Understanding the growing importance of Environmental, Social, and Governance reporting—and how accounting professionals can adapt.

ESG has shifted from "nice-to-have" marketing to decision-useful, investor-grade information. New standards now define what to report, how to govern and control it, and—more and more often—who must obtain assurance. That's the sweet spot for CPAs. Below is a practical, source-backed playbook to help you advise clients and build durable ESG reporting and assurance capabilities.

1. The Standards Landscape—What Actually Matters Right Now

ISSB (IFRS S1/S2)

The International Sustainability Standards Board issued IFRS S1 (general sustainability disclosures) and IFRS S2 (climate) effective for annual periods beginning Jan 1, 2024 (jurisdictional adoption varies). They're investor-focused and emphasize financial materiality. SASB Standards are now maintained by the IFRS Foundation and are the go-to industry-based metrics within S1/S2. (IFRS Foundation, Global Reporting Initiative, EFRAG)

Interoperability with Europe

ISSB and EFRAG published joint guidance to reduce duplication when reporting under both ISSB and the EU's ESRS. In short: financial materiality concepts align; ESRS also adds impact (double) materiality. (Proskauer)

EU CSRD/ESRS

The Corporate Sustainability Reporting Directive phases in from FY 2024 (first wave) with detailed ESRS standards and a massive datapoint list (EFRAG IG 3). ESRS requires double materiality (financial + impact) and a limited-assurance requirement initially, with possible progression to reasonable assurance in later years. (Global Reporting Initiative, EFRAG, DART)

United States—SEC Climate Rule Status

The SEC adopted a climate disclosure rule in March 2024 but voluntarily stayed it pending litigation; in March 2025 the SEC voted to end its defense of the rule. Outcome remains uncertain, so registrants should still monitor investor expectations and state requirements. (SEC)

California (SB 253 + SB 261)

Regardless of federal uncertainty, California requires large companies "doing business" in the state to disclose Scopes 1–3 GHG emissions and climate-related financial risks starting in 2026, with limited assurance on Scopes 1–2 in 2026 and reasonable assurance from 2030; Scope 3 timing and assurance are being finalized through CARB rulemaking (FAQ updated July 2025). (California Air Resources Board)

2. Core Concepts CPAs Need to Master

Materiality (Single vs. Double)

  • ISSB (IFRS S1): disclose material sustainability-related risks and opportunities—i.e., what could reasonably be expected to affect the entity's prospects for investors. (IFRS Foundation)
  • ESRS/CSRD: disclose what is material from a financial perspective and/or an impact perspective (double materiality). (DART)

GHG Accounting Baselines

Build inventories per the GHG Protocol:

  • Scope 1 (direct), Scope 2 (purchased energy), Scope 3 (value chain; 15 categories). Use current Scope 2 guidance and Scope 3 calculation guidance. (GHG Protocol)

Controls Over Sustainability Reporting

COSO's 2023 guidance maps the internal-control framework (5 components, 17 principles) to sustainability data—useful for building "ICSR." (COSO, DART)

Assurance Standards and Ethics

  • IAASB ISSA 5000 (issued Nov 2024; effective for periods beginning Dec 15, 2026) sets a global, principles-based framework for limited and reasonable assurance on sustainability information, to be used with IESBA's IESSA ethics and independence standards. (IAASB, EFRAG)
  • In the U.S., CPAs can use the AICPA's Attestation Engagements on Sustainability Information guide to apply AT-C/SSAE to ESG and GHG engagements. (AICPA)

3. A Practical Workflow You Can Run with Clients

  1. Scope & applicability. Map entities and jurisdictions to applicable regimes (e.g., CSRD, ISSB-aligned markets, California SB 253/261, voluntary frameworks). Document scoping assumptions early.
  2. Materiality assessment.
    • If ESRS applies: run a structured double materiality process (identify impacts/risks/opportunities, engage stakeholders, document thresholds/decisions) and maintain robust evidence for assurance.
    • If ISSB applies: assess financial materiality (investor lens) and use SASB industry metrics to operationalize.
  3. Data inventory & mapping. Build a line-item inventory of required datapoints (e.g., ESRS IG 3 list; IFRS S2 climate metrics). Link each datapoint to a data owner, source system, and calculation method to enable auditability.
  4. GHG inventory buildout. Stand up Scope 1–3 following GHG Protocol; define org/operational boundaries, emission factors, estimation methods, and data-quality ratings. Keep a transparent methodology file and versioned workpapers—critical for assurance under ISSA 5000.
  5. Controls & governance (ICOSR).
    • Map ESG processes to COSO (control environment; risk assessment; control activities; information/communication; monitoring).
    • Embed management review controls on high-judgment estimates (e.g., Scope 3 Category 1 purchased goods).
  6. Draft disclosures.
    • ISSB: structure around governance, strategy, risk management, metrics & targets (TCFD lineage) for climate (S2) and add other material sustainability topics (S1).
    • ESRS: compile cross-cutting ESRS 2 plus topic standards (e.g., E1 Climate requires Scopes 1–3, intensity, transition plan).
  7. Assurance readiness. Decide limited vs reasonable pathways, define evidence plans (traceability, completeness, controls testing), and pre-clear criteria with your assurance provider.
  8. Systems & automation. Select tooling that preserves data lineage, supports calculation transparency, and exports auditor-friendly evidence packs.

4. What to Report—Quick Metric Guide by Pillar

Environmental (examples):

  • GHG: Scopes 1, 2, 3; total; intensity; targets and progress. (ISSB S2; ESRS E1-6; IG3 datapoints)
  • Energy & transition: energy consumption, renewable share; transition plan disclosures. (ESRS E1)

Social (examples):

  • Own workforce (ESRS S1): headcount, demographics, turnover, pay, health & safety, adequate wages, training—segregated for employees vs. non-employees where required.

Governance (examples):

  • Business conduct (ESRS G1): anti-corruption policies, confirmed incidents, lobbying/political activity, supplier conduct, payment practices.

5. U.S. Focus: What to Do with the SEC Pause and State Rules

Even with the SEC rule paused, investors, lenders, and rating agencies continue to expect decision-useful climate information. Many filers are building to ISSB/TCFD and preparing for California requirements (Scopes 1–3 and climate-risk reporting beginning 2026, with defined assurance phases). If you have California nexus, start scoping and data collection now; CARB's FAQs lay out timing and assurance expectations while rulemaking finalizes mechanics. (SEC, California Air Resources Board)

6. Assurance—How to Explain It to Management

Dec 15, 2026 ISSA 5000 effective date for sustainability assurance engagements
  • Limited assurance: moderate (negative-form) conclusion; fewer procedures; often the starting point under CSRD and California for early years.
  • Reasonable assurance: high (positive-form) conclusion; deeper evidence and testing—closer to a financial statement audit mindset. ISSA 5000 governs both, effective for periods beginning Dec 15, 2026; use IESSA for ethics/independence. For U.S. attest, the AICPA guide shows how to apply SSAE/AT-C to sustainability. (IFAC Web, IAASB, AICPA)

7. A 90-Day CPA Action Plan

Implementation Timeline

  • Days 1–30: Confirm scope (jurisdictions, entities); pick baseline(s) (ISSB/ESRS); set governance; kick off double- or single-materiality workshops; gap-assess against ESRS IG 3 / SASB metrics.
  • Days 31–60: Build/refine GHG inventory (S1–S3) and document methods; stand up key controls mapped to COSO; draft climate narrative (strategy, risks, metrics/targets).
  • Days 61–90: Compile draft disclosures; perform internal QC; do a pre-assurance rehearsal (evidence binder, traceability, management representations); align on limited vs reasonable trajectory under ISSA 5000 (and AT-C in the U.S.).

8. Common Pitfalls (and How to Avoid Them)

  • Scope 3 paralysis. Use the GHG Protocol categories, start with material hot-spots, and disclose methods/uncertainties transparently. (GHG Protocol)
  • Controls after the fact. Build ICOSR alongside calculations, not after; align to COSO early. (COSO)
  • Mixing materiality concepts. Be explicit when applying ISSB financial materiality vs ESRS double materiality; document judgments for assurance.

Bottom Line

This is mainstream corporate reporting now. CPAs are uniquely positioned to translate evolving ESG rules into disciplined processes, reliable metrics, and credible assurance. If you anchor on ISSB/ESRS requirements, GHG Protocol measurement, COSO-style controls, and ISSA 5000/AICPA assurance frameworks, you'll help clients produce ESG information investors can actually trust.

Key Resources