The climate crisis demands action across all sectors of the economy, and ICAEW has been calling for government action to lead the change that is needed. However, the scale of investment required means that the private and public sectors must work together. 

Private sector investment and know-how alongside well-focused and efficiently managed public policy programmes are the key to unlocking a brighter, greener future for all. 

A reporting framework for the public sector

In 2022, the World Bank issued a report calling on the International Public Sector Accounting Standards Board (IPSASB) to develop a framework for public sector sustainability reporting, citing a significant information gap for sovereign entities, in particular the capital-raising activities that are not considered in existing climate and nature-related disclosure frameworks.

The draft standard, IPSASB Sustainability Reporting Standard (SRS), aims to support global climate action by proposing guidance aligned with the Taskforce for Climate-related Financial Disclosures (TCFD) and IFRS S2, Climate-related Disclosures, while integrating the multi-stakeholder focus of the Global Reporting Initiative (GRI).

IPSASB’s exposure draft argues that the public sector has a greater diversity of user needs and therefore a broader range of guidance may be necessary to meet those demands, including reporting on progress towards sustainable development goals (SDGs) and/or other specific public policy objectives. 

For this reason, the standard is split into two parts. One section provides guidance on climate-related disclosures based on an entity’s own operation (which is closely aligned with IFRS S2) and the other section provides guidance on climate-related public policy programmes (which incorporates some elements from the GRI).

ICAEW’s view

ICAEW’s response to the consultation compares the reporting frameworks, focusing on differences in objectives, scope and definitions, as well as how materiality is applied and the structure. 

It also shines a spotlight on climate-related public policy programme disclosure requirements, which are unique to IPSASB’s framework. 

The ICAEW concludes that not everyone will appreciate the structure of the standard. Some will find it unwieldy to include one section dedicated to entity-level reporting (operations) and another to climate-related public policy programmes. IPSASB decided to structure the standard in this way to clearly signpost which sections may be relevant to the user, but ICAEW argues that this creates a certain amount of repetition. 

Furthermore, IPSASB has not yet replicated IFRS S1, which contains the general disclosure requirements and guidance. Many of these elements are therefore included in the SRS draft standard, making it quite lengthy. 

ICAEW also has concerns that IPSASB’s SRS requirement to only make disclosures on material climate-related public policy programmes could lead to ‘greenwashing’, since only climate-positive policies would be disclosed. 

ICAEW also raises questions on how the definition of public policy programme outcomes – which are impacts on the economy, environment and/or people – will be interpreted. It seems from the definition to require quite wide-ranging reporting, yet this appears contrary to IPSASB’s intention when looking at some of the other guidance in the draft standard. 

Overall, IPSASB has based much of its content on existing standards and frameworks while focusing on public sector-specific areas, particularly on how the guidance needs to reflect a government’s ability to set policy and regulations.

Henning Diederichs, Senior Technical Manager, Public Sector Financial Reporting, ICAEW, notes that IPSASB’s draft climate standard is designed to set a global benchmark for public sector climate reporting but has concerns how this standard will be received. “To some it will appear far too ambitious and complex and to others it may not go far enough,” he says.

“Including guidance on public policy programmes is ultimately the right thing to do as that is how the public sector differentiates itself from the private sector and is a key driver to changing behaviour. But limiting this to only climate-related public policy programmes causes concern as this could easily be gamed.” 

He adds: “Sustainability reporting is still relatively new and will be challenging to implement in the public sector. Public finance professionals need to support one another to ensure we can up our skills and capacity as quickly as possible to ensure effective communication of climate-related information.”

IPSASB’s consultation is open until 28 February 2025. Read ICAEW’s full response and analysis here.