Climate-related disclosures are coming

‘Right now, the landscape is very fragmented,’ says Mike Surman, ACCA’s head of public sector. ‘In different jurisdictions, you get different bodies using different frameworks. Some will report against the UN’s Sustainable Development Goals; some, like the UK, are using the Task Force on Climate-Related Financial Disclosures framework.’

Surman acknowledges that the current state of fragmentation globally makes benchmarking difficult. ‘IPSASB has tried to bring this all together in their sustainability reporting standard, and the hope is it will lead to some uniformity,’ he says.

Early engagement

Having been published in January this year, it is early days for SRS 1, but Alex Metcalfe, IPSASB’s principal consultant on the standard, is ‘pleasantly surprised’ with the level of engagement he and his colleagues are seeing.

‘We’re already hearing about different entities that are picking up the standard voluntarily,’ Metcalfe says.

While engagement has been high, implementation for some bodies may be challenging. Concerns have been raised in some quarters around data quality and skill issues in particular. The greatest risk to success, some argue, is that bodies regard sustainability reporting as a bolt-on exercise, rather than integrating it throughout their governance and processes.

Celine Chan, a principal at IPSASB based in Canada, who works on the standard’s development and implementation, says these challenges often include locating the necessary data and developing new skills around reporting non-financial sustainability metrics.

‘It’s a lot of capacity-building and learning for the accountants, but it will also mean a lot of collaboration with others across organisations to bring all this information together,’ she says.

‘It will be important to understand the implications of climate risks on your balance sheet, income statement and cashflows. It’s a lot of non-financial metrics, but there’s an element of connecting it with the financial information.’

Practical challenges

In large organisations, such as government departments, regional governments or local councils, working out who holds particular datasets required for disclosures can be a practical challenge for accounting teams, notes Laura Ward FCCA, sustainability strategy and performance lead at ESB Networks, the electricity distribution operator in Ireland.

While Ireland has not adopted SRS 1 as yet, Ward has undertaken similar work in preparation for the EU’s Corporate Sustainability Reporting Directive. She notes that the standards themselves ‘aren’t the biggest challenge’. Instead, she says, the practicalities of ‘mapping out and building the governance, data, controls, systems and organisational capabilities required to produce reliable decision- and assurance-ready sustainability information’ are crucial.

‘Where the finance side has had years to get to a point where they have really tight governance controls around their information and their data, that’s not always the case with non-financial information. A lot of organisations are grappling with doing this for the first time,’ Ward says. ‘It’s change, and it’s about understanding who is responsible for what elements of it, and who is comfortable to hold the pen on certain parts of it.’

Metcalfe is clear, however, that despite some viewing non-financial information as ‘new territory’, IPSASB is of the view that climate and sustainability disclosures ‘belong quite firmly within general purpose financial reports’.

‘There’s the need to have connected information, but also the acknowledgment that, for compliance purposes, this sits as a separate suite of standards from the financial reporting,’ he says.

Global perspectives

One of the earliest movers on the standard has been Nigeria, where the country’s Financial Reporting Council has amended standards to accommodate SRS 1.

Tanzania has similarly been proactive, with the country’s accountant-general Leonard Mkude leading the project. The aim is for wholesale adoption across Tanzania’s public sector entities, from national down to district level, he says.

‘We have recently signed sustainability implementation guidance for all public sector entities to start preparing sustainability reports effective from July 2026,’ says Mkude. ‘By 30 June 2027, we should have sustainability reports for each public sector entity, and we should be in a position to consolidate these into a national sustainability report.

‘We have the roadmap in place, and that will go in phases; at least for Scope 1, we expect each public sector entity to be compliant in that timeframe,’ he says. ‘The controller and auditor general will undertake sustainability assurance for both the individual entity sustainability reports and the consolidated national sustainability report. In places where it’s not appropriate, we have given entities the flexibility to borrow from other best practice, such as the Global Reporting Initiative.’

Other jurisdictions that have embraced the standard early on include several municipalities in Brazil, Canada, the Philippines and Costa Rica, with more expected to follow.

What’s next?

As engagement and voluntary early-adoption progresses ahead of the effective date, IPSASB is now working on a climate-related disclosure standard for public policy.

‘Reporting on public policies – how governments can influence behaviours and regulations – is a critical perspective of climate-related information,’ Chan says. ‘This is the second phase of the project that continues to be deliberated by the board, and we’re looking within the next year in terms of timeline.’