Businesses worldwide face increasing pressure to balance financial goals with long-term sustainability, and accounting professionals are emerging as critical drivers of Environmental, Social, and Governance (ESG) compliance.
In Sri Lanka, this shift is becoming more evident as businesses incorporate ESG into core strategies to meet new regulatory frameworks and international expectations. The growing emphasis on ESG reflects a broader recognition that sustainability is essential for long-term business resilience. Companies that do not adapt will face regulatory challenges and potential market disadvantages.
The upcoming SLFRS Sustainability Reporting Standards (S1 and S2), are based on the IFRS Sustainability Disclosure Standards—issued by the International Sustainability Standards Board (ISSB). SLFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and SLFRS S2 Climate-related Disclosures will become effective in Sri Lanka from 1 January 2025, placing accounting professionals at the forefront of ensuring compliance and connecting sustainability initiatives with financial performance: their role is to help organizations meet regulatory requirements while identifying opportunities for cost efficiency and long-term value.
Over the past decade, Sri Lanka has made notable progress in ESG reporting due to the involvement of accounting professionals. This progress has positioned the country as a regional leader in ESG compliance, aligning local businesses with global standards. However, organizations must prioritize material topics relevant to stakeholders while maintaining a competitive edge amidst the evolving global frameworks and increasing investor scrutiny.
A survey conducted by ACCA, IFAC, and PwC in 2023 found that nearly half of senior accountants globally reported their organizations lacked plans to reduce carbon emissions, with 70% having no intention to develop one, highlighting the depth of insights and the critical role of accounting professionals in embedding ESG principles into corporate strategy and ensuring businesses are prepared for regulatory changes, especially as investors and regulators increasingly demand transparency in ESG performance.
In Sri Lanka, accounting professionals have become essential to navigate through the journey of ESG compliance. Their role extends beyond traditional financial reporting, helping businesses integrate ESG into broader strategies. By aligning sustainability initiatives with business performance, they ensure these efforts contribute to long-term business objectives and compliance. According to Sampath Jayawardena, Senior Director at EY, ESG is now a priority in boardrooms across Sri Lanka, driven by new regulatory requirements.
The SLFRS Sustainability Reporting Standards, effective in 2025, will require climate-related disclosures, compelling businesses to adapt their operations. Jayawardena notes that non-compliance could lead to reduced access to capital, while proactive adoption of sustainable practices could improve financing terms. He stresses the importance of companies prioritizing ESG to avoid falling behind in a competitive financial environment where lenders and investors are increasingly factoring in climate risks.
Ranjani Joseph, Audit Partner and Head of Banking & Markets of KPMG Sri Lanka stresses that accounting professionals take a vital role in connecting and analysing ESG efforts with related financial impact. Accountants play a critical role in aligning sustainability goals with business performance and investor communication. Finance professionals help identify opportunities for cost savings and operational efficiencies. That is particularly relevant in renewable energy and sustainable supply chains, where investments can reduce environmental impact while improving financial results.
Joseph highlights the need for continuous learning, noting that accountants must stay updated with evolving global ESG standards to ensure organizations meet the growing demand for transparency. By integrating ESG into everyday business functions, such as procurement and financial planning, accountants help businesses navigate compliance complexities while enhancing long-term performance.
Sri Lanka’s progress in ESG reporting began in the early 2000s with the introduction of global frameworks like the Global Reporting Initiative. Initial awareness-building efforts gradually transformed into an industry-wide shift as more companies recognized the value of integrated reporting. Aruni Rajakarier, Founder and Director of SheConsults, reflects on these early efforts, which began with workshops and seminars designed to raise awareness about sustainability practices.
Over time, these efforts led to a significant shift in how Sri Lankan companies approach ESG reporting. By 2020, Sri Lanka was ranked third globally in KPMG’s Sustainability Reporting Survey, reflecting the advancement in sustainability practices. Rajakarier acknowledges that while Sri Lanka has made significant strides, the global ESG landscape is constantly evolving, and local companies must stay ahead of these changes to remain competitive.
She believes the shift toward harmonized standards presents challenges and opportunities for businesses. Companies need to focus on material ESG topics relevant to their stakeholders while avoiding unnecessary complexity in reporting. Rajakarier emphasizes the crucial role accounting professionals will play in guiding businesses through this transition, helping them adopt global ESG frameworks and ensuring compliance.
Accounting professionals in Sri Lanka have been central to ensuring compliance with evolving ESG reporting standards. Their expertise in capturing and analysing non-financial data extends beyond financial reporting to improving stakeholder engagement through transparency and accuracy. The pressure to provide reliable ESG data is growing, and accountants are prepared to deliver. Joseph points out that companies must ensure their ESG efforts are aligned with global frameworks to remain competitive in an increasingly sustainability-conscious market.
While accounting professionals have been leading ESG adoption efforts, the Association of Chartered Certified Accountants (ACCA) has played a pivotal role in supporting Sri Lanka’s sustainability journey. ACCA has provided resources and training to help accounting professionals stay informed on global ESG trends and develop the expertise needed to navigate the complexities of sustainability reporting. ACCA advocates for global sustainability standards, building ESG into its student curricular and continuous professional development programmes.
One of ACCA’s most impactful contributions has been the ACCA Sustainability Reporting Awards, promoting excellence in ESG reporting for 20 years. These awards have recognized organizations in Sri Lanka that demonstrate leadership in adopting ESG principles, setting a benchmark for others. The awards have fostered widespread adoption of sustainability practices across various industries. Companies recognized through the ACCA awards are now seen as models for ESG compliance, contributing to Sri Lanka’s growing reputation as a leader in sustainability reporting.
ACCA’s influence extends beyond the awards. Through continuous professional development initiatives and knowledge-sharing platforms, ACCA has empowered accountants to lead their organizations in adopting international best practices in ESG compliance. This support will be critical as Sri Lanka moves toward mandatory climate-related disclosures and faces increased scrutiny from investors and regulators. ACCA’s role in shaping Sri Lanka’s future sustainability landscape ensures that accounting professionals are well-equipped to meet the challenges ahead.
As Sri Lanka’s ESG journey continues, accounting professionals remain central to driving compliance and integrating sustainability into business strategies. The increasing demand for transparency from regulators, investors, and consumers means businesses must ensure their ESG initiatives achieve compliance with global standards and contribute to long-term value creation. Accountants help organizations achieve this balance, ensuring sustainability efforts align with financial performance and remain competitive in a rapidly changing global market.
With the continued support of ACCA through its sustainability awards and professional development initiatives, Sri Lankan accounting professionals are well-positioned to guide their organizations through the evolving ESG landscape. As the country prepares for mandatory reporting standards, the combined efforts of accountants and institutions like ACCA will ensure that Sri Lanka remains at the forefront of sustainability reporting, aligned with global trends and ready to navigate a more sustainable future.