Crafting ESG reporting standards for public sector excellence

GLOBAL authorities and regulators prioritise environmental, social and governance (ESG) practices in the private sector that result in stringent reporting standards.

The European Union (EU) has enacted the Corporate Sustainability Reporting Directive; New Zealand mandates climate-related disclosures for both public-listed companies and financial sectors while the UK has established the Task Force on Climate-related Financial Disclosures.

In the dynamic realm of sustainability, the private sector stands out for its commendable efforts in advancing ESG initiatives. Yet, it is essential to acknowledge the pivotal role of the public sector in boasting extensive influence and outreach, not merely as a significant player but as a crucial driver in integrating ESG principles to promote sustainable development.

However, amidst these commendable actions, it is crucial to question where the public sector stands in its capacity as policymakers and guardians of accountability in ESG practices. How does it ensure transparency in reporting to uphold the integrity of sustainability efforts?

It is the public sector that can greatly contribute to aligning the actions of organisations with the broader global sustainability agenda. That being said, it is worth exploring the need for ESG reporting guidelines specifically tailored for public sector organisations to understand both their significance and benefits.

Making informed assessments

Public sector entities – whether government agencies or state-owned enterprises – are colossal actors in the global economy. Their decisions and operations have a profound impact on environmental sustainability, social welfare as well as governance standards.

Therefore, the integration of ESG considerations into their reporting practices is not a mere formality as it could be doubted but a strategic necessity.

However, the unique challenges faced by these entities such as their diverse objectives and broad stakeholder base, call for a specialised and specific approach to ESG reporting.

At present, generic ESG frameworks which are often designed with the private sector in mind may not always fully capture the peculiarities of public sector operations. Tailored ESG reporting guidelines are essential to accurately reflect the sector’s distinct goals, regulatory environment and stakeholder expectations.

These guidelines can enhance transparency while enabling stakeholders to make informed assessments of an organisation’s sustainability performance, thereby building trust and facilitating collaborative efforts.

It is important to note that the absence of standardised ESG reporting creates a risk of ‘greenwashing’ where organisations might present themselves as more environmentally and socially responsible than they are in reality.

This misleading information not only undermines the trust of stakeholders but also impedes genuine efforts to drive positive change.

In a similar vein, the lack of standardisation in ESG reporting poses regulatory challenges. Governments and regulatory bodies may struggle to establish coherent policies and guidelines without a standardised framework, leading to inconsistencies in enforcement and reporting requirements.

Enhancing civil service integrity

In this case, what are those benefits of implementing sector-specific ESG reporting guidelines for public sector organisations? They, in fact, are substantial.

Adopting specific ESG reporting guidelines for the public sector can enhance transparency in sustainability disclosures, thus providing stakeholders with a comprehensive understanding of the organization’s ESG initiatives and performance.

This transparency fosters trust and confidence in the organisation’s commitment to sustainability.

Furthermore, adopting standardised ESG guidelines for public sector organisations will hold them accountable for their environmental, societal, and governance impact, ensuring that sustainability is a tangible practice integrated into their operations, thus ensuring accountability for the utilisation of public funds and the achieved results.

Following transparency and accountability, informed decision-making is another significant benefit of standardised ESG reporting. With access to detailed ESG data, public sector leaders can make more strategic decisions that align with sustainability goals.

This ability to assess risks and opportunities in the context of economic, environmental and social objectives will lead to a more balanced and effective policy-making and resource allocation.

Since our focus now is on the ESG reporting guidelines for the public sector, it is robust governance which presents a major benefit resulted from tailored ESG reporting frameworks.

These frameworks provide a structured approach to reporting, ensuring that ESG considerations are integrated into decision-making processes and that there is clear oversight of sustainability initiatives.

This contributes to stronger governance practices within public sector organizations, enhancing their effectiveness and integrity.

Finally, reputational enhancement becomes an advantage of adopting ESG reporting guidelines. Public sector organisations that demonstrate a commitment to sustainability and transparency build a much stronger public image.

As such, it can attract investment, foster stronger relationships with stakeholders and position the organisation as a leader in sustainability.

These are some of the great benefits that reflect the critical need for sector-specific ESG reporting guidelines which should be not only comprehensive but also flexible enough to meet the unique requirements of public sector organizations.

After all, adopting such guidelines allows these entities to make truly meaningful contributions to sustainable development of the country as well as foster a more resilient and equitable society. – April 2, 2024


The authors are staff of the Faculty of Business and Economics at Universiti Malaya. They can be reached at [email protected].

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

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