Accounting for Tomorrow: Mastering the Shift to Universal Sustainability Standards

Sustainability, climate change, and climate finance are among the recent buzzwords echoing through geo-politics, national politics and are even impacting the business landscapes. Even ICAI and SEBI have foreseen this trend, which is evident in their recent steps like SEBI's 2025 circular that revised the BRSR norms — including a tiered implementation for the top 1,000 listed companies and "BRSR Core" adoption with assured KPIs for the top 250 companies — and the launching of initiatives like SAE 5000 by ICAI.

Even the IFRS Foundation has come out with IFRS S1 — General Requirements for Disclosure of Sustainability-related Financial Information — and IFRS S2 — Climate-related Disclosures — in June 2023, introducing the first global standards for the disclosure of investor-focused sustainability information.

However, these recent standards are not pioneer efforts to establish globally accepted frameworks for sustainability. Multiple earlier initiatives have paved the way, as detailed in Table 01 below.

This multiplicity of standards can lead to confusion among professionals as to their application in a given scenario. This article aims to resolve these concerns of Indian Chartered Accountants. It emphasizes a brief account of the standards and where they can be used. It is also important to note that the IFRS Foundation, via the ISSB, has subsumed some of the above-mentioned bodies and attempted to integrate their disclosures in IFRS S1 and S2.

Task Force for Climate-related Financial Disclosure (TCFD)

It was established in 2015 by the Financial Stability Board (FSB). It focused on improving climate-related financial disclosures, with an emphasis on transparency and comparability. It classified risks into physical (e.g., extreme weather) and transition (e.g., policy shifts to low-carbon economies). Disclosures were structured around four pillars: Governance, Strategy, Risk Management, and Metrics & Targets. TCFD has been fully integrated into ISSB standards.

Sustainability Accounting Standards Board Standards (SASB)

It is a not-for-profit organisation focused on financially material ESG disclosures. SASB provided 77 industry-specific standards across five dimensions (Environment, Social Capital, Human Capital, Business Model & Innovation, Leadership & Governance). Emphasizing financial materiality, it was merged into the IFRS Foundation in 2022 and serves as guidance in ISSB standards.

Climate Disclosure Standards Board (CDSB)

Aiming at integrating environmental reporting with financial statements, CDSB targeted investors by equating natural and financial capital. It featured guiding principles (e.g., relevance, verifiability, forward-looking) and reporting requirements aligned with TCFD pillars. CDSB's content has been consolidated into ISSB standards.

The Global Reporting Initiative (GRI) Standards

Till date it is widely used for stakeholder accountability. GRI emphasizes impact materiality (effects on economy, environment, and people), which is a combination of financial and non-financial factors. Its modular structure includes Universal Standards (foundation, general disclosures, material topics), Sector Standards (industry-specific), and Topic Standards (detailed ESG issues). While not fully subsumed, GRI complements ISSB by focusing on broader impacts.

All these diverse standards overwhelm business owners and even professionals providing assurance on their statements. Further, with the addition of the EU's CBAM (Carbon Border Adjustment Mechanism), EUDR (European Union's Deforestation Regulation) and other similar statutes, one can only expect ESG and sustainability reporting to further expand.

However, this plethora of standards and disclosures exhibits a silver lining for Chartered Accountants and other professionals in India. CAs are at the forefront of Financial Reporting and Auditing in India. This, coupled with the ongoing drive for incorporating sustainability and ESG reporting, provides a great opportunity for Chartered Accountants to reap maximum benefit from this integration movement.

Another blessing in disguise came in the form of the establishment of the International Sustainability Standards Board (ISSB) by the IFRS Foundation. The above-mentioned CDSB, TCFD, SASB Standards and even the Integrated Reporting framework have been subsumed in ISSB. The IFRS Foundation is a not-for-profit organization which sets the reporting standards globally. Indian Accounting Standards (Ind AS) represent an adopted version of standards issued by IFRS. These were further finetuned by ICAI to suit domestic requirements by carve-ins and carve-outs.

It is imperative to view IFRS S1 and S2 not merely as reporting checklists, but as foundational capital-market infrastructure. This represents a structural shift from voluntary ESG 'storytelling' to investor-focused enterprise value reporting, where sustainability risks are priced directly into the cost of capital, as depicted in Table 02 below.

The consolidation of Financial Reporting Standards and Sustainability Reporting Standards under the same issuing body is highly significant, suggesting a future where many concepts and terminologies will overlap or be directly applicable across both domains. This is a considerable advantage for Chartered Accountants (CAs). The journey toward global sustainability benchmarks mirrors the profession's successful transition from Indian GAAP to Ind AS. Having already mastered the complexities of global financial convergence and local 'carve-ins/outs,' Indian CAs are the most qualified architects to lead the integration of non-financial data into mainstream corporate reporting. The profession that delivered Ind AS will now deliver the next-generation sustainability standards. Let's delve into IFRS S1 and S2 briefly.

IFRS S1 — General Requirements for Disclosure of Sustainability-related Financial Information

It is the fundamental standard for all sustainability disclosures, comparable to IAS 1 / Ind AS 1 for Financial Reporting. Its primary objective is to assist reporting entities to disclose information regarding their sustainability-related risks and opportunities in a manner useful to the general user of financial statements, to assist them in their decision making.

The standard also focuses on the "Enterprise Value" concept — i.e., factors affecting the entity's cash flows, access to finance, and/or cost of capital over the short/medium/long term are considered. Additionally, the coverage is not limited to climate; the entire ESG spectrum is included.

1. The four core content areas: IFRS S1 requires disclosures over four core content areas. These areas are consistent with the recommendations of the Task Force on Climate-related Disclosures (TCFD), i.e., Governance, Strategy, Risk Management and Metrics & Targets.
2. Key Principles and Requirements: IFRS S1 introduces several requirements to ensure usefulness and quality of disclosures. These are majorly consistent with IAS 1 / Ind AS 1.
   1. Connected Information: The user should be able to connect information in financial reports with the facts and figures presented in the sustainability report. For example, impairment of assets in a flood-prone area due to flood risk.
   2. Reporting Entity: The sustainability-related disclosures must pertain to the same entity/group to which the financial reports are referred. For example, a standalone sustainability report of a subsidiary can't be referred to in the Group's Financial Statements.
   3. Fair Presentation: The disclosure should provide a complete, neutral, and accurate depiction of the sustainability-related risks and opportunities.
   4. Reference to Other Standards: An entity is required to consider SASB Standards to identify industry-specific sustainability-related risks and opportunities and the corresponding metrics; and in case of unavailability of a standard, SASB / other standards are to be referred.

IFRS S2 — Climate-related Disclosures

IFRS S2: Climate-related Disclosure is the first theme-based standard issued by the ISSB. It applies to one of the most discussed and debated topics of climate change. It effectively bridges the gap between the principles of IFRS S1 and detailed, mandatory disclosures about climate.

The standard covers three categories of climate-related risk and opportunities:

1. Climate-related Physical Risks: Risks related to the physical impacts of climate change.
   • Acute: Event-driven (e.g., floods, wildfires).
   • Chronic: Longer-term shifts (e.g., rising sea levels, sustained heat waves).
2. Climate-related Transition Risks: Risks associated with the transition to a lower-carbon economy.
   1. Policy & Legal: New regulations (e.g., carbon pricing, emissions limits).
   2. Technology: Replacement of existing technologies (e.g., shift to electric vehicles).
   3. Market: Changes in supply and demand (e.g., consumer preference for low-carbon products).
   4. Reputation: Loss of reputation due to climate performance.

1. Climate-related Opportunities: Potential benefits from adapting to or mitigating climate change (e.g., new product development, energy efficiency savings).

Apart from the above, the standard also requires climate-specific disclosures structured around TCFD recommendations, i.e., Governance, Strategy, Risk Management and Metrics & Targets. However, it is also pertinent to note there are some critical requirements under Metrics & Targets in IFRS S2:

1. Greenhouse Gas Emissions: Here, an entity is required to disclose its absolute GHG emissions for Scope 1, Scope 2 and Scope 3.

Measurement: GHG emissions must be measured in accordance with the Greenhouse Gas Protocol Corporate Standard.

1. Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, owned facilities).
2. Scope 2: Indirect emissions from the generation of purchased electricity, steam, heat, or cooling.
3. Scope 3: All other indirect emissions in the value chain (e.g., purchased goods, business travel, use of sold products).
4. Capital Deployment and Internal Carbon Pricing: IFRS S2 requires disclosures about the amount and percentage of assets susceptible to climate-related physical and vulnerable risk, and also those which can benefit from climate-related opportunities. Further, disclosures regarding the amount of capital expenditure towards climate-related risk and opportunities, and whether the company is using internal carbon pricing in its decision making, and how.
5. Climate Targets: Disclosure regarding quantitative and qualitative climate-related targets (e.g., Net-Zero commitments, renewable energy goals) and the progress made toward achieving them. If a net GHG emissions target is set, the entity must also disclose the corresponding gross target.

“The ICAI has already issued the Standard on Sustainability Assurance Engagements (SAE) 3000 and SAE 3410 (for GHG statements), providing the technical framework for practitioners to deliver these services.

Alignment with India's SEBI BRSR Core

While IFRS standards provide a global benchmark, India has decided to come out with its own regulatory and reporting leadership by mandating one of the most descriptive and comprehensive frameworks in the global south. In 2021, SEBI replaced the narrative-based Business Responsibility Report (BRR) with BRSR. It was further evolved with the introduction of BRSR Core in 2023.

SEBI's BRSR and BRSR Core align closely with IFRS S1 and S2. BRSR Core mandates assured KPIs on ESG metrics like GHG emissions (Scopes 1–3), water usage, and supply chain sustainability, mirroring IFRS S2's climate disclosures. While IFRS emphasizes investor-driven materiality tied to financial impacts, BRSR integrates broader stakeholder considerations but increasingly converges on enterprise value through value-chain reporting. This alignment facilitates Indian companies' compliance with global standards like EU CBAM, positioning CAs to advise on integrated reporting under both regimes. ICAI's SSA 5000 further supports assurance, ensuring BRSR disclosures are reliable and comparable.

A key conceptual distinction runs through the global landscape. GRI follows impact materiality (double materiality): what the company does to the economy, environment and society. IFRS S1/S2 follow financial materiality (single materiality): what sustainability issues do to the company's cash flows, cost of capital and enterprise value.

India sits at the perfect intersection. SEBI's BRSR began with a stakeholder lens (closer to GRI) but BRSR Core is rapidly converging toward financial materiality through assured KPIs and value-chain reporting, as depicted in Table 03. This dual approach gives Indian companies and CAs a natural advantage — we can speak both languages fluently when dealing with global investors and domestic regulators.

The report is divided into three sections:

1. Section A — General Disclosures: Details regarding size, location, and workforce.
2. Section B — Management and Process Disclosures: Governance, leadership oversight, and policy implementation.
3. Section C — Principle-wise Performance Disclosures: Granular reporting on indicators such as energy consumption, water withdrawal, and employee well-being.

While the regulatory mandate begins with the top 1,000 listed companies, the ripple effects will reach far wider. Banks and large corporates are already demanding BRSR-aligned sustainability data from their suppliers and borrowers. Mid-sized companies seeking foreign funding, credit facilities, or participation in global value chains will face de-facto pressure to report under IFRS S1/S2 principles by 2027–28.

For Small and Medium Practitioners (SMPs), this creates a significant new practice area: helping clients build basic sustainability data systems, conduct materiality assessments, and prepare for voluntary or bank-mandated disclosures. Early movers among SMPs will be able to offer high-value advisory services at a fraction of major multinational accounting firms' costs, expanding their relevance and revenue streams.

“With the convergence of IFRS S1/S2 and India's BRSR framework, Chartered Accountants are uniquely positioned to lead this transition.

Where do CAs fit in?

The advent of these new sustainability standards and the integration of ESG data into mainstream reporting frameworks creates a multi-dimensional opportunity for Chartered Accountants. Chartered Accountants' pre-existing and thoroughly trained expertise in data integrity, audit aspects and methodology, and strategic financial and cost planning can be directly imported into the sustainability domain.

1. Sustainability Assurance and the Audit of Non-Financial Information: This is the most immediate opportunity and a natural, almost inevitable, extension of a Chartered Accountant's traditional skill set. As sustainability data becomes mandatory and impacts the financial position, investors require independent assurance (audit) over the reported figures. The ICAI has already issued the Standard on Sustainability Assurance Engagements (SAE) 3000 and SAE 3410 (for GHG statements), providing the technical framework for practitioners to deliver these services.
2. Preparation & Advisory Services: CAs can assist in preparation of the annual sustainability report (BRSR in India), advising on materiality, framework selection, etc. CAs can also assist in the prevention of greenwashing — i.e., when companies show themselves as more environmentally sound than they actually are.
3. Corporate Strategy and Integration: These roles bridge the gap between finance, risk management, and sustainability, positioning the CA in a strategic leadership role. Mitigation of environment-based risks puts strain on the financial stability of companies. Usually demanding heavy upfront capital allocations, CAs can assist in the evaluation of Environmental-Risk-adjusted IRR/NPV and also in pricing of the end product by valuing the "Greenium" — amalgamating the concepts of carbon pricing in capital budgeting.
4. Internal Controls over Sustainability Reporting (ICSR): Among the fundamental challenges in sustainability reporting is the reliability of underlying data. As non-financial data is often kept in fragmented form and is rarely linked to existing ERP applications, CAs can participate by providing some degree of assurance over completeness, accuracy and traceability of data.

Sustainability reporting is no longer peripheral — it has become central to capital allocation, risk pricing, and regulatory compliance in global markets. With the convergence of IFRS S1/S2 and India's BRSR framework, Chartered Accountants are uniquely positioned to lead this transition.

The same professionals who mastered Ind AS and built robust internal financial controls will now design internal controls over sustainability data (ICSR), assure GHG emissions and ESG metrics, price climate-adjusted risk into investment decisions, and advise boards on capital deployment that creates long-term enterprise value.

The opportunity is clear: upskill in ESG assurance and advisory today, and Chartered Accountants will not only protect India Inc. against climate and regulatory risks — they will actively shape the future of responsible capital markets. The time to act is now.