Governments are currently lagging behind the private sector when it comes to Environmental, Social and Governance (ESG) disclosures but, given the important role the public sector plays in achieving net zero, they will not be able to stay out of the spotlight for long.
New legislation coming into force in April this year will require Britain’s largest businesses to disclose climate-related risks and opportunities in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Furthermore, the newly created International Sustainability Standards Board (ISSB) is expected to consult on its first proposed standard early this year, which will be the first step towards issuing widely accepted standards.
The plethora of reporting frameworks has both advantages and disadvantages for government and public bodies in that it gives preparers the option to choose a framework that most suits their particular circumstances, or even to develop their own public sector-specific reporting standards.
However, with private sector sustainability reporting likely to converge on a smaller number of internationally-endorsed frameworks, public sector bodies are likely to come under pressure to adopt standards that are equal to, if not more rigorous than, those adopted by business.
The UK government committed to embed sustainability into the way it runs its operations more than a decade ago. The Greening Government Commitments (GGC) started in February 2011, setting out goals for the 22 central government departments to tackle carbon emissions and other climate-related externalities. This is a good foundation to build upon, but UK government reporting needs to address the gaps that exist in the reporting of risks relating to climate and sustainability.
Internationally, the International Public Sector Accounting Standards Board (IPSASB) is due to make an official announcement on its intentions regarding sustainability in Q1, which will be a first test to see what appetite there is to formally create public sector specific guidance. In the meantime, governments should be looking at best practice examples being generated in the private sector and determine how some of the TCFD-related risks and opportunities could apply to their own entities.
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A more detailed article is available here, providing an overview of all the key organisations operating in this space, what their relevant frameworks/guidance contains and how these could inform public sector reporting developments.
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