the public sector is behind on ESG reporting

Green shoots: Governments must take action to improve their sustainability reporting Photo: Pixabay

Government organizations need to step up their reporting on their sustainability. Nina Johansson explains what the challenges can be – and how they can be overcome

As with so many chapters in human history, it takes war to facilitate lasting change. It appears to have happened once again with the tragic events in Ukraine prompting Western nations to re-evaluate their dependence on hydrocarbons and accelerate plans to adopt renewable energy.

Pledges made at COP26 last year have already been accelerated by many Western countries, with green energy switchover plans rapidly advancing. Germany has halted Nord Stream 2, the EU has pledged to wean itself off imported Russian energy in the next few years while the UK and US have banned imports of Russian oil. The void could still be filled by alternative supplies from the Middle East, of course, but this current crisis has reinforced the idea that in the long term, countries must fight for energy independence by investing in more green.

But it’s not just about fossil fuels or solar panels, it’s also about the impact of broader activity in the sector. At CIPFA, we would say that understanding the environmental impact of the work of a public sector organization is even more important. Visibility and transparency are essential parts of the broader sustainability movement – ​​it’s hard to know where you need to go if you don’t know where you are now.

In most countries, the public sector is the largest economic sector, which means that it has a significant impact on the environment. It has a dual role as a provider of essential services, such as the armed forces, healthcare, public transport and waste collection, which inevitably contribute to climate change. But it is also a regulator and standard setter, proposing a framework of environmental rules. This reality means that the public sector, not just private sector companies, will be instrumental in achieving net zero goals.

Read more: Evergreen Arguments: Persuading the Public of Sustainability

In 2021, CIPFA commissioned “Evolving Climate Accountability,” which examined the practice of sustainability reporting in the public sector. Sustainability reporting brings together an organization’s environmental, economic and social metrics to assess its impact on the world. While reports of this nature have become common in the private sector, where factors such as investor pressure, consumer perception and ultimately profits compel it to recognize and mitigate environmental impacts , the public sector is far behind.

Public sector objectives are tied to public interest and benefit, so public bodies also have strong incentives to be more transparent about their impact. Public interest in climate change is at an all-time high, and sustainability reports allow governments to demonstrate the progress they are making in reducing emissions.

What are the obstacles to sustainability reporting?

So why isn’t it happening?

Our research has identified three main obstacles to the widespread adoption of sustainability reporting in the international public sector:

  1. It can have many definitions that influence the scope and focus of any report
  2. There are too many standards for sustainability reporting, while very few relate specifically to the public sector
  3. Differences between private and public organizations can impact how sustainability reporting is done

The main barrier to wider adoption of sustainability reporting in the public sector is that there is currently no agreed standard or framework. Our research identified 12 different sustainability reporting frameworks that are currently available – none of which relate specifically to the public sector context. This can create uncertainty and confusion among those responsible for producing reports, while making it difficult to compare performance with other agencies.

Almost a quarter of the organizations surveyed in our report that currently produce a sustainability report said that a lack of quality data is a major challenge for them, followed by a lack of political will and an agreed framework. Although there was little consistency in the approaches taken by these organizations, the most common sections that made up their reports were environmental, economic and social impacts.

A lack of specialist climate and ESG experience in organizations can be problematic. Among organizations that said they already produce reports, only 37% said they felt they had sufficient skills to do so, while only 34% said they had the staff capacity to produce one. .

Read more: Governments urged to end ’empty climate pledges’

How to integrate sustainability reporting into your organization

There are also obvious issues to be addressed if sustainability reporting is to become mainstream in the public sector. Our report makes some key recommendations to facilitate this:

  1. Accelerate the adoption and alignment of existing standards, with a view to adopting a framework suitable for the public sector
  2. Clarity is needed on the definition and scope of what a sustainability report means and aims to do
  3. There must be political will to make sustainability reporting mandatory across the public sector
  4. Empower staff with the skills and expertise they need to produce reliable, high-quality sustainability reports
  5. Integration with broader forms of reporting to provide a holistic view of organizational performance

In the UK, new legislation is coming into force in the UK which will make large companies accountable for their environmental impact. This could be a sign of things to come for small and medium businesses as well. These new rules will be enforced by the Financial Reporting Council, which will ensure compliance with a defined framework, giving companies a uniform way to assess their environmental impact. In another positive step, the UK government published updated sustainability reporting guidelines for central government departments in November last year. Despite these developments, the public sector in the broad sense is notable for its absence.

The fight against climate change is now high on the agenda of governments around the world. The dire warnings that the time to act is running out are finally sounding. Although the war in Ukraine may have shifted the focus of Western nations, it has also intensified the need to become energy independent. This can be achieved by investing in renewable energy sources and creating new green industries, while creating jobs and opportunities for those in need. Achieving net zero, leveling and energy independence do not have to exist in isolation.

Sustainability reports can help us understand the environmental impact of the public sector and hold it to account. As events in Eastern Europe accelerate our plans to transition away from fossil fuels, having as much data as possible will help the public sector make informed and transparent decisions in its transition to a greener future – which could arrive earlier than expected.

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