The Muamalat Newsletter Vol. 2 2024

FEM eNewsletter | December 2024 71 Carbon Accounting: The next frontier in ESG Nurul Nazlia Jamil Faculty of Economics and Muamalat Universiti Sains Islam Malaysia their ESG ratings. Nonetheless, the utility of carbon accounting extends beyond mere reporting. To enhance their ESG ratings, firms must reduce their environmental impact, necessitating a comprehensive understanding of that impact. Robust carbon accounting will allow a corporation to deconstruct its carbon footprint by source and pinpoint the most significant emissions within its activities or value chain. These insightsenable thefirmtoexecutecarbon reduction measures (Jiang & Tang, 2023). Carbon accounting is an emerging discipline that has rapidly become a crucial instrument in the battle against climate change. Carbon accounting is a method for quantifying the greenhouse gas emissions produced by an organisation. Similar to financial accounting, carbon accounting measures the effects of an organization’s business actions; however, it focusses on climate impact rather than money impact. Carbon accounting, or greenhouse gas (GHG) accounting, quantifies, documents, and disseminates information regarding Definition of ESG Environmental, social, and governance (ESG) criteria are designed to evaluate the influence of a company’s activities on its surrounding environment. The climate crisis has illuminated the environmental consequences of corporate actions, leading to heightened pressure on firms to operate sustainably. By engaging with ESG principles, a firm not only contributes positively to the world but also realises business benefits and competitive advantages. What is the necessity of carbon accounting for ESG? Carbon accounting allows enterprises to quantify their greenhouse gas emissions. These emissions constitute a significant aspect of a company’s environmental impact, represented by the E in ESG. Consequently, carbon accounting is crucial for organisations to accurately record their comprehensive environmental effect, particularly regarding obligatory disclosure mandates, and to assess Ersa Tri Wahyuni Faculty of Economics and Business Universitas Padjajaran