The International Public Sector Accounting Standards Board has been developing accounting standards and guidance for public sector entities since 1986 and now it’s turning its attention to climate reporting.
Earlier this month, the IPSASB teamed up with the International Federation of Accountants and Accountancy Europe to host a discussion in Brussels on how to help governments measure and report on their contributions to addressing global climate change and other sustainability challenges. The move comes as sustainability reporting has taken on greater urgency around the world as extreme weather events become an almost daily occurrence. The International Sustainability Standards Board, the Securities and Exchange Commission and the European Commission have all unveiled or proposed climate-related disclosures for companies to make over the past year, but governments also need to report on their progress, not only in terms of meeting the United Nations’ 17 Sustainable Development Goals. The SDGs were formulated in 2015, and most countries have fallen far short of attaining them. The U.S. currently ranks No. 41 on the list. In order to meet those goals, governments will need to get better information on their climate reporting.
Raquel Wise
“At the moment, we don’t have the data on what’s going on in the public sector,” IPSASB chair Ian Carruthers told Accounting Today. “IFAC has collected a lot of information on what’s going on in the private sector, and regulators have started focusing on private sector organizations and assurance providers, so inevitably you’re seeing a rapid upskilling in that area.”
He believes there’s going to be a need for upskilling in the preparer and assurance community working in the public sector as the guidance arrives.
Last year, the IPSASB issued a consultation paper in response to a call from the World Bank on the need for sustainability reporting guidance in the public sector.
“In that consultation paper, we looked at what are the specifics in the public sector, particularly the broader multistakeholder environment compared with the private sector,” said Carruthers. “How might you approach that?”
The paper proposed the IPSASB serve as the standard-setter for global public sector-specific sustainability guidance, drawing upon its experience, processes and global relationships to develop initial guidance focused on general disclosure requirements for sustainability-related information and climate-related disclosures, and approach guidance development at an accelerated pace, with the potential for releasing the initial guidance by the end of this year.
“We did both a written consultation and also a series of regional roundtables last summer around the world,” said Carruthers. “We got almost 500 attendees from 127 different countries, and we got amazing levels of support. We got 99% agreement that there should be specific sustainability reporting guidance for the public sector to address.”
Over 90% of the respondents supported the IPSASB taking the lead, but also collaborating with other standard-setters like the International Sustainability Standards Board and the Global Reporting Initiative.
The IPSASB received 70 responses to the consultation, with climate change standing out as the most important issue, according to the respondents, but with others citing the social and governance aspects of ESG as well as the UN’s Sustainable Development Goals. The IPSASB is still in the process of raising more funding to move ahead with developing sustainability reporting standards, but has moved into a scoping and research phase. The IPSASB is also looking at natural resources reporting and what disclosures might be needed there.
“The more that governments are willing to hold themselves to account for the impacts of what they’re doing, the better,” said Carruthers. “We certainly see a lot of interest, for example, in green budgeting.”
He pointed to the work of the Organization for Economic Cooperation and Development, which formed the Paris Collaborative on Green Budgeting to try to disseminate best practices in that area.
“I think the main challenge for IPSASB is you see a lot of disparate initiatives going on and a fragmentation,” said Carruthers. “The important thing, as far as possible, given that this is a new field in most countries, is that there’s dialogue and coordination between the various interested parties.”
The IPSASB is proposing to create a Sustainability Reference Group that would be a discussion forum to bring together various interested parties, including the investment community, statisticians, and those involved in oversight of the public sector with the relevant international and regional groups.
“This is moving very quickly,” said Carruthers. “There’s more that we can coordinate, rather than individual jurisdictions going off and creating their own standards. I think this is an opportunity for global cooperation, rather than the evolution that we had at a national level in financial reporting standard-setting, and then you end up having to gradually get everybody on board. The more that we can get everybody on board upfront and get common requirements, the better.”
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