A sustainable transformation is important for everyone: consumers, companies, but also public enterprises, government offices and (higher) education schools. Every institution, whether private or public, can contribute to sustainable development and optimize its own processes. But government agencies and public institutions in particular struggle to find the right approaches …
In the summer of 2021, the German federal government adopted the program “Nachhaltige Verwaltung”. The package is supposed to make federal government agencies more sustainable in all areas. The measures range from minor adjustments, such as saving printing paper or energy-saving notes in the office, to major changes, such as conversion of car fleets to electric mobility or the climate-neutral construction of new buildings. The initiative is justified by the “role model function of the public sector”. And this is true: Not only private companies should make their activities more sustainable; the public sector also faces the challenge of addressing sustainability at all levels.
The public sector consists of the federal government, the states, municipalities and local authorities. In addition, public companies such as municipal utilities or transport associations are also included. In addition, non-profit organizations, faith communities and schools, colleges or universities are part of the public sector.
Even if it is often forgotten, the public sector, too, generates emissions in its way of “doing business”, e.g. through the energy consumption of large buildings, emissions from vehicles or simply the provision of food in the canteen. Meanwhile, all the different entities that belong to the public sector make it difficult to develop universal solutions and proposals. Nevertheless, there are already some approaches that can contribute positively to sustainable development.
Public Sector: The relevant ESG topics
The topics for sustainability in the public sector are based on the topics in companies: Sustainability strategy, corporate governance, digitalization, sustainable administration, sustainable procurement, sustainable development, and regulatory and legal issues. However, not all of these topics have suitable standards and guidelines that public companies and institutions can follow.
There are already numerous specifications and standards in the public sector, particularly on the subject of sustainable procurement. However, the different guidelines make comparability difficult because they each have a different scope and approach. The ISO 26000 standard covers both environmental and social aspects, but is unwieldy to use. The ILO core labor standards focus, as the name suggests, on better working conditions, but leave ecological factors completely out of the equation. The SA8000 standard integrates the aforementioned ISO 26000 and ILO standards, although the ecological component is still missing here. On the environmental side, there are ISO 14000 and Life Cycle Costing (LCC): Both focus on ecological factors in production and take environmental aspects into account in the production process; however, the social perspective is missing. And finally, there is the UN Global Compact or the OECD Guidelines. Both include social as well as environmental factors in the value chain but are very general and are solely voluntary commitments.
Suitable standards for public sector ESG reporting are still missing
Uniform ESG standards and frameworks for the public sector – as for the private sector from SASB, TCFD or GRI – do not yet exist. Only CDP works with states, cities, and public agencies to present environmental issues in reporting; however, this is still a pilot project that has just started in the United States. And although some German states, cities and municipalities already publish sustainability reports, there is no sign of uniformity:
For example, the city of Hannover divided its most recent sustainability report into six volumes. Volume 1 is an overview, while volumes 2-6 address more specifically the dimensions of ecology, economy, social, culture and good governance. The city of Nuremberg, in turn, refers completely to the 17 SDGs of the United Nations . The Bonn Sustainability Report is divided into the sections well-being, social justice, environmental quality and resource efficiency, and economic efficiency. Each section is again divided into practical examples and quantitative data. The federal state of Baden-Württemberg has also been publishing a sustainability report since 2014. It reports on the one hand on the external measures of the various ministries, and on the other hand on the internal measures within the government.
The bottom line is that all reports talk about ESG in one way or another. However, the presentation, structure and key figures used are so different that it is nearly impossible for readers to compare the information presented in the reports.
However, first reporting standardization efforts are underway: in 2021, the German ESG reporting standard setting organization „Rat für Nachhaltige Entwicklung (RNE)“ created the reporting standard “Berichtsrahmen nachhaltige Kommune auf Basis des DNK“. The report provides examples of the criteria that municipalities can use as a basis for more standardized sustainability reporting. A distinction is made between management criteria (e.g. strategy, focal points or finances) and fields of action (e.g. energy, mobility or housing and sustainable quarters). The reporting framework designed in this way is based on the criteria of the German ESG reporting framework “Deutscher Nachhaltigkeitskodex” (DNK), which is used by many German small and medium-sized companies for their ESG reporting.
Is an ESG reporting obligation also coming for the public sector?
Last year, the EU also agreed on a new directive, the Corporate Sustainability Reporting Directive. This directive is to come into effect in 2024. The directive greatly expands the number of companies subject to reporting requirements: up to 50,000 companies in the EU are to become subject to reporting requirements instead of the current 11,000. The CSRD is to be implemented step by step:
- as of January 01, 2024, all companies currently subject to reporting requirements (generally listed companies with more than 500 employees) are to switch to the new guidelines.
- as of January 1, 2025, large companies (i.e. more than 250 employees), which are currently not yet subject to reporting requirements, are to be added.
- from January 1, 2026, all listed companies are to be subject to reporting requirements.
In addition, the guideline is intended to create a binding standard on the European level so that greater comparability can be achieved between different business organizations. For the public sector, this also means a major challenge: in the course of the CSRD reform, almost 3,000 companies in the public sector will be affected in Germany alone.
We know the specific challenges for the different areas of the public sector and are willing to support you in the development of your (first) sustainability report – don’t hesitate to get in touch!