How does sustainability accounting contribute to decision-making?

Sustainability accounting contributes to decision-making primarily by providing insights into environmental and social impacts. This approach allows organizations to assess not just their financial performance, but also how their operations affect the environment and society at large. By incorporating these insights, businesses can make more informed decisions that align with sustainability goals, such as reducing their carbon footprint or improving social equity.

This broader perspective helps companies recognize potential risks and opportunities, guiding them to develop strategies that balance economic performance with social responsibility and environmental stewardship. Stakeholders, including investors, customers, and regulators, increasingly expect organizations to demonstrate their impact on social and environmental issues, making these insights integral to strategic planning and long-term success.

In contrast, focusing solely on past performance limits the scope of understanding to historical data, while an exclusive emphasis on regulatory compliance overlooks the broader implications of a company's actions. Additionally, limiting financial disclosures reduces transparency, which is counterproductive in fostering trust with stakeholders who are keen to understand both financial and non-financial impacts.