Extensive environmental, social, and economic developments in recent decades have increased the need to review traditional financial reporting systems and move toward more comprehensive approaches such as sustainability accounting and environmental, social, and governance (ESG) reporting. Municipalities, as the most important urban management institutions, require tools to measure and report on their sustainable performance due to their direct role in providing public services, managing urban resources, and influencing the quality of life of citizens. The purpose of the present study is to conceptually analyze sustainability accounting and ESG reporting in municipalities and examine its position, dimensions, challenges, and requirements for establishing it in the urban management system. This study is applied in terms of purpose and library and review in terms of method, and was conducted using a review and analysis of scientific sources, research articles, and international frameworks related to sustainability reporting. The research findings show that sustainability accounting, by expanding the scope of information beyond financial indicators, allows for a more comprehensive assessment of municipal performance, and ESG reporting can be used as a tool to increase transparency, public accountability, strengthen citizen trust, and improve managerial decision-making processes. Also, the studies showed that the successful establishment of this system faces challenges such as the lack of an integrated urban reporting framework, weak data and information infrastructure, lack of local standards, and the need for digital transformation. In this regard, the development of smart information systems, the development of indicators appropriate to the characteristics of urban management, and the promotion of employee expertise are essential requirements for the implementation of ESG reporting in municipalities. In summary, sustainability accounting and ESG reporting can pave the way for municipalities to transition to sustainable, transparent, and accountable governance by creating a link between financial information, social performance, and environmental outcomes.