What are the 3 Pillars of Corporate Sustainability?
1 min
Level
What are the 3 pillars of corporate sustainability and why are they important?
The voice of impact
ESG / CSR
Industries
MEASURE
ACT
COMFORM
What sustainability means for accountancy
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For decades, accountancy has been about balance sheets, profit margins, and financial forecasting. But today, a company’s bottom line isn’t just about revenue, it’s also about impact. Investors, regulators, and customers are looking beyond traditional financial statements, asking tougher questions: What risks does this company face from climate change? Is it prepared for the shift to a low-carbon economy? How does it impact the planet?
Sustainability is no longer a peripheral issue in business. It has become a factor in risk management, investment decisions, and long-term corporate strategy. And accountants now find that their role is expanding beyond financial reporting to include emissions tracking, climate risk assessment, and sustainability disclosures.
This article explores the changing role of accountancy in a world where sustainability is no longer optional. We’ll look at how accountants are integrating environmental, social, and governance (ESG) factors into financial decision-making, and why climate change has become the most pressing financial risk.
“ As new regulations raise the stakes, businesses can no longer afford to treat sustainability as an afterthought. Accountants will need to adapt, not just to ensure compliance, but to help companies build resilience and stay competitive in an economy where sustainability and financial success are increasingly connected. ”
What is sustainability in accounting?
“ Sustainability in accountancy encompasses the financial, environmental, and social factors that shape a company’s long-term stability. Accountants are increasingly being asked to integrate environmental, social, and governance (ESG) considerations into financial strategy, ensuring businesses remain both profitable and sustainable. ”
While sustainability accounting covers multiple areas, three key dimensions stand out:
1. Environmental accounting
Companies are under pressure to track, report, and reduce their environmental impact. This has made environmental accounting an essential part of financial management. Accountants are now responsible for:
- Carbon accounting and emissions reporting: Businesses are increasingly being asked to calculate and disclose Scope 1, 2, and 3 emissions, ensuring transparency in climate performance.
- Regulatory compliance: Frameworks such as the Corporate Sustainability Reporting Directive (CSRD), IFRS Sustainability Disclosure Standards, and GRI (Global Reporting Initiative) mandate detailed reporting on environmental impact.
- Climate risk integration: Accountants are often required to assess how climate-related risks (such as extreme weather, carbon pricing, and supply chain disruptions) could impact financial stability.
- Sustainability-linked finance: Lenders and investors increasingly use climate and ESG metrics to determine access to capital. Businesses with strong sustainability performance may benefit from better financing terms.
2. Social and human capital accounting
Sustainability also considers how businesses treat people and contribute to society. Social and human capital accounting helps companies measure:
- Labor and fair pay standards: Ensuring ethical practices, fair wages, and safe working conditions.
- Diversity and inclusion: Tracking representation at all levels, from leadership to entry-level employees.
- Community and supply chain impact: Assessing how business operations affect local communities, workers, and suppliers.
- Human rights and ethical sourcing: Evaluating risks such as modern slavery, exploitative labor practices, and unsustainable sourcing.
3. Governance and ethical financial reporting
Sustainability reporting is only effective if the data is accurate, verifiable, and free from greenwashing. Strong governance ensures that businesses can back up their ESG claims with robust financial and non-financial reporting. This includes:
- Transparency in ESG reporting: Companies must align with recognised frameworks such as IFRS, CSRD, and the Task Force on Climate-Related Financial Disclosures (TCFD).
- Risk management and internal controls: Ensuring sustainability risks are monitored, reported, and factored into financial planning.
- ESG accountability at the board level: Companies need clear sustainability governance, with boards and finance teams actively involved in setting climate and ESG strategies.
- Avoiding greenwashing and misinformation: Regulators are cracking down on misleading sustainability claims. Accountants play a critical role in ensuring ESG data is accurate and auditable.
Good governance is what makes sustainability credible. Without it, ESG commitments risk becoming marketing statements rather than measurable financial strategies.
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How sustainability accounting works in practice
“ Sustainability accounting means turning environmental and social data into strategic financial insights. Accountants play a critical role in quantifying sustainability impacts, aligning ESG efforts with financial performance, and ensuring compliance with growing regulatory requirements. ”
Sustainability accounting tools & methodologies
To integrate sustainability into financial decision-making, accountants use a variety of tools, including:
| Tool/Methodology | Purpose |
|---|---|
| True Cost Accounting (TCA) | Captures the hidden environmental and social costs of business activities, such as pollution or labor exploitation. |
| Natural Capital & Social Capital Accounting | Measures the financial value of nature-based solutions and human capital investments. |
| Lifecycle Assessments (LCA) | Evaluates the environmental impact of a product or service over its full lifecycle. |
| Carbon Accounting Models | Tracks direct and indirect emissions to align with climate reporting standards. |
| Double Materiality Assessment | Identifies both the financial impact of sustainability risks on a company and the company’s impact on society and the environment. |
Accountants translate sustainability data into measurable financial terms, helping businesses make informed decisions about sustainability investments, risk mitigation, and ESG strategy.
Navigating sustainability reporting frameworks
With ESG reporting moving from voluntary to mandatory, businesses need guidance on which standards to follow. Some of the most widely used sustainability reporting frameworks include:
| Framework | Focus Area |
|---|---|
| CSRD (Corporate Sustainability Reporting Directive) | Mandatory ESG reporting for large EU companies. |
| GRI (Global Reporting Initiative) | Covers economic, environmental, and social impact reporting. |
| IFRS Sustainability Disclosure Standards | Focuses on investor-relevant sustainability disclosures. |
| SASB (Sustainability Accounting Standards Board) | Industry-specific ESG metrics linked to financial performance. |
| TCFD (Task Force on Climate-Related Financial Disclosures) | Requires climate-related risk and opportunity disclosures. |
Many businesses use multiple frameworks depending on industry, regulatory requirements, and investor expectations. Accountants must ensure that sustainability data is aligned with financial disclosures and can stand up to scrutiny from regulators and stakeholders.
The financial case for sustainability accounting
Beyond compliance, sustainability accounting creates real business value. Companies that embed sustainability into financial strategy can:
- Improve risk management: Climate risks, resource shortages, and regulatory penalties are minimised when sustainability is fully integrated into financial planning.
- Attract investors and access better financing: ESG-focused investment funds and sustainability-linked loans reward companies with strong sustainability performance.
- Enhance brand reputation and customer trust: Transparent ESG reporting strengthens consumer confidence and stakeholder relationships.
- Drive cost savings and operational efficiency: Sustainability data highlights inefficiencies, leading to smarter resource management and lower operational costs.
Accounting and climate action
While sustainability in accounting covers a broad range of factors, climate change is the financial risk that businesses can no longer afford to overlook. It is reshaping regulatory requirements, influencing investment decisions, and forcing companies to reconsider their long-term financial strategies.
Climate risk is now a business risk
Rising global temperatures, extreme weather events, and shifting environmental policies are not just disrupting ecosystems, they’re disrupting balance sheets. Climate change is now a material financial risk, with direct consequences for corporate valuations, insurance costs, and supply chain stability. Accountants must treat it as they would market volatility, credit risk, or operational uncertainty.
Some of the most pressing financial risks linked to climate change include:
| Climate Risk | Financial Impact |
|---|---|
| Extreme Weather Events | Damage to physical assets, supply chain disruptions, increased insurance costs. |
| Regulatory Pressure | Fines, legal liabilities, and higher operational costs for businesses that fail to comply with emissions regulations. |
| Carbon Pricing & Emissions Trading | Higher costs for high-emission businesses due to carbon taxes and cap-and-trade systems. |
| Investor & Market Shifts | Reduced investment in carbon-intensive industries, increased capital flow to sustainable businesses. |
| Reputational & Consumer Risk | Loss of market share as consumers and stakeholders demand greater sustainability transparency. |
These risks have direct implications for financial planning, budgeting, and long-term corporate strategy.
The end of voluntary climate reporting
For years, businesses could choose whether or not to disclose their climate risks. That era is over. Governments and financial regulators are making climate reporting mandatory, placing accountants at the center of compliance.
Some of the most significant regulations include:
| Framework | Scope & Applicability | Key Climate Reporting Requirements |
|---|---|---|
| CSRD (Corporate Sustainability Reporting Directive) – EU | Mandatory for large EU companies, including those meeting two of the following: 250+ employees, €50M+ turnover, or €25M+ assets. Expands to listed SMEs from 2026. | Disclose Scope 1, 2, and 3 GHG emissions; Conduct double materiality assessment; Report on climate transition plans aligned with EU Taxonomy; Align disclosures with ESRS; Third-party assurance required. |
| ISSB IFRS S1 & S2 – Global | Applies to publicly listed companies in jurisdictions that adopt ISSB standards (e.g., UK, Canada, Australia, Singapore, Japan, among others). Designed for global financial markets. | Requires disclosure of climate-related financial risks and opportunities; Report Scope 1, 2, and Scope 3 emissions if material; Must align with TCFD recommendations; Climate resilience scenario analysis required; Compatible with CSRD and SEC climate rules. |
| SEC Climate Disclosure Rule – USA (Upcoming) | Expected to apply to publicly traded companies registered with the US Securities and Exchange Commission (SEC). Final rule pending adoption. | Requires disclosure of Scope 1 and 2 emissions, and Scope 3 if material or part of reduction targets; Mandatory reporting on climate-related financial risks; Requires transition risk disclosures; Companies must disclose climate-related governance and oversight; Climate risk financial impact must be integrated into financial statements. |
| TCFD (Task Force on Climate-Related Financial Disclosures) – Global | Mandatory in the UK, EU, Japan, New Zealand, Canada, and other jurisdictions. Adopted by over 4,000 companies globally. | Requires disclosure of climate governance, strategy, risk management, and metrics; Businesses must assess climate-related financial risks (physical & transition risks); Encourages scenario analysis for climate resilience; Companies must integrate climate risks into overall risk management frameworks. |
| UK Sustainability Disclosure Requirements (SDR) – UK | Applies to UK-listed companies, asset managers, and large private companies. Builds on TCFD framework and ISSB standards. | Requires climate risk disclosures aligned with ISSB; Mandates reporting on sustainability impacts for investment firms; Includes FCA rules for ESG fund labeling to prevent greenwashing. |
| EU Green Taxonomy – EU | Mandatory for large EU companies subject to CSRD, financial institutions, and investors managing EU-regulated funds. | Defines which economic activities qualify as 'environmentally sustainable'; Requires companies to report on Taxonomy-aligned revenue, CapEx, and OpEx. |
These frameworks are shaping financial decision-making. Businesses will need accountants to not only track carbon emissions but also quantify climate risks in financial terms.
The accountant's role in net zero transition planning
Many businesses have announced emissions reduction targets, but very few have a credible plan to achieve this. Without financial expertise, sustainability commitments remain just words. Accountants are essential in turning these targets into measurable, actionable financial strategies.
Key areas where accountants are driving net zero planning include:
- Carbon accounting and emissions tracking: Ensuring accurate measurement and reporting of Scope 1, 2, and 3 emissions.
- Financial planning for decarbonisation: Identifying cost-effective pathways to reduce emissions and transition to clean energy.
- Climate scenario analysis: Modeling different regulatory and climate scenarios to assess financial risk exposure.
- Carbon pricing and offsetting strategies: Navigating emissions trading schemes, carbon taxes, and the role of offsetting in financial planning.
Without financial oversight, businesses risk setting unrealistic sustainability goals, facing regulatory non-compliance, and losing investor confidence.
The financial consequences of climate inaction
“ Companies that fail to integrate climate risks into their financial strategies face growing costs and shrinking access to capital. Investors and financial institutions are already shifting away from high-carbon industries and toward businesses with strong climate strategies. ”
For accountants, this means:
- Quantifying climate risks in financial terms and embedding them into corporate risk management.
- Ensuring compliance with evolving climate disclosure regulations.
Helping businesses transition toward net zero through informed financial planning.
With climate change reshaping the financial landscape, accountants must take on a leadership role. The next section will explore the specific actions finance professionals can adopt to integrate sustainability into core financial strategy, ensuring resilience in a rapidly changing economy.
How accountants can incorporate climate action
With climate risks becoming financial risks and sustainability reporting shifting from voluntary to mandatory, accountants are no longer just reporting on climate impacts, they are shaping business strategy. Companies that integrate climate considerations into financial planning will gain a competitive edge, while those that fail to act face higher costs, regulatory penalties, and shrinking investor confidence.
Embedding climate risks into financial decision-making
Climate-related risks - whether from extreme weather events, regulatory shifts, or carbon pricing - should now be treated as material financial factors. Accountants need to:
- Integrate climate risk into corporate financial models: Assess how physical risks (extreme weather, resource shortages) and transition risks (policy changes, carbon pricing, market shifts) could affect cash flow, asset valuation, and operational costs.
- Use scenario analysis and climate stress testing: Model best-case, moderate, and worst-case climate scenarios to assess financial exposure.
- Ensure climate risks are captured in financial statements: Under new regulations, businesses will need to quantify climate-related financial impacts in provisions, impairments, and contingent liabilities.
Strengthening carbon accounting and emissions tracking
Regulatory requirements and investor demands mean businesses must report accurate, auditable emissions data. Accountants play a key role in:
- Tracking Scope 1, 2, and 3 emissions: Ensuring compliance with CSRD, ISSB, SEC, and TCFD reporting standards.
- Verifying emissions reduction targets: Companies will be expected to set science-based targets (SBTs) and disclose progress.
- Navigating carbon markets and pricing mechanisms: Businesses must understand cap-and-trade systems, carbon offsetting, and the financial impact of carbon taxes.
Developing a net zero financial strategy
Transitioning towards net zero targets requires not just sustainability commitments, but clear financial planning. Accountants can:
- Map out cost-effective decarbonisation pathways: Identify high-emission cost centers and investment opportunities in low-carbon alternatives.
- Support climate-aligned investment decisions: Companies will need to divest from carbon-intensive assets and prioritise sustainable investments.
- Align sustainability with corporate budgeting: Ensure sustainability initiatives are financially integrated rather than treated as standalone CSR efforts.
The future of accountancy
Accountants who develop climate expertise will be at the forefront of a profession that is shifting from compliance to incorporating elements of strategic leadership. Businesses that embed climate considerations into financial planning will gain a long-term advantage, while those that delay will face increasing financial instability and regulatory pressure.
How Greenly can help businesses navigate the climate accounting shift
As sustainability reporting moves from voluntary to mandatory, businesses need expert guidance to integrate climate considerations into financial decision-making. Greenly provides comprehensive carbon management solutions that help companies track emissions, comply with evolving regulations, and build financially viable sustainability strategies.
Our key services include:
- Carbon accounting: Accurately track Scope 1, 2, and 3 emissions.
- Regulatory compliance and audit readiness: Align sustainability reporting with financial disclosure frameworks and prepare for audits.
- Climate risk analysis: Identify financial exposure to carbon pricing, regulatory shifts, and climate-related operational risks.
- Decarbonisation planning: Develop science-based targets (SBTs), emissions reduction roadmaps, and credible offsetting strategies.
Greenly helps businesses stay ahead of climate regulations, mitigate financial risks, and turn sustainability into a strategic advantage. Get in touch with us today to find out more.
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