Strengthening the Public Sector’s Climate Action Through Sustainability Reporting and Assurance: A Global Imperative [Promoted content]

Throughout history, the public sector has consistently played a pivotal role in leading transformative initiatives aimed at improving the lives of its citizens. In the present day, governments and public institutions bear the responsibility of not only managing economies but also ensuring they positively contribute to and foster global sustainability goals – they are the natural climate action leaders.

Josefina Movillo is Policy Manager at Policy & Insights, ACCA.

As part of their leadership, governments must actively tackle climate change through traditional mitigation and adaptation policies and, as importantly, adopt comprehensive disclosure practices that facilitate transparent and accountable reporting and measurement of their impact. For supranational organisations such as the European Commission or European Parliament, common sustainability reporting and assurance standards could be addressed in part through structural reform programmes as part of their efforts to ensure equitable and sustainable economic development.

This enables governments and public sector bodies to foster trust and confidence in the sustainable development trajectory, establish best practices and inform long-term high-quality policy decisions.

With this in mind, the Association of Chartered Certified Accountants (ACCA), the INTOSAI Development Initiative (IDI), and the International Federation of Accountants (IFAC) have prepared an introduction to public sector sustainability reporting and assurance, published in November. The foundation of this work rests upon the valuable contributions from professionals deeply involved in public sector reporting and auditing, gathered through global roundtables held during the months of August and September 2023. These forums facilitated a collective effort to enrich the understanding of sustainability reporting and assurance, shedding some light on comprehending the challenges, opportunities, and guiding principles underlying these transformative developments in the public sector.

Sustainability reporting and assurance

Worldwide, sustainability reporting and assurance are concepts that are gaining importance and momentum, but what do these terms mean for the broader public and particularly for the public sector?

Sustainability reporting: objectives and principles

On the one hand, sustainability reporting in the public sector refers to the broad exercise of measuring and reporting positive and negative contributions to sustainable development, not only limited to environmental considerations, but also considering the social and economic impact of human activities.

It aims to inform the broader public about public sector climate action. Because the public sector is a key player in this transition, communicating its impact is an essential part of the process.

Additionally, with public spending representing a significant share of the global economy, transparent and accountable sustainability reporting is essential for a wide understanding of sustainable development advances. This information will not only inform the public and policymakers but ensures the public sector is better prepared to attract investment and donor funding, aiding the pursuit of sustainability goals.

Sustainability reporting in the public sector is also key to supporting internal decision-making, ensuring that policy and investment choices align with sustainable development objectives. Moreover, it builds public trust by showcasing efforts to meet national targets and sustainable development outcomes.

“Public sector plays a pivotal role in both setting the conditions for sustainable development and taking action towards that goal.”

Sustainability reporting in the public sector is, however, not an easy task. Standards and sustainable reporting practices must acknowledge the particularities of each context and have the necessary flexibility to adapt to the diversities and differences in size, capabilities, and activities of public sector bodies.

For public sector entities considering their approach to sustainability reporting, four key guiding principles emerged from the roundtable’s discussion:

• Focus must be on the areas of greatest impact, conducting a “materiality assessment” that allows for prioritisation.
• Align reporting with overarching sustainability strategies, ensuring consistency with the goals outlined.
• Lead by example, mirroring the standards they require from the private sector. This will not only lead to better reporting outcomes but create greater confidence in public sector climate action and signal the markets on sustainable development.
• Select an appropriate and recognised reporting framework to effectively ensure consistent and reliable reporting.

Sustainability assurance: the role of SAIs

External oversight becomes necessary as sustainability reporting matures. Sustainability assurance, which involves external assurance on disclosed information’s reliability and accuracy, is not appropriate for all sustainability information. However, applied in the right context, it can build confidence in reporting processes in the public sector.

In public sector auditing, Supreme Audit Institutions (SAIs) play a crucial role. SAIs can offer independent external oversight to build trust in the information disclosed, acting as an important actor in a country’s sustainability accountability chain.

The roundtables found three underlying principles necessary to provide effective sustainability oversight:

• Identifying the right audit approach based on the purpose of the audit (e.g., accuracy of information or effectiveness of policies). A materiality assessment is crucial for selecting the right focus.
• Providing the appropriate level of confidence or assurance, depending on the purpose and risk. Transparency in the level of assurance offered is crucial.
• SAIs should support the development of frameworks through diverse stakeholder engagement to ensure positive reporting outcomes and enhanced public trust.

Teamwork towards sustainability: the finance professions’ role and the invaluable support of ACCA, IFAC and IDI

In the mission of strengthening the public sector’s climate actions tools, the finance professional’s role is essential. Their expertise in reporting processes, systems, controls, and regulatory compliance can drive the agenda forward.

The public sector should leverage the skills of these professionals to ensure sustainability reporting is transparent, reliable, and capable of guiding decision-making.

Similarly, ACCA, IFAC and IDI are committed to supporting public sector bodies in their effective reporting challenges, as well as SAIs in their crucial role in the assurance of sustainability information. For this purpose, many resources on auditing SDGs, sustainability standards, assurance, and professionalisation in public sector finance have been developed and are publicly available to assist public sector organisations and private markets in this challenging transition.