IPSASB’s First Draft Climate Disclosure Standard for the Public Sector: A Step in Sustainability Reporting Standards

The International Public Sector Accounting Standards Board (IPSASB) has taken a bold step towards integrating climate-related financial disclosure in the public sector. On November 10, 2024, IPSASB introduced its pioneering draft standard, SRS ED 1, Climate-related Disclosures. This first-of-its-kind climate-related disclosure standard aims to align public sector reporting practices with global sustainability reporting standards.  

The release opens a window of opportunity for regulators, policymakers, and sustainability practitioners to engage in shaping public sector sustainability reporting standards. This blog explores the motivations behind the new draft, the implications for regulatory bodies, and how public sector entities are poised to lead global climate action. 

Supported by the World Bank and in alignment with the International Sustainability Standards Board’s (ISSB) global baseline, IPSASB’s draft is a significant leap for sustainability reporting standards in the public sector. Designed specifically for public entities, SRS ED 1 presents a set of principles for comprehensive climate-related reporting. These principles echo the ISSB’s standards yet cater to the distinct challenges and opportunities in the public sector, aiming to foster accountability, transparency, and comparability. 

In the words of IPSASB Chair Ian Carruthers, “Public sector action is essential.” Governments have unique mechanisms—taxes, subsidies, and regulatory power—that they can leverage to mitigate climate risks, and establishing standardized climate reporting practices is foundational to this mission. 

The proposed SRS ED 1 signals a new era for regulators striving to build resilient and transparent governance frameworks. With sustainability reporting standards evolving rapidly in the corporate world, the absence of comparable standards in the public sector has been a noted gap. The draft standard not only fills this gap but opens the door for public and private alignment in climate-related disclosures. This alignment is crucial, especially when considering the cross-sector dependencies in tackling climate change. 

Regulators stand to benefit from these sustainability reporting standards as they offer a reliable framework for assessing and comparing climate-related information from public sector entities. Sue Lloyd, ISSB Vice-Chair, emphasized the importance of public sector entities producing “high-quality, comparable data” that can support investor confidence and contribute to the broader sustainability ecosystem. 

SRS ED 1 draws from ISSB standards but integrates public sector-specific requirements, making it more adaptable for government bodies. Here are some of the key features of the draft: 

1. Alignment with Global Standards: While SRS ED 1 adheres to the ISSB’s global baseline, it is tailored to the needs of the public sector, ensuring that sustainability reporting standards are relevant and practical for government entities. 
2. Focus on Climate Risks and Opportunities: The standard encourages public entities to disclose climate risks, including physical and transition risks, and the strategic opportunities associated with climate action. 
3. Policy Impact and Program Reporting: One distinguishing feature is the emphasis on reporting policies, public programs, and climate-related initiatives. This approach allows governments to demonstrate accountability and track progress on climate commitments. 
4. Comparability and Consistency: One of the primary goals is to create consistent, comparable, and verifiable data, making it easier for regulators to analyze trends and measure impact. 

The public sector has a distinctive advantage in spearheading climate initiatives, given its regulatory authority and policy-setting capacity. Sustainability reporting standards like SRS ED 1 create a common language for climate-related information, ensuring consistency and facilitating regulatory oversight. 

This draft standard encourages governments to view climate risks not merely as compliance requirements but as an opportunity to lead by example. Regulators can leverage these standards to foster collaboration between the public and private sectors, creating an ecosystem where climate-related information is transparent, actionable, and influential. 

One of the most transformative aspects of SRS ED 1 is its potential to harmonize public sector sustainability reporting standards with those used in the corporate world. Traditionally, public sector entities have lacked reporting frameworks comparable to the private sector. By aligning with ISSB standards, IPSASB is addressing this gap, creating potential for cross-sector comparability that has never been fully realized. 

For regulators, this alignment presents an opportunity to better understand how public sector actions impact broader economic and environmental outcomes. Furthermore, it supports a unified approach where both public and private sectors are held accountable to rigorous climate reporting standards. 

A critical discussion point at the upcoming IPSASB event on November 13 will be digital reporting. The ISSB taxonomy offers a structured digital format that can streamline sustainability reporting standards for the public sector. Digital reporting enables data consistency, automation, and analytics, allowing regulators and other stakeholders to monitor compliance, assess risks, and identify trends more effectively. 

To fully capitalize on these digital capabilities, IPSASB is inviting collaborations from governments, states, or tech vendors. Demonstrating the efficacy of digital reporting in the public sector could be pivotal in proving its business value and scalability. 

The shift toward climate accountability in the public sector aligns with the global drive toward sustainable development. The public sector’s ability to collect and report climate-related data offers regulators a more holistic view of national and regional climate efforts, policy effectiveness, and areas for improvement. 

In this context, the SRS ED 1 draft standard is an empowering tool for public sector entities, enabling them to: 

• Demonstrate Accountability: With standardized sustainability reporting standards, governments can showcase their commitment to climate goals transparently. 

• Align with SDGs: IPSASB’s alignment with ISSB standards supports the UN Sustainable Development Goals, especially those targeting climate action and sustainable infrastructure. 

• Enhance Public Trust: Transparent climate disclosures increase public confidence and allow citizens to hold their governments accountable. 

IPSASB encourages feedback from a wide range of stakeholders, including public sector preparers, sustainability experts, and regulatory bodies. The goal is to refine SRS ED 1 into a practical standard that supports effective climate action on a global scale. The consultation period runs until February 28, 2025, providing ample time for in-depth contributions. 

The development of climate-focused sustainability reporting standards by IPSASB could be a game-changer for the public sector. By establishing standards that resonate with both public and private stakeholders, IPSASB is fostering an environment where transparency and accountability are foundational to global climate action. These efforts position the public sector as a leader, driving sustainable change and aligning with global sustainability reporting standards. 

The release of IPSASB’s SRS ED 1 draft standard represents a groundbreaking move in public sector sustainability reporting standards. For regulators, this marks an opportunity to deepen public trust, promote transparency, and enhance accountability in climate-related disclosures. As the public sector aligns with global standards, it is not only contributing to a unified approach to climate action but also strengthening the global sustainability ecosystem. 

IPSASB’s initiative provides a framework for impactful, cross-sector collaboration and sets the stage for governments worldwide to lead by example. As public sector entities adopt these standards, they move closer to a future where climate disclosures are as integral to governance as financial reporting. With IPSASB leading the way, sustainability reporting standards are poised to become an essential part of the public sector’s toolkit for climate action, making governments more accountable, transparent, and aligned with the global sustainability agenda.