MIA Sustainability, Digital Economy and Reporting Team
“Our stakeholders have been clear that the IPSASB should lead the development of International Public Sector Sustainability Reporting Standards. The IPSASB has heard this message and started the development of these important standards.”
Ian Carruthers, IPSASB Chair, in the Chair’s Message of Consultation on Strategy and Work Program 2024-2028
In the Sovereign Climate and Nature Reporting: Proposal for a Risks and Opportunities Disclosure Framework published by the World Bank in 2022, the World Bank invited the IPSASB to lead a consultative process to gain support for developing global public sector specific sustainability reporting guidance. Leveraging its extensive experience in public sector standard-setting, the IPSASB has also participated as an observer in the establishment of the International Sustainability Standards Board (ISSB).
The IPSASB initiated the development with the issuance of Consultation Paper, Advancing Public Sector Sustainability Reporting in response to the growing demands from its stakeholders for global sustainability reporting guidance. The respondents agreed that the public sector urgently needs its own sustainability reporting standards. This article sets out the developments at the IPSASB in relation to public sector sustainability reporting standards.
May
Consultation Paper on Accounting for Natural Resources
The IPSASB released a Consultation Paper (CP), Natural Resources which considers the issues relating to the recognition, measurement, and presentation of natural resources by public sector entities. This CP considers whether natural resources can be recognised as assets in general purpose financial statements or should be disclosed in broader financial reports.¹
November
Exposure Draft (ED) on the update of Recommended Practice Guidelines (RPGs)
IPSASB issued an Exposure Draft (ED) to propose additional guidance on how two previously published Recommended Practice Guidelines (RPGs)² can be applied by governments and public sector entities to report on sustainability program information. ED 83, Reporting Sustainability Program Information – RPGs 1 and 3: Additional Non-Authoritative Guidance proposed additional Implementation Guidance, along with Illustrative Examples on such key topics as green bonds, green taxes, tax expenditures and other programs developed to mitigate the effects of climate change and achieve the United Nations (UN)’s Sustainable Development Goals.³ Currently, the RPGs are not adopted in Malaysia.
December
Sustainability Steering Committee
IPSASB took the next step in advancing public sector sustainability reporting by establishing a Sustainability Steering Committee to lead the critical phase of research and scoping. The prioritised research topics were as follows:
- General Requirements for Disclosure of Sustainability-related Financial Information,
- Climate-Related Disclosures, and
- Natural resources – Non-Financial Disclosures (in parallel with the development of financial reporting guidance proposed in its Consultation Paper, Natural Resources)
This decision builds on IPSASB’s 25 years of public sector standard setting experience as well as the strong global stakeholder support for the proposals in its Consultation Paper, Advancing Public Sector Sustainability Reporting.⁴
May
Public Sector Guidance to Report on Sustainability Program Information
Several months following the issuance of ED 83, Reporting Sustainability Program Information – RPGs 1 and 3: Additional Non-Authoritative Guidance, IPSASB issued additional non-authoritative guidance included in RPG 1 and RPG 3 which can be immediately applied by governments and public sector entities to report on sustainability program information.⁵
June
Development of a Climate-Related Disclosures Standard for the Public Sector
The IPSASB decided to move forward with the development of a public sector specific Climate-Related Disclosures standard and has published the Climate-Related Disclosures project brief. Among the matters highlighted are as follows:⁶
- The project objective is to develop a global baseline for consistent and comparable public sector climate-related disclosures, separate from the current suite of IPSAS, to meet the needs of users of public sector sustainability reports (service recipients and resource providers) and ensure better transparency, accountability and enable improved decision-making.
- The project scope is to develop climate-related disclosure requirements for reporting entities as defined in the Conceptual Framework, by leveraging international sustainability reporting guidance.⁷
October
Proposed Changes to the Strategic Objective of IPSASB
The IPSASB issued Consultation Paper, Strategy and Work Program 2024-2028 which proposes changes to the IPSASB’s strategic objective and the two main activities to achieve the strategic objective which are as follows:
The IPSASB proposed to deliver its strategic objectives through four key areas below which include public sector sustainability reporting.
December
IPSASB issues Exposure Drafts related to Accounting of Exploration, Evaluation and Extraction Activities
The IPSASB approved Exposure Draft (ED) 86, Exploration for and Evaluation of Mineral Resources which provides guidance related to the costs incurred in the exploration and evaluation of mineral resources, and ED 87, Stripping Costs in the Production Phase of a Surface Mine (Amendments to IPSAS 12, Inventories) that gives guidance on how to account for costs incurred to remove waste material in a surface mining operation.⁸ ED 86 is aligned with the private sector requirements in IFRS 6, Exploration for and Evaluation of Mineral Resources, with limited changes for the public sector context and ED 87 is aligned with the guidance in IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine with limited changes for the public sector context.
March
IPSASB issues Natural Resources Exposure Draft
Following the issuance of CP, Accounting for Natural Resources in May 2022, the IPSASB decided that the guidance on natural resources should be in a standalone IPSAS that will address all natural resources at a principled level and incorporate issues regarding subsoil resources, water, and living resources as implementation guidance or illustrative examples.⁹ The IPSASB has developed ED, Natural Resources in March 2024 and it is subject for approval in the June 2024 IPSASB meeting.¹⁰
Further Development of Climate-Related Disclosures for Public Sector
The IPSASB reviewed the objectives, scope, and conceptual foundations for the development of the draft Climate-related Disclosures standard for the public sector. IPSASB agreed that a government’s ability to set policy is unique to the public sector and specific guidance for government’s policy setting activities that influence other entities, including other economic sectors, is necessary. The IPSASB sought feedback on technical topics and issues for consideration in the March 2024 meeting related to governance, strategy and risk management sections of the developing draft standard.¹¹
Way Forward
Public sector sustainability reporting standards will enable governments and other public sector entities to provide better transparency, accountability, and comparability of their efforts to combat the climate crisis and other sustainability challenges.¹² This will in turn allow governments to be held accountable for the long-term impacts of their interventions and enable better-informed decision-making.
¹ “IPSASB Launches Consultation Paper on Accounting for Natural Resources”, 16 May 2022; https://www.ipsasb.org/news-events/2022-05/ipsasb-launches-consultation-paper-accounting-natural-resources#:~:text=The%20International%20Public%20Sector%20Accounting,resources%20by%20public%20sector%20entities
² Recommended Practice Guideline 1 (RPG 1) Reporting on the Long-Term Sustainability of an Entity’s Finances and Recommended Practice Guideline 3 (RPG 3) Reporting Service Performance Information.
³ “The IPSASB Seeks Comments on Sustainability Reporting Implementation Guidance Proposals”, 3 November 2022; https://www.ipsasb.org/news-events/2022-11/ipsasb-seeks-comments-sustainability-reporting-implementation-guidance-proposals
⁴ “IPSASB Confirms its Role in Advancing Public Sector Sustainability Reporting”, 8 December 2022; https://www.ipsasb.org/news-events/2022-12/ipsasb-confirms-its-role-advancing-public-sector-sustainability-reporting
⁵ “IPSASB Issues Public Sector Guidance to Report on Sustainability Program Information”, 9 May 2023; https://www.ipsasb.org/news-events/2023-05/ipsasb-issues-public-sector-guidance-report-sustainability-program-information
⁶ “IPSASB Begins Development of Climate-Related Disclosures Standard for the Public Sector”, 14 June 2023; https://www.ipsasb.org/news-events/2023-06/ipsasb-begins-development-climate-related-disclosures-standard-public-sector
⁷ “Climate-Related Disclosures Project Brief and Outline”, 14 June 2023; IFAC Normal Template (ifacweb.blob.core.windows.net)
⁸ “IPSASB ENEWS: DECEMBER 2023’’, 14 December 2023; https://www.ipsasb.org/news-events/2023-12/ipsasb-enews-december-2023#sustainability-climate-related_disclosures
⁹ “Agenda Item 12 – Natural Resources”, 14 March 2023; https://www.ipsasb.org/_flysystem/azure-private/2023-03/12-Natural-Resources-.pdf
¹⁰ “IPSASB ENEWS: MARCH 2024”, 20 March 2024; https://www.ipsasb.org/news-events/2024-03/ipsasb-enews-march-2024
¹¹ “IPSASB ENEWS: DECEMBER 2023’’, 14 December 2023; https://www.ipsasb.org/news-events/2023-12/ipsasb-enews-december-2023#sustainability-climate-related_disclosures
¹² “IPSASB Begins Development of Climate-Related Disclosures Standard for the Public Sector”, 14 June 2023; https://www.ipsasb.org/news-events/2023-06/ipsasb-begins-development-climate-related-disclosures-standard-public-sector