Holding to account: Climate reporting in the public sector
In recent years, sustainability reporting has attracted widespread interest and activity in the private sector. However, there has been only limited focus on the public sector to date, despite the public sector being the largest economic sector of most nations.
To better understand the challenges and opportunities sustainability reporting brings, the Chartered Institute of Public Finance and Accountancy (CIPFA) recently conducted international research across the public sector globally, with a particular focus on climate reporting. CIPFA’s report, Evolving Climate Accountability, A Global Review of Public Sector Environmental Reporting, identifies several areas of further consideration if sustainability reporting is to become more mainstream in the public sector.
In our review of reporting practices, across various levels of government, we found public sector sustainability reporting to be in its infancy. Fewer than half (44 per cent) of the participants in our survey currently produce a sustainability report.
Those currently reporting on climate matters largely do so on a voluntary basis.
The lack of any statutory obligation, as well as the challenges involved with the preparation of sustainability reports – including the availability and quality of data – were identified as significant obstacles hindering widespread uptake. The skills and specialist expertise required for both the preparation and assurance of such reports was highlighted by participants as a key challenge for the sector.
Practically speaking, sustainability reporting requires a multi-disciplinary team with capacity and capabilities beyond what most public sector organisations have in-house at present.
There was broad recognition that the finance profession has a key role to play and, amongst other things, can use its expertise in establishing controls and supporting systems for the collection and communication of data in sustainability reports.
There is much more work to be done, but the sector is not starting from scratch.We found that, of those public sector organisations that have been producing sustainability reports, few were integrating them with other forms of reporting. While standalone sustainability reports can raise greater awareness of climate issues, integration with other organisational reporting provides a more holistic view of performance and enables better-informed decision-making.
However, it’s worth noting some jurisdictions around the world are making constructive links between financial and non-financial reporting. A prime example is the NSW Treasury’s guidance for public sector bodies, which explains how to reflect the effects of climate-related matters in financial statements. At CIPFA, we expect public sector sustainability reporting to evolve, and examples like the NSW guidance will only improve and accelerate that development.
Despite the array of obstacles, there is clearly appetite for this type of reporting. There was a consistent view from participants that public sector entities should commence their sustainability reporting journey sooner rather than later, as processes and standards will need to evolve over time.
Waiting is viewed as a mistake. Furthermore, we found that commitment to report on climate impact can provide the impetus needed to overcome some of the current hurdles.
CIPFA recognises that this research is just the tip of a very large iceberg for the public sector.
We intend for it to serve as a baseline from which the evolution of public sector sustainability reporting can be measured.
There is much to do in the public sector to identify a robust and consistent approach to sustainability reporting.
Only then will meaningful and targeted climate action follow. After all, as one research participant stated, “carbon is carbon – the planet doesn’t care who produced it”.
Karen Sanderson director of public financial management, CIPFA