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Sustainability has become a prominent topic of discussion over the past decade. The United Nations’ concerted efforts to achieve the Sustainable Development Goals (SDGs) by 2030 have stimulated widespread policy action across the globe. As a result, businesses of all sizes have increasingly sought to integrate sustainability into their strategic decision-making processes. Corporate annual reports serve as a valuable resource for examining corporate sustainability initiatives. Growing stakeholder pressure and rising environmental costs have been primary drivers of voluntary sustainability reporting (SR). Certain corporations, such as BP, have proactively published standalone sustainability reports. Disclosing environmental information is essential for corporations, as it not only appeals to socially responsible investors but also fosters accountability to stakeholders. This chapter aims to provide an accessible introduction to the fundamentals of SR. The discussion will be structured to ensure that readers, regardless of their accounting expertise, can comprehend the core issues in this field.

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A variety of factors motivate firms to voluntarily disclose sustainability information within their corporate reports. Compliance with increasing social and environmental reporting regulations is one driver. Additionally, firms may seek to enhance target tracking, facilitate environmental strategy implementation, raise environmental awareness and improve their reputation. Accounting and reporting systems serve as fundamental internal control mechanisms. Sustainability reporting can potentially extend the scope of these systems. However, the integration of social responsibility and social accounting into existing management control frameworks remains limited. This chapter explores various theoretical perspectives that can explain why firms voluntarily disclose sustainability information. We will examine the theoretical frameworks for sustainability reporting practices.

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Sustainability reporting is a critical component of corporate reporting that underscores accountability, communication and governance. The process encompasses various stages, including responsibility management, defining the reporting scope, assessing materiality, determining data requirements, collecting data and disseminating information. Organisations must understand their context, adopt a structured approach, and consider international, regional and national regulations. Sustainability reports should effectively communicate a diverse range of information, including core sustainability metrics, general business information and data from various organisational sources. Sustainability reporting is increasingly mandated for large, publicly listed companies. The Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFDs) and International Sustainability Standards Board (ISSB) are key players in this evolving landscape. GRI standards provide a global framework for disclosing the economic, environmental and social impacts of corporate actions. SASB standards enhance communication between businesses and investors on sustainability matters. The ISSB aims to streamline sustainability reporting by integrating it into financial reporting standards, with mandatory reporting expected in 2024. However, the adoption of these standards by individual jurisdictions will vary. While sustainability reporting is gaining traction, its implementation remains voluntary, influenced by both internal and external factors.

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A 2012 Ernst & Young report identified five key trends driving the growth of sustainability reporting: increasing CFO involvement employee engagement greenhouse gas reporting resource scarcity awareness performance rankings The shift from voluntary to mandatory reporting could enhance the quality of disclosures. The Kyoto Protocol, adopted in 1997, marked a significant step in addressing climate change. Coupled with rising energy and commodity prices, and increasing consumer demand for sustainable products, organisations have recognised the imperative for sustainable development. Regulatory reforms have accelerated the adoption of sustainability initiatives, with a growing emphasis on social responsibility and environmental protection. While financial reporting standards are well-established, the development of standards for governance, ethics and environmental performance is still evolving. Organisations may be hesitant to disclose unaudited sustainability metrics due to potential accountability concerns. Policymakers are increasingly mandating sustainability reporting to improve transparency and long-term performance. Organisations are responding to this pressure by advocating for greater disclosure. Levels of linguistic representation in corpus-linguistic research go through case studies looking at variant alternation and linguistic choice in the domains of semantics (or lexical analysis), phonetics, phonology, morphology, syntax, discourse, gesture, and sign research. It covers the kinds of contexts that condition alternation in variationist corpus linguistics. This chapter covers studies that investigate synonyms, polysemy, forced alignment and forced aligners, sociolinguistic vowel variation, phonetic alphabets, insertion, borrowing, morphological productivity, dative alternation, healthcare interactions, and turn-taking. Clustering techniques and regression are mentioned, as well as the types of annotations needed to conduct fruitful research. The purpose of this chapter is to give students a first look at the wide range of research questions that can be investigated using corpora and corpus-linguistic techniques and to understand how annotation types and various methods can be used to answer specific research questions.

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The Global Reporting Initiative (GRI) is a leading international standard-setter for sustainability reporting. While the GRI framework has been instrumental in driving sustainability disclosure, challenges such as materiality assessment and the lack of mandatory adoption persist. Nevertheless, the GRI has adapted to emerging global challenges and established a Global Standards Fund to support ongoing development. The Task Force on Climate-Related Financial Disclosures (TCFD) was formed to address the growing need for climate-related financial information. The TCFD framework provides guidance for organisations to disclose climate-related risks and opportunities, encouraging widespread adoption across various sectors. The Sustainability Accounting Standards Board (SASB) focuses on material sustainability information relevant to investors. By aligning with existing frameworks and best practices, SASB standards enhance the comparability and reliability of sustainability disclosures. The International Sustainability Standards Board (ISSB) has introduced global baseline standards for sustainability-related financial disclosures. These standards require companies to disclose climate-related risks and opportunities, promoting greater transparency and comparability in sustainability reporting.

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Large listed companies within the EU are now subject to mandatory non-financial reporting under the Non-Financial Reporting Directive, with the scope of disclosure set to expand under the forthcoming Corporate Sustainability Reporting Directive. Similarly, jurisdictions like Australia have introduced obligations for companies to address modern slavery and disclose climate-related risks and strategies. To facilitate consistent and comparable sustainability reporting, organisations such as the Global Reporting Initiative (GRI), Value Reporting Foundation (VRF) and Sustainability Accounting Standards Board (SASB) have developed standards and frameworks. By establishing standardised metrics and disclosure requirements, these frameworks aim to enhance market efficiency and inform decision-making. Crucially, they emphasise the interconnectedness of sustainability factors and financial performance, providing investors with a more comprehensive assessment of organisational health.

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Corporate governance and corporate reporting are inextricably linked, with their evolution mutually influencing each other. Traditionally, corporate governance focused primarily on protecting shareholder interests, aligning with the shareholder primacy perspective championed by Milton Friedman. However, the evolving role of corporations and the increasing influence of stakeholders have necessitated a broader approach to governance. The relationship between board composition, financial performance and integrated reporting warrants further investigation within a unified theoretical framework. The convergence of corporate governance and sustainability reporting is evident in the growing emphasis on non-financial disclosures. Companies are increasingly recognising the importance of addressing stakeholder expectations and mitigating risks associated with environmental and social impacts. The shift from voluntary to mandatory reporting in regions like the European Union underscores the significance of sustainability information for informed decision-making. Transparency is a cornerstone of effective corporate governance and sustainability reporting. By disclosing non-financial information, companies can bridge the information gap between management and stakeholders, fostering trust and enhancing accountability.

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Sustainable business models (SBMs) go beyond traditional value creation by considering the needs and interests of diverse stakeholders. This necessitates mutual value generation that benefits all parties involved. The concept of sustainable value creation (SVC) delves into comprehensive notions of value, exploring who it matters to and how it is produced. This chapter provides practical SVC initiatives. Additionally, the pivotal role of shareholder value in the SVC framework is addressed. Environmental management decisions, coupled with investments in fixed and current assets, significantly impact production methods, decision-making processes and specialised skills. Several factors influence shareholder value: Investment in current assets: Allocating resources effectively can enhance production efficiency and overall productivity. Operational management: Effective management practices directly affect sales revenue, net operating margin and income tax rates. Financing methods: Strategic financing decisions, such as securing environmental loans at lower interest rates, can positively influence shareholder value. However, the adoption of the Total Business Benefit (TBL) framework has led to varying responses from companies regarding sustainability issues. Achieving uniformity remains a challenge, impacting accountability for ethical and social performance.

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The price of producing sustainability reports among corporations is increasing with the primary aim to meet the needs of a diverse range of stakeholders as well as comply with regulatory measures. Therefore, professional accounting and regulatory bodies have highlighted the importance of assurance practices that could improve the credibility of these sustainability reports. Corporate stakeholders may demand assurance on sustainability reports even if it is not legally required by a regulator or standard setter. Assurance services can play a vital role in helping stakeholders obtain sustainability performance information that is as reliable, accurate and timely as they desire. Sustainability reports, which are relevant and reliable, are crucial for both internal and external users. Both internal and external auditors have a unique role to play in the sustainability assurance process. Internal auditors can assist management in the preparation of sustainability reports and assure the integrity and credibility of the reports. External auditors ensure independent and objective assurance through professional assurance services. GRI advocates the use of external assurance for sustainability reports, recommending key qualities, such as competence, voluntary, uniformity of sustainability reporting, high enforcement, law enforcement, mandatory, and the ability and availability of accounting and consulting firms to audit or review all dimensions of sustainability performance. More credible sustainability information improves the level of trust and confidence that stakeholders have in a company’s disclosure.

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Management accounting serves as a vital tool for assisting managers in their decision-making process. It evaluates both financial and non-financial information, ensuring that managers have all relevant data to make informed choices. Over the past decade, there has been a notable shift towards integrating sustainability considerations into corporate policies. Consequently, managers now require deeper insights into the environmental impact of their investment, financing and operational decisions. This growing emphasis has given rise to the need for sustainability management accounting (SMA) practices. Management accounting plays a pivotal role as an information tool for managers. It supports strategic and operational planning, serves as the foundation for decision-making, provides feedback on outcomes and acts as a control mechanism. As environmental issues exert increasing influence on corporate economic performance and eco-efficiency, effective management accounting systems must accurately identify and evaluate the impact of corporate sustainability practices. Incorporating environmental considerations into conventional management accounting ensures that corporations remain accountable for the financial consequences of environmentally induced activities – such as environmental protection initiatives and investments in cleaner production processes. Similarly, SMA SMA systems, akin to traditional management accounting, facilitate the decision-making process. Additionally, SMA ensures accountability across various levels of company management and support staff responsible for products, sites and divisions. In an ideal scenario, all impacts – whether on society or the natural environment – would be seamlessly integrated into management accounting systems. However, practical considerations come into play. Business managers must decide to what extent they voluntarily incorporate SMA practices within their current operations.

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Transition and physical risks can significantly impact the demand for products and services. Organisations must carefully consider their potential effects on revenues and identify opportunities for enhancing or developing new revenue streams. Notably, as carbon pricing emerges and grows as a mechanism to regulate emissions, industries affected by such pricing need to assess its impact on business revenues. An organisation’s response to climate-related risks and opportunities often hinges on its cost structure. Suppliers with lower costs tend to be more resilient in the face of climate-related challenges and more adaptable in addressing them. By transparently communicating their cost structure and flexibility to adapt, organisations can better inform investors about their investment potential. Additionally, investors benefit from understanding capital expenditure plans and the necessary debt or equity levels to fund these initiatives. The resilience of these plans should consider the organisation’s ability to shift capital and the willingness of capital markets to support entities exposed to significant climate-related risks. Transparent disclosure of these plans may enhance access to capital markets and improve financing terms. Changes in supply and demand resulting from climate policies, technological advancements and market dynamics can impact the valuation of an organisation’s assets and liabilities. Long-lived assets and reserves are particularly susceptible to climate-related issues. Organisations should explicitly indicate the potential climate-related impact on their assets and liabilities, especially long-lived assets. This disclosure should focus on existing and committed future activities, including decisions related to new investments, restructuring, write-downs or impairment. Furthermore, climate-related risks and opportunities may reshape an organisation’s debt and equity structure. Increased debt levels might compensate for reduced operating cash flows or new capital expenditures and research and development (R&D) initiatives. It could also affect the organisation’s ability to raise new debt or refinance existing debt, potentially shortening borrowing tenors. Additionally, changes to capital and reserves may result from operating losses, asset write-downs or the need to raise new equity to support investments.

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The Sustainability Accounting Standards Board (SASB) crafted a conceptual framework in February 2017 to establish precise definitions of key concepts, principles and objectives for first-time adopters of sustainability accounting. This framework centres around five dimensions: environment, social capital, human capital, business model and innovation, and leadership and governance. Materiality, defined as information that could impact a company’s financial condition or operating performance, plays a crucial role. Companies bear the responsibility of identifying and reporting material information in their sustainability reports, necessitating an industry-specific review before publication. SASB’s framework aims to enhance decision usefulness for investors by providing sustainability information that is fair, useful, applicable, comparable, complete, verifiable, aligned, neutral and widely distributed in annual reports. The Global Reporting Initiative (GRI) comprises a set of sustainability reporting standards designed for organisations to present their activities in a structured manner. These standards prioritise transparency and usefulness for decision-makers. The process involves three steps: Impact assessment: Identifying an organisation’s impact on the economy, environment and people. Materiality assessment: Determining the most significant impact of an organisation’s activities across these dimensions. Due diligence: Addressing, preventing, mitigating and accounting for potential negative impacts. Additionally, the International Sustainability Standards Board (ISSB) introduced the IFRS Sustainability Disclosure Standards in June 2023. These standards serve as a global benchmark for sustainability reporting, covering fair representation, materiality, timing of reporting and implementing judgements. The ISSB recommends integrating sustainability reports with financial statements, ideally spanning 12 months while addressing material sustainability risks and opportunities.

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Investors face challenges in identifying green business activities within corporate annual reports, which serve as the primary sources of information. The sustainability disclosure standards proposed by the International Financial Reporting Standards (IFRS) have the potential to strike a balance in sustainability reporting. However, the integrated annual report of Umicore, the 2023 award winner for best impact sustainability reports, lacks further granularity in classifying turnover resulting from sustainable products or services and operating income. This chapter delves into the accounting for green revenue within corporate sustainability reports. The FTSE Russell Green Revenue Classification System (GRCS) provides a distinctive framework for identifying green products and services across ten sectors, including energy, environmental support services, food and agriculture, transport and water management. The GRCS employs a tiering system to categorise the overall environmental impact associated with green activities: Tier 1: Encompasses core activities with significant environmental benefits. Tier 2: Covers activities with more limited but net positive environmental effects. Tier 3: Addresses activities with greater environmental benefits and net neutrality or negativity. This tiering process empowers users of sustainability reports to comprehend their exposure to varying levels of green products and services, enabling informed decision-making. Additionally, this chapter explores the recognition of environmental expenses – expenditures incurred by companies with environmental impacts. These expenses fall into two categories: Direct expenses: Directly linked to environmental impacts. Indirect expenses: Challenging to measure and integrate with economic evaluation. Companies, such as Daigas Group, report environmental expenses in their 2023 sustainability reports, typically treating them as period expenses. To enhance transparency regarding financial risks, environmental expenses should be disclosed separately. Capitalisation of costs should only occur if they contribute to future economic benefits. Early recognition of potential expenses necessitates collaboration with environmental protection agencies.

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To ensure the usefulness of sustainability-related financial information, it must not only be relevant but also faithfully represent its intended purpose. Achieving a fair presentation necessitates disclosing pertinent details about sustainability-related risks and opportunities – factors that could reasonably impact an entity’s prospects. These disclosures should align with the principles outlined in the relevant standard. Materiality, a context-specific aspect of relevance, depends on the nature and magnitude of the items to which the information pertains. This assessment occurs within the context of the entity’s sustainability-related financial disclosures. Metrics and targets delve into the entity’s performance concerning sustainability-related risks and opportunities. The primary goal is to provide users of general-purpose financial reports with insights into the governance processes, controls and procedures used to monitor, manage, and oversee these aspects. Key considerations include Identifying the governance body or individual responsible for oversight. Determining appropriate skills and competencies. Ensuring informed decision-making regarding sustainability-related risks and opportunities. Integrating sustainability considerations into strategic oversight. Establishing targets related to sustainability-related risks and opportunities. Clarifying management’s role in governance processes. Furthermore, the entity must disclose information about the effects of sustainability-related risks and opportunities on its financial position, performance and cash flows during the reporting period (current financial effects). Additionally, anticipated effects over the short, medium and long term should be considered, taking into account how sustainability-related factors are integrated into the entity’s financial planning (anticipated financial effects).

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The growing emphasis on sustainability has propelled “green” financing, which takes into account Environmental, Social and Governance (ESG) factors. The European Commission, as part of the European Green Deal, has introduced the “Renewed Sustainable Finance Strategy”. This strategy addresses concerns related to reputational risks, project nature and intricate reporting procedures. As demand for “green” financing rises and the number of “green” finance products increases, accounting and reporting challenges emerge. The European Green Bond Standard (EUGBS) is currently under development by the European Union (EU). Its primary goal is to redirect capital towards sustainable investments. By establishing this standard, the EU aims to achieve sustainable and inclusive growth. The EUGBS will assist investors in identifying high-quality green bonds and facilitate their issuance. However, despite this initiative, there are no global regulations within the International Financial Reporting Standards (IFRS) or commercial accounting legislation specifically addressing financial reporting for “green” financial instruments. The auditing profession must intensively address this novel category of financial instruments. Financial institutions stand to benefit from uniform recommendations regarding financial reporting aspects. Green loans, designed with specific purposes, repayment schedules and associated costs, adhere to the Green Loan Principles. These loans impact both lenders and borrowers in terms of financial statements. Lender’s assessment: Lenders must classify green loans within the statement of financial position based on PSAK 71’s business model criterion and contractual cash flow characteristics. If the interest rate variation reflects changes in the instrument’s credit risk and aligns with that change, the loan can pass the SPPI (Solely Payments of Principal and Interest) test. Borrower’s considerations: Borrowers evaluate whether a green loan contract should be classified as debt, equity, or a compound instrument under PSAK 50. Additionally, they assess changes in expected cash flows due to sustainability-linked measures. If these cash flows deviate from market interest rates, borrowers adjust the effective interest rate accordingly.

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The FASB and IASB have revised their standards on accounting for acquired goodwill, retaining the impairment-only approach but considering simpler tests. Sustainability reporting (SR), on the other hand, focuses on data disclosure without meaningful aggregation and measurement. The European Sustainability Reporting Standards and the International Sustainability Standards Board are the most ambitious standards. The proposed SR standards include requirements related to financial reporting, considering environmental, social and governance impacts on financial risks and opportunities. SR faces challenges such as multiple reporting frameworks, a large volume of rating and ranking organisations, diverse target audiences, increasing expertise and different definitions of materiality. To improve comparability and efficiency, companies should combine different standards and harmonise disclosures, metrics and indicators. Companies should segment audiences by broad categories or issue priorities, differentiate between reporting, communications and stakeholder engagement, and create a “transparency hub”. Companies should also develop multi-year reporting strategies to address stakeholder demands, revised standards and new reporting frameworks. Future research directions include revisiting empirical relations in the context of CSR reporting, exploring the development of SR from theoretical and practical perspectives and providing a wider perspective and theoretical support for research on SR.