Sustainability accounting
is all about measuring and reporting an organization’s impact on the environment and society alongside its financial performance. It goes beyond the traditional bottom line and helps companies account for things like carbon emissions, water usage, labor practices, and community engagement. Sometimes it is called ESG Accounting (Environmental, Social, and Governance).
It is an attempt to integrate previously externalized costs into a more comprehensive balance sheet. Externalized costs occur for example in the mining industry where the extraction of resources from rocks causes damages to the environment. Society as a whole then needs to cover the cost of restoration whereas mining companies reap the profits alone.
More and more organizations practice Sustainability Accounting, not just because it’s the right thing to do, but because investors, regulators, and customers increasingly expect transparency.
Sustainability reporting
Sustainability reporting is mandatory for large companies that have business operations in the European Union. Included are also companies which sell in this market. Guidelines for sustainability reporting have been standardized by European regulators (archived here). In this blog article we explain these and other standards for sustainability reporting.
Corporate Sustainability Reporting Directive
CSRD is a European Union regulation that significantly expands the scope and depth of sustainability disclosures required from companies (archived here). Starting with fiscal year 2024, it applies to around 50,000 companies, including large EU firms and non-EU companies with significant operations in Europe. CSRD mandates reporting on environmental, social, and governance (ESG) issues using the European Sustainability Reporting Standards (ESRS).
Task Force on Climate-related Financial Disclosures
The TCFD is a global framework developed by the Financial Stability Board. It focuses specifically on climate-related financial risks and opportunities. Its structure is built around four pillars: governance, strategy, risk management, and metrics & targets.
How do they relate?
In summary, CSRD’s climate disclosure requirements are broadly aligned with TCFD’s four pillars. Companies already using TCFD are well-positioned to comply with CSRD, especially for climate-related reporting. TCFD is climate-specific, while CSRD covers a broader range of sustainability topics, including social and governance issues.
CSRD vs. TCFD
| Feature | CSRD | TCFD |
|---|---|---|
| Type | EU regulation | Voluntary global framework |
| Focus | Broad ESG disclosures via ESRS | Climate-related financial disclosures |
| Compatibility | CSRD aligns with TCFD structure | TCFD users are well-positioned for CSRD |
CSRD vs. ISSB
| Feature | CSRD | ISSB (IFRS S1 & S2) |
|---|---|---|
| Legal Status | Mandatory in the EU | Voluntary, gaining global traction |
| Scope | Comprehensive ESG reporting | Focused on climate and sustainability |
| Interoperability | Growing collaboration with ISSB | Supports dual-framework reporting |
CSRD vs. GRI
| Feature | CSRD | GRI |
|---|---|---|
| Legal Status | Legally binding | Voluntary long-standing framework |
| Approach | Prescriptive and detailed | Rich ESG metrics with flexibility |
| Relationship | Draws on GRI principles | Often used to complement CSRD |
Implementation in Practice
Many companies are mapping their existing TCFD or GRI reports to CSRD and ISSB requirements to streamline compliance. Tools like interoperability guidance from the ISSB and EU help navigate overlaps and avoid duplication.
Further reading
https://www.manifestclimate.com/global-climate-disclosure-requirements-comparison/
https://corpgov.law.harvard.edu/2025/06/19/comparison-of-significant-sustainability-related-reporting-requirements/
Image: Pixabay
