Sustainability Accounting: Measuring the Financial Impact of Green Practices

Abstract

This study examines the role of sustainability accounting in measuring the financial impact of green practices by employing a mixed-methods experimental design that integrates quantitative econometric modeling with qualitative thematic analysis. Data were collected from multiple global sources, including Bloomberg, Refinitiv, MSCI ESG Ratings, CDP disclosures, and corporate sustainability reports, covering the period 2018–2023. Quantitative results revealed that environmental, social, and governance (ESG) performance significantly enhances firm-level financial outcomes, with higher ESG scores positively associated with return on assets (ROA), Tobin’s Q, and market valuation. Carbon performance was also found to inversely affect profitability, indicating that poor environmental practices carry measurable financial risks. Difference-in-differences estimations confirmed that mandatory ESG disclosure regimes improve market efficiency and enhance firm valuation, highlighting the importance of regulatory frameworks.Complementary qualitative findings emphasized managerial motivations, stakeholder trust, and transparency as crucial drivers of value creation, with sustainability narratives shaping investor confidence and mitigating reputational risk. The integration of natural language processing (NLP) into textual analysis further demonstrated how sustainability reporting language influences perceptions of accountability and corporate legitimacy. Triangulation of results underscored the multidimensional role of sustainability accounting, not only in quantifying financial impacts but also in reinforcing firms’ resilience, reducing capital costs, and enhancing strategic competitiveness.Overall, the study provides robust evidence that sustainability accounting functions as both a financial measurement tool and a strategic framework, enabling firms to align green practices with long-term financial performance. The findings carry important implications for managers, investors, and regulators seeking to balance financial accountability with environmental stewardship in an era of climate-conscious capitalism.