How Managerial Accounting Integrates ESG Metrics into Cost Frameworks: The Indian Context

When sustainability is a central theme of corporate strategy in India, as it is the case now, the managerial accounting has to integrate ESG (environmental, social, and governance) metrics as a “must, have” feature. These metrics that include carbon emissions, water consumption, and energy usage are becoming part of cost frameworks aimed at unlocking value, managing risks, and meeting the regulations. Such an integration is also important in view of the changes in Indian regulations like SEBI’s Business Responsibility and Sustainability Reporting (BRSR), and the forthcoming Carbon Credit Trading Scheme (CCTS) (SEBI, 2021; MoEFCC, 2023). Gradually, managerial accounting functions are being transformed to include instruments such as Environmental Management Accounting (EMA), Material Flow Cost Accounting (MFCA), and internal carbon pricing. Nevertheless, still, a few problems such as data availability, standardization, and capacity of Indian industries remain. This paper delves into these events and puts forward a framework specially designed for Indian companies to incorporate ESG with the help of their cost accounting systems as a means of creating sustainable value.