The Role of Environmental Accounting in Mitigating Climate Change: ESG Disclosures and Effective Reporting—A Systematic Literature Review

Abstract

Climate change poses an existential threat, spurring businesses and financial markets to integrate environmental accounting and ESG (Environmental, Social, and Governance) disclosures into decision-making. This study aims to examine how environmental accounting practices and ESG reporting contribute to climate change mitigation in organizations. It seeks to highlight the significance of these tools in enhancing transparency and accountability, thereby driving more sustainable corporate behavior. By synthesizing the recent literature, the study contributes a comprehensive overview of best practices and challenges at the intersection of accounting and climate action, addressing a noted gap in consolidated knowledge. We conducted a systematic literature review (SLR) following PRISMA guidelines. A broad search (2010–2024) across Scopus, Web of Science, and Google Scholar identified 73 records, which were rigorously screened and distilled to 47 relevant peer-reviewed studies. These studies span global contexts and include both conceptual and empirical work, providing a robust dataset for analysis. Environmental accounting was found to play a pivotal role in measuring and managing corporate carbon footprints, effectively translating climate impacts into quantifiable metrics. Firms that implement rigorous carbon accounting and internalize environmental costs tend to set more precise emission reduction targets and justify mitigation investments through a cost–benefit analysis. ESG disclosure frameworks emerged as critical external tools: a high-quality climate disclosure is linked with greater stakeholder trust and even financial benefits such as lower capital costs. Leading companies aligning reports with standards like TCFD or GRI often enjoy enhanced credibility and investor confidence. However, the review also uncovered challenges, like the lack of standardized reporting, risks of greenwashing, and disparities in adoption across regions, that impede the full effectiveness of these practices. The findings underscore that while environmental accounting and ESG reporting are powerful means to drive corporate climate action, their impact depends on improving consistency, rigor, and integration. Harmonizing global reporting standards and mandating disclosures are identified as key steps to improve data comparability. Strengthening the credibility of ESG disclosures and embedding environmental metrics into core decision-making are essential to leverage accounting as a tool for climate change mitigation. The study recommends that policymakers accelerate moves toward mandatory, standardized ESG reporting and urges organizations to proactively enhance their environmental accounting systems that will support global climate objectives and further research on actual emission outcomes.

1. Introduction

Climate change has become a defining challenge of our time, with scientific consensus urging immediate actions to limit global warming (Matuszak-Flejszman et al., 2024; Raghupathi et al., 2023; and Tettamanzi et al., 2024). The Paris Agreement and subsequent climate frameworks emphasize the need for broad participation, including significant involvement from the private sector, in reducing greenhouse gas emissions (Ferdous et al., 2024). In this context, environmental accounting, including environmental costs, impacts, and considerations into accounting and reporting, has gained prominence as a mechanism to help organizations identify their ecological footprint and implement mitigation strategies (De Silva Lokuwaduge et al., 2022; Ferdous et al., 2024; and Velte, 2023). By quantifying emissions, resource usage, and environmental expenditures, environmental accounting provides data-driven insights that can drive corporate climate actions, such as energy efficiency investments (De Silva Lokuwaduge et al., 2022; Gabr & ElBannan, 2025; and Mahieux et al., 2025). Additionally, there is a growing emphasis on ESG disclosures, whereby companies publicly report their performance on environmental and social metrics alongside traditional financial results (Gabr & ElBannan, 2025; Ngo et al., 2023). ESG disclosure, often in sustainability or integrated reports, serves as a communication strategy for climate change efforts, as it enhances transparency about a firm’s climate risks, carbon footprint, and mitigation measures, thereby enabling stakeholders to assess the company’s sustainability commitment (Ferjančič et al., 2024; Gabr & ElBannan, 2025; and Hoang, 2024).

While concepts of “green accounting” and corporate sustainability reporting have existed for decades, their role in actively mitigating climate change is a subject of evolving research and interest (Gabr & ElBannan, 2025; Madaleno et al., 2023; and Velte, 2023). Investors, regulators, and civil society are increasingly expecting companies to not only disclose ESG information but also to align their business strategies with global climate goals (Cosma et al., 2022; De Silva Lokuwaduge et al., 2022; and Ngo et al., 2023). Environmental accounting practices like carbon accounting, environmental management accounting, and lifecycle costing have been observed to support climate mitigation by internalizing environmental externalities through, for example, measuring a product’s carbon emissions or assigning costs to pollution, which has been noted to inform more sustainable decision-making (Madaleno et al., 2023; Mishra et al., 2024; and Velte, 2023). ESG disclosures complement these internal practices by externally reporting progress and commitments, thereby holding organizations accountable and enabling market mechanisms to reward climate responsibility (Hazami-Ammar, 2024; Mahieux et al., 2025; and Mishra et al., 2024). Understanding how these tools contribute to actual climate outcomes, such as emissions reductions and improved climate risk management, is critical for both theory and practice. This literature review, therefore, examines the intersection of environmental accounting, ESG reporting, and climate change mitigation by synthesizing findings from studies worldwide.

While often discussed together, environmental accounting and ESG reporting differ in scope and orientation. Environmental accounting focuses primarily on the systematic recording, analysis, and reporting of environmental costs and liabilities within financial accounting systems (Qian & Schaltegger, 2017). It quantifies environmental impacts in monetary terms and supports internal decision-making and regulatory compliance. On the other hand, ESG reporting is a broader, externally oriented framework that discloses a firm’s environmental, social, and governance practices to stakeholders, emphasizing transparency, risk management, and sustainable performance metrics (Grewal et al., 2021). Although distinct, both approaches are increasingly integrated to support sustainability accounting and climate change mitigation.

The importance of understanding climate change exposure has become increasingly central in both financial and strategic decision-making processes. Firms exposed to climate-related risks often face higher capital costs and labor disruptions, which directly affect their competitiveness and long-term viability (Brahmana et al., 2016). Empirical evidence from emerging economies suggests that firms with a higher exposure to climate risks experience an increased cost of equity due to investor perceptions of long-term environmental liabilities. Furthermore, climate exposure can significantly influence corporate employment structures. For instance, recent findings by Cao et al. (2025) demonstrate that in China, firms facing a high climate risk are more likely to experience employment reductions as part of cost-adjustment mechanisms. These dynamics reinforce the need for robust environmental accounting and ESG disclosure mechanisms that integrate climate risk exposure into decision-making processes, aligning corporate behavior with broader sustainability goals.

This systematic review aims to examine and critically discuss the role of environmental accounting in climate change mitigation, with a special focus on ESG disclosures as a strategy for effective climate reporting. Key questions guiding the review include:

(1)

In what ways do environmental accounting practices support organizations’ climate change mitigation efforts?

(2)

How do ESG disclosure frameworks and practices enhance transparency and accountability regarding climate change, and what evidence exists of their impact on corporate behavior or performance?

(3)

What are the global approaches to ESG climate disclosures, and what challenges affect effective reporting?

By addressing these questions, the review aims to identify best practices and gaps in the current knowledge, thereby providing a foundation for enhancing climate-related accounting and reporting.

The remainder of this paper is organized as follows: a research methodology section will follow, which will describe the systematic review approach, including the use of PRISMA guidelines for study identification and selection. This will be followed by Section 3 and Section 4, which will present the main findings from the literature and is structured around how environmental accounting contributes to climate mitigation, the role of ESG disclosures, and comparisons of global initiatives and challenges. Finally, the conclusion summarizes the key insights and provides recommendations for leveraging environmental accounting and ESG reporting to combat climate change more effectively.

2. Materials and Methods

2.1. Systematic Review Approach

This study employed a systematic literature review (SLR) approach, guided by the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) methodology. The PRISMA framework provides a structured process for identifying, screening, and selecting relevant literature, aiming to ensure transparency and reproducibility in the review. The study began by defining the scope and inclusion criteria of the review, centered on the literature examining environmental accounting in the context of climate change mitigation and ESG disclosures. Given the focus on globally sourced research and academic emphasis, we prioritized studies published in peer-reviewed journals indexed in Scopus. The review encompasses both conceptual and empirical studies, including prior literature reviews, case studies, and quantitative analyses, to capture a comprehensive understanding of the topic.

2.2. Data Sources and Search Strategy

Multiple academic databases were searched to gather comprehensive research. The primary source was the Scopus database, chosen for its comprehensive indexing of international journals and articles. To mitigate potential bias from a single database, complementary searches were conducted on Web of Science and Google Scholar. The study employed a search query that combined keywords related to environmental accounting, climate change, ESG reporting, and climate mitigation. Search strings included combinations like “environmental accounting” and “climate change”, “carbon accounting” and “disclosure”, “sustainability reporting” and “climate risk”, and “ESG disclosure” and “emissions”. The search was restricted to publications in English and initially to the period of 2010–2024, reflecting the timeframe during which corporate climate reporting and environmental accounting practices have undergone a significant evolution.

The database searches conducted in June 2025 returned a substantial number of records. For example, in Scopus, hundreds of results were found for broad terms such as “environmental accounting and climate change.” These results were then refined by applying filters and our inclusion criteria, and the search was limited to journal articles. Journal quartile rankings were also cross-checked using the Scimago Journal Rank (SJR) to focus on relevant journals.

2.3. Inclusion and Exclusion Criteria

Inclusion criteria were defined to ensure that the selected studies were directly pertinent to the review questions. The inclusion and exclusion guidelines used in the study are set out in

Table 1. Inclusion and exclusion criteria.

Criteria	Inclusion	Exclusion
Focus	Studies explicitly addressing environmental or sustainability accounting practices (e.g., carbon accounting, ESG disclosures).	Studies not relevant to the climate context (e.g., environmental accounting without mention of climate change).
Link to climate	Studies linking practices to climate change mitigation or adaptation (e.g., discussing impacts on emission reductions).	Papers dealing with ESG or sustainability in a broad sense, without a specific connection to climate change.
Evidence	Studies providing analysis or evidence rather than purely opinion.	Non-academic reports and news articles, unless they provide valuable data or context.
Geographic diversity	The global literature focusing on varying geographic contexts (single-country or multi-country studies).	None
Screening Process	Titles and abstracts were screened to eliminate irrelevant items, followed by full-text review for final inclusion.	None

Source: Researchers’ construction.

below:

Selection Process (PRISMA Flow)

Following PRISMA guidelines, the selection process is documented in a flow diagram (Figure 1). In the identification stage, approximately 73 records were identified through database searches, including an initial set of 15 from Scopus, 36 from Web of Science, and 22 from Google Scholar. Four (4) duplicate records were identified and removed. During screening, the titles and abstracts of these 69 records were reviewed against the inclusion criteria, resulting in the exclusion of four (4) book chapters and five (5) theses. This left sixty articles for retrieval; however, five (5) articles could not be accessed for in-depth eligibility assessment, and eight (8) were further excluded because they were not written in English. Therefore, only 47 articles were read thoroughly, and no further articles were excluded at this stage.

For each of the 47 included studies, relevant data and insights were extracted, and key information was recorded, including the study’s context or location, research design, the aspect of environmental accounting or ESG disclosure examined, and the main findings related to climate change mitigation or reporting outcomes. Given the interdisciplinary nature of the topic, the literature spans various fields, including accounting, finance, environmental management, and policy journals. The extracted insights were organized thematically to facilitate synthesis and understanding. Thematic analysis was employed to categorize findings into major themes, including the mechanisms by which environmental accounting influences emissions or climate strategy, the effectiveness of various ESG disclosure frameworks, stakeholder reactions to ESG information, and regulatory or regional differences.

Special attention was paid to recurring findings or consensus in the literature, as well as noting any conflicting results or debates, such as whether ESG performance is positively correlated with financial performance. Some studies find benefits, while others highlight potential trade-offs.

The level of evidence was also evaluated throughout the synthesis. Some of the included papers were conceptual or review pieces that provided frameworks for understanding, while others were empirical studies that provided data; these sources were triangulated to draw well-supported conclusions. Where applicable, statistics or quantitative results from studies were reported to illustrate the magnitude of observed effects. The synthesis aimed not only to describe what has been found but also to compare global approaches. By structuring the results and discussion around these themes, the review provided an academic overview of how environmental accounting and ESG disclosures function as tools for climate change mitigation, as well as the challenges that must be overcome to enhance their effectiveness.

Following the identification and screening of eligible studies, we conducted a qualitative synthesis using a thematic analysis. An inductive coding approach was applied, where the texts were carefully reviewed to identify recurring patterns, themes, and concepts. Codes were iteratively developed and grouped into higher-order categories that reflect the key focal areas in the literature, such as regulatory frameworks, disclosure practices, and reporting effectiveness. This grounded theory-inspired process enabled a robust and data-driven derivation of thematic clusters that formed the basis of our results and discussion.

3. Results

A total of 47 studies were reviewed in detail, which collectively provide a holistic view of the intersection between environmental accounting, ESG disclosures, and climate change mitigation across various contexts. The results are organized into four subtopics: the contributions of ecological accounting to climate change mitigation; the role and effectiveness of ESG disclosures in climate reporting; global approaches, frameworks, and regulatory initiatives driving ESG/climate disclosure; and common challenges and limitations identified in the literature. Throughout, the results from different studies are integrated, thereby highlighting the consensus as well as any divergent viewpoints.

3.1. Descriptive Profile of Included Studies

The 47 studies included in the final review span a publication period from 2018 to 2025, with a marked increase in ESG and environmental accounting research in the years 2021–2024, reflecting the heightened global concern over climate-related disclosures. Most studies were conducted in Europe (34%) and North America (28%), followed by Asia (19%), Africa (11%), and other regions (8%). In terms of methodology, qualitative designs dominated (49%), followed by quantitative empirical studies (36%) and conceptual/theoretical papers (15%). Most of the studies were published in Q1 and Q2 journals in fields related to accounting, sustainability, and corporate governance. This profile helps contextualize the thematic analysis by highlighting dominant regional and methodological perspectives in the literature.

3.2. Environmental Accounting as a Tool for Climate Change Mitigation

Environmental accounting is broadly defined as the identification, measurement, and incorporation of environmental costs and impacts into business practices and financial reporting (Ho, 2022; Mishra et al., 2024; and Tian et al., 2024). Regarding climate change, a significant focus is on carbon accounting, which involves measuring greenhouse gas (GHG) emissions, assigning costs to those emissions, and reporting this information (Gabr & ElBannan, 2025; Hazami-Ammar, 2024; and Yadiati et al., 2024). The literature indicates that environmental accounting practices can directly support climate mitigation by making emissions and climate-related costs more visible and actionable for decision-makers (Gabr & ElBannan, 2025; Mishra et al., 2024; and Ngo et al., 2023). For instance, companies that implement environmental management accounting (EMA) techniques that track energy consumption, waste generation, and carbon emissions in physical and monetary terms are better equipped to identify inefficiencies and opportunities for emissions reductions (Abdalla et al., 2024; Dilling et al., 2024; Madaleno et al., 2023; and Ngo et al., 2023). They argue that by allocating environmental costs to processes or products, firms can integrate climate considerations into a profitability analysis, which often justifies mitigation investments from a cost–benefit perspective. In this regard, environmental accounting internalizes what would otherwise be externalities, thereby aligning corporate objectives with climate goals.

Studies highlight the emergence of carbon accounting as a distinct field within environmental accounting, encompassing both internal practices and the external reporting of carbon footprints, and it has been growing rapidly in academic research (Ngo et al., 2023; Tettamanzi et al., 2024; and Tian et al., 2024). A comprehensive review found that the literature on carbon accounting is extensive, fast-growing, rich and varied, and covering topics from carbon management accounting and carbon financial accounting to carbon disclosure and reporting and even carbon accounting education (Gabr & ElBannan, 2025; Hazami-Ammar, 2024; Sharaf-Addin & Al-Dhubaibi, 2025; and Yadiati et al., 2024). One key insight is that carbon accounting is not purely a technical exercise; it often involves normative and strategic dimensions, like whether firms should account for future climate liabilities or only current emissions (Alotaibi et al., 2024; Jiang & Tang, 2023; and Sharaf-Addin & Al-Dhubaibi, 2025). As climate change pressures intensify, many companies are incorporating climate-related factors into their financial planning and risk management, thereby expanding traditional accounting to encompass climate mitigation considerations (Dilling et al., 2024; Matuszak-Flejszman et al., 2024).

The literature also highlights how environmental accounting information is utilized internally to establish mitigation targets. Carbon budgeting is one example where companies establish an allowable emissions budget and then manage operations to stay within that budget, and, hence, by measuring emissions regularly, firms can track progress towards emissions reduction targets (Tian et al., 2024). Empirical studies show that corporations with strong accounting for sustainability frameworks tend to integrate climate targets into their performance management (De Silva Lokuwaduge et al., 2022; Mishra et al., 2024; Ngo et al., 2023; and Sharaf-Addin & Al-Dhubaibi, 2025). For example, some companies assign internal prices to carbon as a strategy to guide investment decisions, and if a project’s profitability is significantly reduced once a carbon cost is factored in, it provides a clear incentive to opt for a lower-carbon alternative, which in turn links accounting data to managerial action on climate change (Hazami-Ammar, 2024; Mishra et al., 2024; Ngo et al., 2023; and Sharaf-Addin & Al-Dhubaibi, 2025).

3.3. ESG Disclosures and Effective Climate Reporting

A central theme in the literature is the critical role of ESG disclosures as a strategy for communicating and enhancing corporate climate action (Alotaibi et al., 2024). ESG disclosure refers to the public reporting of information on a company’s environmental, social, and governance performance, which, in the context of climate change, often involves reporting GHG emissions, energy usage, climate risks, and mitigation strategies (Madaleno et al., 2023). They state that over the past decade, there has been a marked increase in the number of companies issuing sustainability reports. A global survey by KPMG in 2020 found that around 80% of large and mid-cap companies worldwide, and an even higher 96% of the world’s 250 largest companies, are now publishing sustainability reports (Dilling et al., 2024; Hazami-Ammar, 2024; Principale & Pizzi, 2023; Tian et al., 2024; and Yadiati et al., 2024), which indicates that ESG reporting is becoming a norm, driven by stakeholder expectations and often by peer pressure or industry norms.

The literature identifies several drivers for ESG disclosure. The significant antecedents that have been noted to motivate firms to disclose ESG information are mandatory disclosure regulations (Cosma et al., 2022; Tian et al., 2024; and Velte, 2023), sustainability reporting frameworks (De Silva Lokuwaduge et al., 2022; Sharaf-Addin & Al-Dhubaibi, 2025; and Tettamanzi et al., 2024), and internal corporate factors (Ferdous et al., 2024; Matuszak-Flejszman et al., 2024; and Velte, 2023). Mandatory regulations compel companies to report specific climate-related data, whilst voluntary frameworks like the Global Reporting Initiative (GRI) standards or the Task Force on Climate-related Financial Disclosures (TCFD) recommendations provide structure and incentives for firms to report, even in the absence of binding rules (Madaleno et al., 2023; Principale & Pizzi, 2023). In this regard, corporate factors include reputational considerations, investor demands, and the desire to benchmark against peers (Jaiswal et al., 2024; C. Li et al., 2025). Therefore, the act of disclosure itself is often linked with corporate accountability, whereby disclosing targets and performance, companies essentially make public commitments, which can spur more vigorous internal efforts to meet those commitments (Meqbel et al., 2025).

One key question asked is how adequate ESG disclosures contribute to climate change mitigation, as opposed to simply reporting on it. Research provides evidence that high-quality climate disclosure can influence corporate behavior and stakeholder decisions (Dilling et al., 2023; Mishra et al., 2024). From a corporate behavior perspective, researchers have observed a ‘what gets measured gets managed’ effect, and firms that publish their emissions and climate actions tend to implement more mitigation measures to ensure they have a positive story to tell (An, 2023; Devine et al., 2024; Hoang, 2024; and Mahieux et al., 2025). Hence, the process of preparing an ESG report, collecting data on emissions, and writing about climate initiatives can internally motivate improvements (Velte, 2023). Disclosure can also be tied to executive incentives, where, for example, some companies link management compensation to achieving climate or ESG targets, thereby aligning reporting outcomes with personal incentives (Alotaibi et al., 2024; Lee et al., 2024; and Saini et al., 2022).

From the stakeholder perspective, transparent ESG reporting enhances stakeholder trust and pressure (Alotaibi et al., 2024; Gabr & ElBannan, 2025). Several studies have examined how markets respond to climate disclosures. A notable finding is that a better climate disclosure is associated with favorable financial impacts for companies, such as a lower cost of capital (Abdalla et al., 2024; Cosma et al., 2022; Dilling et al., 2024; Mishra et al., 2024; and Ngo et al., 2023), which suggests that investors reward transparency and likely perceive well-disclosed firms as less risky, thereby accepting lower returns. Conversely, firms with a higher carbon intensity and poor disclosure tend to face a higher cost of equity and debt (Lee et al., 2024; Mahieux et al., 2025; and Velte, 2023). Researchers have similarly observed that companies with more comprehensive climate disclosures have lower financing costs, whereas those with high emissions and minimal reporting face risk premiums on capital (Alotaibi et al., 2024; Principale & Pizzi, 2023). Such findings support the argument that ESG disclosure is not merely window dressing, as it has material effects by influencing investor behavior and capital allocation (Gabr & ElBannan, 2025; Mishra et al., 2024). Therefore, by making climate-related performance visible, disclosures can channel investment toward more sustainable companies, indirectly encouraging laggards to improve or risk a higher cost of capital and reduced investor demand.

Another aspect of effective climate reporting is the use of standardized frameworks that ensure comparability and decision-usefulness of the information, and prominent frameworks and standards like the GRI standards, the Sustainability Accounting Standards Board (SASB) metrics, and the TCFD are widely used (Alotaibi et al., 2024; Devine et al., 2024; Ho, 2022; Ngo et al., 2023; and Sharaf-Addin & Al-Dhubaibi, 2025). TCFD has gained global traction, as it provides a clear structure for disclosing climate governance, strategy, risk management, and targets (Cosma et al., 2022; Dias et al., 2024; and Principale & Pizzi, 2023). Studies report that TCFD-aligned disclosures have improved the quality of climate reporting by pushing companies to discuss not only their emissions but also how climate scenarios might impact their business strategy (Dias et al., 2024; Dilling et al., 2023, 2024). This forward-looking risk disclosure is crucial for investors and has been mandated or encouraged by regulators in multiple jurisdictions, such as the UK and the EU (Cosma et al., 2022; Dilling et al., 2024).

Despite the overall positive view of ESG disclosures, the results also include cautious notes about quality and consistency. While many companies disclose climate information on carbon emissions and reduction efforts, researchers have noted that these disclosures are not yet standardized across firms or regions (Dilling et al., 2023; Gabr & ElBannan, 2025; Hoang, 2024; and Ngo et al., 2023). They observed that certain areas, such as the financial impacts of climate change on company financial statements, are rarely disclosed. This indicates a gap, as companies may report their emissions or qualitative climate commitments, but few integrate climate matters into their financial reporting (Dias et al., 2024; Ho, 2022; and Ngo et al., 2023). The implication is that ESG disclosures, to be truly adequate, should evolve to encompass not only standalone sustainability metrics but also connections to the core financial performance (Cosma et al., 2022; Ho, 2022). The lack of standardization leads to the incomparability and sometimes incompleteness of reports, making it more challenging for stakeholders to assess and compare corporate climate performance (Hazami-Ammar, 2024; Ho, 2022; Madaleno et al., 2023; and Tian et al., 2024).

3.4. Global Approaches and Regulatory Initiatives

The push for environmental accounting and ESG disclosure has a global dimension, with various regions adopting different approaches based on regulatory philosophies, market pressures, and stakeholder activism (Dilling et al., 2023; Madaleno et al., 2023). The reviewed articles make it clear that Europe, North America, and the Asia-Pacific region have all seen significant developments, although not uniformly (De Silva Lokuwaduge et al., 2022; Hoang, 2024; and Mishra et al., 2024).

Europe is portrayed as a leader in mandating and standardizing ESG and climate disclosures. The EU’s regulatory initiatives, such as the recently enacted Corporate Sustainability Reporting Directive (CSRD), require a broad set of companies in the EU to report in line with detailed sustainability standards, including climate-related information, thus moving ESG reporting firmly into the realm of mandatory corporate reporting (Dilling et al., 2023; Madaleno et al., 2023; Matuszak-Flejszman et al., 2024; and Principale & Pizzi, 2023). Regulations like the CSRD aim to harmonize companies’ sustainability reporting and improve the availability and quality of ESG disclosures, which reflects a regulatory view that consistent, high-quality disclosure is necessary for markets to price sustainability correctly and for stakeholders to make informed decisions (Matuszak-Flejszman et al., 2024). In addition to EU-wide rules, individual European countries have also implemented climate disclosure requirements, such as the UK’s mandatory TCFD-aligned disclosures for large companies and financial institutions, which started in 2022 (Dilling et al., 2023, 2024; Ngo et al., 2023). Europe’s approach tends to be proactive, treating climate disclosure as a driver of change through transparency, which has resulted in European companies being among the highest ESG reporting and providing more detailed disclosures, spurred by both regulation and a strong investor culture around sustainability (An, 2023; Dilling et al., 2023).

North America historically had a more voluntary and market-driven approach to ESG disclosure. Several manuscripts discussed the anticipated U.S. Securities and Exchange Commission (SEC) climate disclosure rules, which would require publicly listed companies to disclose climate-related risks, GHG emissions, and governance of climate issues in their annual filings, which, if implemented, would be a significant shift for the U.S., moving from relying on voluntary sustainability reports and investor pressure to formal regulatory requirements (Ho, 2022; Mahieux et al., 2025). Until these rules are finalized, many large corporations do report sustainability metrics, often following frameworks like SASB or TCFD voluntarily, but others provide minimal ESG information in mandatory filings (Cosma et al., 2022; Principale & Pizzi, 2023). The literature points out a transatlantic divide where European firms have generally led in comprehensive disclosure, with U.S. firms catching up more recently, partly under investor-driven initiatives and partly due to impending regulations (Dias et al., 2024; Ho, 2022). Notably, even without finalized SEC rules, investor pressure and stock exchange guidelines have already prompted many North American companies to enhance their ESG reporting over the last few years (An, 2023; Principale & Pizzi, 2023).

When it comes to the Asia-Pacific region and other regions, the picture is mixed. Developed economies, such as Japan and Australia, have been progressively enhancing ESG reporting standards (Dilling et al., 2023, 2024; Tian et al., 2024). Japan’s corporate governance code promotes sustainability disclosure, and its financial regulators have encouraged the adoption of the TCFD (Alotaibi et al., 2024; Ngo et al., 2023). Australia and New Zealand are also moving towards mandatory climate risk reporting, while emerging markets and developing countries often face challenges in ESG reporting (Ferjančič et al., 2024; Hazami-Ammar, 2024; and Pandey et al., 2025). Research comparing developed and developing countries finds that ESG disclosure quality is generally higher in developed countries, attributed to stronger regulatory frameworks, greater stakeholder demand, and more resources/capacity in developed markets (Dilling et al., 2024; Hazami-Ammar, 2024; and Velte, 2023). Developing countries may have limited or no mandatory requirements, and firms there might see less investor pressure (Abdel-Shafy & Mansour, 2018; Z. Li & Qamruzzaman, 2023; and Sarkar, 2022). Additionally, companies in certain developing regions face challenges in acquiring the necessary expertise and systems for comprehensive ESG accounting and reporting (Abdel-Shafy & Mansour, 2018; Cianconi et al., 2020; and Xavier et al., 2021).

Despite differences, a common global trend has been identified: the shift from voluntary to mandatory disclosure regimes. Research has identified several countries that introduced mandates for ESG disclosure in recent years, including not only EU nations but also countries like China, India, Brazil, and South Africa, in which the mandates typically start with large companies and most publicly listed or state-owned enterprises (Ferdous et al., 2024; Gabr & ElBannan, 2025; Raghupathi et al., 2023; and Yadiati et al., 2024). This proliferation of regulations worldwide underscores that ESG reporting “is here to stay” and is becoming a norm rather than an exception (Madaleno et al., 2023; Matuszak-Flejszman et al., 2024; and Raghupathi et al., 2023). Importantly, even where regulation is not yet present, companies are feeling indirect pressure: for example, suppliers in developing countries may be asked by multinational customers to provide ESG data, effectively forcing an upgrade in reporting practices to remain competitive (An, 2023; Hazami-Ammar, 2024; and Tian et al., 2024).

Another notable global initiative is the development of harmonized standards. In 2022, the International Financial Reporting Standards (IFRS) Foundation established the International Sustainability Standards Board (ISSB), tasked with developing a global baseline of sustainability reporting standards, which, by 2023, released IFRS S1 and S2 covering general sustainability disclosures and specifically climate-related disclosures (Dilling et al., 2023, 2024; Ho, 2022). These new standards build on frameworks like the TCFD and SASB and aim to be adopted worldwide to unify reporting, a critical step toward solving the comparability problem, as companies around the world report climate information using the same metrics and principles (Ho, 2022). Harmonization efforts are echoed in some studies, which advocate for standard setters and regulators to coordinate, ensuring that ESG reporting aligns with national accounting frameworks. This could even enable better environmental and economic accounting at the national level, thereby helping governments track progress on climate goals more efficiently.

3.5. Challenges and Ongoing Issues in Environmental Accounting and ESG Reporting

While the benefits of environmental accounting and ESG disclosures are well-documented, the literature also highlights several challenges and limitations that hinder their effectiveness in driving climate change mitigation (Dias et al., 2024; Raghupathi et al., 2023). Understanding these challenges is crucial for practitioners and policymakers to address them in the design of future reporting standards and corporate practices (Abdalla et al., 2024; Raghupathi et al., 2023).

Lack of standardization and comparability is one of the most frequently cited issues that creates inconsistencies in what and how companies report (Alotaibi et al., 2024). The absence of a single global standard (until the emergence of ISSB standards) meant that companies had to choose from a variety of frameworks, including GRI, SASB, TCFD, and national guidelines, often leading to fragmented reporting (Hazami-Ammar, 2024; Matuszak-Flejszman et al., 2024). Failure to standardize climate change accounting disclosures has been argued to have hampered the ability to benchmark and aggregate data across companies (Alotaibi et al., 2024). Without standardization, there is a risk that ESG reports become marketing documents rather than rigorous disclosures, as companies might cherry-pick favorable metrics (Tian et al., 2024). The push for harmonization through regulations and bodies like the ISSB is a direct response to this challenge. However, as noted in the literature’s timeline, many authors indicate that progress is still needed to align disclosure practices globally (Ho, 2022).

Data quality and verification, aligned with standardization, is the other challenge in ensuring data accuracy and credibility (Alotaibi et al., 2024). Many ESG metrics, like carbon footprint and climate risk exposure, are complex to measure and sometimes involve estimation and assumptions (Madaleno et al., 2023; Tian et al., 2024). Unlike financial data, which goes through audits, sustainability data has historically not always been assured by third parties, even though assurance is becoming more common now (Hoang, 2024; Toukabri, 2025). The rise in ESG reporting has led to scrutiny about misleading disclosures, and some jurisdictions are starting to consider or enact anti-greenwashing regulations (Ho, 2022; Meqbel et al., 2025). It has been noted that expanded ESG disclosures are likely to spur greenwashing litigation as stakeholders take legal action over false claims, like selective reporting, inconsistent boundaries, and/or a lack of clarity on targets vs. outcomes (Ho, 2022). Ensuring credibility might require standard audit procedures for ESG data or a more vigorous enforcement of accuracy (Abdalla et al., 2024; Meqbel et al., 2025). The literature suggests that building trust in ESG disclosures is essential; otherwise, stakeholders may become skeptical of all sustainability reporting, and, hence, researchers recommend independent assurance and clearer guidelines on measurement methodologies as ways to improve data quality and comparability (D’Amato et al., 2021; Mishra et al., 2024).

The integration of sustainability with financial decision-making is another challenge identified, which makes it impossible to effectively integrate environmental accounting insights with core business strategies and finances (Tian et al., 2024). While environmental accounting generates a lot of valuable data, the extent to which companies use this data in financial planning and risk management varies, as it has been noted that many companies still treat sustainability accounting as a separate silo from financial accounting (Madaleno et al., 2023; Tian et al., 2024). Climate risks might be described in an ESG report but not be reflected in the financial risk analysis or asset valuation on the balance sheet, which can lead to an underestimation of climate-related financial risks (Abdalla et al., 2024; Ho, 2022). Researchers have advocated for integrated reporting, which involves embedding environmental accounts into national and corporate accounting systems, allowing for the simultaneous evaluation of environmental and financial performance (Alotaibi et al., 2024; Principale & Pizzi, 2023). However, the challenge in achieving integration remains technical in developing methods to quantify climate resilience in dollar terms and organizational in ensuring finance departments take ownership of climate metrics (Noja et al., 2024).

There are resource and capacity constraints in smaller firms or those in developing markets which prohibit conducting detailed environmental accounting, recruiting expertise to measure emissions accurately, and conducting scenario analyses, as well as staying updated with multiple reporting frameworks (Tian et al., 2024). Many studies highlight that companies incur substantial costs and efforts in collecting ESG data across their operations and supply chains, thereby creating a risk that they may perform only the minimum or treat it as a box-ticking exercise (Alotaibi et al., 2024). Regulators are mindful of balancing the ambition of disclosures with practicality, for example, phasing in requirements or providing simplified frameworks for SMEs (An, 2023; Ngo et al., 2023). Nonetheless, the challenge remains that high-quality environmental accounting often requires investment in systems and people, which not every organization is ready or willing to make without a clear return on investment (Hazami-Ammar, 2024; Velte, 2023). Over time, as stakeholders demand this information, it may become increasingly costly not to report; until then, capacity building and perhaps external support can help companies enhance their capabilities (Ferdous et al., 2024).

Global disparities and regulatory arbitrage can lead to the lagging of companies in certain jurisdictions (Ho, 2022). A company operating in a country with no ESG reporting mandate might choose to disclose very little, enjoying a short-term advantage of less scrutiny, but if investors are global, they might penalize that company anyway (Matuszak-Flejszman et al., 2024). Some researchers call for international cooperation and capacity building so that developing country firms can participate in ESG reporting and thereby avoid a situation where ESG expectations become a trade barrier or an added burden on them (Tian et al., 2024).

Demonstrating real impact versus symbolic reporting is a conceptual challenge of determining whether increased environmental accounting and disclosure are leading to real-world emission reductions and climate risk mitigation or if they sometimes remain symbolic (Gabr & ElBannan, 2025). While transparency is valuable on its own, the goal is to change behavior, with questions having been raised on whether companies with glossy sustainability reports are performing better on climate metrics or are just better at reporting (Hazami-Ammar, 2024). There is evidence that shows a correlation between disclosure and improved performance, whilst on the other hand, there are instances where companies with high ratings in ESG disclosure still have rising emissions, indicating that reporting alone does not automatically equate to mitigation (Madaleno et al., 2023; Yadiati et al., 2024). The challenge for the future is to enhance the effectiveness of reporting by linking it with performance incentives, stakeholder engagement, and regulatory follow-up (Alotaibi et al., 2024; Hazami-Ammar, 2024). The findings of this PRISMA-based review highlight significant regional and sectoral variation in the adoption and reporting of environmental accounting and ESG practices. While there is a growing convergence in frameworks and standards, gaps remain in implementation consistency and disclosure quality across jurisdictions. These results set the stage for a deeper discussion of their implications, particularly concerning policy harmonization, institutional capacity, and the role of ESG in climate accountability. The following section provides a discussion.

4. Discussion

The findings of this systematic review highlight the pivotal role that environmental accounting and ESG disclosures play in corporate responses to climate change, while also underscoring the areas that require improvement to maximize their impact on mitigation efforts. In this section, we synthesize the results and discuss their implications in a broader context by linking back to the research questions and findings.

One of the fundamental insights from the literature is that robust environmental accounting systems form the information backbone for climate action within organizations, whereby companies that accurately account for their GHG emissions, energy use, and other environmental impacts are essentially translating climate change considerations into the language of business. The review found evidence that companies employing practices such as carbon accounting and internal carbon pricing tend to integrate climate targets into their operations and strategies, which suggests that policymakers and industry groups should encourage the adoption of standardized environmental accounting practices. It can therefore be concluded that governments could promote tools for companies and small enterprises to measure their carbon footprint or provide frameworks for such sectors to consistently account for environmental costs, which would lower the barrier for companies to get started on ecological accounting and ensure that smaller players are not left behind.

The findings of this study support the view that “what gets disclosed gets managed”, in that ESG disclosures create a feedback loop between companies and stakeholders, in that by disclosing, companies invite scrutiny and comparison, which can reinforce internal accountability, as no one wants to be named and shamed for failing to meet a public climate commitment. Additionally, the financial market’s response to disclosures, rewarding transparency with potentially better valuations or lower capital costs, serves as a market-based incentive for companies to both disclose and improve their climate performance. This underscores an essential point for regulators and investors to push for a more consistent and mandatory climate disclosure, not as an administrative exercise, but as a tool that can actively shift capital towards greener companies and thereby pressurize high emitters to change. The discussion in many reviewed papers suggests that as disclosure regimes mature, they should be accompanied by investor education to interpret the data and by integration of ESG data into the investment analysis. Only when investors utilize the disclosed information, such as incorporating carbon intensity into risk assessments or portfolio allocations, will companies fully feel the impact of market discipline.

The study observes a trend of convergence in ESG reporting expectations globally, yet one size may not fit all in terms of implementation. Though developed markets with advanced regulatory systems have forged ahead with comprehensive requirements, which is excellent for setting high standards, developing markets may need a more gradual approach, such as voluntary guidelines transitioning to mandatory rules over time, which must be combined with capacity building. There is, however, a potential risk of duplication or confusion if a country mandates a local format that differs from ISSB standards, as companies operating internationally may have to report under multiple regimes. The ideal outcome, suggested by many researchers, is that the global baseline (ISSB) be widely adopted, and that local authorities add to it only where there are necessary, specific national priorities, thereby allowing multinationals to prepare one sustainability report that largely satisfies multiple jurisdictions, and hence reduces the burden while increasing comparability. The literature suggests that the next few years (mid-2020s) represent a window of opportunity for achieving alignment; otherwise, we may replace voluntary frameworks with a regulatory patchwork.

The challenge of greenwashing, as noted in the results, is a serious concern. The discussion around this needs to consider not just punitive measures, such as litigation and enforcement, but also preventative measures. These could include clearer technical protocols for measurement, which would leave less room for creative accounting; third-party assurance mandates for specific, critical ESG metrics; and improvements in the transparency of methodologies. Several researchers emphasize the importance of independent verification in building trust. If assurance becomes a standard practice globally, it could significantly reduce the incidence of misleading reporting. The growth of ESG data and rating providers is also a valid contributor, as the availability of multiple analysts and data firms scrutinizing a company’s ESG disclosures could flag inconsistencies, which would create reputational incentives for companies to be honest. The academic discourse suggests that a combination of regulatory oversight and stakeholder vigilance will be needed to tackle greenwashing. A cultural shift is also implied, as companies must transition from treating sustainability reports as PR documents to viewing them as serious, investor-grade reports.

The ultimate measure of success for environmental accounting and ESG disclosure practices will be actual reductions in GHG emissions and enhanced climate resilience at the firm and economy-wide level. While the study reveals a generally positive relationship, establishing causality can be complex at times. For example, do companies disclose because they are already performing well on climate initiatives, or do they do well because they disclose? Future research is encouraged to delve deeper into this causation by conducting longitudinal studies that track firms before and after adopting rigorous accounting or disclosure practices to see if their emission trajectories change significantly relative to a control group. Another area for future study, as noted in the literature, is the interplay between ESG disclosure and social and governance factors. Although this study focused on environmental/climate aspects, ESG issues are interconnected. Therefore, integrating climate responsibilities into board oversight is increasingly seen as best practice, which could be assisted by research that quantifies how governance structures influence the effectiveness of environmental accounting.

For corporate managers and accountants, this review underscores several actionable points. Investing in environmental accounting capabilities, such as software, training, and data systems, is not just about compliance or producing sustainability reports; it can also drive internal efficiencies and innovation. For example, discovering how energy is wasted through material flow cost accounting can simultaneously save money and reduce emissions. Managers should view ESG reporting as a strategic exercise and need to align it with the company’s mission and stakeholder engagement strategy. Leading companies are utilizing ESG disclosures to differentiate themselves, demonstrating leadership in climate action, which can enhance brand value and foster stakeholder loyalty.

For policymakers, the findings reinforce the value of mandatory ESG disclosure regimes and suggest that careful design with phased implementation and support can bring the rest of the market up to best practice levels. Policymakers should also consider how to make disclosures more impactful, possibly by connecting them to other policies, for example, linking access to public contracts or finances to ESG disclosure performance and thereby creating direct rewards for good reporters. Additionally, companies may be required to incorporate climate targets into their business plans, and boards certify the alignment of the strategy with those targets.

In the broader societal context, ESG disclosures enhance transparency, empowering various stakeholders to make climate-conscious decisions and motivating consumers to support greener companies while also enabling regulators to identify systemic risks. Environmental accounting at the macro level can inform national inventories and progress tracking for international climate commitments, and corporate disclosures, if standardized and aggregated, can improve the quality of national GHG reporting and help governments identify which sectors require more policy intervention.

4.1. Theoretical Implications

The literature reviewed demonstrates a growing integration of stakeholder theory, institutional theory, and legitimacy theory in the study of environmental accounting and ESG disclosures. Stakeholder theory is the most invoked, highlighting the influence of investors, regulators, and civil society on disclosure practices. Institutional theory also appears frequently, particularly in studies examining regulatory or cultural environments. However, there is a notable theoretical gap in applying the dynamic capabilities theory, particularly in understanding how firms adapt ESG strategies over time to address climate risk. Furthermore, very few studies explore the role of systems thinking or ecological economics, which could deepen understanding of ESG’s transformative potential. Future research would benefit from a more explicit and diverse theoretical engagement to build a stronger conceptual foundation in the field.

4.2. Limitations

While this review provides a comprehensive synthesis of recent literature, several limitations must be acknowledged. First, the study focused exclusively on English-language, peer-reviewed articles indexed in Scopus and Web of Science, which may have excluded relevant regional publications. Second, the thematic coding process, although systematic, involved subjective judgment in theme classification. Third, the rapid evolution of ESG standards means that some recent regulatory developments may not have been captured at the time of review. Future research could expand the scope to include the gray literature, non-English sources, and real-time policy tracking to offer a more holistic understanding of the field.

5. Conclusions

This systematic literature review examines the intersection of environmental accounting, ESG disclosures, and climate change mitigation, drawing together insights from a diverse global research body. The review confirms that environmental accounting and ESG reporting are indispensable elements of an effective corporate climate strategy. Environmental accounting provides the internal mechanisms for organizations to measure and manage their environmental impacts by quantifying emissions and integrating environmental costs into decision-making, turning sustainability from an abstract goal into concrete actions and metrics. ESG disclosures, on the other hand, serve as the external facet of this process, as companies report sustainability information to stakeholders, creating transparency and accountability that can drive both market responses and regulatory actions supportive of climate mitigation.

A key takeaway is that transparency through ESG disclosure can lead to tangible benefits, not only in terms of stakeholder goodwill but also financial performance, such as potentially lower capital costs and improved investor confidence for companies with a strong climate disclosure and performance records. Moreover, mandatory disclosure requirements emerging around the world are likely to level the playing field, ensuring that all significant companies provide at least a baseline of climate-related information. This will help channel investments toward lower-carbon activities and enable policymakers to track progress more effectively, guiding corporate contributions to national and global climate goals.

However, the review also highlights several critical challenges that need to be addressed to enhance the effectiveness of environmental accounting and ESG reporting. The lack of standardization has been a persistent issue; however, current developments, such as the ISSB standards and various national regulations, are actively working to resolve this issue. Ensuring that companies everywhere report climate data comparably and reliably is foundational, as it will reduce confusion and increase trust in reported information. The risk of greenwashing must be mitigated by combining rigorous standards with assurance and oversight, thereby encouraging companies to report truthfully and completely.

The global disparity in reporting practices suggests that capacity building and knowledge transfer to less developed markets are crucial. Multinational companies can help enhance the reporting capabilities of companies in emerging economies, enabling the global supply chain to move in step toward greater climate accountability. Collaboration through industry associations on standard reporting templates or tools can also alleviate the burden on individual companies.

Building on the literature reviewed, we propose a few recommendations for practice and policy. First, regulators worldwide should continue to develop and implement precise ESG disclosure requirements, ideally aligned with international standards, and provide guidance to companies during the transition. In addition, companies should invest in robust environmental accounting systems and not wait for regulation to drive action. By proactively improving their sustainability measurement and reporting, they can gain strategic advantages and be better prepared for future requirements. Furthermore, the accounting profession, including standard-setters and auditors, should accelerate efforts to integrate sustainability into mainstream accounting and assurance services, thereby lending credibility and rigor to ESG information. Finally, academia and practitioners should collaborate in ongoing research to monitor the outcomes of new reporting regulations and share best practices, ensuring that lessons learned are fed back into improving frameworks and avoiding unintended consequences.

The fight against climate change is a complex endeavor requiring a multi-stakeholder approach. Environmental accounting and ESG disclosures are potent tools that translate environmental challenges into actionable knowledge and accountability. When effectively implemented, they not only help mitigate climate change by driving reductions in emissions and resource use but also promote a form of capitalism that incorporates environmental and social considerations, thereby steering the economy toward sustainability. As we move forward, the continuous improvement and widespread adoption of these practices will be crucial in aligning corporate conduct with the urgent need to protect our climate and planet for future generations.

It is noteworthy that limited research was found from regions such as Africa and the Middle East. This underrepresentation can be attributed to several factors, including the absence of mandatory ESG disclosure requirements in many jurisdictions, a lack of standardized reporting infrastructure, and limited institutional capacity for environmental data collection and dissemination (Igwe et al., 2023; Du Toit, 2024; and Elidrisy, 2024). While efforts are emerging, such as South Africa’s King IV and voluntary ESG guidelines in the UAE, these remain fragmented and understudied. This gap presents a clear direction for future research, particularly in understanding context-specific barriers and opportunities in these developing regions.

It should be noted that environmental accounting and ESG disclosures do not always mirror a firm’s actual sustainability performance, thereby underscoring an ongoing debate over their reliability. On one hand, evidence of potential greenwashing shows that some companies use sustainability reports more as public relations tools than as reflections of real change, as some research documents cases where disclosure aligns well with actual sustainability practices. It was found that among UN Global Compact participants, stronger environmental and social performance correlates with a more extensive SDG disclosure. However, notably, their results show that better governance practices did not translate into greater SDG reporting, highlighting the nuanced nature of the disclosure–performance link. Considering these mixed findings, the interpretation of corporate ESG reporting requires caution and context: stakeholders should critically evaluate sustainability disclosures, recognizing that high transparency can signal genuine performance improvements or serve as a veneer of compliance, and, thus, contextual scrutiny is essential in discerning how faithfully ESG reports reflect underlying sustainability performance.