Sustainability accounting and ESG: The double inoculation to climate change

Climate change, inequality, and other challenges have made sustainability a prominent topic today. The world demands sustainable growth that satisfies our needs without jeopardising those of future generations. Other than personal awareness, government policies also push for the creation and enforcement of laws, such as placing a price on carbon to discourage emissions. Every sector needs it, and accounting is no exception.

This brings us to sustainable accounting. What is it?

• It measures, assesses, and discloses a company’s social and environmental implications.
• It caters to all stakeholders in a company, who have various interests, starting from compensation differences to the firm’s greenhouse gas emissions, to ensure the safety and cleanliness of their neighbourhoods.
• It understands that investors typically have an interest in a company’s financial performance, which includes ESG.

Companies that meet specific ESG standards are more appealing to investors. However, measuring sustainability is a challenge. A lot of the data used to assess a company’s sustainability is supplied by the business itself, and it isn’t necessarily audited. It differs significantly from published financial information. Businesses don’t have to disclose anything they don’t want to because ESG disclosures are optional, and there aren’t many repercussions for making extravagant claims or not disclosing information.

Sustainability accounting and ESG are there to stay on the horizon. Long-term efforts are essential for environmental sustainability if we want to protect both the planet and humanity. We need strong corporate standards that are quantitatively enforced, accountants trained to measure sustainability precisely and thoroughly and we all need to contribute to changing how we live if we are to attain environmental sustainability.