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Public Sector Sustainability Reporting- achieving sustainability goals
Public Sector Sustainability
Reporting – achieving
sustainability goals
An Executive Briefing designed to stimulate debate and feedback
*About the Author John Thornton is the researcher and author of a number of recent high profile reports examining
Public Sector Performance Management, the Future of the Finance Function and ways of using
technology to improve efficiency. He is an independent adviser and writer on financial
management, business transformation and innovation. He is the Executive Director of e-ssential
Resources, which provides advice, consultancy and support to organisations working in and with
the public sector. Between 2001 and 2005 he was the Director of e-Government for the
Improvement and Development Agency (UK) and Local Government e-envoy. He is also the
former adviser to the Local Government Association (UK) on e-Government and former Chief
Executive of the Institute of Public Finance. He has over 25 years of board level experience of
financial and strategic management. © e-ssential Resources Limited 2009
John.Thornton@essentialresources.co.uk
Foreword
Oracle instigated the development and publication of this Executive
Briefing in order to assist public service bodies in understanding and
responding to the challenges of sustainability reporting with the aim
of sharing expertise and reducing the costs of implementation. It is
presented as a discussion draft to help generate debate and encourage
the sharing of ideas and experiences between public sector bodies.
Oracle has many clients in the public sector, in both the UK and
overseas, who are wrestling with sustainability targets and reporting.
These are important and increasingly high profile issues for all public
sector organisations. We at Oracle share many of your aspirations and
understand a lot of the issues that you face. Oracle is committed to
using its technology and resources to advance education in innovative
ways, promote diversity, enrich the life of communities, and protect
the environment. We were the first software company to participate
in the U.S. EPA Climate Leaders Program. We have established
extensive conservation and recycling programmes and we are a
participant in the Carbon Disclosure Project.
We would like to thank all of those who have been interviewed or
have contributed in other ways to this publication. We would also
like to point out that many areas of sustainability planning and
reporting are still evolving and/or are the subject of consultation. We
hope that this report will be of interest to everyone working in and
with the public services.
James Stirk
Director
Central Government and Healthcare
Oracle Corporation
www.oracle.com
2
Public Sector Sustainability Reporting- achieving sustainability goals
CONTENTS
Foreword 2
EXECUTIVE SUMMARY 4
Purpose 4
Context 4
Issues 4
The Way Forward 4
1. INTRODUCTION 5
2. THE LEGISLATIVE AND POLICY FRAMEWORK 5
Carbon Targets and Carbon Budgets 6
The CRC Energy Efficiency Scheme (CRC) 6
Accounting and Reporting 7
3. THE REPORTING REQUIREMENTS 8
CRC Reporting 8
Government Financial Reporting Manual (FReM) -
Exposure Draft (09)07 10
Reporting GHG emissions 10
Reporting Waste 11
Finite Resource Consumption 12
Other Sustainability Reporting Requirements 12
4. UNDERSTANDING AND RESPONDING
TO THE CHALLENGES 14
Integration with Performance Management Systems 14
Base-lining 15
Collecting the necessary information 15
Developing a CRC Strategy 16
Penalties 17
Potentially Conflicting Reporting Requirements 17
After the 2010 General Election 17
Presenting Performance Data 18
5. MOVING FORWARD 20
Conclusions and Recommendations 20
Twelve Steps to Integration and Operation 21
3
Public Sector Sustainability Reporting –achieving sustainability goals
Public Sector Sustainability Reporting- achieving sustainability goals
Executive Summary
Purpose
The aim of this Executive Briefing is to highlight and explain the performance
management and reporting challenges that flow from the sustainability agenda. It
also raises awareness of the importance and urgency of sustainability reporting, and
provides advice on meeting the requirements.
Context
Is your organisation ready to meet the challenges and targets that have been set
as part of the government’s sustainability plans? Sustainability is now an
important and high profile agenda for all public sector organisations. There are
new and demanding reporting requirements that need to be implemented within
relatively short timescales. These need to be understood and owned by policy
makers, performance managers and accountants, as well as sustainability experts.
There are also significant financial and reputational implications for failing to
comply with the requirements and/or inadvertently reporting incorrect
information.
This briefing draws on the experiences of organisations that are already grappling
with these issues and seeks to share some of their experiences and learning
points. It also provides pointers to more detailed guidance.
Issues
The new sustainability reporting requirements are mandatory and the timescales
for implementation are challenging. Plus, whilst the reporting requirements may
initially appear complex and confusing, they are actually the easy part. The
greater challenges lay in putting in place the performance planning and
management arrangements, and the systems and processes to ensure that your
organisation can pro-actively plan and manage the achievement of your
sustainability objectives.
At present there is a lot of guidance on sustainability, but it is not all in one
place. Also, it is not always clear what needs to be achieved and reported under
which particular aspect of government policy.
Much of the information you require may not currently be collected and may be
held by others outside of your organisation. This means setting up arrangements
to collect reliable and robust information from a multitude of suppliers and
partners within the delivery supply chains that are operated by your organisation.
Whilst it may be possible to collect and collate this information as a one-off
exercise using spreadsheets, e-mails and telephone calls, this is not a viable
medium or even short-term solution for producing the comprehensive,
consistent, timely and reliable performance information that is required.
The Way Forward
The final section of this report provides advice and comment on how to address
these issues and proposes a twelve step plan to towards integration and operation.
4
Public Sector Sustainability Reporting- achieving sustainability goals
5
1. INTRODUCTION
There was a time when the reality of climate change and its consequences
were debated. That time has passed; the focus now is on combating it and
mitigating its effects. We all know that we need to make the transition to a
low carbon economy.
Public sector bodies have major roles to play in terms of leadership,
regulation and in reducing their own carbon footprints.
For all public sector bodies, an important part of making progress is to
understand how what they do contributes to their carbon footprint and
then to put in place the mechanisms to actively manage and minimise
these processes. Measuring and monitoring are therefore important pre-
cursors to making progress.
This brings combating climate change into the realms of accountants and
performance managers. They have the necessary skills and experience to
measure costs, formulate budgets and monitor achievements against plans.
This briefing explores the issues involved in sustainability reporting and
monitoring, and provides advice for accountants and performance managers
on how to integrate sustainability reporting within their existing processes
and information systems.
In accountants’ terms we are consuming capital as if it is revenue, which is
just not sustainable. Combating climate change is therefore a high priority
for the UK Government, which plans to stabilise and then reduce carbon
emissions. This includes the introduction of demanding statutory targets
for public sector bodies.
2. THE LEGISLATIVE AND POLICY FRAMEWORK
As the Government’s Sustainable Development Strategy makes clear, the
goal of sustainable development is to meet the needs of today, without
compromising the ability of future generations to meet their needs. At the
heart of this strategy is the belief that addressing climate change is central
to a ‘healthy, just and fair society.’ This means that starting now, all of us
need to understand and get used to new concepts that include carbon
accounting and sustainability reporting.
The Government’s strategy, not surprisingly, places great emphasis on the
central role that must be played by public service bodies in managing and
reducing their own carbon footprints.
The Climate Change Act 2008 provides the statutory framework by
establishing:
• Carbon Targets and Carbon Budgets
• The CRC Energy Efficiency Scheme, the UK’s mandatory climate
change and energy saving scheme, targeting large non-energy intensive
businesses and public sector organisations.
The Stern Review on the Economics
of Climate Change:
“Using the results from formal
economic models, the Review
estimates that if we don’t act, the
overall costs and risks of climate
change will be equivalent to losing
at least 5% of global GDP each year,
now and forever. If a wider range of
risks and impacts is taken into
account, the estimates of damage
could rise to 20% of GDP or more. In
contrast, the costs of action –
reducing greenhouse gas emissions
to avoid the worst impacts of
climate change - can be limited to
around 1% of global GDP each year.”
Sir Nicholas Stern, Head of theGovernment Economic Service andformer World Bank Chief Economist,
“On the one hand, we have every
good reason to believe that carrying
on as we are will lead to a depleted
and divided planet incapable of
meeting the needs of its nine billion
citizens, let alone sustaining its
other life forms. On the other hand,
we can adopt the technologies,
lifestyles and, crucially, a much more
integrated way of thinking and
perceiving the world that can
transform our relationship with the
Earth that sustains us.The choice is
certainly clear to me.”
HRH The Prince of Wales, The RichardDimbleby Lecture, entitled “Facing theFuture”, 7th July 2009
Public Sector Sustainability Reporting- achieving sustainability goals
Carbon Targets and Carbon Budgets
The Climate Change Act requires the Government to put in place legally
binding targets to reduce national greenhouse gas emissions by at least
80% by 2050, and reductions in CO2 emissions of at least 34% (revised
from 26%) by 2020, against a 1990 baseline, together with a set of five-
year “carbon budgets” to 2022. The UK Low Carbon Transition Plan, the
national strategy for climate and energy, provides the details of these targets
and budgets.
Under these new arrangements, each government department will be set its
own carbon budget made up of two elements: one representing its relative
degree of influence on reducing emissions from each sector of the economy;
and one reflecting the emissions from the part of the public sector for
which it has responsibility. This second element of the target is analogous
with Public Service Agreements; its purpose is to give departments a stake
in reducing emissions from a given sector. Departments will be expected
to use the policy levers that they hold, for example setting building
regulations, to cut emissions. Importantly, the only way that a department
can deliver its carbon budget is to work with other departments, to ensure
that emissions from each sector in which it has a stake are reduced to the
levels required to meet the UK’s carbon budget.
The CRC Energy Efficiency Scheme (CRC)
The CRC Energy Efficiency Scheme (formerly known as the Carbon
Reduction Commitment) is the UK’s mandatory climate change and energy
saving scheme. It comes into force in April 2010 and will cover around
5000 of the UK’s largest public and private sector organisations; broadly
those spending more than £500,000 per annum on electricity. The scheme
requires participating organisations to report their energy usage which is
then converted into CO2 emissions equivalents. It will include a published
annual league table comparing the performance of participants in relation
to efficient/reduced energy use. It will operate as a ‘cap and trade’
mechanism, providing financial incentives to reduce energy use by putting
a price on carbon emissions from energy use. All participants must
purchase allowances for every tonne of CO2 they emit in a given year. The
revenue from these allowances is then recycled back to those organisations
that have performed best in reducing their carbon footprints.
The overall emissions reduction target is achieved by placing a ‘cap’ on the
total allowances available to CRC participants. Within that overall limit,
individual organisations can determine the most cost-effective way to
reduce their emissions. This could be through buying extra allowances or
investing in ways to decrease the number of allowances they need to buy.
The government has confirmed that no money will change hands in the
first year. However in the second and subsequent years, those that are at the
top of the league table will receive back more carbon credits than those
“The Government has a firm
commitment to reduce the risk of
climate change by mitigating its
causes, primarily through working to
reduce human-induced emissions of
greenhouse gases in the
atmosphere. It is vital that both
central and local government bodies
lead the way in monitoring,
managing and reporting emissions
of GHGs measured in terms of
carbon dioxide equivalents (CO2e).”
Sustainability Reporting in the PublicSector, HMT Guidance, 2009
6
Public Sector Sustainability Reporting- achieving sustainability goals
“Unless government takes action to
cut its own carbon dioxide
emissions, it will lack credibility in
its challenge to society to do the
same.The reputational risk for
government is huge.”
Sustainable Development inGovernment (SDiG), the SustainableDevelopment Commission, AnnualReport 2007
“The NHS in England accounts for
25% of public sector greenhouse gas
emissions.”
David Pencheon, Director, NHSSustainable Development Unit, LocalGovernment Chronicle, 26 Nov 2009
7
lower down, thereby creating a financial penalty for poor progress
compared to other participants.
The scheme will run indefinitely, but there are fixed phases. The allowances
for years two and three will be available for purchase at a fixed price of £12
per tonne of CO2, with no limit on the number available for purchase. The
next phase covers a five year period from April 2013 and will involve a ‘cap
and trade’ scheme whereby a capped number of allowances are sold by
auction via a sealed bids process. The allowances will then be sold at a
uniform clearing price (all bids being added together to determine the price
where demand meets the number of allowances for sale). Both phases allow
for a ‘secondary market’ where organisations can buy and sell allowances.
Accounting and Reporting
The Climate Change Act also requires the Government to develop a carbon
accounting methodology. To take this forward, in September 2009 the
Department for Environment Food and Rural Affairs (Defra), in partnership
with the Department for Energy and Climate Change (DECC), published
guidance for businesses and organisations on how to measure and report
their greenhouse gas (GHG) emissions.
In August 2009, HM Treasury published proposals to amend the
Government Financial Reporting Manual (FReM) to embed sustainability
reporting within Annual reports and Accounts. The aim of the proposals is
to introduce minimum reporting requirements and ensure consistency
within central government. At the time of writing the timetable for
implementation has not been confirmed, but it seems almost certain that it
will commence with dry-run reporting from 2010-11 for central
government, which will become mandatory from 2011-12. It is anticipated
that the rest of the public sector will follow later, with possible dry-run
reporting from 2011-12 and mandatory reporting from 2012-13.
Public Sector Sustainability Reporting- achieving sustainability goals
3. THE REPORTING REQUIREMENTS
CRC Reporting
Under the CRC Energy Efficiency Scheme (CRC), which will begin on 1
April 2010, all organisations that have one or more half-hourly electricity
meters (HHM) will be required to register and make an information
disclosure during the registration period. Those registered who have an
energy consumption of at least 6,000 MWh will be required to participate
in the CRC.
Half-hourly electricity meters are installed on sites that have high energy
usage. They enable the energy companies to monitor consumption on a
half-hourly basis and to thereby match demand and supply. This is a
relatively easy way to identify major users of electricity and the
Environment Agency has details of the sites where these meters are
installed. Local authorities and other public bodies with large office
buildings, for example, will almost certainly have half-hourly meters
installed.
For Government departments, the Scottish Administration, the Welsh
Assembly and Northern Ireland Departments, CRC participation is
mandatory, regardless of their electricity consumption. They will however
have the power to voluntarily disaggregate parts of their structure,
regardless of the size of the disaggregated body, for mandatory individual
participation in the scheme. In general, all other public bodies including
NHS organisations will participate if they meet the qualifying threshold.
The Government also intends to show “public sector leadership” by
providing the Secretary of State/Welsh Ministers with discretionary powers
to require the participation of specified local governmental bodies in
England and Wales that do not meet the qualification threshold and in
addition to mandate the aggregation of bodies for the purpose of CRC
participation. This will include full participation by the Greater London
Authority (GLA), with the functional bodies associated with the GLA -
Transport for London, the Metropolitan Police Authority, London Fire and
Emergency Planning Authority and the London Development Agency -
participating individually where they meet the qualification threshold.
The registration window for CRC will begin in April 2010, and last until
the end of September 2010. An estimated 20,000 organisations will need
to register, although only about 5,000 to 6,000 will become active CRC
participants.
CRC participants will have to comply with key CRC obligations including
accurately measuring and reporting different types of energy use;
maintaining evidence records; and the cancellation of sufficient allowances
to cover annual CRC emissions. Other performance requirements include
providing relevant assistance to tenants, franchisees and other public bodies
such as schools.
"The future of financials is non-
financials"
Sir David Tweedie, InternationalAccounting Standards Board
8
Public Sector Sustainability Reporting- achieving sustainability goals
9
The CRC will be administered via the online CRC registry and functions
such as registration, reporting, allowance purchasing and trading will all be
carried out online.
Although qualification for CRC is based on half-hourly electricity
consumption only, the CRC covers both direct and indirect emissions from
all energy sources. Direct emissions are those from energy transformation
processes that take place on the premises, whereas indirect emissions are
those from energy transformation that occurs elsewhere, in particular due to
electricity generation.
Participants will be obliged to measure the emissions from energy supplies
for which they are responsible, according to the emissions factors specified
in the CRC fuels list. These amounts will then be converted by the CRC
Registry into tonnes of carbon dioxide by the application of standard
emissions factors. It is vital for the integrity of the scheme that participants
maintain sufficient records in order that the information they submit can
be verified during an audit. Around 20% of participants will be audited
each year.
There are financial penalties for failing to register, inaccurate reporting and
for not maintaining an adequate evidence pack. The administrators will
also publish details of non-compliance which could cause public
embarrassment and have significant implications for the reputations of
participating public bodies.
Public Sector Sustainability Reporting- achieving sustainability goals
Source: HMT Sustainability Reporting
Government Financial Reporting Manual (FReM) - Exposure
Draft (09)07
Based on the draft guidance, it is expected that with effect from April 2011
(with dry-run reporting in 2010/11) central government bodies will be
required, as a minimum, to include a section in their Annual Report on
their performance on sustainability during the year. This is expected to
include:
• A simple overview commentary covering their performance in the
reported year along with an overview of forward plans
• A ‘Sustainability Report’ essentially comprising a table of financial and
non-financial information, in absolute volume or consumption terms,
reporting performance against their sustainability targets for:
✓ Greenhouse gas emissions (in CO2 equivalents)
✓ Waste minimisation and management
✓ Use of finite resources, i.e. energy and water
The key principles of such reporting are that it should provide both
transparency, in terms of clarity and openness, and consistency for
comparative purposes.
All other public service bodies are expected to be required to provide the
same information from April 2012, with dry-run reporting in 2011/12.
These reporting requirements on their own may prove challenging for some
public sector bodies. However they need to be viewed in the context of
other reporting requirements.
Reporting GHG emissions
To comply with the reporting requirements you will need to identify which
activities in your organisation are responsible for GHG emissions being
released into the atmosphere categorised as:
Scope 1 (Direct emissions): These are the activities owned or controlled
by your organisation that release emissions straight into the atmosphere
and include emissions from owned or controlled boilers, furnaces, and
vehicles, as well as emissions from any owned or controlled chemical
production process.
Scope 2 (Energy indirect): These are emissions released into the
atmosphere associated with your consumption of purchased electricity, heat,
steam and cooling. These are indirect emissions that are a consequence of
your organisation’s activities but arise at sources you do not own or control.
Scope 3 (Other indirect): The final category is all other activities that
release emissions into the atmosphere as a consequence of your
organisation’s actions, which occur at sources that you do not own or
control and which are not classed as scope 2 emissions. Examples of scope 3
10
Public Sector Sustainability Reporting- achieving sustainability goals
11
emissions are business travel by means not owned or controlled by your
organisation, waste disposal and the use of sold products or services.
In some instances, it may be difficult to categorise some emissions, such as
those from outsourced activities, leased assets or tenanted buildings. In
addition to the Treasury guidance, Defra has published guidance which will
help to resolve these issues. The proposed minimum requirement for public
sector emissions accounting is full coverage of Scope 1, Scope 2 and
emissions resulting from staff travel on official business under Scope 3.
Reporting Waste
It is expected as a minimum, reporting should include absolute values for
the total volume of waste produced by the organisation over the reporting
period, and the financial costs associated with this. If you are unable to
currently provide this information then this should be clearly stated and
reasons given. Ideally, quantitative data on waste should be broken down
into the following categories showing absolute values along with the
associated financial costs associated with handling and processing:
• waste sent to landfill (e.g. residual office waste)
• waste recycled / reused (e.g. paper, aluminium cans & glass)
• waste incinerated / energy from waste (e.g. food waste)
• hazardous waste (e.g. many chemicals & solvents, fuel oil & diesel)
• comparisons for the previous 3-5 years, where available
Public Sector Sustainability Reporting- achieving sustainability goals
An extract from the HMT Draft Guidance
Finite Resource Consumption
The expected mandatory requirements are to report on water and energy
consumption, however public sector organisations should also, as a minimum,
consider whether there are any other finite resources whose use has a material
impact.
The total impact of an organisation’s water usage is termed its ‘water
footprint’. This is divided into direct use and indirect use. As a minimum,
reporting must cover direct water use as measured in cubic metres: the
measurable consumption from water providers, abstraction and collection.
Water sources can be classified in a similar way to carbon emissions, as follows:
• Scope 1: Water owned or controlled by your organisation. This would
include water reserves in lakes, reservoirs and boreholes
• Scope 2: Purchased water, steam or ice. This would include your mains
water supply as well as other deliveries of water for the purpose of heating,
water coolers and ice
• Scope 3: Other indirect water. This would include embodied water
emissions in products and services (upstream) as well as any products,
services and policies that you contribute to water use (downstream)
The minimum source reporting requirements for organisations is to cover
Scope 1 and Scope 2 water sources.
Energy usage accounting is closely related to that of carbon emissions, as the
former drives much of the latter. As public sector organisations are required to
report on both areas, it is both more efficient for those preparing reports and
more useful to those reading reports for the two areas to use a consistent
accounting approach. Carbon accounts are produced on a gross basis. All inputs
into gross emissions that pertain to energy use should be converted to kilowatt
hours for the purpose of energy usage accounting.
Other Sustainability Reporting Requirements
In developing your plans for sustainability reporting and management, you
will also need to be cognisant of other related reporting requirements, these
include:
Sustainable Development Action Plans (SDAPs) - the Government’s
Sustainable Development Strategy committed all central government
departments and their executive agencies to produce Sustainable Development
Action Plans. These are scrutinised by the government’s independent advisor
on sustainable development, the Sustainable Development Commission that
acts as watchdog on government progress.
Sustainable Operations on Government Estate (SOGE) - the Government
has set targets to reduce carbon emissions on the Government Estate, which
are monitored and reported annually. These targets are being reviewed by
Defra and OGC, whose Centre for Expertise in Sustainable Procurement now
12
Public Sector Sustainability Reporting- achieving sustainability goals
13
has oversight of government delivery of these commitments. Revised SOGE
targets and measures for sustainable procurement are due to come into
place for central government with an extended scope including NDPBs
from 2010-11.
The Sustainable Development in Government (SDiG) reports assesses
the performance of central government operations against the targets of the
Framework for Sustainable Operations on the Government State (SOGE).
These annual reports aim to inform and inspire continuous improvements
across government. They are produced by the Sustainable Development
Commission (SDC) - the government’s independent adviser and watchdog
for sustainable development.
The Connected Reporting Framework (CRF) - the format adopted for
public sector reporting has been derived from the Connected Reporting
Framework (CRF) developed under the Accounting for Sustainability (A4S)
Project that was set up by HRH the Prince of Wales in 2006. The CRF is a
reporting model which presents key sustainability information alongside
more conventional financial information. It links sustainability issues to the
organisation’s overall strategy; assists comparability between years and
organisations; and thereby attempts to provide a more balanced picture of
the organisation’s overall performance in both financial and sustainability
terms. The CRF has built on, and is compatible with, the work of other
organisations which have developed sustainability reporting guidelines, in
particular the Global Reporting Initiative, the United Nations
AccountAbility and Defra/Trucost, and can be used in conjunction with
these frameworks. This should ensure some consistency with these other
reporting initiatives which are used in both the public and private sectors.
Devolved administrations – the devolved administrations Scotland,
Wales and Northern Ireland have their own sustainability plans and
reporting arrangements.
The NHS has published its own carbon reduction strategy and assesses
performance using a corporate citizenship tool developed jointly with the
Sustainable Development Commission.
Public Sector Sustainability Reporting- achieving sustainability goals
4. UNDERSTANDING AND RESPONDING TO THE
CHALLENGES
Integration with Performance Management Systems
Sustainability reporting may prove challenging for many public sector
organisations. Reporting is however the easy element. Far more challenging
will be putting in place the performance planning and management
arrangements that will drive behavioural change at both organisational and
personal level, thereby achieving the challenging sustainability targets that
have been set.
The Highways Agency provides a good example of how organisations can
respond. According to Lisa Scott, Head of Corporate Governance &
Performance Reporting, the Highways Agency is focussing on developing
its internal management accounting to incorporate regular performance
monitoring covering sustainability, rather than just focussing on
reporting at year-end. The agency is adopting this approach to support
managers with information to enable them to drive changes and achieve
the desired outcomes.
The Agency’s 2009-10 Business Plan includes carbon reduction targets in
addition to the ‘Sustainability on the Government Estate (SoGE) targets
which have been set across Government. They cover the reduction of
emissions resulting from lighting on the strategic road network by some
600 tonnes. To achieve this, the Agency is introducing more energy-
efficient lighting and is also piloting a ‘midnight switch-off’, where
motorway lighting is turned off between midnight and 5am at pilot sites.
More details can be found on the Agency website at
www.highways.gov.uk/roads/projects/21635.aspx.
The Highways Agency also has a target to reduce emissions from
administrative offices and travel by 5%. Lisa Scott admits that whilst these
changes will only make a small difference to the Agency’s overall carbon
footprint, they are an important part of winning hearts and minds, and
thereby changing behaviours as they impact on all staff. The Agency has for
example implemented the automatic switching-off of office IT equipment
and office lights using sensors. It has also introduced a new ticketing system
that enables staff to see the carbon emissions that would result from
different ways of travelling before they make any travel bookings.
The Highways Agency like most departments has sustainability and
environmental experts who look after and lead on sustainability issues.
According to Lisa Scott, the danger is that their work can sometimes be
seen as a side issue which is not fully owned by operational managers. It is
now vital that improving sustainability becomes the responsibility of all
managers as part of the normal performance management processes.
Rapid progress in reducing public
sector emissions can play a valuable
role in demonstrating new energy-
saving and low-carbon technologies
to the public. Reducing the public
sector’s spending on energy –
currently around £3.2 billion – will
improve the efficiency of delivery of
public services, as well as creating
business opportunities for the
sector.The Government is therefore
committing to a 10 per cent saving
in public sector energy spend by
2012-13, delivering savings of up to
£300 million per year.
Source: 2009 Pre-Budget Report
West Sussex County Council is
integrating sustainability fully into
its performance management
framework. At the same time as a
new performance management
system was introduced in 2007, the
Council adopted its new 3 year
‘Sustainability Improvement Plan/
Action Plan’. As a consequence,
sustainability is integrated into the
entire performance management
framework, from individuals’
objectives/responsibilities, through
Directorate Business Plans, all the
way to the Chief Executive, Board
and Cabinet.
Source: The Sustainability at Workwebsite
14
Public Sector Sustainability Reporting- achieving sustainability goals
15
Base-lining
In order to pro-actively manage carbon emissions and other sustainability
objectives, public sector organisations will need to develop some form of
base-line carbon footprint. The carbon budgets that are quoted in the
Climate Change Act are based on emissions in 1990. These are high-level
targets that are set nationally and whilst there have been discussions about
high-level PSA targets for sustainability, which will require base-lining of
some form; it seems unlikely that individual organisations will be required
to baseline their 1990 levels.
Base-lining will also be important for CRC purposes. According to James
Robey, Head of Corporate Sustainability for Capgemini, initially for many
organisations their position in the CRC rankings will be more important
from a reputational perspective than a financial one. However, this is likely
to change as the scheme develops over the next few years with the
bonus/penalty element of the recycling payments increasing from 10% to
50% and the carbon price transitioning from the initial £12 per tonne to
the prevailing market price. In five years time, the potential exposure could
run into many £100,000s for many organisations, possibly £millions if the
carbon price rises significant (See also, Developing a CRC Strategy).
Collecting the necessary information
Many organisations will need to collect a lot of detailed information from a
wide range of internal sources as well as a variety of partners and
contractors within their service delivery supply chains. This has been a
challenge for the Highways Agency, which has made available a number of
different types of spreadsheet via its “partnernet” website for its agents and
contractors to complete in order for it to prepare its 2009 Annual Report.
As Lisa Scott explained, this resulted in a large number of spreadsheets that
had to be brought together centrally by the Agency’s climate change team.
As a result they are now exploring more structured systems and processes
for collecting and managing the data. They are also exploring other
methods for data capture such as asking for sustainability data to be
incorporated with invoice requests by suppliers and contractors, so that
financial and sustainability data can be collected together via their
payments system.
Paul Ntjortjis, from Oracle, described this as a common problem that will
face many organisations. He explained that integrating data from large
numbers of spreadsheets can become a nightmare to maintain and make it
very difficult to adequately reference source data. He feels that most
organisations will want to integrate sustainability fully into their
performance management systems, thereby making the data easy to collate,
track and consolidate, whilst also providing robust audit trails.
Public Sector Sustainability Reporting- achieving sustainability goals
£20 million is to be invested in
innovative energy efficiency
measures to cut emissions and
energy bills in central government
departments.The allocation is part
of the package of £405 million low
carbon funding announced at the
Budget in April to help establish the
UK as a market leader in renewable
technology and advance green
manufacturing.The £20 million will
be invested in helping government
departments go further, faster in
reducing their carbon emissions
across their estates, realising both
carbon and financial savings.
Successful solutions can then be
replicated elsewhere in the public
sector.
Source: publictechnology.net
Developing a CRC Strategy
Jon Malcolm of XCarbon, a carbon management consultancy, specialises in
the CRC and he explained the importance and pitfalls in making the first
year calculations for CRC purposes, which he stressed, will be of crucial
importance as these will set the base for future years. He also stressed the
importance of putting in place robust systems for monitoring and
controlling carbon emissions. XCarbon has been running training courses
in conjunction with CIMA, the accountancy institute, taking delegates
through the calculations. Typically, explained Jon Malcolm, on a course
with 10 delegates, they will come up with 10 different answers to the
illustrative calculation, which highlights the scope for errors and confusion.
Under the scheme, CRC participants will need to forecast their emissions
for the coming year and make a judgement about the number of CRC
allowances that they need to purchase. Whilst the first year is reporting
only and is regarded as a “gentle” lead in, it will be important for
participating organisations to develop their CRC trading strategy. They
will be able to buy and sell allowances in years two and three. The
second phase then begins in year four, which is when CRC allowances
will be auctioned.
Organisations will need to be concerned about measuring and monitoring
their emissions for compliance purposes. They will also be concerned about
improving their position in the league table to minimise financial and
reputational costs.
Position in the CRC league table will not only have implications for an
organisation’s reputation. The proceeds of the government sale of CRC
allowances will be recycled to participants based upon their league table
position. A bonus/penalty rate will then be applied, which will rise to +/-
50% after five years.
Participating organisations will be able to purchase CRC allowances and
will need to develop a carbon trading strategy. Their purchase decisions
will depend upon their trading strategies and their attitudes to risk. They
might for example buy as many allowances as they can, and then expect to
sell to others who have not bought sufficient (or perhaps any) allowances
themselves. Alternatively they might choose not to buy any allowances at
the government sale and expect to purchase them later on the secondary
market. Or, they might choose to buy some and then sell any surplus
allowances on the secondary market later.
Some organisations will make a profit from CRC, whilst others will face
new costs. According to Jon Malcolm, for many, the CRC will prove to be
challenging, and for those yet to get to grips with all its intricacies, a steep
learning curve awaits.
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Public Sector Sustainability Reporting- achieving sustainability goals
17
Penalties
At first sight the sustainability reporting requirements and particularly the
CRC reporting would appear to offer some scope for interpretation and
creative accounting. Jon Malcolm however stressed the need for accuracy
and transparency, particularly for CRC reporting. He pointed out that
whilst individual participating organisations will self-administer the
scheme, the Environment Agency will be auditing approximately 20% of
organisations each year and so each organisation can expect to be audited
within a five-year period.
There will be significant penalties for organisations that file incorrect
returns. The names of transgressors will be published and so the impact on
organisational reputation could be extremely damaging. There is also a
range of financial penalties, plus a named individual at a senior level must
have responsibility for ensuring the accuracy of information provided. Jon
Malcolm also pointed out that deliberate attempts to deceive or mislead the
Environment Agency could result in a custodial sentence. Typically, a main
board director will be the named individual responsible for compliance and
it seems most likely that finance directors will be in the firing line for
taking on this role.
Potentially Conflicting Reporting Requirements
In addition to the CRC and expected Treasury reporting requirements,
there are various additional requirements that aren’t necessarily consistent.
As Lisa Scott pointed out, the Highways Agency will fall within the remit
of the CRC and would be required to participate anyway because of its
street lighting responsibilities. Reporting against the CRC will be different
to the sustainability reporting for Treasury purposes. She explained that
whilst there is a boundary between them, there are overlaps as the CRC is
about energy consumption whereas sustainability reporting goes wider.
After the 2010 General Election
Sustainability is expected to continue as a high profile issue post the next
general election, with strong local, national and international pressures to
respond to climate change. It is unclear what a Conservative government
would do in terms of sustainability reporting. Whilst it would continue to
be bound by European and international agreements, it may adopt a
different approach to sustainability. However, regardless of the outcome of
the general election, an incoming government, of whatever political
complexion, will have to balance the costs and administrative workload of
complying with sustainability measures with strong pressures to increase
efficiency and reduce the overall costs of public services. Many would of
course argue that these objectives are entirely consistent with meeting
sustainability targets and mitigating the effects of climate change.
Burnley Council has a carbon
management plan in place to reduce
its energy consumption and overall
carbon footprint. Its last annual
energy bill was around £470,000. It
has signed up to a national 10:10
campaign on climate change,
pledging to cut the amount of
energy it uses by 10% by 2010.The
council has already pledged to
reduce its energy use by 25% over
five years and by signing up to the
10:10 campaign it is effectively
saying that it will make its first two
years’ worth of savings in one year.
It is hoping other local organisations
in Burnley will follow the council’s
lead and make a public commitment
to cutting their carbon emissions.
Source: LGC Nov 2009
Public Sector Sustainability Reporting- achieving sustainability goals
As Lisa Scott points out, ideally the whole of government should be about
sustainability. We should not really need separate sustainability
development plans. The real problem is joining up activity across
government. For example, moving people from cars to public transport,
means that the requirements for actions fall primarily within the
Department of Transport. However, the take-up of public transport could
be increased through crime reduction, which requires linking with and
working with the Home Office. These are some of the difficulties of
handling cross-cutting issues within government that are highlighted
through sustainability reporting and overall performance management.
Presenting Performance Data
Collating the various sources of information across the organisation and
presenting it succinctly in a format that is easy to understand can be
challenging. Interactive management dashboards that automatically update
and integrate operational and financial data can provide a powerful means
of communicating actual performance and progress against plans. These
dashboards, like the ones illustrated, can provide personalised and corporate
views of both internal and external information, giving a comprehensive
picture, whilst also linking back to source data.
18
Public Sector Sustainability Reporting- achieving sustainability goals
19
Examples of Interactive Sustainability Dashboard
Public Sector Sustainability Reporting- achieving sustainability goals
Source: Oracle
Source: Oracle
5. MOVING FORWARD
Conclusions and Recommendations
At present most of the debate is about sustainability reporting and then
moving to sustainability/carbon accounting. We now need to reset the
agenda and to talk in terms of achieving sustainability objectives and
integration into corporate performance management.
Until now sustainability has not been seen by most organisations as being
as important as financial performance and other operational reporting. This
is changing. Sustainability is no longer an ‘add-on’. It is becoming a central
theme of planning and delivery. This means that key plans and decisions
may change as a result of including sustainability objectives and
considerations. It also means that sustainability objectives need to be
quantified and communicated at all levels as they cascade down the
organisation.
The "tone at the top" will be very important in showing corporate
leadership and commitment to achieving sustainability objectives. This
needs to be coupled with processes that encourage people working in the
heart of the organisation and on front-line services to engage with this
agenda and to contribute their ideas.
It must also be recognised that all public sector organisations now sit
within value chains of activity where they are dependent, at least in part,
on partners and suppliers to achieve their objectives. They need to engage
these partners and suppliers in planning, monitoring and achieving
sustainability goals.
Achieving sustainability goals will not be easy. Organisations will need to
articulate and nuance the reasons and the business cases to fit the needs of
different audiences and stakeholders; often balancing short-term pressures
and longer term benefits. They may not for example convert the "Jeremy
Clarkson" types but they will need to get them engaged and contributing
to agreed corporate objectives.
It will be important to share information and learning about the
performance management aspects of implementing and achieving
sustainability plans. The Public Sector Performance Management Forum
(PSPMF), which is supported by leading organisations in the public and
private sectors, has offered its support in helping to facilitate and share this
type of learning (www.pspmf.org).
There are issues about the range and comparability of reporting
requirements. Whilst there is some work going on to establish consistency,
the government should seek as a matter of urgency to rationalise and
standardise the various reporting arrangements to improve efficiency,
transparency and consistency, linking this with similar work that is being
undertaken by the accounting bodies to agree reporting standards.
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Public Sector Sustainability Reporting- achieving sustainability goals
“Any economic system relies on the
availability of accurate, timely and
relevant information.This is the
natural territory of accountants.”
“We believe that sustainability is
simply about doing better business.
Despite the current economic
difficulties, this is not the time to
ditch sustainability objectives.”
Martin Hagen, President of theInstitute of Chartered Accountants ofEngland and Wales (ICAEW) at theAccounting for SustainabilityConference, 16th December 2009
“Accountants can play a key role in
developing and implementing
standards for reducing greenhouse
gases – a central aim of Copenhagen.
Unless clear universal standards are
adopted the plan to reduce global
warming will be in jeopardy.”
Steve Freer, Chief Executive of theChartered Institute of Public Financeand Accountancy, December 2009
“The Government must deliver the
carbon savings it has identified in the
Low Carbon Transition Plan and then
increase the rate at which emissions
are falling to meet the 2-3% annual
reduction recommended by the
Committee on Climate Change...
The management of the carbon
budget is as vital as the management
of the fiscal budget. It requires the
same level of political attention and
civil service commitment, and the
same degree of parliamentary
scrutiny. Our successors should lead
the way in rigorously monitoring the
robustness of the carbon budgets
and the progress the UK makes in
meeting them.”
Carbon Budgets, the House ofCommons Environmental AuditCommittee, January 2010
Until recently it would have been extremely difficult to compile, collate
and report on sustainability issues across large complex organisations that
are working in conjunction with a multitude of partners and suppliers in
complex delivery chains. However, modern performance management
systems now make this possible. This means that the barriers to
successfully integrating sustainability within corporate performance
management frameworks are much more likely to be structural and
cultural, rather than technology related.
Twelve Steps to Integration and Operation
The diagram at the end of this report maps out twelve suggested steps to
integration and operation.
The timescales for implementing the changes identified are challenging but
achievable - assuming that you take action now and begin putting in place
the necessary skills, processes and systems.
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Public Sector Sustainability Reporting- achieving sustainability goals
Copyright © 2010, Oracle. All rights reserved.Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners. Published January 2010
Disclaimer: This publication has been prepared for general guidance only. While every care has been taken in the preparation ofthis publication, it may contain errors for which the publisher and author cannot be held responsible. No responsibility can beaccepted by the author or publishers for loss occasioned to any person or organisation acting or refraining from action as aresult of any material in this publication.
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