What Does Climate Reporting Look Like in the Public Sector?
Karen Sanderson, Director of Public Financial Management, CIPFA | July 8, 2021
As the effects of climate change become more visible, organizations are experiencing increasing pressure to recognise and mitigate their environmental impact. In addition to greening operations, products and services, there is also a growing focus on reporting and disclosing environmental information to investors and the public. Sustainability reporting – reporting using environmental and social measures - is becoming common practice in the private sector. However, practices within the public sector are less prevalent. CIPFA conducted international research to better understand what public sector organizations are doing to report their impact on the climate.
For most countries, the public sector is the largest sector in the economy. Public sector organizations also influence the climate through regulation and through the provision of public services. Despite the size and scale of the sector, sustainability reporting in the public sector faces challenges for three main reasons:
- there are many definitions, which can influence the scope and focus of a report;
- there are numerous standards for sustainability reporting, with few referring directly to the public sector context; and
- there are distinct differences between private and public organizations (purpose, motivation and responsibilities) which impact the way sustainability reporting is conducted.
After surveying public sector accountants, academics, auditors, public servants and standard setters, we found that of those who responded, less than half (44%) were currently preparing sustainability reports. Despite the low rate of occurrence in the sector, there was a clear appetite for this type of reporting among respondents, with the cited benefits of sustainability reporting including better environmental outcomes, social outcomes, cost savings and operational improvements.
We found that sustainability reporting in the public sector is also largely done on a voluntary basis. Of the international jurisdictions we researched, very few had mandatory sustainability reporting requirements for public sector organizations. The absence of a mandate is considered by participants in the research to be a key reason why the practice has not materialised in the same way as it has in the private sector. In addition to larger mandates, institutional commitment is also viewed as pre-requisite for wider adoption in the public sector.
CIPFA identified 12 sustainability reporting frameworks that could be used to report climate information. However, none of these identified frameworks focus specifically on the public sector context. Furthermore, we found no consistency or preference for a particular framework among respondents. In fact, among those who have prepared a sustainability report, only two-thirds (66%) confirmed that their organization used an established framework for the report.
Auditing sustainability reports was also a key area of focus for this research. Our survey found that currently, only 25% of sustainability reports prepared go through an audit or assurance process. However, there was a strong view that audit and assurance of such reports was essential to mitigate any risk of ‘green-washing’. Assurance was also considered to be critical in ensuring the reliability and credibility of reports more broadly.
Perhaps the greatest challenge for public sector sustainability reporting is capacity and capability. The specialist climate science expertise and broad skill set required in both the preparation and assurance of sustainability reports, requires organizations to have multi-disciplinary teams. We found that this requirement is beyond the scope of what most public organizations currently possess in-house. That said, there was a consensus that the public finance profession has a key role in sustainability reporting. Finance professionals have skills in establishing controls and systems for the collection and communication of complex data, as well as broader skills and experience that will be invaluable as sustainability reporting becomes more common.
Despite clear challenges, there is overwhelming support for the further development of sustainability reporting in the public sector. Our findings suggest that the act of committing to, and beginning to report, environmental and climate information provides the impetus needed to address many of the challenges involved. There was a consistent view that public organizations not currently reporting should begin reporting climate information as soon as possible. There was also strong agreement among research participants that work to align and harmonise frameworks should be a priority – with a particular focus on public sector application.
There is much to do, and clearly a desire to step up to the challenges involved in the evolution of public sector sustainability reporting. After all, the public sector is a significant contributor to climate issues and reporting can help measure that impact – meaning that governments can take more informed action to better contribute to global environmental and climate objectives. Transparent, relevant information is needed now to enable decision-making that best serves the interests of our planet.