Climate change risk for sustainability: The implication on financial and environment, social and governance reporting

Authors

  • Yanto Kamarudin Faculty of Business and Economics, Universitas Indonesia, Kota Depok, Jawa Barat 16424, Indonesia.
  • Zuraidah Mohd-Sanusi Accounting Research Institute-HiCOE, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia.
  • Kazi Musa Accounting Research Institute-HiCOE, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia.
  • Soheil Kazemian School of Business and Law, Edith Cowan University, Joondalup WA 6027, Australia.
  • Mizan Hitam College of Built Environment, Universiti Teknologi MARA 40450 Shah Alam, Selangor, Malaysia.
  • Aziatul Waznah Ghazali Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia.
  • Nur Aima Shafie Accounting Research Institute-HiCOE, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia.

DOI:

https://doi.org/10.24200/jonus.vol8iss3pp277-299

Abstract

This study examines the impact of climate change risk on financial reporting and the disclosure of non-financial information related to environmental, social, and governance (ESG) aspects. It also extends the analysis to the use of assurance standards to ensure the credibility of ESG reporting. Drawing upon professional and industry reports, as well as academic research, this study utilises data from 2019 to 2020 to assess the current state of ESG reporting and its implications. The findings reveal the significant influence of climate change risk on financial reporting, highlighting the need for auditors to incorporate these risks into financial statement audits. Moreover, the inclusion of non-financial information, such as ESG or sustainability reporting, has become integral to corporate reporting, as stakeholders increasingly rely on such information to inform investment and decision-making processes. By exploring the interplay between climate change risk and financial reporting, this study contributes to a deeper understanding of ESG frameworks, guidelines, and standards companies adopt when preparing sustainability reports for their stakeholders. The study demonstrates that adopting sustainable reporting practices enhances a company’s trustworthiness among stakeholders. It also emphasises the need for further research into current ESG practices, the application of accounting standards, and stakeholder acceptance to advance sustainability efforts. This research provides valuable insights into improving the effectiveness and reliability of ESG reporting in the context of climate change risk.

Keywords: Sustainable reporting, environment, climate change, audit, ESG framework.

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Published

2023-09-30

How to Cite

Climate change risk for sustainability: The implication on financial and environment, social and governance reporting. (2023). Journal of Nusantara Studies (JONUS), 8(3), 277-299. https://doi.org/10.24200/jonus.vol8iss3pp277-299