Sustainability, ESG and Integrated Reporting in Sri Lanka Pathways to Modernizing Financial Accounting

Abstract

As global reporting standards continue to include sustainability and Environmental, Social, and Governance (ESG) factors, Sri Lanka is adjusting its corporate reporting practices to keep pace with these changes. This chapter discusses how integrated reporting and ESG disclosures are shaping financial accounting practices in Sri Lanka, in line with international standards. Sri Lanka has begun following the International Sustainability Standards Board guidelines, with plans to apply IFRS S1 and S2 from 2025 for sustainability and climate related reporting. Local regulators and the stock exchange have also taken steps to improve ESG reporting rules. Based on a literature review and data analysis, the chapter builds an ESG Quality Index and an ISSB Readiness Score to understand how well companies are preparing to meet global standards. Findings from 2024 show that more companies are publishing integrated reports, with fifty reports released and ten of them following the international framework. However, challenges remain in areas such as consistency, selecting material topics, and connecting ESG information with financial results. To make progress, stronger policy support, training efforts, and better alignment with international frameworks will be important.