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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

[email protected]

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

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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

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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.

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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


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

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“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

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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.


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

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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.


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

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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


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

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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.


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

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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.


£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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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


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.

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19

Examples of Interactive Sustainability Dashboard


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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“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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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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