Vol. 3 No. 6 (2026): EIYB (Educational Yield Insights & Breakthroughs)
Articles

FIRST ADOPTION OF ESG STANDARDS AND ITS IMPACT ON COMPANIES' FINANCIAL REPORTING

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  • Sinxuddin Istamov
Sinxuddin Istamov
Banking and Finance Academy Master's Student, Speciality of Corporate Finance and Market Securities

Published 2026-06-10

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

With the fast growth of mandatory ESG standards, such as ISSB's IFRS S1/S2 (2023), EU Corporate Sustainability Reporting Directive (CSRD), and U.S. SEC climate disclosure requirements (2024), it is necessary for firms to integrate ESG data into their financial reporting systems for the first time. In this paper, the financial reporting implications, compliance issues, and consequences related to ESG adoption for the first time will be discussed by considering the first adoption of accounting standards theory, legitimacy theory, and institutional theory. Four major areas of impact of adopting ESG reporting will be considered: changes in accounting information system, increased audit complexity, increased cost of first year of compliance, and changed format of financial statements. Moreover, the methodology of future empirical research as well as some initial hypotheses about market reaction to first ESG-compliance reports will be discussed in the paper. The findings of the paper are of importance for the new literature on the topic of ESG reporting transition and can be used by preparers, auditors, investors, and regulators.

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