The International Public Sector Accounting Standards Board (IPSASB) has launched a consultation on developing a sustainability reporting framework for the public sector, saying global guidance is necessary to drive consistency, comparability and high-quality reporting.
Announcing the consultation, the IPSASB said that although significant progress had been made towards the development of a global baseline for sustainability reporting in the private sector, “public sector reporting has yet to move forward in the same way”.
No equivalent body to the International Sustainability Standards Board (ISSB) has been tasked with considering global sustainability reporting standards for the public sector and, in the absence of internationally recognised guidance, individual jurisdictions are beginning to develop their own requirements, the IPSASB said.
Its consultation is a response to an invitation from the World Bank, which in a report earlier this year argued that sovereign sustainability reporting needed its own approach and framework.
The World Bank suggested the IPSASB, which is the public sector partner of the International Financial Reporting Standards (IFRS) Foundation, lead a consultative process to gain support for developing a reporting framework or guidance for the public sector.
“Governments are significant in expenditure and employment terms in all jurisdictions, as well as in the global bond market,” said the IPSASB. “How and where they spend the money they raise through the taxes everyone pays will therefore be critical in successfully delivering the UN’s Sustainable Development Goals, and making meaningful progress on climate change.
“As a result of expected differences in focus and coverage compared with the private sector, global public sector sustainability reporting guidance will be required to bring the necessary transparency and comparability to government activities in this important area.”
“The IPSASB has the experience, processes, and relationships to develop global public sector sustainability reporting guidance efficiently and effectively”
Ian Carruthers, chair of the IPSASB
In its January 2022 report, the World Bank said sovereign sustainability reporting would help meet the needs of investors who were increasingly requesting forward-looking disclosures for all asset classes so they can measure portfolio alignment with the Paris Agreement.
Within the consultation paper, IPSASB said it proposed to serve as the standard-setter for global public sector-specific sustainability reporting guidance, develop initial guidance by drawing on the work of the newly formed ISSB, and “approach guidance development at an accelerated pace”, with a potential for releasing initial guidance by the end of 2023.
Comments on the consultation are requested by 9 September 2022.
“The IPSASB has the experience, processes, and relationships to develop global public sector sustainability reporting guidance efficiently and effectively,” said Ian Carruthers, chair of the body.
“We are ready to take on this responsibility, and the consultation paper we released today outlines how we would tackle this critical work through collaboration with others, and building on our 25 years of standard setting experience.”
Natural resources accounting
The IPSASB is separately also consulting on a paper on accounting for natural resources by public sector entities, its first step in developing guidance for this area.
It said governments often lacked sufficient information on the monetary value of natural resources, and as a result, granted rights to these resources without regard to financial and environmental sustainability, or intergenerational fairness.
The board is working towards develping explicit guidance on accounting for natural resources in their original state. It said the first phase of its work focused on the financial reporting of tangible, naturally occurring resources, including subsoil resources, water, and living resources, which are in their natural state.
It said its consultation paper considered whether natural resources can be recognised as assets in general purpose financial statements or should be disclosed in broader financial reports.
“The issue of accounting for natural resources is important for the public sector in most jurisdictions,” said Carruthers. “The recognition and measurement of natural resources impacts not only on financial reporting, but also potentially for many governments on policy decisions and public financial management.”
The deadline for feedback on the natural accounting consultation paper is 17 October 2022.