This blog serves as a continuation of a blog series on Green Public Finance Management. After describing the concept and the key factors of Green PFM in the first post of the series, this second part takes a focused look at the responsibilities shouldered by the public sector during implementation and the ensuing benefits. In addition, sustainable budget reporting as an important part of Green PFM will be discussed, for which the IPSASB model will be presented.
Of course, sustainability and Green PFM are not possible without a government policy and programs to improve sustainability. The role of the public sector is to meet the needs of the present, without imperiling future generations. This means public sector actions should lead to a wider number of private businesses and organizations willingly changing their habits to achieve SDGs.
The budget cycle and preparation in the public sector is important and essential to sustainable development.
Ian Carruthers, member of the Chair of the International Public Sector Accounting Standards Board (IPSASB) described this importance very successfully saying: “How and where governments spend money matters.” (3) For this matter, the International Public Sector Accounting Standards Board is currently working on a concept of Sustainability Reporting.
As the World Bank report Sovereign Climate and Nature Reporting states in its proposal for a Risk and Opportunities Disclosure Framework “Sustainable Reporting can play a central role in driving to sustainable investments and away from environmentally harmful ones.”
Along with already established methods of categorizing and analyzing sustainability, such as the EU-Taxonomy which “tags” budgetary items as positive, neutral, or negative depending on the potential impact on the environment, the IPSASB is focusing on concrete guidance for Public Sector Sustainability Reporting. “Governments need to be transparent about the choices they have made, and to be accountable for the resulting outcomes if they are to rebuild public trust.”
With this guidance, governments should be capable of supporting governments to direct their spending “to bring the necessary transparency and comparability to government activities in this important area,” which the IPSASB reports in its consultation paper (see: Advancing Public Sector Sustainability Reporting: IPSASB Launches G) lobal Consultation | IFAC).
IPSASB will also help determine the significance of sustainability programs addressing both climate change and the SDGs in the public sector context.
An example for a less developed country, which profits from Green PFM and a successful Sustainability Reporting is Bangladesh, which has an explosive population increase and therefore needs to take immediate actions. “This is where greening the public financial management (PFM) system draws its relevance to the economic dialogue on Bangladesh’s green growth.“ The PFM for sustainable developement _ Bangaldesh .pdf paper provides an implementation plan of a Green Fiscal Framework that will facilitate greening of the country’s PFM system, despite having its unique set of weaknesses and strengths.
In summary, the second part of the Green Public Finance Management series underscored the public sector's essential role in implementing sustainable practices, emphasizing the IPSASB's upcoming sustainability reporting framework. The pursuit of transparent and accountable government spending, aligned with global goals such as the SDGs, marks a crucial step towards a greener future.
In the upcoming and final installment of this series, you will be able discover how SAP supports governments' strides towards sustainable practices. While uncovering the compatibility of various SAP products and solutions with Green Public Finance Management and IPSASB Sustainability Reporting.
Sources:
1: Aydin, Ozlem; Battersby, Brain; Gonguet, Fabien; Wendling, Claude. 2021. IMF: STAFF Climate NOTES. Climate-Sensitive Management of Public Finances-” Green PFM.” Found in: ”Green PFM” –IMF Staff Approach to Climate-Sensitive Management of Public Finances
2: IPSASB. 2022. Advancing Public Sector Sustainability Reporting. Found in: file:///C:/Users/I570955/Documents/Sustainablitity/IPSASB-Sustainability-Reporting-CP.pdf
Additional SAP Links that could also be interesting:
First Part of the Green PFM Series: Driving Sustainable Growth: The Role of Green Public Finance Management, Part 1: Understanding the C...
A New Government Operating Environment: S/4 HANA Cloud for Public Sector | SAP Blogs
Public Sector Sales Plays
SAP Sustainability Navigator (ondemand.com)
SAP Sustainability Control Tower
Green Ledger: Where Carbon and Financial Accounting Unite (sap.com)
