Citation:

Swapna Raghupathi, Dr. Shailashri V. T. "Accounting Foundations for Sustainability Disclosure: A Conceptual Framework on the Role of GAAP, IFRS S1 and IFRS S2 in Harmonising ESG Reporting" International Research Journal of Economics and Management Studies, Vol. 5, No. 9, pp. 38-57, 2026. Crossref. https://doi.org/10.56472/25835238/IRJEMS-V5I9P104

Abstract:

Environmental, social and governance (ESG) reporting has expanded through a proliferation of voluntary frameworks, regulatory initiatives and jurisdiction-specific rules, producing well-documented problems of fragmentation, inconsistent measurement, limited comparability and greenwashing risk. This conceptual paper examines whether, and how, Generally Accepted Accounting Principles (GAAP) and the broader financial reporting infrastructure they support can contribute to a more harmonised ESG reporting environment, and it evaluates the specific role of IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures), issued by the International Sustainability Standards Board (ISSB), in that process. Drawing primarily on institutional theory, information asymmetry theory and agency theory, with stakeholder, legitimacy, decision-usefulness and standards-diffusion perspectives as supporting lenses, the paper develops and critically tests the thesis that accounting principles supply necessary but not sufficient conditions for harmonised sustainability reporting. It argues that GAAP-based recognition, measurement, materiality, comparability and assurance discipline can meaningfully discipline ESG disclosure, but that GAAP alone cannot resolve the boundary problems created by externalities, long time horizons, double materiality and impacts that fall outside enterprise-value considerations. IFRS S1 and IFRS S2 are analysed not as another voluntary ESG framework but as a structured, investor-focused extension of financial reporting architecture into sustainability-related information, built on, and partially superseding, the Task Force on Climate-related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB) and related initiatives. An original conceptual framework and a linked set of eight propositions connect accounting-principle inputs, reporting-mechanism disciplines and IFRS S1/S2 architecture to comparability, decision-usefulness and, conditionally, harmonisation, subject to jurisdictional, institutional, firm-size and assurance-capacity boundary conditions. The paper contributes a conceptual integration of literatures that have largely developed separately accounting-principle research, ESG disclosure research and ISSB-specific commentary and offers implications for standard-setters, regulators, preparers, assurance providers and researchers, with particular attention to micro, small and medium-sized enterprises (MSMEs) and developing-economy contexts, including India. The paper does not claim that global ESG reporting harmonisation has been achieved, or that IFRS S1/S2 constitute a comprehensive answer to stakeholder-oriented sustainability reporting; it argues only that they represent a conceptually significant, but bounded and contested, contribution.

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Keywords:

GAAP, ESG Reporting, IFRS S1, IFRS S2, ISSB, Harmonisation, Materiality, Sustainability-Related Financial Disclosure.