Summary
Green accounting has become essential in 2025 as ESG (Environmental, Social, and Governance) rules tighten and stakeholders expect more transparency. This blog explains how accountants are moving beyond basic compliance to help businesses understand sustainability data, manage risks, spot opportunities, and support long-term growth.
Core Components of Green Accounting
Green accounting brings environmental, social, and governance information into everyday financial planning. To do this well, accountants need reliable, structured measurements of sustainability impacts that could affect long-term performance. Key elements include:
- Emissions accounting
- Environmental cost allocation
- Understanding natural-capital impacts
- Valuing social factors, such as staff wellbeing and retention
How Scope 1, 2, and 3 emissions fit in
- Scope 1: Direct emissions from a company’s own activities
- Scope 2: Emissions from purchased energy
- Scope 3: Indirect emissions throughout the value chain
For many SMEs, Scope 3 is the largest category. Accountants often help clients gather spend-based or activity-based data to produce defensible calculations.
Which environmental costs can be capitalised or expensed?
Environmental costs might include:
- site clean-up or remediation
- renewable-energy investments
- carbon credit purchases
- waste-management improvements
Whether these are capitalised or expensed depends on whether the spend creates future economic benefit, following normal accounting rules.
How carbon pricing affects financial decisions
Schemes like the UK Emissions Trading Scheme (UK ETS) directly influence operating costs for businesses covered by the rules. Carbon prices and penalties shape cost forecasts, risk planning, and investment decisions.
For example, the official civil-penalty rate for UK ETS in 2025 is £41.84 per tonne.
How social metrics affect valuation
Data on employee retention, diversity, training, and community engagement play a growing role in investment decisions. These factors often signal productivity, organisational health, and long-term resilience.
Turning ESG Insights into Strategy
Accountants are well placed to turn sustainability information into practical financial advice.
Cost control and efficiency
Analysing emissions, waste, and resource use can highlight inefficiencies. Cutting these often reduces long-term operating costs and improves resilience.
Access to funding
Investors and lenders increasingly assess a company’s ESG performance. Clear, credible ESG data can strengthen funding applications and lower perceived risk.
Improving market competitiveness
Many tenders and procurement processes now include sustainability criteria. Strong ESG performance helps SMEs win and retain contracts.
Long-term planning and risk management
Understanding climate risk, regulatory developments, and resource dependencies supports better long-term decision-making. Tools like scenario modelling help businesses plan for different futures.
Tools and Technology for ESG Advisory
Digital tools make ESG advisory work more efficient and accurate.
- ESG platforms simplify emissions measurement and reporting.
- Scenario-modelling tools help businesses assess the impact of regulatory change, carbon pricing, or resource constraints.
- Cloud accounting integrations allow spend-level data to be used for emissions estimates, improving Scope 3 data quality.
Why data assurance matters
As ESG reporting becomes more detailed, independent verification is increasingly expected. Assurance helps build trust and ensures compliance—something accountants are naturally positioned to deliver.
Skills Accountants Need to Grow as ESG Advisors
Sustainability knowledge
- carbon accounting
- climate-related financial risks
- biodiversity impacts
- emerging frameworks (ISSB, CSRD, TNFD)
Financial modelling
- scenario planning
- long-term forecasting
- investment appraisal
- integrating sustainability variables into models
Upskilling efficiently
Cost-effective routes include:
- ACCA and ICAEW sustainability courses
- CPD modules
- webinars and industry reports
- partnerships with ESG specialists
How ESG Fits with OD Accountants’ Services
OD Accountants already support clients with growth advisory, outsourced finance functions, and cloud-based accounting. These services naturally complement ESG integration. As SMEs increasingly need sustainability insights for decision-making, OD’s frameworks can include:
- ESG readiness assessments
- sustainability dashboards
- risk reviews
- strategic planning that includes carbon, resource use, and social metrics
ESG within outsourced CFO services
Outsourced CFOs are now expected to report ESG performance to boards, interpret sustainability risks, and develop strategies that reflect environmental and social factors.
Conclusion
ESG and green accounting are now central to business strategy. They shape risk management, financial planning, competitiveness, and long-term decision-making. As standards continue to evolve, accountants are uniquely placed to guide organisations through this new landscape.
By embracing ESG, firms can expand their advisory services and help clients build more resilient, future-focused strategies. OD Accountants can support organisations through sustainability-aligned advisory work and outsourced finance services tailored to SME needs.
FAQs
Which sectors benefit most from ESG advisory?
Industries with complex supply chains—manufacturing, construction, retail, logistics—often face the greatest sustainability demands and therefore benefit most from ESG support.
Are ESG metrics mandatory for all UK SMEs?
Not always. But lenders, investors, and major customers increasingly require ESG data, so reporting is becoming essential for competitiveness.
Do SMEs need specialist ESG software?
Not at first. Many begin with spreadsheets and move to ESG software as reporting becomes more complex.
How long does it take to prepare a first ESG report?
It depends on the business. Those with organised data can do so relatively quickly; others may take longer while gathering information for the first time.
Can ESG help reduce operational risks?
Yes. ESG analysis helps businesses anticipate regulatory changes, supply-chain vulnerabilities, and resource risks—strengthening long-term resilience.