In essence, sustainability reporting enables organisations to disclose the environmental, social and governance (ESG) impacts of their activities and the strategies thereon.
Sustainability reporting is a relatively new topic in the public sector environment. The Global Reporting Initiative Standards (GRI Standards) describe the objective of sustainability reporting as ‘to provide transparency on how an organisation contributes or aims to contribute to sustainable development’. In turn, sustainable development refers to ‘development which meets the needs of the present without compromising the ability of future generations to meet their own needs’.
Over the years, most of the reporting in the public sector has been focused on the United Nations Sustainable Development Goals as adopted by all United Nations Member States in 2015 as part of The 2023 Agenda for Sustainable Development, which provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.
Various standards and guidance relating to sustainability reporting are available, including the GRI Standards referred to above. However, these standards are generally geared towards the private sector with no equivalent standards specifically for the public sector. Following an invitation from the World Bank, the International Public Sector Accounting Standards Board (IPSASB) conducted a public consultation process to evaluate the demand from stakeholders for public sector guidance, the degree of support for the IPSASB’s involvement in the process, the priority areas for guidance and the approach thereof. The consultation paper proposed that the IPSASB should:
- Serve as the standard setter for global public sector-specific sustainability guidance, drawing upon its experience, processes, and global relationships
- Develop initial guidance focused on general disclosure requirements for sustainability-related information and climate-related disclosures
- Approach guidance development at an accelerated pace, with the potential for releasing initial guidance by the end of 2023
SAICA provided comments on the consultation paper and agreed that the IPSASB should be the standard setter for global public sector-specific sustainability guidance. In addition, it was recommended that the guidance developed should leverage already available sustainability reporting-related standards to avoid duplications that may occur. It was further highlighted that the IPSASB should be considerate of the sustainability reporting maturity levels across the various jurisdictions and the need to address such levels of diversity in the guidance developed.
The IPSASB has subsequently decided to progress with the development of public sector-specific sustainability reporting guidance with climate-related disclosures as its first project, due to this area having been identified as the most urgent by stakeholders who participated in the consultation process that was undertaken. Work on initial research and scoping activities continues into the second quarter of 2023, notwithstanding the decision to focus on climate-related disclosures as the first project.
In addition to the consultation, various other sustainability-related consultations and exposure drafts (EDs) have been issued by the IPSASB (which SAICA has provided comments on), including:
- Consultation Paper on Accounting for Natural Resources, which aimed to develop guidance to address issues relating to the recognition, measurement, presentation and disclosure of natural resources in the public sector. The IPSASB has subsequently decided to develop an exposure draft to propose accounting requirements for natural resources as well as the approach to describing and identifying natural resources.
- ED 83, Reporting Sustainability Program Information – RPGs 1 and 3: Additional Non-Authoritative Guidance, to propose additional guidance for Recommended Practice Guide (RPG) 1, Reporting on the Long-Term Sustainability of an Entity’s Finances and RPG 3, Reporting Service Performance Information, and to enhance the awareness about the applicability of these RPGs. The IPSASB has subsequently approved the amendments to these RPGs for issue in the second quarter of 2023.
It is evident that the public sector cannot be left behind in the conversations around sustainability reporting, given the vast amount of natural resources − including water, mineral deposits and various forms of biodiversity − under the control of governments. The activities performed by governments in providing services to citizens will undoubtedly have an impact on these natural resources. The IPSASB has taken the lead in developing public sector-specific guidance on sustainability reporting. However, the timeframe for the release of such guidance is currently unclear as the initial research and scoping activities are currently underway.
Professional accountants are often charged with the responsibility of reporting in both the financial statements and annual reports of their entities. The introduction of sustainability reporting will most likely add to these responsibilities, particularly for professional accountants in the public sector. This will mean that public sector professional accountants will have to acquire the technical knowledge relating to the topic since sustainability reporting is relatively new in this sector. While the guidance is currently being developed, it is important that professional accountants keep a keen interest in the latest developments in this area, which will help ensure that there is a readiness to implement the guidance when it becomes effective. This can be achieved through various forms, including:
- Participating in and attending various information sessions held by the IPSASB which are available online
- From a South African perspective, participating in, and attending various information sessions held by the Accounting Standards Board (ASB) which are available online
- Participation in submissions to the IPSASB on consultation papers and EDs issued inviting commentary from stakeholders
The advent of sustainability reporting in the public sector will bring numerous challenges and opportunities alike. There will be a need for sustainability report preparers and assurance providers to obtain new technical knowledge and skills. Furthermore, there may be an increase in the use of experts in the field of ESG with resultant cost increases for public sector institutions. In addition, there may be a need for revision to existing laws and regulations to aid the required reporting.
While guidance is currently being developed, standard setters, regulators, preparers and assurance providers should be aware of these challenges and opportunities and devise strategies to address them in preparation for the implementation of the sustainability reporting guidance when it becomes effective.
Odwa Benxa CA(SA), Project Director: Public Sector at SAICA