Navigating the green path: key recommendations for implementing public sector sustainability reporting

In recent months, we have discussed with colleagues and stakeholders the increasing demand and feasibility of implementing Sustainability Reporting (SR) in the public sector. While some countries have long produced sustainability reports, especially in the private sector, others still struggle with basic financial reporting. Implementing SR in the public sector will require a clear plan, commitment, and resources; otherwise, progress could take years or even decades.

Despite these challenges, sustainability reporting (SR) is increasingly recognized as a necessary aspect of transparent and accountable governance, particularly as the effects of climate change attract heightened attention. Given the pervasive influence of climate change across all sectors of the economy and society, SR standards are becoming indispensable for the public sector, which manages public resources and delivers essential services, implementing standards is a crucial step towards a more sustainable future.

According to the recent Public Sector Accounting and Reporting (PULSAR) Program’s knowledge product, “Sustainability Reporting: Implications for Public Sector and the Next Steps”, developed with the Korean Institute of Public Finance (KIPF) and Zurich University of Applied Sciences (ZHAW), implementing SR can strengthen governance, enhance accountability, and support informed decision-making in the public sector. SR helps governments identify climate-related risks and opportunities, understand climate change impacts on public finances and service delivery, and monitor progress on environmental objectives. However, the lack of standardized public sector reporting frameworks specifics has impeded progress in this area.

To address this gap, the International Public Sector Accounting Standard Board (IPSASB), with support from the World Bank, is developing its first sustainability reporting standard (SRS) on climate-related disclosures. The IPSASB SRS Exposure Draft 1, Climate-related Disclosures was published on October 31, 2024 and open for public comment through February 28, 2025.  

The main objective of the IPSAS SRS ED 1 is to guide public sector entities in disclosing climate-related risks and opportunities linked to their operations and policy outcomes. Its application aims to: (i) measure and monitor climate policies and programs; (ii) identify climate risks and opportunities; and (iii) manage climate concerns at the public sector entity level.

IPSASB received 96 formal responses to a technical consultation. In response, IPSASB has decided to split ED 1 into two phases to address the complexity of different reporting perspectives within a single standard. Phase 1, Own Operations, will address how public sector entities disclose climate-related risks and opportunities associated with their own operations. Phase 2, Public Policy Programs, will focus on public sector entities responsible for delivering climate-related public policy programs and their outcomes.

What will it take to successfully and timely implement these standards in each jurisdiction? We share four key recommendations from the referenced PULSAR knowledge product:

First, it is important to review the lessons learned from the implementation of public sector accounting and IPSAS reforms. The implementation of SR could be viewed as an extension of accounting and financial reporting by integrating non-financial information into the existing financial reporting framework. Secondly, create and implement a roadmap with three phases: preparation, transition, and utilization. The preparation phase covers strategic decisions about adopting SR in the public sector; the transition phase focuses on implementing SR requirements; and the utilization phase ensures full integration of SR across public sector entities. Thirdly, ensure adequate time for organizations and stakeholders to integrate and accept new practices and standards, while avoiding reform fatigue from overlapping public financial management reforms, which can reduce support and confidence in reforms. Finally, it is essential to conduct a thorough assessment of direct and indirect implications associated with the adoption of SR in a particular jurisdiction during the implementation phase.

Sustainability reporting is becoming standard in the public sector, and it is a matter of time before more jurisdictions choose to adopt it. We hope that the recommendations in this blog assist public sector practitioners in comprehending the implications and guiding them through implementation.