Public sector sustainability reporting: Time to step it up
Carol Adams CA, Chair of the ICAS Sustainability Panel, recently authored a new report for CIPFA, which was endorsed by ICAS.
A recent report by Carol Adams and CIPFA 'Public sector sustainability reporting: Time to step it up', highlights how public sector organisations can improve their reporting of sustainability information.
Recent developments in sustainability reporting have largely focused on the private sector. However, the public sector has responsibility for organisations operating in carbon intense industries, such as energy and transportation, as well as those with social impacts, including education and healthcare.
The public sector therefore has an arguably even more important role to play in achieving the UN Sustainable Development Goals (SDGs), including net zero targets, than the private sector.
The report highlights the existing resources that public sector professionals can use to improve sustainability reporting and sets out how they can develop their reporting.
ICAS is delighted to endorse the CIPFA publication 'Public sector sustainability reporting: time to step it up'. Sustainability reporting is paramount in holding organisations accountable for their contribution to sustainable development. We strongly support this timely call to action for the public sector to improve efforts in reporting sustainability information.
Top three takeaways
1. Multi-stakeholder focus
Public sector entities have a range of internal and external stakeholders, including but not limited to, employees, customers and communities served, amongst others. Public institutions exist to create value for a range of stakeholders, and to have a positive impact on the economy, society and/or environment. Therefore reporting on this impact is crucial. It is also important to find out from key stakeholders what impacts are material to them, otherwise there is a risk that something material is not reported which can affect reputation and trust.
Public sector bodies need to report on policy effectiveness and program outcomes in the public sector for a broad audience. This could include reducing negative impacts on the environment. Public sector bodies and government are expected to contribute to national reporting on achievement of the SDGs, therefore using a set of consistent, standardised metrics and measurement tools would make aggregating reporting across entities and departments much easier.
Standards such as those developed by the Global Reporting Initiative (GRI) for impact reporting are commonly used in the private sector (78% of the largest 250 companies in the world report on sustainability using the GRI standards). These standards could be leveraged by those in public sector reporting roles rather than re-creating the wheel by developing new metrics or standards.
Pages 52-59 of the report provide further information on the GRI standards.
2. Collaborative effort, led by finance professionals
Public sector organisations need to look at resourcing for sustainability reporting compared to financial reporting. In most cases, there needs to be an increase in resourcing dedicated to sustainability reporting if we are to step up. There also needs to be a collaborative effort with information collected from across the organisation, including human resources, finance, operations and other areas. Finance professionals are well placed to lead such information gathering efforts as they have a solid understanding of controls around data collection and processing.
The same level of rigour should be applied to the data collection process for non-financial information as is applied for the collection of financial information. This may necessitate updates to systems and processes. There is typically a greater emphasis on social value in the public sector and a broad range of factors are taken into account in decision making. However, there may be a need to upskill finance professionals to consider environmental and social information more broadly, as well as financial information, when making decisions.
The report suggests that disclosures on governance, management approach, strategy as well as performance and targets are all important for inclusion in public sector sustainability reporting.
Pages 43-51 of the report provide further information on these themes.
3. Starting point – mandatory disclosures and what’s relevant
In its revised Green Finance Strategy issued in March 2023, the UK Government announced an endorsement process for the first two International Sustainability Standards Board (ISSB) Sustainability Disclosure Standards which are expected to be published in June 2023.
The government is committed to introducing mandatory reporting against the UK endorsed standards, subject to the conclusion of the assessment process. ICAS has called for mandatory sustainability reporting in the private sector and is supportive of a collaborative approach between the ISSB and GRI to ensure reporting on impact is incorporated. It is likely then, that we will see mandatory reporting in the UK public sector as well as the private sector soon.
Additionally, it’s important to determine what the key things are that each organisation should be reporting on – there is no one size fits all approach and this will differ between public sector services such as schools, health care providers and fire brigades. We have a clear steer in the UK to start with the impact of climate change upon organisations, and the impact that organisations are having upon climate change.
There are also required disclosures in other jurisdictions on topics such as gender, race, disability etc. Public sector bodies tend to be effective at collecting and reporting non-financial information therefore existing reporting mechanisms can be adapted for sustainability reporting rather than starting from scratch.
Pages 63-64 of the report provide further guidance on what information to disclose.
Conclusion
There needs to be a significant step up in public sector sustainability reporting in order to hold organisations accountable for their contributions to the environment and society. We have several existing tools, such as GRI standards, which can be used today – we don’t need to wait for the publication of new standards or develop separate public sector reporting standards.
A multi-stakeholder approach is key to determining what impacts are material to be reported, finance teams are well placed to lead the charge in instilling the required discipline for the collection of non-financial information, and mandatory reporting requirements are a good starting point, supplemented with what’s relevant to the particular organisation to report.
Further information
- The ‘Public sector sustainability reporting: time to step it up’ report can be downloaded for free from the CIPFA website.
- The recording of a briefing call on the report featuring Carol Adams and CIPFA’s Director of Public Financial Management, Iain Murray, is now available to watch on the CIPFA YouTube channel.