ESG accounting standards set the rules companies use to report environmental, social and governance performance alongside financial results. SSCOGLOBAL explains how ESG accounting standards change reporting practice, how they affect decisions and why the right advisers are important to accompany you in this. This article is written to help executives and finance leaders in the UAE choose the right path with help from the best accounting firms in UAE.
What are ESG accounting standards?
ESG accounting standards create a common basis for measuring and reporting sustainability information that investors can use. These rules aim to make environmental social and governance disclosures comparable across companies and transparent to capital markets. The International Sustainability Standards Board has published IFRS S1 and IFRS S2 as a global baseline for sustainability-related disclosures, and jurisdictions are adapting those standards for local use. Investors, lenders and regulators now look for information prepared under recognized ESG accounting standards because that information feeds credit decisions, valuations and risk assessments. The IFRS Foundation explains the role of the ISSB and the new standards in plain terms.
How ESG accounting standards effect financial statements?
ESG accounting standards influence the figures that appear in the financial statements even when they are framed as non-financial disclosures. Climate risks and legal changes can change cash flow forecasts, useful lives of assets, and provisions for remediation. The KPMG briefing on sustainability and IFRS highlights that sustainability issues may already affect impairment tests, depreciation and provisions under existing accounting rules. Practical changes include stress-testing budgets, reassessing useful lives of property and equipment, and recognising provisions where damage has already occurred. These effects mean that adoption of ESG accounting standards requires coordination between sustainability teams and financial accountants.
The global picture and how it reaches the UAE
The ISSB standards provide a global baseline that many regulators and exchanges now reference when they write local rules. Jurisdictions seek to adopt or align with the ISSB to avoid fragmentation and to support cross-border capital flows. In the UAE, exchanges and regulators have issued guidance and expectations for sustainability disclosure and they encourage companies to adopt consistent frameworks. The Dubai Financial Market and Abu Dhabi exchanges publish ESG reporting guides that steer listed companies toward recognised ESG accounting standards and measurement approaches. Companies operating in Dubai must therefore consider both the global standards and the local disclosure guides when they design their processes.
What boards and auditors will ask for
Boards will want assurance that sustainability claims hold up under scrutiny. Auditors and assurance providers will want documented processes, traceable data and internal control over the collection and aggregation of sustainability metrics. The market for ESG assurance services is evolving quickly and accounting firms are expanding those services. Leading professional firms now offer independent assurance on sustainability disclosures and work with clients to align sustainability data to ESG accounting standards. The Financial Times has reported on how major accounting firms are investing in assurance capabilities for new reporting demands.
How ESG accounting standards change internal processes
Adopting ESG accounting standards means designating owners, defining material topics, and building data flows that link source systems to the financial ledger.Companies need to decide which ESG (environmental, social, and governance) metrics are most important and manage them with the same care and accuracy as financial data. This work requires clear controls, defined measurement methods and routine reconciliations so that disclosures prepared under ESG accounting standards are repeatable and auditable. Where companies plan to seek third-party assurance, the controls must be in place at the start of the reporting cycle.
The role of accounting advice and why to work with the best accounting firms in UAE
Accounting teams need practical help to translate sustainability metrics into accounting outcomes. The best accounting firms in UAE use the combination of their technical accounting knowledge with advisory skills on sustainability reporting and assurance. These firms help clients map ESG inputs to financial statement items, test assumptions in impairment models, and design disclosures that comply with both global ESG accounting standards and local guidance. Engaging the best accounting firms in UAE early reduces the risk of restatements and speeds the path to credible, investor-grade reporting.
Materiality and sector focus under ESG accounting standards
Materiality determines what a company should disclose and measure under ESG accounting standards. Companies with heavy physical operations prioritise emissions, resource use and energy efficiency because those issues affect asset lives and operating costs. Service-oriented businesses focus on governance, data privacy and social measures because these topics drive reputation and client retention. Applying ESG accounting standards means the company must document the materiality assessment and explain how the chosen metrics tie back to financial risks and opportunities.
Sustainable finance and accounting treatment
Sustainable finance products such as green bonds or sustainability-linked loans carry ESG-linked terms that influence accounting treatment and disclosure. Firms must assess whether the sustainability features affect the classification of the instrument, whether a derivative exists that needs separation, and how performance triggers affect expense recognition. Examples from the region show that issuers are increasingly adopting sustainable finance frameworks and that these transactions require clarity on both sustainability and accounting outcomes. Reuters reported on a UAE sustainable finance framework that illustrates the growing market for these instruments. (Reuters)
Practical steps to align with ESG accounting standards
The journey to compliance with ESG accounting standards begins with a status review, followed by an analysis of accounting impacts and a gap assessment. Companies should document flows from source data to reported metrics, assign governance, and test internal controls across sustainability reporting processes. The notes to the financial statements must disclose significant judgments and assumptions. Firms that adopt ESG accounting standards early should also plan for assurance and engage advisers to design the audit trail needed for independent verification. The KPMG guidance on sustainability and IFRS summarises a four-step approach that boards can follow.
Assurance, capacity building and tools
Assurance over sustainability disclosures requires different skills than traditional financial audit and a mix of technical experts is needed. Accounting teams should upskill and adopt tools that can capture, reconcile and preserve sustainability evidence. The best accounting firms in UAE often provide training, template controls and technology recommendations that reduce implementation time. Working with advisers that can combine accounting, sustainability and assurance expertise helps companies make their ESG accounting standards implementation predictable and scalable.
Common pitfalls and how to avoid them
Assurance over sustainability disclosures requires different skills than traditional financial audit and a mix of technical experts is needed. It is necessary for the accounting departments to acquire new skills and use tools that will be able to capture, reconcile, and keep sustainability evidence. The most reputable accounting firms in the UAE usually offer training, template controls and tech suggestions that cut down the time needed for implementation. Collaborating with advisers who can integrate the areas of accounting, sustainability and assurance will make it possible for companies to have their ESG accounting standards implemented in a predictable manner.
Conclusion
ESG accounting standards are not a separate compliance exercise. They are an integrated program that affects planning, capital allocation, asset valuation, and financial reporting. Companies that treat ESG accounting standards as part of core governance strengthen investor trust and lower execution risk.
