Foreword

The Global Accounting Alliance (GAA) is an alliance of ten of the world’s leading professional accounting bodies, representing more than 1.4 million accountants across over 180 countries. Connectivity has become an essential aspect of high-quality corporate reporting, as stakeholders seek to understand how sustainability-related risks influence an organisation’s strategy and financial performance. Without clear links between sustainability reporting and financial statements, reporting remains fragmented, limiting its usefulness for decision-making.

Executive summary

Connectivity ensures reporting elements provide a comprehensive package of information, telling a consistent story about value creation. The absence of connectivity risks inconsistent information, undermining the credibility of financial statements. Achieving connectivity remains a challenge due to organisational silos and capability gaps. However, the accounting profession is well-placed to lead this, drawing on disciplines like materiality, governance, and internal controls.

Introduction

This publication is the first in a series exploring the relationship between financial statements and climate-related disclosures. While climate disclosures are the most mature sustainability area, they are still in early stages compared to financial reporting. There is a need to move beyond viewing these as separate streams and understand how they intersect, particularly regarding judgement and uncertainty.

Why was this publication developed?

The report aims to clarify key concepts and highlight existing reporting gaps. It provides a foundation for subsequent guidance on governance and processes. Global standard-setters are embedding connectivity requirements, necessitating reporting that enables investors to understand connections with financial statements, including assumptions and risk assessments.

What does connectivity mean?

Connectivity is defined by coherence across reports, connections between related items, and common reporting boundaries. It involves using consistent data and assumptions to ensure sustainability information aligns with financial statements. Practically, this involves four dimensions: reporting boundaries, risks and assumptions, narrative and quantified information, and reconciling time horizons. It is not merely cross-referencing.

Why connectivity matters

Decisions by investors and boards depend on information quality. Connectivity provides clearer data on risks, supporting integrated decision-making. Research by Agrawal et al. (2025) on 80 large companies found that while all referred to climate in narrative reporting in 2022, only 71% disclosed these matters in financial statements, up from 25% in 2017.

The relationship between financial, climate and governance information

Effective reporting demonstrates how governance informs strategy and reflects financial outcomes. Connectivity requires aligned data, coherent disclosures, and decision-useful information for capital providers. Governance information details how boards oversee risks, shaping capital allocation and executive remuneration.

Where financial and climate data intersect, and where they don’t

Professional judgement determines intersections in asset valuations, provisions, and capital allocation. Climate matters can trigger impairment assessments or revised operating costs. However, long-term risks or scenario analysis may not meet strict accounting recognition thresholds, even if providing vital context.

The nexus in reporting between climate, nature and the social context

Organisations are encouraged to embed nature and social considerations into existing climate governance. Risks often arise at this nexus, such as the just transition to a lower-carbon economy. This integrated approach reduces duplication and improves reporting on dependencies like natural capital.

The global context for connectivity in reporting

Standard-setters are centralising connectivity. IFRS S1 and S2 establish it as a conceptual foundation. European Sustainability Reporting Standards (ESRS) require sustainability information to be consistent with financial statements. The Global Reporting Initiative (GRI) also encourages links through cross-references and consistent reporting boundaries.

Activities by standard-setters

The International Accounting Standards Board (IASB) clarifies connections through educational materials. An IFRIC agenda decision notes that net-zero commitments do not automatically create a provision under IAS 37. A liability is only recognised when a present obligation arises from a past event, such as actual emissions.

Challenges and enablers for connectivity

Challenges include data quality issues and organisational silos. Practical enablers include leadership engagement and cross-functional collaboration. Recommendations include getting functions together early, building finance-grade controls over sustainability data, and leading with the story rather than a checklist.

The strategic role of accounting professionals

Accountants lead connectivity by applying expertise in internal controls and materiality to sustainability data. They act as a bridge between data and disclosure. Their ‘true and fair view’ mindset ensures reports provide a fair representation of the business.

New and evolving competencies

Accountants are developing capabilities in systems thinking, data analytics, and climate-related fluency. They must master qualitative narratives and forward-looking analysis under uncertainty to ensure sustainability reporting is not treated in isolation.

Conclusion

The strategic opportunity for the accounting profession is to extend technical skills to sustainability disclosures. This ensures corporate reporting remains credible and decision-useful. Subsequent publications will focus on embedding connectivity in governance and internal decision-making.