The International Public Sector Accounting Standards Board (IPSASB) recently launched a global consultation on advancing public sector sustainability reporting through the development of a globally recognised set of standards specifically tailored to the public sector.
Sustainability reporting covers broad topics around the environment, society and governance. These are topics with a significant level of growing public interest. Public spending can have a direct impact on several sustainability challenges, while regulations can influence conscious practices and redistribution of wealth towards responsible activities. Therefore this is a timely intervention as there is a clear need for public sector specific standards that could help highlight the public-sector specific opportunities and challenges when it comes to sustainability.
IPSASB can play a pivotal role in the development of such standards, due to the vast experience, resources and global relationships that the organisation can draw on. Standards developed by and with the support of IPSASB are expected to be more widely adopted globally, further promoting the consistency and comparability of different organisations.
Contrasts with the private sector
Over the last few years, there have been more efforts to standardise private sector reporting around sustainability metrics in comparison to the public sector. The efforts to increase standardisation in the private sector have been expedited by the International Sustainability Standards Board (ISSB). This is expected to help drive consistency, ease of comparability and increased confidence in the sustainability reporting of the companies that adopt globally recognised standards. However, the public sector has its own unique set of characteristics and challenges, and a lack of standardised sustainability reporting makes it difficult to accelerate progress in embedding sustainability across the sector.
One approach to accelerate the agenda is to clearly define the elements of sustainability where IPSASB can most add value (particularly those linked to the environment and climate), and to tailor related standards that are developing for the private sector. The ISSB’s mission to develop standards is to provide a globally consistent baseline of investor-focused sustainability information. Using a “building blocks approach” the standards developed by ISSB could then be tailored by IPSASB to suit the needs of the public sector. In this manner, IPSASB’s efforts could build on, and align with the efforts of the ISSB.. This could be less resource intensive and could facilitate timely development of public sector guidance.
Key conceptual differences must still be addressed. The ISSB standards place a greater focus on ESG impact on enterprise value, whilst for the public sector, there is likely to be a broader focus on stakeholders. In this regard, IPSASB has highlighted that public sector standards should also include reporting on the sustainable development goals (SDGs) or other public policy objectives.
Developing the guidelines
1. Recognise the breadth of jurisdictional priorities
As public sector priorities are diverse and user needs are broad, the public sector guidance should focus on the needs expressed across jurisdictions.
For example, in the UK, the Government’s overarching sustainability and climate change strategy is set out in its 25 Year Environment Plan. This will contribute significantly to achieving the Government’s SDGs commitments. Under the UK Treasury’s sustainability reporting guidance, Government Departments are required to report their progress against the Greening Government Commitments and the associated sustainability baselined targets and commitment led reporting structure.
2. Need for collaboration
IPSASB should work with other international organisations in the development of the standards and guidance and where appropriate utilise existing information. In doing so, IPSASB could leverage the principles and structure proposed under the ISSB General Requirements for Disclosure of Sustainability-related Financial Information Standard (S1). It could also select from the vast disclosures and metrics proposed under the sector-agnostic EU Sustainability Reporting Standards (ESRS) as well as the Sustainability Accounting Standards Board (SASB) Standards and customise these to the specific needs of the public sector.
3. Immediate actions
As the adaptation for the public sector may take time, IPSASB could start once the ISSB and ESRS are finalised. This is a timely opportunity for IPSASB to be involved with EFRAG and play a part in the development of these disclosures. IPSASB could support the use of the standards by developing practical guidance, underpinned by IPSASB member case studies, that showcase the applicability of the standards and provide practical use cases. It will be important for countries to see what the recommended reporting could and should look like.
