, limited assurance is exactly that—limited. It does not guarantee that an issue is genuinely immaterial, only that the process to determine materiality was reasonable. Should stakeholders simply accept the conclusion, or does this call for greater scrutiny of how governance is being evaluated in DMA processes?

Key Takeaways for 2025 CSRD Reporting

Pandora’s case highlights key challenges companies will face as they finalize their first CSRD-compliant reports:

• Materiality decisions should be clearly explained—even when a topic is deemed immaterial.
• Stakeholders beyond auditors will scrutinize materiality conclusions—investors, ESG analysts, and advocacy groups have their own expectations.
• Governance is difficult to dismiss as immaterial—companies should be prepared to defend exclusions convincingly.

As the first wave of CSRD reports rolls out, cases like Pandora’s will set precedents for materiality decisions. Whether this will lead to greater transparency or growing skepticism toward DMA outcomes remains to be seen.

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