PUBLIC SECTOR

FINANCIAL MANAGEMENT

Public Sector Financial

Management for
Sustainability and
SDGs in Europe
Edited by
Marco Bisogno · Isabel Brusca
Eugenio Caperchione
Sandra Cohen · Francesca Manes-Rossi
Public Sector Financial Management

Series Editors
Sandra Cohen
Athens University of Economics and Business
Athens, Greece

Eugenio Caperchione
University of Modena and Reggio Emilia
Modena, Italy

Isabel Brusca
University of Zaragoza
Zaragoza, Spain

Francesca Manes-Rossi
University of Naples Federico II
Napoli, Italy
This series brings together cutting edge research in public administration
on the new budgeting and accounting methodologies and their impact
across the public sector, from central and local government to public
health care and education. It considers the need for better quality account-
ing information for decision-making, planning and control in the public
sector; the development of the IPSAS (International Public Sector
Accounting Standards) and the EPSAS (European Public Sector
Accounting Standards), including their merits and role in accounting har-
monisation; accounting information’s role in governments’ financial sus-
tainability and crisis confrontation; the contribution of sophisticated ICT
systems to public sector financial, cost and management accounting
deployment; and the relationship between robust accounting information
and performance measurement. New trends in public sector reporting and
auditing are covered as well. The series fills a significant gap in the market
in which works on public sector accounting and financial management are
sparse, while research in the area is experiencing unprecedented growth.
 Marco Bisogno • Isabel Brusca
Eugenio Caperchione
Sandra Cohen • Francesca Manes-Rossi
Editors

Public Sector Financial

Management for
Sustainability and
SDGs in Europe
Editors
Marco Bisogno Isabel Brusca
Department of Management and Department of Accounting
Innovation Systems and Finance
University of Salerno University of Zaragoza
Fisciano, Italy Zaragoza, Spain

Eugenio Caperchione Sandra Cohen

Department of Economics Department of Business
“Marco Biagi” Administration
University of Modena and Athens University of Economics and
Reggio Emilia Business
Modena, Italy Athens, Greece

Francesca Manes-Rossi
Department of Economics,
Management, Institutions
University of Naples Federico II
Naples, Italy

ISSN 2946-5494     ISSN 2946-5508 (electronic)

Public Sector Financial Management
ISBN 978-3-031-55134-5    ISBN 978-3-031-55135-2 (eBook)
https://doi.org/10.1007/978-3-031-55135-2

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 Preface

Public Financial Management (PFM) is an umbrella concept that covers

all the activities carried out for the effective and efficient management of
public resources and requires a continuous adaptation to changes in the
economy and society. One challenge PFM faces at the moment is
Sustainable Development, as public sector organisations must ensure ser-
vices will be available to future generations to meet their own needs. In
this realm, literature has to consider how governments can become more
effective and efficient in service provision and at the same time cherish
sustainability.
This book addresses a gap in PFM studies and literature by analysing
the relevance of sustainability for public financial management systems, in
an era where contributions are scarce and primarily focused on individual
countries.
In this book, an effort to cover all topics linked with Sustainable
Development in the public sector relevant to PFM in terms of sustainabil-
ity, climate change and SDGs achievement has been sought. To do this,
the book aims at describing the concepts, performing a literature review
presenting the relevant advances at an international level, and showing the
status quo of sustainability in PFM in several European countries.
The book adopts a comparative perspective. In this sense, while each
chapter provides stand-alone information on a given topic, this is further
enhanced with reference to the state of the art based on up-to-date empiri-
cal evidence.
In order to illustrate the situation in each country, the authors con-
tacted reputable academics, all having a deep knowledge of the different

v
vi PREFACE

governmental levels of their home country. They were asked to contribute

to the book with a synopsis of the current situation and the main advances
of the different initiatives and tools adopted to promote sustainable devel-
opment in the different levels of government in the relevant country.
This book can offer a valuable contribution useful for research, educa-
tional and professional applications, as well as a basis for developing pro-
posals for standardising or harmonising sustainability reporting in the
public sector.

Fisciano, Italy Marco Bisogno

Zaragoza, Spain  Isabel Brusca
Modena, Italy  Eugenio Caperchione
Athens, Greece  Sandra Cohen
Naples, Italy  Francesca Manes-Rossi
 Acknowledgements

A unique characteristic of this book is that it is informed by the state-of-­

the-art of the way sustainability has been embedded in the PFM in 16
European countries. This would not have been achieved without the gen-
erous support of 25 colleagues who complemented our work. Therefore,
we would like to acknowledge the support of the academic contributors
for their valuable input and for their help with the filling in country tables
and the provision of summaries about the regulations and the initiatives in
the different levels of government. Some of this information has been
included in the book chapters in the form of boxes focusing on country
examples. These boxes contain information that is considered relevant and
of special interest to showcase the situation of a research topic in a country.
The contributors of the country information (in countries’ alphabetic
order) are the following:
Austria
Iris Saliterer, Full Professor at the University Freiburg, Department
Public and Nonprofit Management, Faculty of Behavioral and Economic
Sciences. Freiburg, Germany
Sanja Korać, Professor, Head of the Department of Public Management
at the German University of Administrative Sciences Speyer
Croatia
Gorana Roje, Head of Strategic planning Unit at the Ministry of Physical
Planning, Construction and State Assets, Croatia
Vesna Vašiček, Full professor at the University of Zagreb, Faculty of
Economics and Business, Department of Accounting. Zagreb, Croatia

vii
viii ACKNOWLEDGEMENTS

Finland
Lotta-Maria Sinervo, Senior Lecturer of Public Financial Management,
at the Faculty of Management and Business, Tampere University.
Tampere, Finland
Elina Vikstedt, Doctoral researcher at the Faculty of Management and
Business at Tampere University. Tampere, Finland
France
Céline du Boys, Institute of Public Management and Territorial
Governance, Aix-Marseille University. Aix-en-Provence, France
Germany
Peter C. Lorson, Chair of Accounting, Management Control and
Auditing, Executive Director of the Center for Accounting and Auditing at
the University of Rostock, Germany
Ellen Haustein, Lecturer at the Chair of Accounting, Management
Control and Auditing at the University of Rostock, Germany
Greece
Sandra Cohen, Professor of Accounting at the Athens University of
Economics and Business. Athens, Greece.
Sotirios Karatzimas, Assistant Professor of Accounting at the Athens
University of Economics and Business. Athens, Greece.
Italy
Francesca Manes-Rossi, Full Professor of Accounting at the Università
degli Studi di Napoli Federico II, Department of Economics, Management,
Institutions, Naples, Italy.
Marco Bisogno, Associate Professor of Accounting at the University of
Salerno, Department of Management and Innovation Systems, Salerno, Italy.
Malta
Josette Caruana, Associate Professor at the Faculty of Economics,
Management & Accountancy of the University of Malta, Malta.
Norway
Veronika Vakulenko, Associate Professor at the Business School of Nord
University. Bodø, Norway.
Portugal
Susana Jorge, Associate Professor at the Faculty of Economics of the
University of Coimbra. Coimbra, Portugal.
María Teresa Carvalho Ferreira, Auditor at the Portuguese Court of
Auditors, Portugal.
 ACKNOWLEDGEMENTS ix

Spain
Isabel Brusca, Full Professor at the Faculty of Economics and Business of
the University of Zaragoza, Spain.
Sweden
Pierre Donatella, Associate Professor at the School of Public Administration,
University of Gothenburg, Sweden.
Switzerland
Andreas Bergmann, Full Professor at ZHAW School of Management and
Law. Winterthur, Switzerland
The Netherlands
Tjerk Budding, Full Professor at the School of Business and Economics,
Vrije Universiteit Amsterdam, Amsterdam, the Netherlands.
André Mol, PhD student at the School of Business and Economics, Vrije
Universiteit Amsterdam, the Netherlands.
UK
Alvise Favotto, Senior Lecturer at the Adam Smith Business School,
University of Glasgow, Scotland, UK.
Lynn Bradley, Senior Lecturer at the Adam Smith Business School,
University of Glasgow, Scotland, UK.
John Mc Kernan, Professor at the Adam Smith Business School, University
of Glasgow, Scotland, UK.
Ukraine
Veronika Vakulenko, Associate Professor at the Business School of Nord
University. Bodø, Norway.
Ivan Derun, Department of Accounting and Audit, Faculty of Economics,
Taras Shevchenko National University of Kyiv.
Nataliia Drozd, Department of Finance, Faculty of Economics, Taras
Shevchenko National University of Kyiv.
Iryna Drozd, Center of Advanced Training, Institute of Postgraduate
Education, Taras Shevchenko National University of Kyiv.
Nataliia Miedviedkova, Department of Finance, Faculty of Economics,
Taras Shevchenko National University of Kyiv.
We are deeply grateful for their contribution to the book. Still, the sole
responsibility of the content and the writing of the book remains with the
authors.
 Contents

1 Spreading
 the Sustainability Puzzle Pieces on the Table  1
Isabel Brusca, Marco Bisogno, Eugenio Caperchione,
Sandra Cohen, and Francesca Manes-Rossi

2 Gender Budgeting  9
Sandra Cohen

3 Green Budgeting 27
Eugenio Caperchione

4 SDGs
 Budgeting and Reporting 45
Francesca Manes-Rossi

5 Environmental Reporting 65
Marco Bisogno

6 Sustainability Reporting 83
Marco Bisogno

7 Popular Reporting 99
Sandra Cohen

xi
xii Contents

8 Assurance
 and Auditing of Sustainability and
Non-­Financial Reporting111
Isabel Brusca

9 All
 That Glitters Is Not Gold: The Sustainability Puzzle
and the Pieces in Place127
Francesca Manes-Rossi, Marco Bisogno, Isabel Brusca,
Eugenio Caperchione, and Sandra Cohen
 Notes on Contributors

Marco Bisogno is an Associate Professor of Accounting in the

Department of Management & Innovation Systems at the University of
Salerno. He received his PhD from the University of Naples “Federico
II”. He is the guest-contact editor of the Public Money & Management—
CIGAR annual issue, associate editor of the Journal of Public Affairs, and
a member of the Editorial Board of the Journal of Public Budgeting,
Accounting and Financial Management.
Bisogno is the author of several articles in ranked journals such as
International Public Management Journal and Public Management
Review. His research interests lie in the field of international public sector
accounting standards, earnings management, and financial sustainability
of public sector entities.
Isabel Brusca is a Professor in Accounting in the Department of
Accounting and Finance at the University of Zaragoza. Her research and
professional interest is focused on public sector accounting and manage-
ment. She has participated in numerous research projects in this field and
is the author of several books and papers in prestigious journals, such as
International Review of Administrative Sciences or Local Government
Studies. She has been consultant of the Committee on Local and Regional
Democracy (CDLR) of the Council of Europe. She has participated in the
study designing the basic guidelines for the reform of the budgetary and
accounting system of the European Commission. She is co-chair of the
XII Permanent Study Group of the European Group of Public
Administration (EGPA).

xiii
xiv NOTES ON CONTRIBUTORS

Eugenio Caperchione, PhD, is a Professor in Public Management and

Public Sector Accounting at the University of Modena and Reggio Emilia,
where he also served as the Head of the Business Management Department
and as the Dean of the Faculty of Economics.
His main research area is public sector accounting, and he privileges the
comparative approach. He has written extensively on this subject, and has
worked intensively at CIGAR network (Comparative International
Governmental Accounting Research—http://www.cigar-­network.net),
where he served as the Chairman of the Board from 2009 to 2019.
He is a member of the Italian Standard Setter Board (overseen by the
State General Accounting Department) since 2020.
Caperchione is a Co-chair of the EGPA Permanent Study Group XII
“Public Sector Financial Management”, a member of the Editorial
Advisory Board of PMM, Public Money & Management, and a referee for
several academic journals.
He has been an invited speaker and has presented papers in several
international conferences and workshops. He has been a visiting professor
in Cracow, Klagenfurt, Poitiers, Lima, Kristianstad, and Malta.
Sandra Cohen is a Professor of Accounting in the Department of
Business Administration at Athens University of Economics and Business.
Her research interests lie in the fields of Public Sector Accounting,
Management accounting and Intellectual Capital. Her research work has
been published in several ranked journals and has been presented at several
international conferences.
For several years, she has been a member of the Hellenic Accounting
and Auditing Standards Oversight Board (Greek National Accounting
Standards Setter). She is a Co-chair of the XII Permanent Study Group
“Public Sector Financial Management” of the European Group of Public
Administration (EGPA) and the Vice-Chair of the Comparative
International Governmental Accounting Research (CIGAR) Network
Executive Board. She is a co-author of many books in Greek and is author
of several chapters in international books. She has participated in several
consulting projects for both the private sector and the public sector. She
has been a member of the research team in several EC funded projects and
she has worked as an expert for projects of the Council of Europe,
Expertise France and the World Bank. She is a member of the Editorial
Board in five reputable academic journals. She has been the guest co-edi-
tor in several special issues in academic journals. She is also the co-editor
of two books in English and the co-editor in the Public Sector Financial
Management Book Series published by Palgrave.
 NOTES ON CONTRIBUTORS xv

Francesca Manes-Rossi, PhD, is Professor of Accounting at the University

of Napoli Federico II, where she teaches and conducts research on
accounting and auditing. She has also trained government officials in Italy
and has been active in providing consulting services to public sector enti-
ties. Her research interests include performance measurement in local
government and cultural organisations, intellectual capital, sustainability
and integrated reporting, auditing and accounting standards in both the
private and public sectors. She has participated in the study designing the
basic guidelines for the reform of the budgetary and accounting system of
the European Commission. She has developed special skills in the field of
IAS/IFRS and IPSASs and is co-chair of the XII Permanent Study Group
of EGPA.
 Acronyms

ACCA Association of Chartered Accountants

AGA Association of Government Accountants
AICPA American Institute of Certified Public Accountants
ANAO Australian National Audit Office
CCR Citizen Centric Reporting
CEDAW Convention on the Elimination of All Forms of Discrimination
against Women
COFOG Classification of the Functions of Government
CSO Civil Society Organisations
CSR Corporate Social Responsibility
ED Exposure Draft
EGPA European Groups of Public Administrations
EMA Environmental Management Accounting
EMAS Eco-Management and Audit Scheme
ESRD European Sustainability Reporting Directive
EU European Union
FEE Fédération des Experts Comptables Européens
GASB Governmental Accounting Standards Board
GDP Gross Domestic Product
GFOA Government Finance Officers Association
GPFR General-Purpose Financial Reporting
GRI Global Reporting Initiative
IAS International Accounting Standard
IASB International Accounting Standards Board
IDB Classification of the Functions of Government
IFAC International Federation of Accountants
IFRS International Financial Reporting Standard

xvii
xviii ACRONYMS

IMF International Monetary Fund

INTOSAI International Organization of Supreme Audit Institutions
IPR Integrated Popular Reporting
IPSAS International Public Sector Accounting Standard
IPSASB International Public Sector Accounting Standards Board
IR Integrated Reporting
ISSB International Sustainability Standards Board
NGO Non-Governmental Organisations
OECD Organisation for Economic Co-operation and Development
PR Popular Reporting
PFM Public Financial Management
PSE Public Sector Entity
SAI Supreme Audit Institution
SDGs Sustainable Development Goals
SEEA System of Environmental-Economic accounts
SNA System of National Accounts
TCFD Taskforce on Climate-Related Financial Disclosures
UN United Nations
UNPD United Nations Development Programme
WB World Bank
 List of Figures

Fig. 4.1 Budgeting for SDGs—The overarching framework.

(Source: UNDP, 2022a, p. 10) 47
Fig. 5.1 Integration between environmental and economic data.
(Source: EU, 2022, p. 2) 68
Fig. 5.2 System of Environmental-Economic accounts: Data and
indicators. (Adapted from EU, 2022) 69
Fig. 6.1 IFAC building block approach to sustainability reporting.
(Source: Adapted from IPSASB, 2022) 85
Fig. 6.2 The link between sustainability planning, accounting, and
reporting. (Source: Adapted from Kaur & Lodhia, 2018) 87

xix
 List of Tables

Table 2.1 Gender budgeting: The state-of-the-art in a sample of

European countries 17
Table 3.1 Green budgeting: The state-of-the-art in a sample of
European countries 38
Table 4.1 SDG Budgeting: The state-of-the-art in a sample of
European countries 53
Table 4.2 SDG reporting: The state-of-the-art in a sample of European
countries55
Table 5.1 Environmental reporting: the state-of-the-art in a sample
of European countries 76
Table 6.1 Sustainability reporting: the state-of-the-art in a sample of
European countries 93
Table 8.1 Assurance and auditing sustainability and non-financial
reporting: The state-of-the-art in a sample of European
countries121

xxi
 List of Boxes

Box 2.1 An example from Austria 23

Box 2.2 An example from Croatia 24
Box 7.1 Example of popular reporting in the Netherlands 106
Box 7.2 Example of popular reporting in Portugal 106
Box 8.1 The case of Malta 124

xxiii
 CHAPTER 1

Spreading the Sustainability Puzzle Pieces

on the Table

Isabel Brusca, Marco Bisogno, Eugenio Caperchione,

Sandra Cohen, and Francesca Manes-Rossi

Sustainable development has become a global challenge in the last decades,

aiming to achieve “development that meets the needs of the present with-
out compromising the ability of future generations to meet their own
needs” (United Nations General Assembly, 1987). Sustainable develop-
ment can be interpreted through different but related perspectives (eco-
nomic, financial, social, environmental), which concur in shaping this
concept, and involves multiple stakeholders around the world.

I. Brusca (*)
Department of Accounting and Finance, University of Zaragoza,
Zaragoza, Spain
e-mail: [email protected]
M. Bisogno
Department of Management and Innovation Systems, University of Salerno,
Fisciano, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_1
2 I. BRUSCA ET AL.

The 17 Sustainable Development Goals (SDGs) contained in the 2030

Agenda approved by the United Nations General Assembly have become
a reference for all actors towards the transformation of societies and econ-
omies. Their implementation is a worldwide challenge for all types of
organisations, public and private, a challenge made even more demanding
by the recent Covid-19 pandemic.
Public sector entities have an important role in achieving sustainable
development and SDGs, both by promoting awareness between citizens
and private organisations and by cooperating with active practices that
allow reaching these global challenges. This concerns the whole public
sector: national, regional and municipal governments, but also specific
administrations inside them, such as health services, universities, state-­
owned enterprises or foundations created by public sector entities. Each of
these organisations develops strategies and plans that cover the economic,
social and environmental areas towards sustainable development. These
plans are usually guided by the implementation of SDGs and they also
involve public financial management systems, which are adapting to the
demanding requirements of these challenges.
The book aims to investigate how public financial management systems
have been influenced by sustainability purposes in different European
countries and what changes have been introduced or are being planned.
The book covers several topics, touching up both the description of the
concepts as well as the relevant advances at the international level.
Moreover, it focuses on the situation in several European countries
through a comparative perspective.
The scope of the book covers all aspects linked to public financial man-
agement: budgeting, accounting, reporting and auditing. The book also

E. Caperchione
Department of Economics “Marco Biagi”, University of Modena
and Reggio Emilia, Modena, Italy
e-mail: [email protected]
S. Cohen
Department of Business Administration, Athens University of Economics
and Business, Athens, Greece
e-mail: [email protected]
F. Manes-Rossi
Department of Economics, Mangement, Institutions, University of Naples
Federico II, Naples, Italy
e-mail: [email protected]
 1 SPREADING THE SUSTAINABILITY PUZZLE PIECES ON THE TABLE 3

provides an overview of the various meanings and interpretations of sus-

tainability for public financial management, helping the reader to under-
stand the reasons behind the focus on specific features or models.
More specifically, the book shows the state of the art in sustainability
budgeting by covering gender budgeting, green budgeting, and SDG
budgeting. In the accounting and the reporting area, it analyses the
dimensions of environmental reporting, sustainability reporting, SDG
reporting and popular integrated reporting. The assurance and auditing of
sustainability reporting are also included.
The book offers an important contribution to sustainable development
research in the public sector. Firstly, it covers a gap in public financial man-
agement studies and literature, concerning the relevance of sustainability
for public financial management systems, where contributions are scarce
and mainly focused on individual countries. This is further supported by
the evidence stemming from the recent public consultation issued by the
International Public Sector Accounting Standards Board (2022), entitled
“Advancing Public Sector Sustainability Reporting”. In this public consul-
tation the standard setter refers to the relevance of sustainability in public
sector organisations and the need to extend accountability to this area.
Therefore, this book answers to this call by putting together several dimen-
sions of sustainability that are relevant to public financial management,
providing in this way material that is not covered by any other book so far.
Secondly, the book adopts a comparative perspective toward several
countries. This can offer a valuable contribution useful for research, edu-
cational and professional applications, as well as for setting up proposals
for standardising or harmonising sustainability reporting in the public sec-
tor. In each chapter there is a section to evidence to what extent regula-
tions and practices in several European countries have included initiatives
relevant to the topics investigated in the book.
The comparative analysis has benefited from the contribution of several
reputable academics who have a profound knowledge of sustainability-­
related initiatives in their countries. Based on their deep knowledge of
sustainability-related legislation and practices in the different governmen-
tal levels of their home country, they have provided a synopsis of the state
of the art in regulation and practice and a summary of the main develop-
ments in their countries in each of the areas selected: gender budgeting,
green budgeting, SDG budgeting, environmental reporting, sustainability
reporting, popular reporting, SDG reporting and assurance and auditing
of sustainability and non-financial reporting.
4 I. BRUSCA ET AL.

All chapters have a similar structure to facilitate the holistic coverage of

the topics and they provide insights of the different areas of sustainability
linked with public financial management. Each chapter starts with a
description of the topic, which is followed by an analysis of the relevance
of the topic for public administration, in particular, what are the aims and
the contribution of the topic to accountability and management purposes.
A specific section analyses the state of the art at the international level with
reference to the literature and includes a summary table with information
about the situation in the countries covered in the book based on the
contributors’ input, showing to what extent regulations and practice have
been embedded in financial management. The summary comparative
tables (evident in most of the chapters) show the situation in central,
regional and local governments.
The countries covered by the comparative analysis are the following:

• Austria
• Croatia
• Finland
• France
• Germany
• Greece
• Italy
• Malta
• Norway
• Portugal
• Spain
• Sweden
• Switzerland
• The Netherlands
• UK
• Ukraine

The book contains a total of nine chapters (including this introductory

one) where the different tools of public financial management used by
public sector organisations to achieve sustainable development and SDGs
are analysed. The chapters have been organised along the themes of bud-
geting, reporting and auditing/assurance.
The second chapter analyses Gender Budgeting, a tool that aims to
understand and report on the impacts of public expenditure and revenue
 1 SPREADING THE SUSTAINABILITY PUZZLE PIECES ON THE TABLE 5

policies on women compared to men and analyse how they affect gender
equality, transforming therefore budgets into means for achieving specific
gender-motivated ends. The chapter evidences its relevance for public
organisations and provides a historical analysis of the development of gen-
der budgeting and the factors that have affected its successful implementa-
tion. Furthermore, in the literature review section, the chapter points out
the scarcity of research on the ex-post stages of gender budgeting imple-
mentation, as the majority of studies is focused on the ex-ante stage of
gender budgeting. The last section of the chapter refers to the adoption of
Gender Budgeting at the international level, as it is increasingly practiced
in the OECD countries, and contains a comparative analysis of the differ-
ent levels of government in 16 European countries.
The third chapter is devoted to Green Budgeting, a method that by
making use of budgetary policy-making aims to help in achieving environ-
mental and climate goals, aligning environmental objectives with the allo-
cation choices. This includes evaluating the environmental impacts of
budgetary and fiscal policies. The chapter evidences how Green Budgeting
can help public organisations make the impact of decisions visible through
the interplay of budget allocations and the quality of the environment. It
also contains a literature review section, still limited at the moment due to
the recent emergence of Green Budgeting. The last section of the chapter
shows the state of the art of Green Budgeting in 13 European countries
that allows to map its diffusion, and to shed light on some recent
developments.
Sustainable Development Goals Budgeting and Reporting are investi-
gated from a holistic perspective in the fourth chapter. This chapter is
devoted into the analysis of the development and the role of SDGs bud-
geting and reporting in public sector entities, focusing in particular on
central, regional and local governments. It provides a summary of recent
literature on the topic which is a growing area of research due to its rele-
vance at the global level. Furthermore, the chapter reveals that SDGs bud-
geting and reporting are also expanding in practice. There is corroborative
evidence that governments are aware of the importance of including SDGs
in public financial management, considering this tool as a mean to com-
municate the strategies and actions undertaken to contribute to a more
sustainable society to all stakeholders.
The fifth chapter is focused on Environmental Reporting, investigating
the main characteristics of environmental reporting and the reasons for its
relevance in the public sector context. The whys, to whom and what
6 I. BRUSCA ET AL.

environmental information should be disclosed are analysed. The chapter

covers the different literature streams, that is national accounts, financial
accounting and management accounting, related to environmental
accounting and reporting, by referring to previous studies in these areas.
The last section of the chapter provides a summary of the state of the art
in several European countries, evidencing that environmental reporting is
mostly not mandatory, with only a few exceptions.
Sustainability Reporting is addressed in Chap. 6, defining the aims and
relevance of the topic for public sector organisations, considering also the
whys, to whom and what information should be disclosed. The literature
review discusses the findings that have emerged from previous literature,
where studies document that public sector organisations are increasingly
embracing sustainability discourses. The last section of the chapter evi-
dences the state of the art in central, regional and local governments in
several European countries, showing that, even though sustainability
reports are not mandatory in the vast majority of the cases, governments
at different levels tend to provide information concerning sustainabil-
ity issues.
Chapter 7 is devoted to Popular Reporting and Integrated Popular
Reporting, which are adopted by public organisations, mainly local gov-
ernments, as a means to provide citizens with public financial information
and, more recently, with non-financial information, in a concise and easily
readable manner aiming at enhancing citizens’ understanding of public
finance matters. After discussing the main characteristics of these alterna-
tive reporting formats, the chapter presents the findings of previous stud-
ies discussing the content, the challenges that popular reporting faces to
meet user needs as well as alternative presentation means also with the use
of technology. While it is evidenced that popular reporting is a tool mainly
in use in Anglo-Saxon countries, especially in the US, the last section of
the chapter refers to some experiences at the central government level in
European countries.
After analysing the tools used for budgeting and reporting, Chap. 8 is
focused on the Assurance and Auditing of Sustainability and Non-­
Financial Reporting. The chapter analyses the origins of the concept, as
well as recent trends, with reference to the private sector. After that, the
chapter focuses on the relevance of assistance and auditing for account-
ability and management purposes in the public sector through a review of
the scarce literature on the topic. The chapter sheds light on the recent
developments at the international level, especially on the role of Supreme
 1 SPREADING THE SUSTAINABILITY PUZZLE PIECES ON THE TABLE 7

Audit Institutions, where there are some experiences related to Sustainable

Development Goals. The last section of the chapter refers to the state of
the art in several European countries, evidencing that assistance and audit-
ing in sustainability and non-financial reporting are mainly a work in prog-
ress issue.
The last chapter summarises the main conclusions obtained through
the analysis of the different areas of public financial management with
reference to sustainability, with interesting reflections about the future
lines of action for public sector organisations, regulators and standard set-
ting boards. Sustainable development requires that all private and public
agents cooperate in harmony, and this requires important changes in the
public sector field.
To sum up, the book contains a holistic contribution to Public Financial
Management from the Sustainable Development perspective, embracing
all the areas that can help governments, at all levels, to face these chal-
lenges, as governments need to provide services that add value to stake-
holders making sure the future generations would be able to meet their
own needs.

References
International Public Sector Accounting Standards Board, IPSASB. (2022).
Consultation paper. Advancing public sector sustainability reporting. IPSASB.
United Nations General Assembly. Report of the World Commission on
Environment and Development: Our Common Future. (1987). https://sus-
tainabledevelopment.un.org/content/documents/5987our-­c ommon-
­future.pdf
 CHAPTER 2

Gender Budgeting

Sandra Cohen

1   A Description of Gender Budgeting

Public budgets reflect the policies and the priorities of governments as
they identify the way public expenditure is going to be allocated to differ-
ent actions and programmes during a specific time period. They translate
political goals into financial resources (Hyndman et al., 2014). Apart from
allocating financial resources, budgets are closely related to the discharge
of accountability of public authorities to citizens and other stakeholders.
Moreover, they distribute income and wealth to citizens and aim at achiev-
ing a welfare state for them. Based on these premises the budget seems to
be neutral in gender terms. However, this is not the case.
Men and women can be affected by budgets in different ways as they
assume different roles in the economy due to predominant social roles
(Budlender et al., 1998). When there is not a gender dimension within the
budget, its apparent neutrality can not only mask the differences between

S. Cohen (*)
Department of Business Administration, Athens University of Economics
and Business, Athens, Greece
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 9

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_2
10 S. COHEN

men and women but also exacerbate the unintended impacts of budget
policies that occur because of the economic and social differences between
them. Ignoring the differences constitutes what has been termed “gender
blindness” (Elson, 1999). In other words, standard budget classifications
fail to account for the financial and social consequences of gender inequal-
ities, and they do not provide adequate information for meaningful and
multifaceted gendered analysis (Khalifa & Scarparo, 2021).
Gender budgeting is related to gender mainstreaming. Gender main-
streaming ensures that policy-making and legislative work respond more
effectively to the needs of all citizens regardless of gender. In this realm,
gender mainstreaming makes public interventions more effective by avoid-
ing the creation of inequalities but also analyses the existing situation to
ensure that inequalities are not perpetuated.
Thus, gender budgeting comes as a tool to face this challenge by trans-
forming budgets into means for achieving specific gender-motivated ends
through government policies. Gender budgeting also found under the
terms “gender budgets,” “gender-sensitive budgets,” and “gender-­
responsive budgets,” has been used to describe public budgets that incor-
porate a gender lens into the budget process.
Gender budgeting was first introduced in the 1980s by the Australian
Government. Even though the Australian experience brought interna-
tional attention to gender-responsive budgeting, the next initiatives were
triggered by the actions of the United Nations. In 1995, the United
Nations called on governments to incorporate a gender perspective into
the design, development, adoption, and execution of all budgetary pro-
cesses as appropriate in order to promote equitable, effective, and appro-
priate resource allocation and establish adequate budgetary allocations to
support gender equality (UN, 1995). This call follows suit the Convention
on the Elimination of All Forms of Discrimination against Women
(CEDAW) adopted by the United Nations General Assembly in 1979 and
the 4th World Conference on Women, held in Beijing, which reaffirmed
CEDAW’s commitment to set an end on women discrimination as well as
moves by feminist economists (Klatzer et al., 2018). Since then, gender
budgeting has become an internationally recognised strategy for enhanc-
ing gender equality. More recently, the 5th Sustainable Development Goal
(SDG 5) on Gender Equality calls for adequate resources and tools to
track resource allocations towards gender equality.
Over the years gender budgeting has evolved from being focused on
women’s issues into focusing more on understanding the impacts of
 2 GENDER BUDGETING 11

public expenditure and revenue policies on women compared to men and

analysing how they affect gender equality; whether they reduce, increase
or leave gender equality unchanged. Data coming from the OECD show
that progressively more OECD countries are moving towards adopting
gender budgeting (OECD, 2023).

2  Relevance of Gender Budgeting

for Public Administration

While gender budgeting does not follow a standardised format and the
way it is encountered internationally is heterogeneous (OECD, 2023), it
aims at ensuring that governments are aware of the impact of their policy
choices on gender outcomes by making the gender impact of budgets vis-
ible. This means that gender budgeting is not confined to funding pro-
grammes that explicitly address gender equality initiatives. Gender
budgeting analyses all policies and budgetary decisions to assess the way
they impact either intentionally or not intentionally on gender equality. In
addition, the feedback gained through this process is expected to be capi-
talised to set up and implement more effective gender policies.
In other words, gender budgeting does not only aim at making visible,
raising awareness, and facing gender inequalities, but it also aims at
strengthening governments’ accountability and improving the budgetary
process by enhancing transparency and enforcing the participation of poli-
ticians and civil society (Downes et al., 2017). Gender budgeting is
expected to have positive effects on accountability, transparency and par-
ticipation, efficiency and effectiveness and good governance (Council of
Europe, 2005).
A holistic view of gender budgeting presupposes that the gender per-
spective is evident in all four phases of the budget cycle. In other words,
gender budgeting should pertain to budget preparation, budget approval,
budget execution, and finally budget appraisal and audit (Rubin &
Bartle, 2023).
One of the main benefits that the countries implementing gender bud-
geting have achieved is a better understanding of the intended and unin-
tended impact of the budget on gender equality which means that the
policymakers are more aware of the potential impact of their decisions on
gender. In this sense, the attainment of gender equality goals becomes
clearer. For example, policymakers could compare the impact of specific
12 S. COHEN

government expenditures on women and girls with the impact on men

and boys, or assess whether current policies are likely to reduce or increase
gender inequities also with the use of a variety of indicators.
Still the application of gender budgeting in public administration is not
challenges-free. The literature on gender budgeting initiatives has identi-
fied several factors that play an important role in the success of these
attempts. These include political will and political leadership; high-level
commitment of public administrative institutions; civil society and other
stakeholder involvement; improved technical capacity of civil servants; and
sex-disaggregated data availability (Galizzi et al., 2023; Jorge et al., 2023;
Rubin & Bartle, 2023; Steccolini, 2019).
Political commitment is of utmost importance. For gender budgeting
to fulfil its initial goals the gender issue in the sense of clear gender equal-
ity goals should be central to the political agenda. Not only in a rhetorical
and merely practical way but in a way that informs decision-making, in the
sense that gender considerations affect the core (institutional) logic behind
policy formation. This commitment should pertain to all public adminis-
tration institutions involved in the process (Jorge et al., 2023). A study by
the OECD (Downes & Nicol, 2020) revealed that high-level political
commitment towards gender equality and strong leadership are require-
ments for successful gender budgeting.
Political commitment affects and is affected by binding legislative
requirements. The existence of a comprehensive legal framework provides
safeguards so that gender-related policies are discussed in a systematic way
rather than in an ad-hoc fashion and ensures continuity regardless of
changes in political administrations. Still, full-fledged gender-responsive
budget may be more than challenging as such a budget would require
measuring gender impacts for all functions of government, including
seemingly gender-neutral expenditures such as fire protection and infra-
structure construction.
When gender budgeting is in place transparency and accountability
become relevant. In this sense, governments become accountable for the
policies selected to the stakeholders that are mostly affected by them
including citizens. Scrutiny of the budget and its outcomes by the stake-
holders facilitates the gender issue to be high in the political agenda. Thus,
it is not only about governments having ownership of the gender budget
but also for stakeholders outside the government to take ownership and
advocate in its favour. However, practice shows that the evaluation of the
outcomes of gender budgeting is not timely and comprehensive enough
 2 GENDER BUDGETING 13

(Polzer et al., 2023) and countries should try to focus more on the evalu-
ation phase of the budgeting cycle.
A significant prerequisite is the availability of suitable data. Without
data to a granularity that covers gender dimensions, gender budgeting
cannot be applied. The availability of data along with the lack of analytical
capacities of civil servants may hamper the successful implementation of
gender budgeting. However, it has to be noticed that sometimes the lack
of necessary resources and the scarcity of data may camouflage a political
lack of commitment (Steccolini, 2019).
The fact that gender budgeting is not a standardised tool has both pros
and cons. Not being standardised permits flexibility and adaptiveness to
different contexts and adaptation of good practices to fit the need. On the
other hand, the lack of standardisation may affect the quality of the infor-
mation and its completeness impeding trust towards the tool. Despite the
evidenced heterogeneity in gender budgeting implementation, it seems to
focus more on expenditures and less on revenues (Khalifa & Scarparo, 2021).
Another challenge relates to the level of government in which gender
budgeting is found. As there is international evidence of decentralisation
of the budgeting functions, gender budgeting would also be applied at
subnational levels of government. However, the lack of technical capacity
makes it more difficult to implement gender budgeting at levels other
than the central government one.
In this realm, technical challenges should not be overlooked. The appli-
cation of gender budgeting asks for a synthesis of expertise not only on
financial issues but also on gender issues, specific guidelines, and multidi-
mensional coordination let aside the need for adequately disaggregated
data. These technical impediments are important for the successful imple-
mentation of gender budgeting. Thus, in cases where political support is
available, technical shortcomings may hinder proper gender budgeting
implementation. However, waiving these technical challenges, through
increased technical guidance and training and assistance and employment
of specialised staff, can result in the acceleration of gender budgeting prac-
tices provided that political support is there.
Finally, it has to be noted that government action alone by issuing leg-
islation to improve gender equality and help to end discrimination, intro-
ducing public employment practices to encourage the hiring and
promotion of women and changing government budgeting processes is
not enough to achieve gender equality, especially in countries where there
are strong cultural and social barriers that support inequality. Gender
14 S. COHEN

budgeting can work in conjunction with other informal mechanisms aim-

ing at shifting cultural views and perceptions of women’s role in society to
promote gender equality.
Civil society can play an important role in gender budgeting. Apart
from raising awareness, civil society can focus on scrutinising government
measures, looking for impacts and pushing towards more accountability
on gender equity matters (Jorge et al., 2023).

3   An Overview of the Literature

There are several studies that present country cases in relation to gender
budgeting (Galizzi et al., 2021; OECD, 2023). Many of them focus on
low-income countries as international donor organisations are keen on
knowing the impact of the projects they fund on both women and chil-
dren (Rees, 2005). However, there are also cases that focus on European
experiences such as the case of Austria (Moser & Korac, 2021; Polzer &
Seiwald, 2021), Portugal (Jorge et al., 2023) and Slovenia (Stanimirović
& Klun, 2021). There are also a couple of studies where gender budgeting
in analysed through a comparative stance such as the case of gender bud-
geting in Scotland and Wales where the two governments are watching
one another closely on gender budgeting issues (O’Hagan & Nesom,
2023) and the comparison of Austria and Germany that despite their simi-
larities on politico-administrative systems they have followed diametrically
opposed approaches to gender budgeting at the federal level (Moser-­
Plautz & Korac, 2023). Studies that focus on the application of gender
budgeting at the local level are rather rare (Galizzi et al., 2023).
In addition, in a recent literature review, it has been evidenced that the
majority of research on gender budgeting focuses on the ex-ante stage of
the system and leaves research on the concurrent and ex-post stages under-
developed (Polzer et al., 2023).
Studies on the actual implementation are less common. They have
however provided evidence that political support is crucial for the diffu-
sion of the gender budgeting initiative but it cannot guarantee the full
exploitation of the gender budgeting potential (Jorge et al., 2023; Polzer
& Seiwald, 2021). Moreover, political support on gender budgeting
seems to be more a matter of interest and less of ideology (Moser &
Korac, 2021).
The literature also appears to converge on a certain degree of agree-
ment on the potential benefits of gender budgeting, and an interesting
 2 GENDER BUDGETING 15

variety of tools available (Steccolini, 2019). The use of gender perspectives

when introduced in the budgetary process can inform resource allocation
at the central government level in practice (Moser & Korac, 2021).
However, apart from the factors facilitating the success of public budget-
ing initiatives at both the national (Rubin & Bartle, 2023) and the local
level (Galizzi et al., 2023), that have been discussed in the previous sec-
tion, obstacles that can be posed by active and passive resistance from civil
servants and political leaders have also been evidenced (Martínez Guzmán,
2023). Also, technical issues that relate to the inclusion of gender budget-
ing in mid-term fiscal frameworks and not only in yearly budgets have
been proposed to streamline and increase gender budgeting impact
(Elomäki & Ylöstalo, 2021). The same holds for the embedding of gender
budgeting into programme- and performance-based budgeting systems
that permit the incorporation of policy-related objectives into the budget
process better than the traditional input-based budgeting (Jorge
et al., 2023).
It has been evidenced that commitment to gender budgeting is nega-
tively affected by economic and financial downturns (Quinn, 2016).
Governments are willing to introduce and use gender budgeting in stable
times while in times of crisis, reform of austerity, gender budgeting gets
lower in the policy agenda in comparison to more pressing issues (Polzer
et al., 2023).
The COVID-19 crisis made the need for gender budgeting even more
important to ensure that the fiscal recovery policies would advance gender
equality in both the short and the long-term (Jorge & Pimentel, 2021).
However, during the financial crisis, that preceded the COVID-19 crisis,
the implementation of austerity measures across Europe was executed
nationally without taking into account the impact of the measures on
women (Quinn, 2016). In this realm, civil society can play an important
role in drawing attention to the gendered impacts of economic policies in
the context of austerity (Elomäki & Ylöstalo, 2021).
Not all attempts to introduce general budgeting have resulted in satis-
factory results (e.g. Portugal, Jorge et al., 2023) or they have faced short-
comings that deprive the tool from its full potential (Elomäki & Ylöstalo,
2021; Polzer & Seiwald, 2021). Thus, accounting scholars can play a sig-
nificant role by examining the relationship between embedding gender-­
specific data and measurable gender outputs in gender budgeting (Khalifa
& Scarparo, 2021).
16 S. COHEN

4  Recent Developments in the Practice

at the International Level

While gender budgeting was first introduced in Australia about 40 years

ago, its presence in different countries has gone through several imple-
mentation streams that are highly affected by national political priorities
and international influential forces (Kolovich, 2018; Quinn, 2016).
Several countries internationally have incorporated gender budgeting
tools as part of their budgeting systems through their organic budget laws
or other legislations, especially with a focus on expenditures and less on
revenues (IMF, 2021; OECD, 2023). As gender budgeting is highly
related to the efforts towards eliminating discrimination against women,
government budgets are central policy tools to achieve gender parity.
Gender budgeting is increasingly practised in OECD countries. The
number of OECD countries practising gender budgeting has almost dou-
bled in recent years (OECD, 2023), with 23 countries having introduced
it in 2022, compared to 12 in 2016 (35%). The forms and approaches of
gender budgeting differ based on an array of dimensions such as the politi-
cal, social, and organisational contexts of the different countries in which
they are introduced as well as the level of government (national, regional,
and local) at which they are encountered.
There are a few studies from international organisations such as OECD
(Downes et al., 2017; OECD, 2023) and IMF (2021; IMF, 2017) that
keep track of the evolution of gender budgeting in different countries
across the globe and periodically produce reports that describe country
examples. While the number of countries that adopt a form of gender
budgeting is increasing, there are significant differences in the level of
government in which it is applied, the depth of implementation, and the
commitment. Even the gender budgeting initiatives themselves have dif-
ferent origins. Thus, the country cases usually vary in their origin, scope,
objectives, institutional arrangements, entry points to the budget process,
legal basis, analytical tools, and players involved (Kolovich, 2018).
The following Table 2.1 presents the country cases in 16 European
countries in relation to gender budgeting at different levels of government
(central government, regional government, and local government). The
table shows whether gender budgeting is mandatory or voluntary and the
relevant legal basis or recommendations that underpin its implementation
in the different levels of government.
Table 2.1 Gender budgeting: The state-of-the-art in a sample of European countries
Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines

Austria (see Y Y M Y Y M Y Y M
Box 2.1)
Croatia (see N Y N V Y N V
Box 2.2)
Finland Y Y—Order of the V N N V N Y—If gender V
state treasury issues are
on the included in
preparation of the city
state budget strategy, they
proposal also need to
In their budget be
proposal, implemented
ministries in the budget
present a documents.
summary of Gender
their activities issues are
that have rarely
significant explicitly
gender impacts integrated
into budgets

(continued)
2 GENDER BUDGETING
17
Table 2.1 (continued)
18

Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines
S. COHEN

France N—In 2022 the N NR Not applicable Y—Lyon and N V

High Council for Rennes first
Equality calls on introduce
the government GB. Brest,
to introduce Bordeaux,
changes in favour Ivry-sur-Seine
of GB and Grenoble
have adopted a
gendered
approach in
culture, leisure
and sport
Germany N—limited to N NR N—Some N V N—Used for N V
specific funding exceptions. specific
measures and Used for projects—
there is no specific Exception: City
uniform gender projects of Berlin.
budgeting Specific budget
mechanism items and public
services are
analysed and
budgeted
following a
gender analysis
Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines

Greece Y—It has not yet Y (law) M N N NR N N NR

been
implemented—
the aspect of
gender is not
explicitly evident
in the state
budget and there
are no
quantifiable
targets
Italy N Y—Code for V Y Y (e.g. regional V N N V
Gender Equality laws in Puglia,
Emilia-­
Romagna)
Malta N—There are no Not applicable N
formal gender
budgeting
structures in
place
Norway Y—integrated Y—National M Y Y (National V (Encou Y Y (National V (Encou
into Norwegian strategy strategy) raged) strategy) raged)
budgetary
process since
beginning of
2000s—
Ministries must
promote gender
equality in their
budget
2 GENDER BUDGETING

propositions
19

(continued)
Table 2.1 (continued)
20

Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines
S. COHEN

Portugal Y—not Y—The law V Not Not applicable Not N

implemented yet requires a applicable applicable
strategic
programme
regarding
gender issues—a
budget is not
explicitly
required—A
pilot has been
performed
Spain Y Y V Y— N V Y—Isolated N V
Isolated cases referring to
cases large
municipalities
Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines

Sweden Y Y—The M Y N V Y—Cases of N V

requirements municipalities
stem from the experimenting
annual with gender
regulation budgeting
letter, the
budget law, or
regulations
from the
Swedish
National
Financial
Management
Authority—
Mandatory only
for some
government
agencies
Switzerland N N NR Y—Some N V NA N NA
cases—E.g.
the Canton
of
Basel-Stadt
produces
gender
budgets
covering
several
years—not
yearly
2 GENDER BUDGETING

budgets
21

(continued)
Table 2.1 (continued)
22

Countries Central government Regional Government Local Government

Yes/No Law/Guidelines M/V Yes/No Law/Guidelines M/V Yes/No Law/ M/V

Guidelines
S. COHEN

The N N NR N Guidelines on V N Guidelines on V

Netherlands sustainability sustainability
issues and issues and
SDGs SDGs

UK Y—budget Y (Guidelines) V Not applicable Y—For example Y V

expenditures Edinburgh in (Guidelines)
associated with 2022
gender
programmes are
audited
Ukraine Y Y (Law + M NA NA
Guidelines)—
Order of the
Ministry of
Finance

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary, NR = Not relevant; GB = Gender budgeting; NA = No information available
 2 GENDER BUDGETING 23

Based on the table below, it is evident that gender budgeting is more

common at the general government level. In 9 of the 14 country cases,
there are provisions for gender budgeting albeit following different imple-
mentation paths in relation to the legislative means that are used to guide
its application as well as to its mandatory or voluntary nature. At the
regional and local government level, the existence of gender budgeting is
more sporadic and mostly voluntary with the striking exception of Austria.
The case of Austria, a frontrunner in gender budgeting is further analysed
in Box 2.1. While gender budgeting is voluntary at the regional and local
levels, some countries have issued laws or recommendations. As gender
budgeting is closely related to SDG 5—Gender Equality, reporting on
sustainability, SDGs, and gender budgeting share some common ground.
However, gender budgeting is far more than sustainability reporting and
SDG reporting and providing gender information for some projects or
policies does not correspond to its application. In Box 2.2, the case of
Croatia, a country where gender budgeting is not applied at the central
level but there are some experiments at the local level is further analysed.

Box 2.1 An example from Austria

The Austrian federal constitution requires since 2006 all governmen-
tal levels to pursue the equality of women and men in their budgeting
systems. Along these lines, the budgeting and accounting reform in
2013 brought about key changes by incorporating outcome orienta-
tion as one of the four principles of budget management at the fed-
eral level. Federal entities are obliged to set a maximum of five
outcome goals of which one must be gender equality related. De
facto, this has led to the introduction of gender budgeting (Moser &
Korac, 2021; Polzer & Seiwald, 2021). Moreover, since 2016, gen-
der equality-related outcome reports have been published annually
by the federal outcome controlling unit. The implementation of the
gender dimension in budget documents varies widely at the states
and the local level. Only two federal states (Carinthia and Styria)
implement outcome-oriented budgeting and thus they have intro-
duced gender equality-related outcome goals in their budgets. At the
local level, the implementation of gender equality-related aspects in
budgeting varies widely, from being non-­existent in the majority of
budget documents in smaller local governments to taking quite com-
prehensive forms in a few cases, for example, Graz, Vienna.
24 S. COHEN

Box 2.2 An example from Croatia

A partial gender budget analysis was drafted by the Croatian Ministry
of Finance in 2009 and 2015. The Ministry of Finance requested
that all the ministries and state administration bodies single out
activities and projects from their budgets with expenditures focusing
on specific gender (mainly activities from the healthcare policy, such
as health programmes for women) and expenditures focused on
equal opportunities (activities with the main goal of gender equal-
ity—such as maternity leave for both parents). Due to the lack of
data for a more detailed analysis, numerous activities directly or indi-
rectly contributing to gender equality were left out. As local and
regional authorities are liaising with citizens, the first initiative to
introduce gender budgeting in Croatia came from the local level.
Based on an initiative of the Gender Equality Commission and under
the auspices of the City of Zagreb a study on the gender responsibil-
ity of the Budget of the City of Zagreb was produced in both 2019
and 2022. The aim was to highlight programmes and activities
already systematically implemented that facilitate reconciling per-
sonal and professional life for women and men and, as such, support
employment, but also family planning. This initiative was voluntary
without any guidelines or law requirements.

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 CHAPTER 3

Green Budgeting

Eugenio Caperchione

1   A Description of Green Budgeting

The interest for the environment, the awareness of its worsening state, and
the willingness to stop a degradation trend, have all grown in relevance
over the last decade (Petrie, 2021, p. 86), also because of the increasing
pressure from citizens and NGOs. The need to react to the climate change
has therefore become a top priority for most national governments—and
for international organizations alike.
This new attitude is at the origin of a wide range of initiatives.
Governments have engaged towards the reduction of GHG emissions,
have set ambitious objectives for redirecting “public investment, con-
sumption and taxation to green priorities and away from harmful subsi-
dies” (European Commission, 2019, p. 17), and are trying to mobilize
private resources to the same aims (ibid.).

E. Caperchione (*)
Department of Economics “Marco Biagi”, University of Modena and Reggio
Emilia, Modena, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 27

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_3
28 E. CAPERCHIONE

However, these initiatives risk to lack in coordination, and the great

picture is not always clear: what is the real measure of the effort? What is
its impact? Will all this ensure the required targets are met? In order to
answer these questions, the idea eventually emerged to frame the environ-
mental actions into the budget, that is, the fundamental document gov-
ernments use to allocate resources for the next year. A so-called green
budget has therefore been proposed, in order to allow governments “to
better align their policies with climate and environmental commitments”
(European Commission, International Monetary Fund, & OECD, 2021:
Executive summary).
Green budgets are therefore documents which, due to their link with
the “official” budget both in content and in timing, align environmental
objectives with the allocation choices.
All available definitions subscribe to this view, and largely overlap.
According to the OECD (2020), “Green budgeting means using the tools
of budgetary policy-making to help achieve environmental and climate
goals. This includes evaluating environmental impacts of budgetary and
fiscal policies and assessing their coherence towards the delivery of national
and international commitments. Green budgeting can also contribute to
informed, evidence-based debate and discussion on sustainable growth.”
Bova (2021a, p. 5) adds a reference to indicators, and stipulates green
budgeting is “a budgetary process whereby the environmental contribu-
tions of budgetary items are identified and assessed with respect to specific
performance indicators, with the objective of better aligning budgetary
policies with environmental goals.”
However, as Petrie (2021, p. 63) claims, the current definitions “lack
of clarity as a variety of related terms are being used that are not always
clearly defined or differentiated from each other”. In particular, he believes
“green fiscal policy” would be a better label. While budgeting mainly
refers to the expenditures appropriated in the annual budgets, the scope of
green budgets is quite larger, as it refers “to the interface between the full
range of fiscal policy instruments and parameters and all environmental
domains” (ibid., p. 66).
Actually, when looking to the practice, green budgets are much more
used to evaluate the greenness of a budget and of its components
(European Commission, 2020, p. 38; Bova, 2021a, p. 5), than to make
decisions about allocations. In other words, the alignment of environmen-
tal objectives with the allocation choices mostly remains in the back-
ground, while the information produced and distributed allows all the
 3 GREEN BUDGETING 29

interested parties to gain awareness of the foreseen impact of a country’s

budget on the environment. Having some clarity on the green content of
a budget may thus be seen as a prerequisite (Bova, 2021a, p. 7), which
could eventually make it easier to coordinate the budgetary and environ-
mental policies.
Information and communication therefore prevail on decision-making,
at least in the first years after the implementation of green budgets. An
impact on decisions can come as a second step, in a more mature phase.
This is confirmed by an analysis of the methodologies currently
employed, which mainly consist in tagging—or tracking—a budget’s envi-
ronmental content.
According to the European Commission, the International Monetary
Fund, and OECD (2021, p. 16) green budget tagging requires to identify
expenditures, revenues, and tax expenditures in the budgets, and assign
them a tag depending on their relevance to climate or environmental
objectives.
To this aim, the European Commission produced two separate lists,
loosely mirroring the classification of the functions of government
(COFOG): the broadly green budgetary items have a positive environ-
mental impact, while the broadly brown budgetary items harm the envi-
ronment. Examples of green items may be the subsidies to protect and
restore marine ecosystems, the training services in environmental protec-
tion, or taxes on greenhouse gases. Brown budgetary items comprise for
example, the fossil fuel consumption for buildings and transportation, the
subsidies supporting unsustainable forestry practices, or reduced tax rates
on fuel for heavy trucks.
The European Commission, the International Monetary Fund, and
OECD (ibid.) suggest national governments should use the two lists as a
starting point in developing their own tagging methodology.
As a matter of fact, green budget tagging seems to be the most used
tool for green budgeting, despite its recent appearance. It replicates and
adapts the experiences of climate budget tagging (see e.g. Bain et al.,
2019; Pizarro et al., 2021), and expands them beyond climate, so as to
take into consideration various environmental objectives.
In order to implement an appropriate tagging system, governments
have to define what they mean by green, decide what budget items to tag,
establish a classification and a weighting system, and decide the timing of
the tagging (OECD, 2021a, 16 ff).
Each of the above steps comes with issues or challenges.
30 E. CAPERCHIONE

Defining what to accept as a green measure is easy in principle, but may

be rather complicated in some areas, for example, nuclear energy or green
ICTs, and charged with uncertainty or disagreement. Some guidance can
be sought in documents prepared by international organizations, like the
European Union (2018), according to which environmentally sustainable
economic activities “make a substantial contribution to at least one of the
EU’s climate and environmental objectives, while at the same time not
significantly harming any of these objectives and meeting minimum safe-
guards”. This translates into a Regulation, stipulating that contributions
are meant to address at least one of the six environmental objectives: (1)
climate change mitigation; (2) climate change adaptation; (3) sustainable
use and protection of fresh water and marine resources; (4) transition to a
circular economy; (5) pollution prevention and control; and (6) protec-
tion and restoration of biodiversity and ecosystems—without harming any
of the other activities (European Union, 2020).
Choosing the budget items to tag is also demanding, as the ambition to
get an extended or even a full coverage of the budget must go together
with a consideration of the cost this would engender, of the additional
workload on government offices, and of the availability of a management
accounting system. In any case, both beneficial and harmful measures
ought to be tagged, if the willingness to raise awareness and to give visibil-
ity to a government’s action is genuine. Moreover, the tagging could be
confined to the central government budget only in an initial phase, but
needs to be extended eventually to regional and local governments, and to
State-owned enterprises, which all have important responsibilities in the
environmental transition.
Classification systems are diverse, and may focus on different elements.
Quite important are the so-called Rio Markers for Climate (OECD DAC,
2016), which distinguish climate mitigation from climate adaptation; and
the above mentioned Regulation of the European Union (2020), a refer-
ral for the French green budget (République Française, 2020, p. 7).
Weighting is also problematic, as only rarely can a measure be fully ben-
eficial—or fully harmful—for the environment; quite often “shades of
green” (Carney, 2019) can be observed, so that the “degrees of green”
have to be measured—of course, tentatively. For example, the Rio Markers
for Climate classify activities as “principal” if they explicitly address and
contribute to a policy objective; “significant” if they contribute but have a
 3 GREEN BUDGETING 31

different primary aim; and “not targeted” if they do not target the policy
objectives. Scores are attributed accordingly, and are respectively 2, 1, and
0 (OECD DAC, 2016, p. 5).
Coming to timing, the tagging exercise is generally done before the
formal approval of the budget, but after its overall structure has been
decided by the relevant government. This choice makes it rather hard for
the green budget to really influence the allocation choices—which would
require for the tagging to be anticipated to the phase of the budget prepa-
ration. Tags can also be attributed ex post, when financial reports are pre-
pared: in this case, the focus is on accountability, as decision-making
happens with the budgeting phase.
As we can see, green budgeting—and its methodology—are much
more aimed at making the impact of decisions visible, at raising awareness
on the interplay of budget allocations and the quality of the environment,
than at informing a government’s (or a parliament’s) decisions. In other
words, green budgeting can contribute to the agenda setting, can provide
citizens and other stakeholders with information, or even set boundaries
for decisions, but it does not, legally, reduce the room for environmental
harmful decisions. Nor is there any guarantee that politicians, having such
a set of important information handy, will act “rationally”, and will freely
withdraw from harmful decisions: this is not happening with financial
reporting, when the long-term financial sustainability is at stake (see van
Helden et al., 2023), and there is no indication this will happen for envi-
ronmental issues.
An interesting note must be added here. Unlike “official” budgets,
green budgets normally lack a report. This is in line with their purpose of
giving an appreciation of the environmental impact of a government’s
budget—and of aligning the latter with climate action. This also reflects
the importance of the budget process for public administration, which is
central for planning the revenues and for allocating and authorizing the
expenditure. However, budgets are not always fully implemented, espe-
cially when capital expenditure is concerned. Should the dropped invest-
ments have been tagged (either as beneficial or harmful) in the green
budget, the actual environmental impact may heavily differ from what was
expected. This may lead to reconsider this lack of a reporting phase, when
introducing green budgeting into a jurisdiction.
32 E. CAPERCHIONE

2  Relevance of Green Budgeting

for Public Administration

We saw in Sect. 1 what green budgeting is, its aims, the way it works, some
challenges to overcome for an effective implementation.
We also saw that, despite its label, the “budget” component tends to be
rather narrow, insofar green budgets can hardly be seen as proper budgets
(Degron & Stroeymeyt, 2021), and are rather meant to be a tool for
evaluating the greenness of budget decisions, so as to offer citizens and
politicians a set of data which could allow a more informed
decision-making.
Entering this section, we now want to elaborate on the reasons and the
extent of the relevance of green budgeting in the public sector.
Building on the UN 2030 Agenda for Sustainable Development and
SDG 13 (Climate action) in particular, the central role of governments in
leading an environmental recovery is generally recognized. Two groups of
reasons can explain this.
On one side, if we look back to the causes of the worsening of climate
and environment, public administrations have their share of responsibility.
Thus, they have to amend their policies in order to drastically reduce the
harmful expenditures (or subsidies) and to increase beneficial interven-
tions. However, this is not specific to public administrations, as busi-
nesses—and households, to some extent—also need to modify their
current behaviour, putting an end, or limiting, the damaging of the
environment.
A more crucial role for public entities emerges, if we look forward and
try to figure out the possible solutions, and to assign tasks for them.
Climate mitigation, climate adaptation, energy transition—and all other
areas of intervention—require great amounts of investment, over multi-­
annual periods. In some cases, only governments can make them available:
let us remember, for example, that the budgets of the EU Member States
represent close to half of their GDP, on average (European Commission,
2020, p. 38).
Still, this would only be a first step, as businesses and households will
not change their preferences, and their behaviour, unless governments can
fix clear, stable, and accepted rules, offering a long-term perspective and
leading the transition. In other words, the role of governments is central,
and no other actor can replace them.
 3 GREEN BUDGETING 33

Governments have therefore taken the lead in climate action, both

directly and through the international organizations they are members of.
A pattern is apparent here: after some pioneering initiatives, mainly
country-based, various supra-national and international organizations
started to intervene with research, proposals, and dissemination, building
momentum, and providing national and subnational governments with
examples and suggestions. Important players in this area are the European
Union (see European Commission, 2019), the OECD (2021b), the IMF
(see Gonguet et al., 2021), the World Bank (2021), the Coalition of
Finance Ministers for Climate Action (2023), the IDB (see Pizarro et al.,
2021), and the UNDP (see Bain et al., 2019). In some cases these institu-
tions have joined their efforts and worked together, so putting even more
emphasis on their ideas and suggestions (see e.g. European Commission,
International Monetary Fund, & OECD, 2021).
All the above institutions provide any interested party with ideas on
how green budgeting—and other tools—can support and qualify the gov-
ernments’ climate action. They therefore propose robust and agreed upon
methodologies, aimed at ensuring the information collected and distrib-
uted is reliable and accurate, and are engaged in monitoring the outcome
of these interventions.
As a consequence of the increasingly crucial role of governments and
parliaments in leading a successful environmental transition, the Supreme
Audit Institutions are also paying attention to green budgeting (see e.g.
Cour des Comptes, 2023; Lelong, 2023).
Similarly, independent fiscal institutions are called to take a stance
(Bova, 2021b, pp. 4–5; Cameron et al., 2022), while some of them are
already active in the field (see e.g. Sousa et al., 2022 for the Conselho das
Finanças Públicas in Portugal).
All that said, green budgeting is not a warranty of success. Common
goods are largely subject to opportunistic behaviour, even from govern-
ments, which could indulge to greenwash their budgets (see e.g.
Peyrol, 2022).
Appropriate governance mechanisms are therefore needed. According
to the European Commission, the International Monetary Fund, and the
OECD (2021, p. 24) a well-conceived “institutional design provides an
enabling environment for green budgeting practices”. Thus, various
frameworks have been suggested to proceed in the smoothest possible
way, for example, the OECD Green Budgeting Framework (OECD,
34 E. CAPERCHIONE

2020), based on four building blocks, that is, strategic and fiscal planning,
budgeting tools for evidence generation and policy coherence, account-
ability and transparency, enabling budgeting environment (Bova, 2021a,
p. 7). In its Green Budgeting Reference Framework the European Union
recommends to assign the responsibility on the green budgets to perma-
nent central structures, and to complement them with green budget cor-
respondents in ministries and agencies; nevertheless, in an initial phase, or
if the investment cannot be significant, an ad-hoc central task force may
also do (European Commission, International Monetary Fund,, & OECD,
2021, pp. 32–33).
A sound governance will also comprise the openness to scrutiny, both
from audit institutions and from the society at large. Making the data
available for independent evaluation, and opening the bases of data, can
equally be a necessary step.

3   An Overview of the Literature

We saw in Sects. 1 and 2 that green budgets emerged only recently as a
tool public administrations can employ in their climate action. The litera-
ture on this subject is therefore quite limited, and dates back mainly to the
last 5 years—with only a few exceptions.
Most papers have been published by international organizations,
national governments, think tanks, and authored by professionals therein,
with a marginal role of the academia so far. We can group them around the
following contributions:

• what is the green budget, and why it should be introduced;

• its methodology;
• governance issues;
• presentation of country cases;
• critical appreciation of current practices and proposals of amendments.

Some of the papers in the first group have already been mentioned in
Sect. 1.
They all elaborate on the expected benefits of the green budgets, shed-
ding light on their components. In an initial phase, the proposal is just a
part of a larger policy document. The European Commission (2019,
p. 17), for example, suggests “a greater use of green budgeting tools will
help to redirect public investment”—but this is inside a comprehensive
 3 GREEN BUDGETING 35

Communication on the so-called European Green Deal. The same hap-

pens with the Coalition of Finance Ministers for Climate Action, which
sees green budgeting as one of the “five key areas to help ministers of
finance take leadership on climate change: macroeconomic modelling,
climate-informed fiscal risk assessment, green budgeting, public invest-
ment and asset management, and green public procurement” (2022, p. 4;
12–13). Other papers are more specific to green budgeting (see e.g. Bova,
2021a, pp. 6–8; European Commission, International Monetary Fund, &
OECD, 2021). The accounting profession seems also interested to have
its say on this theme, and to prepare to contribute to the introduction of
green budgeting (ACCA, 2022). As to academia, Petrie (2021, 61 ff) also
gives a definition (see Sect. 1 in this chapter), before discussing the evolu-
tion of climate budgeting and green budgeting (ibid., 76 ff).
The papers dealing with methodology are mainly aimed at giving guid-
ance for an effective implementation of the green budgets, and have tag-
ging at their core. As we saw in Sect. 1, most papers have been prepared
by international organizations (e.g. Bain et al., 2019; OECD, 2021a;
OECD Development Assistance Committee, 2016; Pizarro et al., 2021),
and are therefore addressed to central governments. Single countries are
of course also active, and tend to take position on an appropriate method-
ology for the respective central governments (see e.g. Alexandre et al.,
2019; Gobierno de España, 2022). Once subnational governments start
taking part in the process, this may lead to a discussion on the best meth-
ods to employ at local level (see e.g. Institute for Climate Economics,
2022; Tola et al., 2021).
The contributions on governance are produced in a more mature phase,
when the awareness arises that green budgeting, as any other tool support-
ing the climate action, needs to be sustained over time. The European
Commission, the International Monetary Fund, and the OECD (2021:
Executive summary) suggest to boost green budgeting by linking it to a
strategic framework and a national plan, by investing on evidence-based
decision-making, by relying “on an institutional design with clearly-­
defined responsibilities and a timeline for actions” and by securing open-
ness and accountability through transparent reporting and independent
oversight. These suggestions are shared, with variations, by Gonguet et al.
(2021) and by Blazey and Lelong (2022). Bova (2021b) and Cameron
et al. (2022) elaborate respectively on the role of environmental watch-
dogs and of independent fiscal institutions. Peyrol (2022, p. 22) also
underlines—focusing on the French case—the opportunity of an
36 E. CAPERCHIONE

independent control on the green budgets, and proposes a committee of

experts, or the Supreme Audit Institution, could be assigned this task. As
a matter of fact, the Cour des Comptes (2023) eventually decided to mea-
sure the environmental impact of the French State budget.
The adoption of green budgeting to a number of jurisdictions has
encouraged authors to investigate the extent of its diffusion, the satisfac-
tion with its results, the lessons learned so far. Some surveys have therefore
been published. In particular, Bova (2021a, 2021b) focused on the expe-
riences in the European Union, while the OECD (2021b), consistently
with its remit, targeted a different sample of countries, partially overlap-
ping the EU. Some analyses, though, are country-based, as for example,
two papers concerning France, which investigate respectively the Region
Brittany (OECD, 2022) and the local governments (Fetet et al., 2023).
Clearly enough, all the evidence and the collected material may be criti-
cally analysed so as to offer ideas on the way ahead. A number of recom-
mendations emerge, which complement the suggestions already seen in
this chapter:

• green budgets ought to be linked with the actual decision-making;

• they should be framed into a multi-annual perspective;
• subnational governments may have an important role in the climate
action, and should therefore also implement green budgeting;
• financial support to the administrations, and training for the staff,
can be highly beneficial.

A common element of the above recommendations is that, in order for

green budgeting to really serve its purpose, it must reach a more mature
stage, and overcome some of its current weaknesses.
The first issue concerns the limited use of green budgets in the political
debate. Nicol (2022, p. 29) suggests the politicians should pay more
attention to the process, and employ the information contained in the
green budgets in their job. Bova (2021a, p. 18) believes “public attention
to these reports could gain more grounds”. Politicians, however, would
be much more interested to use the information generated with green
budgets if the budgets themselves would be a basis for decision-making
(Peyrol, 2022, p. 19). In other words, the knowledge on the environmen-
tal impact acquired with the tagging needs to feed back the government’s
budget (Degron & Stroeymeyt, 2021, p. 8).
 3 GREEN BUDGETING 37

The introduction of a multi-annual perspective could also contribute to

the empowerment of green budgets. Most important decisions, in fact,
require a long-term horizon, hardly consistent with an annual planning.
This is why green budgets could be employed to make long-term deci-
sions (Peyrol, 2022, p. 19). To this aim, Nicol (2022, p. 31) suggests any
incoming government should present and discuss openly its long-term
green budget.
All the above suggestions, originally meant for the central govern-
ments, can of course be extended to subnational governments, and in
particular to local governments, as these play a fundamental role in the
environmental transition (Degron & Stroeymeyt, 2021, p. 10).
Green budgeting, we could then say, has a big potential, and needs to
be managed properly. Since it is a new tool, training and technical support
can facilitate its implementation and can allow the exchange of good prac-
tices with peers (Boutron, 2023, p. 3; 6).
That said, some authors recommend not overemphasizing the role of
green budgets: they are one of the tools to be employed in the climate
action, but cannot serve all purposes, and must therefore go together with
other tools (Joder & Grosse, 2022, pp. 15–16; Nicol, 2022, p. 30).

4  Recent Developments in the Practice

at the International Level

In the previous sections of this chapter, we defined green budgeting,

examined its relevance for national and subnational governments, and
summarized the contributions of literature.
We want now present some results of our research, which investigates
the state of the art of Green budgeting, both at national and subnational
level, in 13 European countries (see Table 3.1). Together with the surveys
mentioned in Sect. 3, this will allow us to better map the diffusion of
green budgeting, and to shed light on some recent developments.
A first element which easily becomes apparent is the heterogeneity of
the approaches adopted by the different countries, and inside each of
them, as Table 3.1 makes it quite clear. For example, while some countries
made the practice mandatory, others prefer not to commit so strongly, and
prepare the budgets voluntarily. There are then countries, where green
budgeting still has not been introduced.
Table 3.1 Green budgeting: The state-of-the-art in a sample of European countries
38

Countries Central government Regional government Local government

Yes/No Law/ Mandatory/ Yes/No Law/ Mandatory/ Yes/ Law/Guidelines Mandatory/

Guidelines Voluntary Guidelines Voluntary No Voluntary

Austria Partly N V Partly N V Partly N V

Finland Y Ya V N N V N Y (Guidelinesb) V
E. CAPERCHIONE

France Y Yc M Y Guidelinesd V
Germany N V N V N V
Greece Y Y (Law) Me N N
Italyf Y Y M N N V N N V
Malta Yg n/a n/a n/a N
Norway Y Y (National n/a Y Y (National n/a Y Y (National n/a
strategy) strategy) strategy)
Portugal Y Guidelines V N
from CFP
Spain Y Y V N N V N N V
Sweden Y Yh Mi Y – V Y – V
Switzerland N N N Partly N V N N N
Ukraine Y Y (Law) M

a
Appropriations connected to carbon neutrality are identified in the preparation of the budget proposal
b
Budgetary guideline states that if environmental issues are included in the city strategy, these need to be implemented in the budget documents. No general
guidance for climate budgets
c
Article 179, law 2019-1479 makes it mandatory. A guideline has been published by the General Inspectorate of Finance in 2019
d
The Institute for Climate Economics published a guide to climate budgeting, largely used by local governments
e
Mandatory, but not fully implemented
f
Green budgeting included in the budget of the Ministry for the Environment. No regulation for other governmental tiers is provided, but evidence of experi-
ences in some towns (e.g. Bologna)
g
No formal green budgeting structures are in place
h
The requirements stem from the annual regulation letter, the budget law, or regulations from the Swedish National Financial Management Authority
i
Green budgets are mandatory for some government agencies
 3 GREEN BUDGETING 39

This is consistent with previous research, for example, European

Commission (2020, p. 39—Table I.5.1) and European Commission,
International Monetary Fund, & OECD (2021, p. 9). On the same line,
Bova (2021a, p. 10) concludes that, “practices diverge quite substantially
with respect to the items covered, the underpinning methodologies used
and the governance structure in place”.
Another evidence is the limited number of countries currently prepar-
ing green budgets. As Table 3.1 shows, only 5 countries in our sample
have some form of obligation at the central government level. Quite inter-
estingly, none of them are imposing anything for the subnational govern-
ments. As we saw in Sect. 3, this may be an issue, if the role of subnational
governments in the climate transition is duly considered (European
Commission, International Monetary Fund,, & OECD, 2021, p. 25).
Where the budgets are in place, the expenditure devoted to environ-
ment and climate objectives tends to be rather small (European
Commission, 2020, p. 39). Moreover, the data collected and presented
are generally not submitted to auditors or third parties for validation
(Bova, 2021a, p. 18): such a move would clearly increase their quality.
That said, it is important to notice that the landscape is evolving, so
that the situation of the countries presented in Table 3.1 may rap-
idly change.
Among the most active countries, the case of France surely deserves
some attention.
In September 2020 the French government published its first green
budget—interesting to notice, also in English (République Française,
2020). The green budget is intended as an appendix to the 2021 budget
bill, and is divided into three parts: Green Budgeting at the Central
Government Level, The range of financial supports for the ecological tran-
sition, and Environmentally related taxation. In the green budgeting exer-
cise, the environmental impacts of the budget’s appropriations and tax
expenditures are tagged, in order to evaluate how they measure up against
France’s commitments (ibid., p. 3). The tagging is done according to a
country-specific methodology (Alexandre et al., 2019), and shows which
expenditures are favourable, neutral or unfavourable for the different envi-
ronmental goals—and what share of total central government expendi-
tures they represent (République Française, 2020, p. 6). The classification
method considers the multidimensional aspect of the environment by
40 E. CAPERCHIONE

identifying the impact of expenditures on six environmental objectives,

inspired by the European taxonomy of activities (European Union, 2018):

• Fighting climate change

• Adapting to climate change and preventing natural risks
• Managing water resources
• Circular economy, waste; preventing technological risks
• Fighting pollution
• Conserving biodiversity and protecting natural areas, farmland
and forests

A coloured tag is attributed to each environmental objective in accor-

dance with a scoring system. In particular:

• the favourable expenditures cover: (a) environmentally targeted

expenditures or expenditures contributing directly to the production
of an environmental good or service (green activity); (b) expendi-
tures with no explicit environmental target, but with an indirect
positive impact; (c) favourable but controversial expenditures with
favourable short-term effects but a potential technology lock-in risk
in the long-term;
• the expenditures are neutral if they have no significant impact on the
environment or if the available information if insufficiently substanti-
ated to determine a favourable or unfavourable effect;
• the unfavourable expenditures cause direct harm to the environment
or create incentives for an environmentally harmful behaviour
(République Française, 2020, p. 8).

The report also presents the aggregated findings by expenditure cate-

gory (ibid., 15 ff) and the aggregate green budget tagging for each envi-
ronmental objective (ibid., p. 21).
The exercise initiated in 2020 has eventually continued, and a new step
has been recently announced by the Government, which stipulates it has
employed green budgeting while preparing the 2024 budget (République
Française, 2023, p. 5).
The communication with citizens remains in any case important, and
the data is therefore presented in simplified form on the web (https://
datavision.economie.gouv.fr/budget-­vert/?view=Toutes%20missions%20
confondues).
 3 GREEN BUDGETING 41

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 CHAPTER 4

SDGs Budgeting and Reporting

Francesca Manes-Rossi

1   The Call for SDGs Budgeting and Reporting

This chapter discusses the development and the role of SDGs budgeting
and reporting in public sector entities (PSE), focusing in particular on
central, regional and local governments.
The 2030 Agenda settled by the United Nations (UN) in 2015 estab-
lished 17 goals, articulated in 169 targets together with a set of 232 unique
indicators in the aim of tracking progress obtained by the 193 nations that
have undersigned the agreement towards the achievements of these goals.
The Agenda is the continuation of the efforts already started by the UN
with the eight Millennium Goals subscribed in 2000. However, the dis-
cussion around sustainable development started well before in public
financial management academic literature, in connection with studies on
sustainability issues (Adams & Guthrie, 2005; Guthrie et al., 2010). Since
the beginning, the pivotal role of PSE in coordinating efforts done by
business entities, civil society organisations (CSOs) and citizens in

F. Manes-Rossi (*)
Department of Economics, Management, Institutions, University of Naples
Federico II, Naples, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 45

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_4
46 F. MANES-ROSSI

managing sustainability issues emerged, and the most recent literature

highlights the importance of localising SDGs both at national (Abhayawansa
et al., 2021) and local level (Bisogno et al., 2023), identifying the possible
enabling conditions allowing the achievement of the Agenda. In parallel,
the need to disclose strategies and actions implemented towards SDGs has
also attracted scholars’ attention (Cohen et al., 2023; Guerrero-Gómez
et al., 2021).
This chapter aims to contribute to the growing debate on SDGs bud-
geting and reporting to offer an overview of how the localisation of SDGs
is leading in communicating to all stakeholders the strategies and actions
undertaken. To this end, after some reflections on the importance of SDGs
budgeting and reporting in public administrations, an overview of the
literature is presented in Sect. 3. Section 4 outlines recent developments in
practice in the European context in national, regional and local govern-
ments, analysing the situation in 16 European countries, presenting some
reflections on the development of SDGs budgeting and reporting.

2  Relevance of SDGs Budgeting and Reporting

for Public Administrations

Public administration has a critical role in achieving SDGs from several

perspectives. First, governments manage a large volume of financial
resources, collecting a massive amount of tax revenues (e.g., in Denmark
in 2021 Tax revenues were 46.9% of GDP—OECD, 2023) and using
these resources to implement their policies for sustainable development
can make the difference in achieving the goals. Second, while no single
actor can fully address global sustainability challenges (Lauwo et al.,
2022), PSE, as a whole, have the power to design public policies support-
ing private sector entities, CSOs and citizens as well as to create partner-
ships to redirect their efforts towards the achievement of SDGs. Third,
public sector entities are responsible for the provision of public goods and
services: designing their strategies in accordance with SDGs implies creat-
ing a more inclusive and innovative society, taking care of the environment
and the societal challenges without neglecting economic development
(Bouckaert et al., 2016).
However, in order to fulfil their role, PSE need to identify their strategies
in accordance with material, human and financial resources available, possi-
bly considering additional resources that can be mobilised through partner-
ship. Consequently, there is a growing need to understand how public
 4 SDGS BUDGETING AND REPORTING 47

sector financial and managerial accounting and national accounting (see

Alexander et al., 2018) can provide data and information indispensable for
a sound budgeting cycle and for fair and comprehensive reporting on SDGs.
Management accounting can support public managers in their opera-
tional decisions, as well as those responsible for setting entities’ strategies
and goals coherent with sustainable growth. Furthermore, it can provide
the basis to identify indicators for monitoring operational activities and
allow the identification of key sustainability drivers and the SDGs to be
included into strategies and actions (Cohen et al., 2023). Financial account-
ing can support governments, at all levels, to adopt tax, debts and a financ-
ing system attuned to the promotion of SDGs. The elaboration of
sustainable financing strategies and investment—at any governmental
level—requires accounting information in order to elaborate coherent bud-
gets. Figure 4.1 provides steps and tools as suggested by UNDP (2022a) to
be applied in order to redirect the budget cycles in accordance with SDGs.

SDG responsive Macro-Fiscal Framework

and Budget Policy Statement
SDG responsive Medium-Term Budget
Framework
Integration of SDG Financing Strategies

SDG oriented Medium

SDG Focused Term Expenditure Framework
Performance Audits (program and performance
Expenditure Review budgeting)
Evaluation and impact SDG focused spending
assessment reviews (guiding sector budget
allocation)
Budget calls and
templates: SDG-aligned
justification and KPIs
SDG based budget
coding and tagging
Budget documents (inc. Citizen’s
Periodic publication of Budget) contain SDGs based
SDG budget, expenditure information
and performance
Parliamentary Committees
Oversight by Parliament scrutinise SDG budget and policies
and CSOs
SDG friendly procurement systems
SDG budgets are timely released and spent
Re-allocations of SDG budgets discussed &
debated

Fig. 4.1 Budgeting for SDGs—The overarching framework. (Source: UNDP,

2022a, p. 10)
48 F. MANES-ROSSI

In the same vein, reporting should allow all stakeholders to understand

how public money has been spent and directed towards SDGs, as well as
to find information in order to be appropriately engaged in decision mak-
ing as co-producers of public services. In addition, both budgeting and
reporting can make use of non-financial information related to social,
environmental, human resources, anticorruption and governance-related
issues that can complement accounting-based information. To this end,
statistical data and national accounting may complete the picture both for
decision making and accountability purposes as well as for stewardship.
The European Union has developed a taxonomy, already in 2020, to
support business entities in identifying environmentally sustainable eco-
nomic activities (e.g., turnover, capital expenditure and operating expenses
connected with activities that have or are subject to an environmental
impact) (EU, 2020). Unfortunately, there is nothing similar for public
sector entities (Cohen et al., 2023). In addition, at the European level, the
recent Corporate Sustainability Reporting Directive mandates all compa-
nies listed on European financial markets, as well as non-listed big compa-
nies operating in Europe, to publish all information suitable to assess past
performance but also to have a preview of strategies in the short, medium
and long term with respect to sustainability issues. The directive should be
applied progressively, starting from 2024, and also involves listed State-­
owned companies. Both the EU Taxonomy and the CSR Directive do not
provide a direct connection with SDGs, but both are part of the actions
undertaken by the EU to manifest the commitment to the implementa-
tion of the 2030 Agenda “in a full, coherent, comprehensive, integrated
and effective manner, in close cooperation with partners and other stake-
holders.” Again, there are no similar requirements for governments, apart
from recommendations provided by the EU and the UN.
It is worth noting that SDGs indicators provided by the UN make a
limited reference to accounting-based information, being basically created
to use qualitative data or statistical and national accounting data (Cohen
et al., 2023). Consistently, more attention should be paid by scholars and
practitioners to understanding how accounting-based information can
support the planning, monitoring and reporting of efforts done by public
administrations—especially from governments—in the achievement
of SDGs.
The following sections attempt to offer an overview of what the litera-
ture suggests in terms of SDGs budgeting and reporting and to explore
which are the recent developments in some European countries.
 4 SDGS BUDGETING AND REPORTING 49

3  An Overview of the Literature

The aim summarised in the UN motto of “leave no one behind” requires
governments, companies, NGO, CSO, citizens, and individuals to cooper-
ate, searching for unprecedented policies and actions that can make SDGs
achievable (Bebbington & Unerman, 2020). While this ambition is being
pursued on a global political stage, reflections from public accounting
scholars have been developed on the possible contribution of public sector
accounting in the achievement of SDGs. Studies on the topic are progres-
sively emerging (Abhayawansa et al., 2021), especially with regard to local
governments (Bisogno et al., 2023; Cohen et al., 2023; Deslatte & Stokan,
2020; Guarini et al., 2022), touching upon governance mechanisms,
enabling conditions, the role of accounting-based information in support-
ing the achievement of the goals. Furthermore, both international organ-
isations (EU, 2018; OECD, 2020) and professional organisations (e.g.,
AICPA-CIMA, 2021) have developed reports and guidelines to help gov-
ernments in localising SDGs.
Research discussing SDGs budgeting and reporting is developing pro-
gressively, together with the adoption of more initiatives around the
world. When SDGs were released by the UN, most of the attention was
concentrated on governance issues, discussing possible enabling condi-
tions (Glass & Newig, 2019) as well as the need for integration at govern-
mental levels, and the need to increase cooperation also among sectors in
the aim of supporting SDGs implementation (Filho et al., 2016). Despite
a consolidated strand of research that has discussed sustainability report-
ing at length in the last decades (see Chap. 5), studies focusing more
specifically on SDGs are still limited, even if the importance of providing
reflections on the matter, also corroborated by empirical analysis, has been
greatly underlined (Bebbington & Unerman, 2020).
At the national level, the importance of integrating the SDGs into the
national budgetary process has been claimed as a precondition for policy
coherence, thus favouring sound resource allocation, to increase account-
ability on undergoing progress towards SDGs, and also to increase com-
parability, contributing to the global ranking of sustainable development
policies (Mulholland & Berger, 2019).
Studies in the European context show that there is still a limited inte-
gration of SDGs in the planning and budgeting systems of LGs (Guarini
et al., 2021), possibly due to a lack of deployment of policy tools associ-
ated with sustainable development. The development of a set of
50 F. MANES-ROSSI

performance indicators, which can cover the social, economic and envi-
ronmental dimensions, could provide the necessary support to strategic
planning and control cycle, also connected with the budget.
Lauwo et al. (2022) have underlined that fair accountability is pivotal
to support cooperation among the relevant actors that can cooperate for
the achievement of the goals, in particular at the national level. However,
it has also been underlined the need for specific frameworks, possibly con-
sidering the inclusion of well identified accounting-based information and
indicators attuned to measure and disclose plans and actions undertaken
for sustainable development, in order to avoid that the quest for SDGs
reporting can result in a further burden for governments, without con-
crete effects (Niemann & Hope, 2018). The idea of integrating financial
reporting with specific measures connected to the Agenda 2030 has also
been promoted, in an attempt to move from symbolic to substantive
reporting on sustainability issues (Manes-Rossi & Nicolò, 2022). In this
direction, there have also been studies examining factors that potentially
affect transparency in disclosing sustainability issues included in the UN
framework. In particular, the research conducted by Guerrero-Gómez
et al. (2021) analysing a sample of LGs in Latin America, highlights that
education level, legislation quality, political corruption, population size
and unemployment affect the level of disclosure.
Scholars also investigated the potential impact of the SDGs on the
financial health of local governments. Benito et al. (2023), analysing a
sample of Spanish LGs for 2020 assert that LGs are making considerable
efforts to implement the SDGs and addressing sustainable development
do not threaten their financial conditions, as it does not affect debt per
capita. Nonetheless, the authors claim that, “further implementation of
the SDGs forces local governments to reduce their surpluses or increase
their deficits, affecting their economic-financial situation” (Benito et al.,
2023, p.12). In this regard, it is worth noticing that there is a dearth of
research on how expenses (and revenues) are accounted for in relation
to SDGs.
SDGs reporting is deemed valuable not only to assess the performance
of PSE, but also as a tool to provide some forward-looking information
that can support decision making and—to some extent—policy-making
(Caruana & Dabbicco, 2022). In particular, Caruana and Dabbicco
(2022) reflect on the role of the accounting profession and the need for
policymakers to obtain information through both accounting and statisti-
cal systems, with the support of IT experts.
 4 SDGS BUDGETING AND REPORTING 51

The need to make use of accounting information originating from

managerial and financial accounting systems is at the core of the discussion
made by Cohen et al. (2023). The authors analyse some frameworks that
propose indicators to assess and report the achievement of SDGs in LGs
as well as the voluntary local review uploaded by European cities for 2021
available on the UN website. The final result of the double analysis is that
the frameworks made limited use of accounting-based information in
building performance indicators and that almost all cities do not highlight
a connection with public expenditure, with the valuable exception of
Barcelona. Consistently, Cohen et al. (2023) suggest the adoption of
accrual accounting and cost accounting systems connected with SDGs, in
support of the preparation of both budgets and reports to promote and
monitor the achievement of the goals.
A very recent strand of research is investigating the role of public sector
auditors in supporting sound accountability of policies and action on
SDGs. In this realm, Cordery et al. (2023) using the case of India’s
Supreme Audit Institution (SAI) show the important proactive role of SAI
in holding a government to account for its SDG pledges. Tetteh et al.
(2023) conducted an investigation on external and internal factors that
can affect public sector audits of SDGs implementation in Ghana’s
SAI. Their results show that SDG audit opinion may be interpreted as an
invasion into the political domain and that stronger independence is nec-
essary to avoid loose coupling of SDGs’ programmes in comparison with
the designed targets.
Clearly enough, studies based on empirical analysis, investigating how
accounting can support SDGs, despite the motto launched in 2018 for the
World Congress of Accountants ‘Can accountants save the world’ are still
languishing, partly as a result of the small number of existing practical
experiences. Scholars can monitor best practices emerging progressively in
an attempt to identify how governments and other PSE are making use of
accounting tools, including budgets and reports, in pursuing SDGs but
also propose how to adapt management and financial accounting systems
to serve the purpose better. Attention to the audit function (both as per-
formance and as financial auditing) is needed to complement the above-
mentioned systems in supporting decision making and increasing
accountability.
52 F. MANES-ROSSI

4  Recent Developments in SDGs Budgeting

and Reporting Practice at the European Level

The creation of a specific UN database, both at the national (https://hlpf.

un.org/countries) and local level (https://sdgs.un.org/topics/voluntary-­
local-­reviews), invites governments to prepare reports that specifically pro-
vide information on strategies and actions undertaken towards sustainable
development. All the 16 countries analysed in preparing this chapter have
uploaded their national voluntary review for two years (apart from Malta
and the UK that have uploaded only one, and Sweden with three reports).
Table 4.1 provides a summary of the state of the art of SDGs budgeting
and Table 4.2 of SDGs reporting in the selected European countries.

4.1   SDGs Budgeting

The picture that emerges with respect to SDGs budgeting highlights that,
even in the wake of the COVID pandemic, almost all European countries
have adopted a National Recovery and Resilience Plan which incorporates
strategies and actions in line with achieving the UN goals.
Looking more specifically at the budget (Table 4.1), only four coun-
tries (Italy, Norway, Sweden and Ukraine) have committed to preparing a
budget that demonstrates how planned strategies and actions are in line
with SDGs. In the case of Sweden, the adoption of the SDGs budget is
mandatory only for some government agencies. Additionally, four other
countries, namely Finland, Portugal, Spain and the UK, have adopted laws
or guidelines to support central governments in the preparation of a bud-
get aligned with SDGs. In Austria, in accordance with the reform intro-
duced in 2021, individual SDGs have been linked to the outcome goals in
the budget document, with a limited adoption of SDGs. The Austrian
Federal Budget Office is pushing for an ex-ante connection between SDGs
and outcome goals.
The other countries do not have an SDGs budget at the central govern-
ment level, even if they can have national strategies aligned to the imple-
mentation of SDGs, as in Germany. The situation gets worse looking at
the regional level, where only Italy and Norway have a law or a national
strategy mandating an SDGs budget, with the other countries mentioned
above having a voluntary adoption of SDGs budget (except the UK, where
there is no regional level).
Table 4.1 SDG Budgeting: The state-of-the-art in a sample of European countries
Countries Central government Regional Government Local Government

Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/ Yes/ Law/Guidelines Mandatory/

No Guidelines Voluntary No Guidelines Voluntary No Voluntary

Austria Partly N V Partly V Partly N V

Croatia Na N N
Finland Y Yb V N Yc V N Yd V
France N Y Y (Guidelines)e V
Germany N V Nf V Ng V
Greece Nh N N
Italyi Y Y M Y Y M N N V
Malta Yj n/a n/a n/a N
Norway Y Y (National M Y Y (National M Y Y (National M
strategy) strategy) strategy)
Portugal Y Y (Guidelines) V N
Spain Y Y V Yk N V Yl Y (Guidelines) V
Sweden Y Ym Mn Y – V Y – V
Switzerland N N N Some N V –o N N
The N N V Y Y(Guidelines)p V
Netherlands
UK Y Y (Guidelines) V Y Y (Guidelines) V
Ukraine Y Y (Law) M Y Y(Law) M Y Y (Law) V

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary

a
Croatia has not an SDGs budget but has a National Resilience and Recovery Plan (2021–2026) aligned to the SDGs
b
Order of the state treasury on the preparation of state budget proposal
c
Wellbeing Service County Act (611/2021) mentions that budgets must be planned on a sustainable basis so that municipal operations are secured also in
4 SDGS BUDGETING AND REPORTING

the future
(continued)
53
Table 4.1 (continued)
54

d
Local Government Act (410/2015) mentions that budgets must be planned on a sustainable basis so that municipal operations are also secured in the future,
but SDGs are not explicitly connected with budgets. (Pilot project ongoing)
e
Guidelines are in progress (ADEME/AFL)
f
With state-specific or local government-specific exceptions
g
With state-specific or local government-specific exceptions
h
Greece has not an SDG Budget but has adopted a National Reform Plan focused on SDGs
i
Law 163/2016 introduced a set of indicators in the national and regional strategic document (DEF and DEFR). These indicators, introduced in Italy in
F. MANES-ROSSI

2012, relate to Equality and Social wellbeing (BES). Each Region should define guidelines and tools to support other public administrations in their territory
to implement actions towards the achievement of BES. Furthermore, there is a close connection between BES and SDGs. The ASviS (Italian Alliance for
sustainable development) has promoted some guidelines to localize SDGs, but no specific guidelines for budget or reporting have been provided
j
There are no formal SDG budgeting structures in place; however, each budget measure is linked to an SDG when funds are requested as part of the formal
Ministry for Finance Circular and templates comprising the annual budget process
k
Only isolated experiences have been carried out voluntarily by some regional governments
l
Only isolated experiences have been carried out voluntarily by some local governments
m
The requirements stem from the annual regulation letter, the budget law, or regulations from the Swedish National Financial Management Authority
n
It is mandatory for some government agencies.
o
No information available
p
The Association of Dutch Municipalities (VNG) launched a campaign to stimulate and support municipalities in implementing the global goals in
their budgets
Table 4.2 SDG reporting: The state-of-the-art in a sample of European countries
Countries Central government Regional government Local government

Yes/ Law/ Mandatory/ Yes/ Law/Guidelines Mandatory/ Yes/ Law/Guidelines Mandatory/

No Guidelines Voluntary No Voluntary No Voluntary

Austria Partly N V Partly N V Partly N V

Croatia Y N V N N
Finland Y Y (Guidelinesa) V N N V N Nb V
France N Y In progress for Vc
budget
Germany Y Y (National M Y Y (Federal state Mostly Y Y (Municipality M (Mostly)
Sustainability (biannually) specific mandatory specific
Strategy) Sustainability Sustainability
Strategies) Strategies)
Greece N N N
Italyd Y Y M Y Y M N N V
Malta Y Y (Law) M N
Norway Y Y (National M Y Y (National Y Y Y (National M
strategy) strategy) strategy)
Portugal Y Y (Guidelines) V Y Y (Guidelinese) V
Spain N N – Yf N V Yg N V
Sweden Y Yh Mi Y – V Y – V
Switzerlandj
The Y N V Y Y (Guidelines) V
Netherlandsk
UK Y Y (Lawl) M (limited) Y Y (Guidelines) V

(continued)
4 SDGS BUDGETING AND REPORTING
55
Table 4.2 (continued)
56

Countries Central government Regional government Local government

Yes/ Law/ Mandatory/ Yes/ Law/Guidelines Mandatory/ Yes/ Law/Guidelines Mandatory/

No Guidelines Voluntary No Voluntary No Voluntary

Ukraine Y Y (Law + M
F. MANES-ROSSI

Guidelines)

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary

a
At the national level, Voluntary National Review is conducted once in electoral term, and the National Commission publishes “State of sustainable develop-
ment” reports. State Treasury’s Guidance on Sustainability Reporting in Central Government recommends that all government organisations publish sustain-
ability reports where they shall adopt at least five SDGs central to their operations
b
No national general guidance—General international Voluntary Local Review guidance (UN Habitat Guidelines, JRC European Handbook for SDG
Voluntary Local Reviews) used
c
Reference to SDG may be included in the Sustainability report
d
Law 163/2016 introduced a set of indicators in the national and regional Strategic document (DEF and DEFR). These indicators, introduced in Italy in
2012, relate to Equality and Social wellbeing (BES). Each Region should define guidelines and tools to support other public administrations in their territory
to implement actions towards the achievement of BES. Furthermore, there is a close connection between BES and SDGs. The ASviS (Italian Alliance for
sustainable development) has promoted some guidelines to localise SDGs, but no specific guidelines for budget or reporting have been provided
e
RICD (Intermunicipal Development Cooperation Network): Intermunicipal communities report compliance with the SDGs
f
Only isolated experiences have been carried out voluntarily by some regional governments
g
Only isolated experiences have been carried out voluntarily by some local governments
h
The requirements stem from the annual regulation letter, the budget law, or regulations from the Swedish National Financial Management Authority
i
It is mandatory for some government agencies
j
SDG reporting is considered to be outside Public Financial Management
k
The central government provides the Voluntary National Review. The Association of Dutch Municipalities (VNG) launched a campaign to stimulate and
support municipalities in implementing the global goals in their budgets and annual reports. Amsterdam has been the first Dutch city to publish a Voluntary
Local Review on the UN database in 2022
l
HM Treasury—Sustainability Reporting Guidance; HM Treasury—The Government Financial Reporting Manual 2023/24. Central Government
Departments should clearly identify where their performance contributes towards delivery of relevant SDGs
 4 SDGS BUDGETING AND REPORTING 57

With regards to local governments, the adoption of the SDGs budget

involves ten countries, basically on a voluntary basis. Only in Norway, the
adoption of this budget is mandatory. In France, there is an ongoing pilot
project to connect SDGs with the budget at the local level and some
guidelines have been prepared. A similar situation occurs in Finland,
where—despite the legislation does not emphasise compliance with
SDGs—high attention is paid to the Agenda 2030 and a pilot project is
ongoing. In Germany the degree of localisation and implementation in
municipalities varies considerably, depending also on the federal states, but
the creation of a platform that occurred in 2023 can be of great help. The
city of Freiburg, well known for its environmental initiatives, in 2022
linked its public services and partial budgets to its SDG based sustainabil-
ity goals. In Spain, some guidelines have been developed as well, but the
voluntary SDGs budget is still random. In the Netherlands, there are no
specific rules for SDGs budgeting. Nonetheless, provinces and municipali-
ties budgets are regulated by the Budget and Accountability Decree for
Provinces and Municipalities (BBV) which leaves a great deal of freedom
and also prescribes that provinces have to include five indicators that are
related to sustainability issues in their budgets. In addition, the Association
of Dutch Municipalities launched a campaign revolving around the Global
Goals for Sustainable Development, to encourage local entities to imple-
ment the global goals in their budgets (and annual reports).
The case of Ukraine is worthy of mention. Since 2017 the country has
created a set of national SDGs indicators (183), then in 2019 a decree
introduced the need to align Ukraine’s development plan to SDGs, and
the law was amended in 2020 introducing a monitoring system alongside
the development of budget in the three-tier financial plans. Indicators,
however, are prepared by the statistical office and there is no clue that
accounting data are included (UNDP, 2022b). The war affected the pro-
cess of implementation of the regulation.
Overall, while specific regulation still affects only a few countries and
is mainly confined to the central government level, voluntary initiatives are
being developed, especially at the local level, possibly depending on the
political will and pressure exercised by the local community. To make the
SDGs operative, their recognition in the political agenda at all govern-
mental levels is pivotal, making the goals the basis for the budget debate.
The situation requires further investigation in the coming years to see to
58 F. MANES-ROSSI

what extent the situation will evolve toward common SDGs budget mod-
els, at least within each country, or will continue to develop on individual
initiatives of individual entities, making any comparison impossible.

4.2   SDGs Reporting

SDGs reporting has been adopted at the central government level in sev-
eral countries as a mandatory tool. This is the case for Germany (biannu-
ally), Italy, Malta, Norway, Sweden, the UK and Ukraine, where this kind
of report has been introduced in the last few years. In the case of the UK,
it is mandatory for central government departments to identify where
their performance contributes towards the delivery of relevant SDGs.
In some cases, countries have selected their own set of indicators among
those developed by the UN to monitor progress (e.g., Germany). It is also
interesting that in Ukraine, a monthly report on the budget implementation
is required to monitor activities in relation to SDGs’ implementation.
It is worth observing that not all countries that have a regulation at the
central government level replicate the same at the regional and local gov-
ernment levels. Some guidelines have been created to support local gov-
ernments in Germany, Portugal, The Netherlands and UK, (or are in
progress, as in France) while in Norway a national strategy has been set
mandating both regional and local government to prepare this report.
The Austrian case is also interesting, because since 2016 all federal min-
istries have been required to conduct an assessment to identify which of
the 17 SDGs and 169 targets were already backed by strategies and pro-
grammes, and were instructed to incorporate the principles of the 2030
Agenda into their relevant strategies and programmes.
The use of an on-line platform to compare the results achieved, using
specific set of common indicators is also progressing (e.g. SDG Portal
2023 in Germany, https://sdg-­portal.de/en/) and can be considered as
an important stimulus, as benchmarking is a great source of inspiration at
the local level (Cohen et al., 2023).
There are also spare initiatives to mobilise the Agenda 2030 when
drawing up reports at regional and local levels (e.g. a methodological
guide was drawn up in 2016 with France urbaine, Intercommunalités de
France, Villes de France, AMF and Régions de France, and a toolbox was
designed in 2019). Initiatives to support the national implementation of
SDGs emerge among the countries observed. For instance, in the Republic
 4 SDGS BUDGETING AND REPORTING 59

of Croatia in 2018 the National Council for Sustainable Development was

established, whose basic task is to propose to the central government mea-
sures and activities, priorities, dynamics, and resources necessary for the
implementation of the first 16 goals of the Agenda 2030 and monitor,
analyse and coordinate their implementation. As already underlined for
the budget, in the Netherlands the Association of Dutch Municipalities
encourages entities to include information on activities undertaken to deal
with the SDGs in their annual reports.
Despite the lack of specific laws or guidelines, Finland can be consid-
ered a frontrunner in the implementation of Agenda 2030, as each branch
of government reports how the goals of Agenda 2030 have been imple-
mented. Furthermore, it is worth noting that the General Secretariat also
organises the Citizens Panel to assess the state of sustainable development
as seen by the citizens, offering a selection of best practices of citizens’
involvement in the adoption of the Agenda 2030.
Switzerland is a peculiar case, because—as already evident for environ-
mental reporting (Chap. 4)—SDGs reporting is considered to be outside
Public Financial Management. Consistently, it seems that accounting data
are not considered relevant information.
In countries where there is a long tradition of sustainability reporting,
information on progress towards SDGs may be included in the former
report (i.e., France).
A few European municipalities have uploaded a voluntary local review
on the UN website, not necessarily large cities. Municipalities located in
Northern countries (i.e., Finland, Norway, Sweden) lead the trend. It is
worth noticing that in 2022 the number of entities increased, including
entities located in new countries in comparison with entities preparing a
report in 2021. Considering that in Germany in most of the Federation
local governments are required to prepare an SDGs report and in Norway
SDGs reporting is mandatory for all local governments, it is evident that
not all entities publish their report on the UN database, possibly due to
some linguistic barrier or simply because they consider important to pro-
vide accountability on a local basis but do not pay attention to disclose the
report to the international audience. However, to understand the why of
this behaviour, more in-depth research is necessary.
Ultimately, in none of the countries surveyed is a specific audit or assur-
ance required for reporting on the SDGs.
60 F. MANES-ROSSI

The variegated landscape presented points out that SDGs reporting can
be approached even without specific norms or regulations. However, in
this case may produce a random effect, with reports generated in accor-
dance with political will and the perceived need to be accountable for the
efforts made for a more sustainable growth.

5   Concluding Remarks

SDGs budgeting and reporting are progressively expanding, from central
to local level, mainly based on the will of public sector entities to commu-
nicate to all stakeholders their efforts to contribute to a more sustainable
society. However, this will need to be accompanied by the contemporary
effort in education, to favour the preparations of future managers and civil
servants capable of supporting politicians in the preparation of budgets
and reports centred on sustainable development. Furthermore, the lack of
common guidelines or standards can create a variegate landscape in
European countries, both with respect to the format and the content, in
particular with reference to the set of indicators adopted. It is also not
clear to what extent accounting information deriving from both manage-
rial and financial data already in use in governments—at all levels—are
used, with narrative disclosure prevailing in most of the cases, especially
for reporting purposes.
The picture resulting from the analysis outlined in the chapter could
encourage standard setters and policy makers, especially at the European
level, to prepare specific guidance that can stimulate and support govern-
ments and other PSE in preparing budgets and providing reports on the
achievement of SDGs or—at least—encouraging to include this informa-
tion in other reports, such as sustainability, environmental or popular
reporting. In addition, practitioners and scholars could offer their exper-
tise to dig more deeply into how to reclassify expenditure and revenues in
connection with SDGs, also revising the chart of accounts with this per-
spective. Reflections on how management accounting can be redirected to
support PSE in ensuring that their plans and actions are addressing sus-
tainable development are also needed.
Undoubtedly, the high attention paid by international standard setters
(e.g., GRI, IPSASB, ISSB) to sustainability also includes consideration for
the SDGs. However, a clear convergence with targets and goals settled by
the UN, coupled with specific criteria on the use of accounting informa-
tion, both from financial and management accounting systems, would
 4 SDGS BUDGETING AND REPORTING 61

boost the process considerably. It remains to see if the governance process

underlying the preparation of both budgets and reports against the 17
SDGs makes an effective use of accounting information and, above all, if a
pervasive or a random adoption of SDGs is applied. This chapter intends
to encourage further research on this issue.

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 CHAPTER 5

Environmental Reporting

Marco Bisogno

1   A Description of Environmental Reporting

This chapter investigates the main characteristics of environmental report-
ing by discussing the reasons for their relevance in the public-sector
context.
The point of departure of the analysis is the need to distinguish between
environmental and sustainability reporting. Indeed, they are frequently
seen as two sides of the same coin, and scholars use the expression “social,
environmental and sustainability reporting”, with a clear risk of overlap-
ping aspects that should be conceptually distinguished.
To clarify this point, one could start by considering how complex the
relationship between humans and the natural environment is (Jones,
2010). The increasing awareness of human beings’ impact on the environ-
ment urged scholars to contemplate the relationship between accounting,
organisations, and society (Chastain, 1973; Dierkes & Preston, 1977;

M. Bisogno (*)
Department of Management and Innovation Systems,
University of Salerno, Fisciano, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 65

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_5
66 M. BISOGNO

Gambling, 1974; Ullman, 1976). Thus, environmental accounting

emerged, developing along three paths (Hussain et al., 2016; Mohd
Khalid et al., 2012): national accounts, financial accounting, and manage-
ment accounting. Section 3 examines these paths in depth. However, it
can be anticipated here that the second and third paths have been largely
examined in the private-sector context to understand if and to what extent
firms have embraced a new way of thinking, paying more attention to
environmental issues, or have simply subscribed to them rhetorically,
adopting window-­dressing policies (Gray, 2006). Less attention, however,
has been devoted to environmental issues in the public-sector context
(Cohen, 2022). This chapter aims to contribute to the debate by discuss-
ing why this topic is also relevant in the public sector, scrutinising the
different literature streams and investigating recent developments in prac-
tice at the international level.

2  Relevance of Environmental Reporting

for Public Administrations

To comprehensively analyse environmental reporting, accounting, eco-

nomics, and environmental literature should be considered. Jones (2010)
proposed a framework whose core message is that conventional account-
ing is unsuitable for environmental accounting (and reporting) because of
its business focus and its reliance on neoclassical economics. Although
some issues—such as carbon emissions—have been considered by the
International Accounting Standards Board (IASB), he thus concluded
that a new accounting system would be necessary to address the environ-
mental consequences of organisational activities.
Moreover, scholars have argued that environmental accounting has
been under-theorised and insufficiently politicised, resulting in a lack of
tools and techniques to be used in practice (Gray, 2002; Tinker & Gray,
2003). In this view, Brown (2009) proposed to take pluralism seriously,
developing a theoretical framework based on dialogic accounting, the
basic idea of which is to treat accounting numbers as a possible arena of
debate (Cohen, 2022). However, theoretical frameworks need to be trans-
lated into concrete tools and techniques; otherwise, the environmental
impact of organisational activities cannot be measured.
In the private sector, indicators and measurement techniques have been
proposed, while a gap seems to emerge in the public sector (Fallan, 2016).
 5 ENVIRONMENTAL REPORTING 67

Focusing on climate change, Cohen (2022) underlined that public-sector

entities do not possess the necessary tools to collect information regarding
environmental issues. Therefore, despite several proposed theoretical per-
spectives (such as the above-mentioned dialogic accounting), only a few
technical tools are available.
However, before investigating these issues, one could provocatively ask
this: Why do we need to discuss environmental accounting and reporting
in the public sector?
This question cannot be answered by simply evoking the general move-
ment towards environmental safeguards or pointing out that citizens are
devoting much more attention now than in the past to environmental
issues, such as climate change, pollution, and waste management.
Furthermore, these issues are generally examined from perspectives other
than accounting.
Indeed, accounting can play a crucial role from different viewpoints.
Citizens have a general right to know (GASB, 1987) so that public-sector
entities are accountable for their activities, including their environmental
impacts. More broadly, as Lodhia and Jacobs (2013) highlighted, investi-
gating environmental reporting in the public-sector context is noteworthy
because of the role of public-sector entities both as the regulator of envi-
ronmental reporting requirements and as a reporting entity that has to
adhere to these requirements. In addition, environmental issues could be
particularly relevant for certain public-sector entities if these issues repre-
sent a core element of their mission. Environmental information thus
allows stakeholders to assess the environmental performance of organisa-
tions (Ferreira et al., 2013), offering them the opportunity to understand
how activities are conducted.
The following section illustrates the different literature streams (national
accounts, financial accounting, and management accounting) related to
environmental accounting and reporting.

3   An Overview of the Literature

Traditionally, the national accounts stream tends to focus on macroeco-
nomic indicators, such as the Gross Domestic Product (GDP) and related
variables. The System of National Accounts (SNA, 2008) and the European
statistical system (Eurostat, 2010) do not directly address issues related to
the cost or the “economic” value of fuelwood gathered from forests, meat
and fish gathered for human consumption, and medicinal plants or similar
68 M. BISOGNO

items for treatment/manufacturing medicines (Heicht, 1999). However,

this traditional approach is evolving, and several countries started to
develop methods and approaches to account for the environment.
In the European context, the EU has implemented a statistical system
to measure both the contribution of the environment to the economy and
the impact of the economy on the environment. The basic idea is to bring
economic and environmental information into a common framework (see
Fig. 5.1) consistent with the national accounts. The data produced by this
framework are expected to be used by policymakers to address several
questions, such as “Which industry is emitting the most greenhouse
gases?”, “How do patterns of consumption and production affect the
environment?”, “What is the effect of economic policy measures, such as
an environmental tax, on the generation of waste or air emissions?”
(EU, 2022).
This framework is based on a sort of pyramid (Fig. 5.2): at the bottom,
basic data regarding the economy and the environment are collected in
addition to socio-demographic data. These basic statistics feed the second
level, namely, the System of Environmental-Economic accounts (SEEA),
which, through in-depth studies and analysis, provide information to pol-
icy analysts and statisticians. The data on the environment are frequently
offered in physical terms (e.g. the flows of materials and energy that enter
and leave the economy and the flows of materials and energy within the
economy itself), while those related to the economy are calculated in

Economy Natural inputs (including

mineral, timber, aquatic
and water resources)
Industries Products (goods
Households and services produced and Environment
Government consumed in the economy)
Residuals (including
air emissions and
return flows of water)

Fig. 5.1 Integration between environmental and economic data. (Source: EU,
2022, p. 2)
 5 ENVIRONMENTAL REPORTING 69

Role Audience

Raise awareness General public & media

Key Support information High-level policy makers
Indicators & communication & managers, lawmakers

Support decision Government officials

Indicators making & policy Policy analysts,
coherence Managers, Stakeholders

System of Environmental- Support analysis & Policy analysts,

Economic accounts (SEEA) in-depth studies Researchers, Statisticians

Basic statistics
Economic, Environmental, Socio-demographic

Fig. 5.2 System of Environmental-Economic accounts: Data and indicators.

(Adapted from EU, 2022)

monetary terms. Based on these data and the related studies, several indi-
cators are calculated, supporting the decision-making processes of govern-
ment officials, managers, and other interested stakeholders. Finally, at the
top of the pyramid, key indicators are used to raise awareness of and sup-
port communication with the general public and the media about envi-
ronmental issues. Lawmakers, high-level policymakers, and managers are
supposed to use these key indicators in their decision-making process.
The financial accounting stream focuses on the different tools and
approaches that could be used to provide information regarding environ-
mental issues. With limited exceptions (see the following section), envi-
ronmental reporting is not mandatory, and different approaches can be
identified. Scholars claim that internal organisational practices should be
considered to understand and interpret external environmental disclosure
(Frost & Seamer, 2002); therefore, to explain and predict environmental
reporting in the public sector, internal actors (the so-called internal cham-
pions; Ball, 2005, 2007; Ball & Seal, 2005; Lodhia & Jacobs, 2013)
should be considered instead of searching exclusively for external legiti-
macy drivers. The findings from these studies suggest adopting a practice
focus to explore the nature of environmental reporting, as internal prac-
tices and actors supply a powerful explanation for the actual production of
environmental reports.
Accordingly, public-sector entities should focus first on the internal
functions of environmental reports, namely, establishing (or revising)
environmental policies, objectives, and programmes and increasing the
70 M. BISOGNO

awareness of managers and employees about the environmental impacts of

their activities. This is expected to facilitate the achievement of the exter-
nal functions of the report, allowing entities to be accountable towards
citizens and other stakeholders. The areas of reporting should be clearly
identified to avoid overlaps with social or sustainability reports. The envi-
ronmental report should summarise the policies implemented and the
outcomes achieved and illustrate the state of activities conducted during
the administrative period for the reduction of environmental burdens (for
instance, the total amount of energy and water inputs, or the total amount
of waste generation) and, more generally, the overall environmental per-
formance. Furthermore, entities are expected to inform citizens about the
strategies and policies they implement to reduce the negative environmen-
tal externalities of private-sector entities.
To guide this process and to accomplish the aim of environmental
reporting—to provide information regarding the implemented environ-
mental strategies and policies as well as the results achieved by a public-­
sector entity—four main questions should be addressed (Deegan &
Unerman, 2011):

1. Why does a public-sector entity want to disclose information regard-

ing its environmental activities and outcome?
2. Who are the stakeholders to whom environmental disclosures
are directed?
3. What information is (or should be) addressed, that is, what are the
information needs of stakeholders?
4. How should the environmental report be compiled?

The why question refers to the motivations of politicians and managers

to disclose information regarding environmental performance. This issue
can be handled in different ways, based on the theoretical approach con-
sidered. For instance, according to the institutional theory, public-sector
entities operate within a social framework in which there are norms, val-
ues, and assumptions regarding what constitutes appropriate behaviour
(Oliver, 1997; Scott, 1987). Accordingly, institutional pressures may be
the main motivation for providing environmental information (DiMaggio
& Powell, 1983; Meyer & Rowan, 1977), and coercive, mimetic, and
normative isomorphisms (and reflexive isomorphism: Imtiaz Ferdous
et al., 2019) can explain why environmental information is disclosed. The
ethical branch of the stakeholder theory (Hasnas, 1998; Stoney &
 5 ENVIRONMENTAL REPORTING 71

Winstanley, 2001) would offer a similar response, as it would prescribe

(this is thus a normative position) that a public-sector entity is accountable
towards all stakeholders, without considering the power certain stake-
holder groups can exercise. Conversely, the managerial branch of the
stakeholder theory would focus on the most powerful stakeholders (Gray
et al., 1996): those who control the resources that are important for the
entity. In the public-sector context, following this approach would mean
focusing on stakeholders with a high political influence or economic power
over the entity (political lobbyists, citizens sharing the governing parties’
political orientation, and so on). Finally, the legitimacy theory would pre-
dict that politicians and managers tend to disclose environmental informa-
tion if they think that the community of reference expects this information,
as it is part of the social contract between an entity and its stakeholders.
This theoretical approach implies that an entity is believed to be account-
able to different categories of stakeholders. This approach has been largely
utilised, frequently with stakeholder theory, and several studies (Frost &
Seamer, 2002; Marcuccio & Steccolini, 2009; Mobus, 2005) have docu-
mented that public-sector entities—especially at the local government
level—tend to disclose environmental information voluntarily to protect
their legitimacy (Che Ku Kassim et al., 2019).
The theoretical lens through which the “why” question is concretely
addressed may affect the second question: the identification of stakehold-
ers to whom information on the environmental impacts of the activities
conducted is provided. Ideally, a public-sector entity is expected to oper-
ate on behalf of all citizens; pragmatically, it would be impossible to con-
sider any form of (current and future) impact the activities conducted may
have on humans (and animals and natural resources as well). It is then
reasonable to hypothesise that a sub-group of stakeholders would be
selected; this process, in turn, is likely to be affected by the managerial
versus ethical motivations of politicians and public managers, which
become pivotal, especially when environmental information is offered vol-
untarily. Indeed, standard setters face a similar issue while defining the
information needs of readers of the general-purpose financial reporting
(GPFR); for instance, the IPSASB (International Public Sector Accounting
Standards Board) conceptual framework (para 2.4) states that “the pri-
mary users of GPFRs are service recipients and their representatives and
resource providers and their representatives”. This means that not all envi-
ronmental information demands can be satisfied.
72 M. BISOGNO

This last consideration leads us to the what question, which aims to

identify stakeholders’ demands for—and reactions to—environmental dis-
closure. The underlying but fundamental assumption is that stakeholders
do use environmental information. This, in turn, requires a dialogue
between a public-sector entity and its stakeholders (mainly citizens), and a
dialogue among stakeholders (Deegan & Unerman, 2011; Unerman &
Bennett, 2001), to understand the impacts of governmental policies and
activities on the environment (the already mentioned dialogic accounting;
Brown, 2009). It is worth observing that notable forms of dialogue with
citizens have already been occurred in the public-sector context—for
instance, in the case of participatory budgeting (Manes-Rossi et al., 2021;
Soguel et al., 2020). However, regarding environmental impacts, the issue
is more complicated: ideally, a public-sector entity would also be required
to engage in such a dialogue with future generations that may be affected
by the entity’s current decisions and policies. Though the entity would
focus only on the current generation, an ideal situation would involve
entering an effective dialogue with all the stakeholders. However, a more
pragmatic view is needed, one that interprets a public-sector entity as the
result of a process of decisions (based on bounded rationality) and activi-
ties and that considers the uncertainties it faces while managing its rela-
tionship with stakeholders (Thompson, 1967). Following this view, an
entity is not in a position to control the process of dialogue with its stake-
holders (Gray et al., 1997, used the expression “polyvocal citizenship
perspective”).
This pragmatic approach means refusing a one-size-fits-all approach
and relying on the reporting guidelines provided by standard setters and
similar organisations (such as the Global Reporting Initiative [GRI]),
which can guide public-sector entities on what to disclose. The implicit
assumption is that these organisations have conducted research on infor-
mation needs regarding the environmental impacts of their activities.
Once again, a similar position is acknowledged by conceptual frameworks
when they state that GPFR is believed to meet most of the information
needs of stakeholders. Regarding environmental reporting, however, there
are no ad hoc international guidelines on environmental reporting, and
rather frequently, environmental issues are absorbed by the sustainability
discourse.
The IPSASB has recently decided to enhance its commitment to envi-
ronmental issues, and several projects have been announced. Two
 5 ENVIRONMENTAL REPORTING 73

projects, in particular, are of interest here: climate-related disclosure and

non-financial disclosures on natural resources.
The climate-related disclosure project aims to issue a new standard,
which will be based on IASB’s IFRS S2 (IPSASB, 2023), which applies to
climate-related physical and transition risks and climate-related opportuni-
ties available to an entity. Furthermore, the project will be developed by
taking as reference the standards and guidance issued by international
bodies, such as the GRI and ISSB (International Sustainability Standards
Board). The information to be disclosed will cover the following aspects:

• The governance processes, controls, and procedures the entity uses

to monitor, manage, and oversee climate-related risks and
opportunities.
• The strategies implemented for managing climate-related risks and
opportunities.
• The processes used to identify, assess, prioritise, and monitor climate-­
related risks and opportunities, including whether and how those
processes are integrated into and inform the entity’s overall risk man-
agement process.
• The entity’s performance in relation to its climate-related risks and
opportunities, including progress towards any climate-related targets
it has set and any targets it is required to meet by law or regulation.

The project on natural resources will be developed by issuing two expo-

sure drafts (EDs) by March 2024 based on the consultation paper issued
in 2022 and the related feedback received from constituents. The first ED
will propose IPSAS guidance on natural resources, while the second ED
will propose an aligned IPSAS with IFRS 6 (Exploration for and Evaluation
of Mineral Resources).
The final question concerns how environmental information can be
provided, which means asking if and to what extent financial accounting
systems can support public-sector entities in this respect.
In the private-sector context, severe criticism has been raised, as
accounting systems and reporting largely ignore the environmental impact
of the activities conducted (Deegan & Unerman, 2011; Gray et al., 1996).
This is due to several motivations, such as (1) the focus on stakeholders
with financial interests towards the entity; (2) the use of the concept of
control over resources as the main criteria of recognition, which means
that air or water are not considered as assets and, consequently, their use
74 M. BISOGNO

(or misuse) is not considered as an expense; (3) the concept of “financial

materiality”, which leads entities not to disclose environmental informa-
tion because of the difficulty in quantifying environmental costs; and (4)
the ignoring of environmental externalities, as there is no related transac-
tion directly impacting the entity. Accordingly, financial accounting sys-
tems and reporting cannot provide adequate environmental information,
and different (but hopefully related) forms of reporting are required to
hold an entity accountable towards its stakeholders.
In the public-sector context, the situation is expected to be different, as
several remarkable specificities deserve attention. First, public-sector enti-
ties are not profit oriented; consequently, accounting systems do not focus
exclusively on profitability and the ability to generate future cash flows.
Second, although control over resources is still central, assets are also
defined by considering their service potential (Anessi-Pessina et al., 2022;
Pallot, 1992). Nevertheless, environmental impacts are still considered as
externalities, and the lack of a reliable monetary measure impedes consid-
ering them. Therefore, the move from cash- to accrual-based accounting
systems is not sufficient to capture and report on the environmental con-
sequences of the conducted activities. Accordingly, on the one hand, an
additional report should be developed; on the other hand, the implemen-
tation of cost accounting systems is strongly encouraged.
This last point leads us to the third literature stream: management
accounting. The literature defines environmental management accounting
(EMA) as a set of techniques that produces, analyses, and uses financial
and non-financial information to improve both the environmental and
economic performance of organisations (Ferreira et al., 2013).
Scholars have claimed that environmental costs could be around 20 per
cent of operating costs (Ditz et al., 1995; Hansen & Mowen, 2005).
Environmental costs (and benefits as well) are not captured by conven-
tional management accounting approaches, making it difficult for manag-
ers to monitor the actual environmental costs of the conducted activities
(Burritt et al., 2002). EMA systems allow to identify, classify, and allocate
environmental costs and inform decision-making processes better.
Economic benefits are likely to flow from better-informed decision-­
making, thus allowing organisations to reduce the total operating costs
(Ferreira et al., 2013) while improving environmental performance
(Imtiaz Ferdous et al., 2019). To this end, EMA systems should include
several monetary accounting methods—such as environmental cost
 5 ENVIRONMENTAL REPORTING 75

accounting, environmental investment appraisal, budgeting, or financial

planning—and non-monetary methods focusing on physical measures,
such as material flow accounting and eco-budgeting (Burritt et al., 2002).
In the public-sector context, EMA is still a young discipline, which is
expected to develop in the future (Schaltegger et al., 2013). Public-sector
accounting scholars are thus encouraged to “get back to the roots of their
discipline” and focus on the techniques and tools for both information
generation and information presentation to assess users’ needs (Cohen,
2022, p. 55).
Accordingly, EMA systems can be considered relevant not only for sup-
porting internal decision-making processes but also for effectively sup-
porting environmental (external) reporting. Without such support,
environmental reporting risks being the product of window-dressing poli-
cies, and environmental issues will not influence the decisions of politi-
cians and managers.

4  Recent Developments in the Practice

at the International Level

Table 5.1 summarises the state of the art of several European countries.
Evidently, environmental reporting is mostly not mandatory, with only a
few exceptions, such as Malta, Norway, and the UK, where it is mandatory
at the central government level. In the case of Sweden, it is mandatory
only for some governmental agencies. It is worth observing that in all the
countries examined, environmental reporting is not mandatory at the
regional and local government levels. However, in some cases (for instance,
Greece), even though a report is not prepared, several national plans offer
a basis for monitoring sustainability issues. Focusing on municipalities,
mainly the larger ones (such as Bologna, Pavia, and Lucca in Italy) offer
environmental disclosures voluntarily.
Bearing in mind the why question, the voluntary nature of environmen-
tal reporting may be interpreted as a sign of a willingness to open a dia-
logue with citizens. For instance, financial reports in Finland are required
to illustrate the environmental issues that significantly impact the financial
performance or the development of operations and activities.
Regulations are mainly provided by law or governmental guidelines,
which principally refer to the central government level, even though they
are also used as a reference at the local government level.
Table 5.1 Environmental reporting: the state-of-the-art in a sample of European countries
76

Countries Central government Regional government Local government

Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/ Yes/ Law/Guidelines Mandatory/

No Guidelines Voluntary No Guidelines Voluntary No Voluntary
M. BISOGNO

Austria – – – Partly N/N V Partly N V

Croatia Ya L V N N N N
Finland Y Y (Guidelinesb) V N Y (Lawc) V Y Y (Lawd) V
France Ye Y (Lawf) M Included in
sustainability
report
Germany N V N V N V
Greece N N N
Italyg N Y V N Y V N Y V
Malta Y Y (Law) M n/a n/a n/a N
Norway Y Y (Law) M Y Y (Law) n/a Y Y (Law) n/a
Portugal Y Y (Guidelines) V ? Yh V
Romania
Spaini N N – Y N V Y N V
Sweden Y Yj Mk Y – V Y – V
Switzerlandl
The N Partlym – Y L M
Netherlands
UK Y Yn M Y Y (Guidelines) V
Ukraine Y Y (Law + V
Guidelines)

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary

a
The law does not prescribe specific rules related to environmental reporting, even though the application of this report is available to a limited extent in the
area of monitoring the execution of the strategic documents related to the National Resilience and Recovery Program.
b
State Treasury’s Guidance on Sustainability Reporting in Central Government recommends all central government organisations to report their environ-
mental footprint and handprint
c
Accounting Act (1336/1997) emphasises that the activity and financial report should include a description of the environmental issues which have a signifi-
cant impact on the financial performance or status of the wellbeing service county or on the development of its operations
d
Accounting Act (1336/1997) emphasises that the activity and financial report should include a description of the environmental issues which have a signifi-
cant impact on the financial performance or status of the municipality or on the development of its operations. Voluntary environmental reports are drawn
by some municipalities (especially biggest cities) based on the Act on administration of environmental protection in municipalities (1986/64). Guidance by
the Municipal Department of the Accounting Board in Ministry of Economic Affairs and Employment on the presentation of environmental issues in the
financial statements of municipalities
e
Report on the “Environmental impact of the budget”, but also report on allocation and performance of green bonds
f
See art. 179, law 2019-1479
g
Despite a specific article in the Italian Constitution requiring public entities to be involved in environmental protection, the existence of specific guidelines
issued in 2009 and the requirement to the government to prepare a specific law in 2007 (which has never been issued), environmental reporting is largely
neglected. Only a few entities have prepared it (e.g. Bologna, Pavia, Lucca) mainly because of their adherence to the European project Life-Environment
CLEAR (City and Local Environmental Accounting and Reporting), which offered the opportunity to access EU funds for municipalities following specific
reporting guidelines. The same applies to regions
h
SNC-AP NCP 27
i
Only isolated experiences have been carried out voluntarily by some regional governments
j
The requirements stem from the annual regulation letter, the budget law, or regulations from the Swedish National Financial Management Authority
k
It is mandatory for some government agencies
l
Environmental reporting is considered to be outside Public Financial Management
m
The Dutch Climate Act prescribes that the Planning Office for the Environment has to publish an annual Climate and Energy Outlook, in which the impact
of climate policy implemented in the previous calendar year should be discussed
n
HM Treasury—Sustainability Reporting Guidance; HM Treasury—the Government Financial Reporting Manual 2023/24
5 ENVIRONMENTAL REPORTING
77
78 M. BISOGNO

There are no national standard setters in charge of issuing environmen-

tal reporting standards; therefore, the to whom question is not directly
addressed, and environmental disclosures seem to be directed towards all
citizens. However, it should be noted that, in some cases, environmental
reporting is considered a component of the traditional accounting system
to express the impact of environmental activities on the financial condition
(Finland) or to illustrate the environmental impact of the budget (France).
In other cases (e.g. Germany, and France at a local government level),
environmental issues are addressed through sustainability reports or SDG
budgeting/reporting, confirming that overlaps between environmental
and sustainability disclosure frequently occur.
Switzerland’s case is worth noting, as environmental reporting is con-
sidered outside Public Financial Management. This may signify that the
boundaries of environmental reporting (e.g. the what question) are not as
clear as expected; furthermore, bearing in mind the how question, it could
be argued that environmental reporting has no connection with financial
reporting and related accounting systems.
Considering that environmental reports are mainly prepared volun-
tarily, they are not audited, and there are no specific assurance procedures
in the countries examined. However, it is worth mentioning the case of
France, where reports from the court of auditor (Cour des Comptes) may
focus on environmental issues (for instance, on green taxes) or investigate
the effects of certain environmental policies, such as air pollution policies.
Environmental disclosures, it can be argued, are in an embryonic stage:
different approaches have been found in European countries regarding
the information to be provided, as there is not an agreed-upon identifica-
tion of the stakeholders’ information needs. The boundaries of such
reports are not clarified, and different approaches have been observed,
from overlaps with sustainability reports to narrative disclosures provided
through financial statements or separate reports. This situation may be
explained by considering that national laws and guidelines regulate envi-
ronmental reporting, and no European or international standards are
taken as references. A preliminary identification of what information
should be addressed and how the report could be compiled would be
helpful and encourage European countries to converge towards homoge-
neous and more comparable situations.
The voluntary nature of environmental reports and disclosures can be
interpreted as a positive sign, implicitly providing an answer to the why
questions. In other words, the increasing attention of public-sector
 5 ENVIRONMENTAL REPORTING 79

entities towards environmental issues seems to be confirmed, even though

more substantial efforts are needed to enhance both the content of infor-
mation and the way it is provided.
The recent consultation paper issued by the IPSASB on Natural
resources and the planned EDs could be taken as a reference to start a
convergence process towards a shared vision on environmental issues.
Defining recognition, measurement, and disclosure criteria would support
such a process.

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 CHAPTER 6

Sustainability Reporting

Marco Bisogno

1   A Description of Sustainability Reporting

According to the UN Report of the World Commission on Environment
and Development, sustainable development is “development that meets
the needs of the present without compromising the ability of future gen-
erations to meet their own needs” (UN, 1987). This approach aimed to
reconcile economic development with the need to protect the social and
environmental balance. Considering that it implies radical changes in the
way societal functions are fulfilled (Köhler et al., 2019), a long-term
perspective is required.
The notion of sustainable development has gained increasing attention
at national and international levels because of several issues, such as the
depletion of natural resources, global warming, pollution, deforestation,
unemployment, and poverty (Hopwood et al., 2005; OECD, 2001).

M. Bisogno (*)
Department of Management and Innovation Systems, University of Salerno,
Fisciano, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 83

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_6
84 M. BISOGNO

The sustainability concept has been frequently connected with environ-

mental issues, and—as already mentioned in Chap. 5—scholars often use
the expression ‘social, environmental and sustainability reporting’.
However, though a common area can be easily identified, there is a need
to make a distinction between sustainability, environmental and SDGs
reporting. This chapter aims to examine the main characteristics of sus-
tainability reporting by highlighting its specificities in both scope and con-
tent and investigating the recent developments in practice at the
international level.

2  Relevance of Sustainability Reporting

for Public Administrations

Governments can influence sustainable development through changes in

regulation—for example, by requiring both private- and public-sector
organisations to focus on minimising emissions or by redistributing wealth
(IPSASB, 2022). Furthermore, since the primary mission of public-sector
organisations is delivering public policy and promoting social welfare (Ball
& Grubnic, 2007), their functions and responsibilities are more connected
to the sustainability discourse than those of private-sector entities
(Ball, 2002).
The need to disclose sustainability performance derives from the
increasing concerns about the social impacts of organisational activities
(Beck et al., 2010; Farneti & Guthrie, 2009; Gray, 1992). As the follow-
ing section will explain in detail, sustainability reports are expected to sup-
port organisations in integrating sustainability into their plans and
operations, identifying their sustainability objectives and indicators, and
communicating their sustainability performance to stakeholders (Kaur &
Lodhia, 2019).
In the private sector, though research is still encountering several chal-
lenges, sustainability reporting is considered a widespread practice (He,
2022). Sustainability factors play a pivotal role in investment decision-­
making, and private-sector entities are required to provide high-quality
information on sustainability-related risks and opportunities. Accordingly,
the IFRS Foundation announced the formation of a global standard set-
ter, and the International Sustainability Standards Board (ISSB) was then
established to develop standards for sustainability disclosures. The aim is
to meet the information needs of investors while enabling (listed) firms to
provide comprehensive sustainability information to capital markets.
 6 SUSTAINABILITY REPORTING 85

Similarly, in the public sector, an increasing number of cities is compil-

ing sustainability reporting, both voluntarily and to respond to legal pres-
sures (Niemann & Hoppe, 2018). However, there is no equivalent body
in charge of issuing sustainability standards to be used in the public-sector
context. The International Federation of Accountants (IFAC) proposed
developing sustainability reporting through two blocks (Fig. 6.1).
Block 1 is investor-focused, dealing with sustainability information that
is material to enterprise value (the so-called outside-in impact). It faces
sustainability (as well as environmental and governance) factors that may
affect the short-, medium-, and long-term performance of organisations.
Accordingly, it needs to be integrated with accounting standards to pro-
vide a holistic picture of enterprise value.
Block 2 is multi-stakeholder-focused, dealing with sustainability infor-
mation that helps a wide range of stakeholders understand how an organ-
isation contributes to sustainable development and how it impacts the
economy, environment, and people (the so-called inside-out impact).

Disclosures indicators and contextual

Block information addressing sustainable
2 development, impacts, or public policy
objectives
MULTI-STAKEHOLDER
FOCUSED • Global Standards or Guidance
Sustainability reporting • Jurisdiction-Specific Requirements

Interoperability

Block Financially material disclosure topics and

1 performance metrics addressing sustainability
impacts relevant to enterprise value
INVESTOR FOCUSED
Sustainability information • IFRS Sustainability Standards and Guidance
material to enterprise value

Fig. 6.1 IFAC building block approach to sustainability reporting. (Source:

Adapted from IPSASB, 2022)
86 M. BISOGNO

Block 2 information is more challenging compared with that of Block 1,

as it comprises disclosures, indicators, and contextual information related
to sustainable development, impacts, and policy objectives (IPSASB,
2022) that seek global standards or guidance.
Block 1 is particularly relevant for private-sector entities, even though it
may also be helpful in the public-sector context, in light of the financial
resources to be collected to finance investment in sustainable development.
Bearing in mind the regulator role played by public-sector entities, as well as
the importance of achieving sustainable objectives, Block 2 is expected to be
particularly relevant in the public sector, where there is a greater diversity of
user needs. Consequently, a broader range of guidance may be necessary to
meet the diversified demands of the different stakeholder groups, including
reporting on the progress of specific public policy objectives. This would
lead to creating a specific set of standards dealing with sustainability issues,
specifically designed for public-sector entities rather than adapting private-
sector guidance or standards (Task Force, 2022). In this vein, Dumay et al.
(2010) criticised the approach adopted by the Global Reporting Initiative
(GRI) to adapt private-sector sustainability reporting guidelines to the
public-sector context (GRI, 2005), arguing that this approach would lead
to a report that has little to do with sustainability.

3   An Overview of the Literature

Several studies on sustainability issues have documented that public-sector
organisations are increasingly embracing the sustainability discourse.
One group of studies focused on sustainability reporting practices,
mainly at the local government level, and investigated the drivers of sus-
tainability reporting prevalently implemented voluntarily (Goswami &
Lodhia, 2014; Guthrie & Farneti, 2008; Lodhia et al., 2012; Lodhia &
Jacobs, 2013; Marcuccio & Steccolini, 2005; Mussari & Monfardini,
2010; Williams, 2015). Other studies investigated sustainability account-
ing (Ball, 2004, 2005) and stakeholder engagement (Greco et al., 2013;
Kaur & Lodhia, 2014, 2018, 2019).
The core message stemming from these studies is that a broad perspec-
tive is required to link sustainability reporting with sustainability planning
and sustainability accounting (Kaur & Lodhia, 2018). Furthermore, sus-
tainability targets should be linked with organisational strategy (Schaltegger
& Wagner, 2006) to guarantee the funds needed to pursue sustainability
goals while aligning the overall performance outcomes with sustainability
 6 SUSTAINABILITY REPORTING 87

outcomes. Figure 6.2 provides an overview of how this link could be inter-
preted, clarifying that focusing only or prevalently on sustainability report-
ing issues implies having a limited perspective. The sustainability discourse
cannot be confined to how the report can be prepared and which informa-
tion it should provide—conversely, it is a key component of the strategic
planning and management of governments (Guarini et al., 2021).
Figure 6.2, then, suggests embracing a holistic approach, which leads
us to address the following questions (Deegan & Unerman, 2011):

1. Why do public-sector entities want to disclose information regarding

sustainability issues and related outcomes?
2. Who are the stakeholders to whom sustainability disclosures
are directed?
3. What are the information needs of stakeholders?
4. How should the sustainability report be compiled?

Sustainability Sustainability Sustainability

planning accounting reporting

Identifying Setting sustainability Preparing

sustainability issues targets and indicators reports

Analysing strategic Developing data Internal and

relevance of issues measurement tools external verification

Developing a Collecting Publications of

strategic plan sustainability data sustainability reports

Analysing and
interpreting information

Fig. 6.2 The link between sustainability planning, accounting, and reporting.
(Source: Adapted from Kaur & Lodhia, 2018)
88 M. BISOGNO

The why question relates to the reasons underlying the decision to

compile the sustainability report. Several studies have utilised the legiti-
macy theory to explain this kind of decision, arguing that the search for
efficiency and effectiveness may unveil legitimacy gaps in addition to
performance gaps. Therefore, the main motivation may reside in the need
to gain legitimacy, with sustainability disclosure being considered a key
component of the social contract between an entity and its different
categories of stakeholders. Legitimacy theory has been largely utilised in
combination with stakeholder theory, especially its managerial branch,
which suggests taking into account the power of certain stakeholder
groups due to their political influence or control over key economic
resources. However, this pragmatic approach risks questioning the widely
accepted idea that public-sector entities should be held accountable
towards all stakeholders, as the ethical branch of the stakeholder theory
postulates (Hasnas, 1998; Stoney & Winstanley, 2001). Conversely, the
need to comply with institutional pressures—coercive, mimetic, and
normative isomorphisms (DiMaggio & Powell, 1983; Meyer & Rowan,
1977)—may stimulate public-sector entities to disclose information
regarding their commitments towards sustainability issues, both as regula-
tors and as a consumer of the resources to provide services to citizens. The
need to maintain a positive political reputation could be considered as an
additional motivation to explain and predict why public-sector organisa-
tions tend to voluntarily disclose sustainability information. It is worth
observing that previous literature has frequently used these theories in
combination, meaning that a single theoretical framework could not cover
the range of reporting practices (Marcuccio & Steccolini, 2005; Niemann
& Hoppe, 2018).
These last aspects, in turn, may affect the second question—to whom
sustainability information is directed. If one embraces the idea that a
public-­sector organisation must be accountable towards all citizens, who
have a right to know (GASB, 1987), sustainability disclosures are sup-
posed to address the expectations of all stakeholders. Unfortunately, this
approach is rather impossible to implement, as it would also imply consid-
ering the future generations (and natural resources as well) that would be
affected by the organisation’s current strategies and policies. Accordingly,
a more pragmatic approach would suggest focusing mainly on specific
groups of stakeholders, whose expectations will determine the responsi-
bilities and accountability towards an entity’s sustainability outcomes;
therefore, the sustainability reports will address these accountability duties
 6 SUSTAINABILITY REPORTING 89

significantly. However, such a stakeholder prioritisation process can be

equally problematic and not easy to implement (Deegan & Unerman, 2011).
The what question, which aims to identify stakeholders’ demands for—
and reactions to—sustainability disclosures, is the central one. Taking for
granted that selected stakeholder groups will concretely use sustainability
information, this question leads us to consider how to engage citizens.
Indeed, the success of sustainability-oriented strategies and policies largely
depends on stakeholder engagement. For instance, Yau (2012) investi-
gated waste recycling in Hong Kong, documenting that promoting waste
recycling behaviour and implementing ad hoc policies requires a prelimi-
nary understanding of the reasons that motivate people to act in a particu-
lar manner, especially when landfill space becomes scarce. Accordingly,
public policies will be ineffective if they do not comply with citizens’
expectations and needs. This implies that a public-sector entity should
commit itself to the role of stakeholders and define governance procedures
to ensure stakeholders’ engagement in the process (Kaur & Lodhia,
2018). Even though the entity is not supposed to have complete control
over the whole process of dialogue with stakeholders (Gray et al., 1997),
a ‘monologic’ accounting perspective should be gradually superseded by a
‘dialogic’ accounting perspective (Brown, 2009). Figure 6.2 emphasises
this central issue: sustainability reports are the final step of a broad process,
one in which public-sector entities firstly identify sustainability objectives
in their strategic plans, then set coherent indicators and develop measure-
ment tools, and finally—having collected and interpreted data—provide
adequate disclosures in their sustainability reports. The core of the sustain-
ability planning phase is the identification of stakeholder groups and the
relationship the entity has (or aims to have) with them in accordance with
the ethical or managerial branch of the stakeholder theory. This would
allow the entity to embed the expectations and values of stakeholders in its
mission and values (Bryson, 2011), and to develop a set of targets and
indicators (the sustainability accounting step). These indicators should
then reflect the entity’s performance in relation to the values and expecta-
tions of both the entity and its stakeholders as well as in relation to wider
societal norms (as the institutional theory would emphasise). Finally,
sustainability reports should disclose information consistent with these
expectations. Kaur and Lodhia (2019) also argued that to attain a better
understanding of the ‘inside-out’ impact mentioned previously, stakehold-
ers could be involved while developing sustainability accounting tools and
collecting data on the entity’s performance. Furthermore, involving
90 M. BISOGNO

stakeholders during the preparation of sustainability reports may allow the

entity to recognise their specific needs. Engagement after the publication
could also be helpful as it makes it possible to obtain feedback, which con-
tributes to future improvements of the report. One of the main implica-
tions of having such a broad and inclusive perspective is that a
‘one-size-fits-all’ approach should be refused. As already observed, a mere
adaptation of private-sector guidance and standards to the public sector
may be ineffective (Task force, 2022). Another relevant implication is the
need to refine the traditional boundary and approach of management con-
trol systems that are unable to address sustainability issues. As a matter of
fact, sustainability control systems are considered separate from manage-
ment control systems (Johnstone, 2019); therefore, integration should be
pursued to support the implementation of sustainability strategies and
policies that seamlessly amalgamate both financial performance and sus-
tainability outcomes (Breusch et al., 2021).
The final question regards how sustainability information can be pro-
vided, which means asking what is (or could be) the role of sustainability
accounting. In general terms (with a prevalent focus on the private-sector
context), sustainability accounting is generally considered a branch of
accounting that integrates the social, environmental, and economic fea-
tures of the activities organisations conduct (Schaltegger & Burritt, 2006),
and that demands organisations to disclose non-financial information
about them. This definition, however, risks being too simplistic, leading to
considering sustainability accounting and sustainability reporting as two
distinct and unlinked practices: in fact, sustainability accounting is consid-
ered a ‘tool’ that produces information, while sustainability reporting is
considered as a formalised medium through which this information is dis-
closed. Consequently, the required connection with sustainability policies
and goals does not emerge. This connection, scholars have argued, is
essential, as it “makes the information influential and thereby ensures it
contributes to sustainable development” and “would avoid superficial
reporting of sustainability performance as the only information that will
be disclosed is that backed by actual performance” (Kaur & Lodhia, 2019:
342; see also Schaltegger & Wagner, 2006). Furthermore, the above-­
mentioned connection allows for taking into consideration the specificities
of public-sector entities; in this vein, the IPSASB has recently decided to
enhance its commitment to sustainability reporting. Moving from the
strong support received by respondents to the consultation paper (IPSASB,
 6 SUSTAINABILITY REPORTING 91

2022) that proposed advancing the development of global public-sector

specific sustainability reporting guidance, the IPSASB decided to start the
scoping of three projects focused on the following:

1. General requirements for disclosure of sustainability-related finan-

cial information;
2. Climate-related disclosure; and
3. Non-financial disclosures on natural resources.

The first project has already led the IPSASB to issue “Reporting
Sustainability Program Information—Amendments to RPGs 1 and 3:
Additional Non-Authoritative Guidance” (IPSASB, 2023). It is expected
to be immediately applied by public-sector entities to report sustainability
information. It is worth observing that the additional guidance is consid-
ered a preliminary step of a broad process, whose outcome will involve
issuing a framework for public-sector-specific sustainability reporting
guidance.
Despite the declared intention to issue public-sector-specific docu-
ments, the implementation of the second project tends to mimic private-­
sector documents. In fact, the future climate-sector standard will be based
on IASB’s IFRS S2 (IASB, 2023), which is applicable to climate-related
physical and transition risks and climate-related opportunities available to
the entity. More specifically, the information to be disclosed will cover the
following aspects:

• The governance processes, controls, and procedures the entity uses

to monitor, manage, and oversee climate-related risks and
opportunities.
• The strategies implemented for managing climate-related risks and
opportunities.
• The processes utilised to identify, assess, prioritise, and monitor
climate-­related risks and opportunities, including whether and how
those processes are integrated into and inform the entity’s overall
risk management process.
• The entity’s performance in relation to its climate-related risks and
opportunities, including progress towards any climate-related targets
it has set and any targets it is required to meet by law or regulation.
92 M. BISOGNO

More generally, the project will be developed by considering a set of

international guidelines (IPSASB, 2023). The IPSASB conceptual frame-
work will provide the basis for identifying the key public-sector reporting
requirements while ensuring a connection between sustainability and
financial reporting requirements. The feedback received from constituents
on consultation papers will also be utilised to implement a multi-­
stakeholder model (Block 2, as mentioned previously). Finally, the stan-
dards and guidance issued by international bodies, such as GRI (Global
Reporting Initiative) and ISSB (International Sustainability Standards
Board), will be taken as references.
Finally, the project on natural resources will be developed by issuing
two exposure drafts (EDs) by March 2024, based on the consultation
paper issued in 2022 and the related feedback received from constituents.
The first ED will propose IPSAS guidance on natural resources, while the
second ED will propose an aligned IPSAS with IFRS 6 (Exploration for
and Evaluation of Mineral Resources).

4  Recent Developments in the Practice

at the International Level

Table 6.1 summarises the state of the art of several European countries.
Evidently, sustainability reports are mainly voluntarily prepared, with only
a few exceptions, such as Malta, Norway, and the UK, where the central
government has recently implemented a Taskforce on Climate-Related
Financial Disclosures (TCFD) framework in central government annual
reports. In Sweden, sustainability reports are mandatory only for some
governmental agencies. This means that even though sustainability reports
are not mandatory in the vast majority of cases, governments at different
levels tend to provide information concerning sustainability issues.
Therefore, bearing in mind the why question, it can be argued that public-­
sector entities in many European countries are willing to inform their citi-
zens about the impact of their policies and activities, opening—as the
‘dialogic’ perspective emphasises—a dialogue with citizens (Brown, 2009).
Regulations are mainly provided by law or governmental guidelines,
which prevalently refer to the central government level, though they are
also used as a reference at the local government level.
There are no national standard setters in charge of issuing standards
regarding sustainability reporting; therefore, the to whom question is not
Table 6.1 Sustainability reporting: the state-of-the-art in a sample of European countries
Countries Central Government Regional government Local government

Yes/ Law/Guidelines Mandatory/ Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/

No Voluntary No Guidelines Voluntary No Guidelines Voluntary

Austria – – – Partly N/N V Partly N V

Croatia Ya L V N N N N
Finland Y Y (Guidelinesb) V N Y (Lawc) V N Y (Lawd) V
France N Y M
Germany N V Ne V Nof V
Greece N N N
Italy N Y V N Y V N N V
Malta Y L M n/a n/a n/a N
Norway Y Y (refer to n/a Y Y (refer to n/a Y Y (refer to n/a
IPSASB) IPSASB) IPSASB)
Portugal Ng V ? Yh V
Romania N N N N N N
Spain N N – Yi N V Yj N V
Sweden Y Yk Ml Y – V Y – V
Switzerland Y N V Some N V –m N
The N N – Yn L M
Netherlands
UK Y Y (Lawo) M Y Y (Guidelines) V
Ukraine Y Y (Law + M
Guidelines)

(continued)
6 SUSTAINABILITY REPORTING
93
Table 6.1 (continued)
94

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary

a
The law does not prescribe specific rules related to sustainability reporting, even though the application of this report is available to a limited extent in the
area of monitoring the execution of the strategic documents related to the National Resilience and Recovery Program
b
State Treasury’s Guidance on Sustainability Reporting in Central Government recommends all central government organisations to report their significant
economic, social, and environmental impacts
c
M. BISOGNO

Accounting Act (1336/1997) emphasises that the activity and financial report should include a description of the issues which have a significant impact on
the financial performance or status of the wellbeing service county or on the development of its operations
d
Accounting Act (1336/1997) emphasises that the activity and financial report should include a description of the issues which have a significant impact on
the financial performance or status of the municipality or on the development of its operations
e
With state-specific or local government-specific exceptions
f
With state-specific or local government-specific exceptions
g
The law seems to refer only to financial sustainability
h
GRI—Cesop local—sustainability index
i
Only isolated experiences have been carried out voluntarily by some regional governments
j
Only isolated experiences have been carried out voluntarily by some local governments
k
The requirements stem from the annual regulation letter, the budget law, or regulations from the Swedish National Financial Management Authority
l
It is mandatory for some government agencies
m
No information available
n
Whereas it is largely upon the decentral governments how much attention they pay to sustainability issues, Dutch law (BBV) prescribes that provinces have
to include five indicators that are related to sustainability issues in their budgets and annual reports. They need to report on water quality, emission of green-
house gases, renewable energy, developed new nature and managed nature. For municipalities, it is mandatory to publish information on household waste
volume and renewable electricity
o
HM Treasury—Sustainability Reporting Guidance; HM Treasury—The Government Financial Reporting Manual 2023/24
 6 SUSTAINABILITY REPORTING 95

directly addressed, and information regarding sustainability issues seems

to be directed towards all citizens. However, it should be noted that, in
some cases, sustainability information is included in other documents,
such as national plans, as in the case of Greece, or is presented in environ-
mental or SDGs-related documents, confirming the existence of an over-
lap between environmental and sustainability disclosures. This also means
that the boundaries of sustainability reporting (e.g. the what question) are
not as clear as expected. Furthermore, in certain cases, governments tend
to focus on specific issues—for instance, in the Netherlands, provinces are
required in their budgets and annual reports to include five indicators
related to sustainability issues: water quality, emission of greenhouse gases,
renewable energy, developed new nature and managed nature. Similarly,
municipalities are required to publish information on household waste
volume and renewable electricity. In Spain, regional governments and sev-
eral large municipalities provide information about sustainability through
their websites, so there are no ad hoc sustainability reports.
Regarding the how question, it could be argued that sustainability
reporting has no strong connection with financial reporting and related
accounting systems. From a broad perspective, this may suggest reflecting
on how accounting can be defined and interpreted. Scholars (Carnegie
et al., 2021) are proposing to view accounting not only as a technical prac-
tice but also as a social and moral practice “concerned with the sustainable
utilisation of resources and proper accountability to stakeholders to enable
the flourishing of organisations, people and nature” (p. 69).
Table 6.1 thus provides a variegated picture: different approaches have
been found in European countries regarding sustainability disclosures,
and there exists an overlap with SDGs-related information or environmen-
tal disclosures. Sustainability reports are not the only tool utilised, as infor-
mation regarding sustainability issues is also provided through ad hoc
documents or websites. Accordingly, as this is occurring in the private
sector, the EU is encouraged to propose harmonised paths by issuing
European rules or by utilising international ones, such as those issued by
the IPSASB.
The voluntary nature of sustainability disclosures can be interpreted as
a positive sign, implicitly providing an answer to the why questions—in
other words, this confirms that public-sector entities are paying more
attention to sustainability issues. However, more substantial efforts are
needed to enhance both the content of sustainability disclosures and the
way they are provided.
96 M. BISOGNO

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 CHAPTER 7

Popular Reporting

Sandra Cohen

1   A Description of Popular Reporting

Governments have several reasons to keep citizens informed about their
activities. They act this way in an attempt to restore trust and legitima-
tion, to be accountable, but also to actively involve citizens in the strate-
gic decision process that is related to democratic participation. However,
the success of these information dissemination and reporting initiatives
relies heavily on the suitability and understandability of the reports pro-
duced by the governments to address the citizens. Thus, the availability
of traditional financial reporting is not automatically translated into
informed citizens as they do not easily understand them. The average,
typically non-accounting savvy citizen finds it difficult to understand the
complex, technical, and detailed content of financial reports (Cohen &
Karatzimas, 2015).
For this specific audience, a special form of a report, less complex, more
simple, and less detailed, has been developed. The reports that address

S. Cohen (*)
Department of Business Administration, Athens University of Economics
and Business, Athens, Greece
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 99

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_7
100 S. COHEN

citizen needs in public financial information are called popular reports.

Popular (financial) reports encourage citizens who are not experts in
accounting to understand and even become more interested in the public
sector finances. They can promote two-way communication and dialogue
between citizens and governments (Barbera et al., 2016).
Popular reports are usually adopted by local governments as a means to
provide—mainly—financial information to citizens in a concise and easily
understood manner aiming at enhancing citizens’ understanding of public
finance matters (Stanley et al., 2008) and serving as a citizen-centred
accountability tool. To do so, popular reports are short in length, use
graphical representations and pictures, avoid technical language, adopt
easily understood narratives and offer a clear connection to the official
financial statements for more information (GASB, 1992; Sharp et al.,
1998; GFOA, 2006; 2007; Clay, 2008). Moreover, the popular reports
have to be related to the financial statements they correspond to as they
reshape and simplify in a user-friendly manner the financial information
extracted from official financial statements (Sharp et al., 1998). They also
need to be timely, of defined scope, understandable, credible, and suitably
disseminated to their targeted audience (Cohen, 2016). The use of info-
graphics to improve the understandability of accounting terms by users
who are non-accounting experts has also been proposed in the literature
(Cohen et al., 2022).
In parallel, apart from citizens, the popular reports, thanks to their
non-technical character, can be useful to other stakeholders that need to
have access to public sector entities’ financial information in a non-­
technical way, such as public sector employees, the media, community
groups, politicians and the civil society (Cohen, 2016).
Popular reports are not confined to the template of the formal financial
statements or any other template. As a result, the popular reports in prac-
tice present significant heterogeneity (Stanley et al., 2008). This flexibility
in developing the popular reports while permitting local governments to
develop a report that meets their specific goals makes comparability among
local governments less straightforward. Also, it raises questions about con-
sistency in popular reporting over time that is relevant to transparency
(Jordan et al., 2017).
Heterogeneity is not only related to the outlay of the popular report
but also to its content. Popular reports can include financial and budget-
ing information regardless of the accounting basis. They would be equally
applicable when an entity uses cash, modified or accrual accounting,
 7 POPULAR REPORTING 101

provided that the financial information in the popular reports corresponds

to that in the official accounting or budgeting statements (Cohen, 2016).
The available flexibility in their development has motivated several
research works on how the ideal popular report should look like (Yusuf &
Jordan, 2012; Cohen & Karatzimas, 2015; Cohen et al., 2017; Manes-­
Rossi et al., 2019; Grossi et al., 2021; Bracci et al., 2021). Research has
focused both on the users’ needs in terms of the financial information
contained as well as the way this information should be presented (e.g.
Cohen & Karatzimas, 2023).

2  Relevance of Popular Reporting

for Public Administration

Citizens are the basis of democratic societies as they provide the necessary
funds for their operations through taxes. They also make crucial decisions
about who will be in charge of the governance at both the local and the
national levels through their voting preferences during elections. Citizens
are also the primary receivers of the services that governments provide.
Thus, although they have been characterised as not-interested, ignorant,
or even ‘receivers of fiscal illusion’ (Zimmerman, 1977), they constitute
the basis of every polity and should be encouraged and facilitated to follow
up government financial performance. This is consistent with the account-
ability and transparency requirements that the governments should exhibit
to their constituents, which is partly achieved by providing public sector
accounting information. But for this to work, citizens should be provided
with easily understandable and relevant information.
Reporting to citizens has been significantly promoted in Anglo-Saxon
Countries (e.g. the US, Canada, and Australia) since the early 1990s,
mainly by professional organisations issuing reporting guidelines and
awards for the best-prepared documents to stimulate their development
(Biancone et al., 2016). For example, the Government Finance Officers
Association (GFOA) in the US inaugurated in 1991 and still operates an
annual award programme to motivate and help state and local govern-
ments to produce popular reports stemming from their annual financial
statements and to recognise the most successful attempts. The criteria for
the award are the popular reports to be of high quality, readily accessible,
and understandable to people without a background in public finance
(https://www.gfoa.org/pafr-­award). Also, the Association of Government
102 S. COHEN

Accountants (AGA) provides guidelines for the development of the

Citizen Centric Reporting (CCR), which aims at simplifying the commu-
nication between the government and its citizens (https://www.agacgfm.
org/Standards/CCR.aspx). Examples of award-winning popular reports
are available at https://www.gfoa.org/pafr-­award-­winners.
However, the basic idea of reporting to citizens goes back in time and
is an ingredient of democratic polities. Democracy during Pericles’s
Golden Age in Athens was based on having ancient Athenians informed
on public money spending through public inscriptions carved in stone vis-
ible to all on a systematic basis (Blok, 2010). Public disclosure with the
means available at that time ‘made’ citizens informed as they were receiv-
ing easily accessible and comprehensive information.
The ‘making’ of interested citizens is expected to lead to multiple ben-
efits. A basic benefit would be that informed citizens might become more
willing to pay their taxes. Tax and budget issues are often the focal points
for citizen dissatisfaction. Willingness to pay taxes is highly relevant to
how the government spends tax money. Transparency and accountability
on public funds spending provide evidence about the use of public money
and disclosures areas of misuse or suboptimal use. Popular reporting in
this realm can strengthen the connection between the taxes collected and
the funding of services provided and public policies pursued by the local
governments.

3  Popular Integrated Reporting

While the initial idea of popular reporting was to produce a simplified ver-
sion of annual financial statements for citizens and other stakeholders who
lack accounting knowledge, the popular reports gradually evolved in prac-
tice into including information that goes beyond financial information,
expanding into sustainability-related information. The study by Manes-­
Rossi et al. (2019) that analysed the popular reports of local governments
in the US showed that these reports included, apart from a brief financial
overview of the local governments (covering revenue sources, expenses
allocation, and financial condition), information about city operations,
projects, services, programmes, governance, public safety, infrastructure,
and public property.
Apart from being evident in practice, including non-financial informa-
tion in popular reports has also been theoretically promoted (Aversano
 7 POPULAR REPORTING 103

et al., 2019; Cohen & Karatzimas, 2015). A form of popular reporting

that embeds the ideas of integrated reporting (IR) proposed by Cohen
and Karatzimas (Cohen & Karatzimas, 2015) is called integrated popular
reporting (IPR). Based on the IPR premises, popular reports are enhanced
to include basic and necessary information regarding public sector entity’s
well-being, prosperity, and value creation that relates to the six capitals of
integrated reporting (i.e. financial, tangible, social, natural, human, and
intellectual capital). IPR aims to provide a holistic, useful, and meaningful
information set in an easily comprehensible and attractive manner for citi-
zens (Cohen & Karatzimas, 2015).

4   An Overview of the Literature

Recent studies (Biondi & Bracci, 2018; Manes-Rossi et al., 2019) advo-
cate that the use of popular reporting for accountability and legitimacy is
increasing. While popular reporting is a relatively common practice in
Anglo-Saxon countries, especially the US (Manes-Rossi et al., 2019), pop-
ular reports have recently been evident in Europe. In Europe, however,
most of the studies correspond to case studies of voluntary applications of
the tool in Italy. The cases of the municipality of Milan (Barbera et al.,
2016) and Turin (Biancone et al., 2016; Grossi et al., 2021) fall within
this category. A study in Sweden covering the period 2015–2018 revealed
that approximately 10% of the Swedish municipalities prepare a popular
report (Donatella & Bisogno, 2021).
Even though popular reporting in the US is well established, the qual-
ity of the popular annual financial reports should not be taken for granted.
Raimo et al. (2023) provide evidence that the quality of popular annual
financial reports in the US (based on the criteria of background, assurance
and reliability, content, and simplicity) is affected both by the population
size (positively) and the population average age (negatively).
Recent studies analyse the content of popular reporting. Apart from
verifying the existence of financial and non-financial information in both
published popular reports (Manes-Rossi et al., 2019) and popular reports
developed by citizens as part of an experiment (Cohen & Karatzimas,
2023), some studies go a step further into analysing presentation means.
Del Gesso (2022) analysed the use of photos to disclose city hospitality in
popular reports in the US and concluded that pictures offer a valid aid to
104 S. COHEN

integrated popular reporting as the provision of supplementary informa-

tion through photos enables holistic, eye-catching disclosure without
compromising the concision and simplicity of communication.
Experimentation with alternative visual aids such as infographics as a
means to improve the understandability of accounting terms by users who
are non-accounting experts might also be plausible in popular reporting
(Cohen et al., 2022).
However, the use of visual aids in popular reports may not always be
problem-free. In a study of the popular reports of 60 retirement funds
receiving a 2021 popular report award from the Government Finance
Officers Association in the US, the analysis revealed that 30% of reports
had one or more broken charts, where their visual elements did not match
the underlying data. Also, a total of 70% of the reports included at least
one badly designed chart containing, for example, non-zero (truncated)
axes, hidden non-zero axes and misleading 3D perspectives (Garrett,
2023). These findings provide evidence of the misuse of accounting
graphics in the popular reports of retirement funds. However, assessing
whether the same findings hold in relation to graphical and chart flaws in
the popular reports of local governments has still to be studied.
In addition, understanding the information needs of the citizens-users
is not trivial. Focus groups or pilot studies may assist the preparers in
reaching their intended audience (Marsh & Montondon, 2005; Yusuf &
Jordan, 2012; Jordan et al., 2017; Cohen et al., 2017). Popular reporting
could be a field for cooperation between local governments and citizens
(Cohen & Karatzimas, 2023) or even an area of cooperation between local
governments, councillors, and external consultants (van Helden &
Reichard, 2019).
Finally, it is not enough for popular reports to be prepared. They need
to be easily accessed by constituents. Thus, the best way to deliver popular
reports to citizens has also been researched (Cohen et al., 2017; Yusuf
et al., 2013). While Yusuf et al. (2013) concluded that local governments
are less active in disseminating the popular reports to constituents com-
pared with their actions to prepare them, Cohen et al. (2017) provided
evidence that citizens prefer more dynamic IT-enhanced popular reports
presentation compared to static pdf. formats. Cohen et al.’s (2017) study
offers collaborative evidence that using ICT to make popular reports more
attractive and useful to citizens would yield positive results with possible
 7 POPULAR REPORTING 105

spillover effects to democratic participation. In this realm, the use of social

media as a means to communicate popular reporting has still to be stud-
ied. From another perspective, social media can also be used as an interac-
tive communication channel between the local government and the
citizens to inform the content of the popular reports per se (Grossi et al.,
2021). Using electronic means to disseminate popular reporting is also a
solution to the lack of resources identified by most local governments
(Yusuf et al., 2013; Yusuf & Jordan, 2015) and can work towards improv-
ing the cost-effectiveness of popular reporting.

5  Recent Developments in the Practice

at the International Level

Popular reporting is widespread, mainly in the US. GFOA and AGA

encourage local governments to communicate in a simplified way the
information of the state and local governments to constituents and other
stakeholders that do not have a public finance background.
The situation in Europe is different. In our country sample covered in
the book, popular reporting, of some kind, at the central government level
is applied in Austria, Italy, Sweden, and Switzerland. Only in Italy and
Sweden there is specific legislation/guidelines for this purpose, and espe-
cially for Sweden, it is mandatory for some government agencies.
The sparse application of population reporting is also evident at the
regional government level. Again, popular reports are available in Austria,
Italy, Sweden, and Switzerland.
Popular reports are more widespread in local governments as they are
produced in Austria, France (e.g. Lille1 or Issy-les-Moulineaux2), Italy,
Malta, Portugal, Romania, and Sweden. In all these cases, apart from Italy,
the application is voluntary. But even in Italy, the mere obligatory nature
of these provisions is not enough for all local governments to eventually
publish popular reports.
Still, informing citizens about public finances in a simple way can be
done in multiple ways without necessarily following the comprehensive
outlay of a popular report. The examples of the Netherlands and Portugal
shown in the boxes following describe two cases where information about

1
Lille: https://www.calameo.com/read/00289880598c662823d1d (accessed 13/8/2023).
2
Issy-les-Moulineaux: https://rapportfinancier.issy.com/2021/ (accessed 13/8/2023).
106 S. COHEN

public finances in a concise form is presented to the public with the use of
IT. Also in Austria, the Federal Budget Office publishes interactive visuali-
sations of federal budget data and provides an overview of outcome goals
as well as reports and maps on cross-cutting issues, such as climate protec-
tion, gender equality, and SDGs (https://www.parlament.gv.at/doku-
ment/budgetdienst/budgetvisualisierung/index.html).
Again, in Austria, local governments can voluntarily join and submit
their budget data to a database that permits an interactive visualisation of
local budget data available at the website offenerhaushalt.at. The database
provides a transparent and easy-to-understand overview of the current
budget and its development over previous years.

Box 7.1 Example of popular reporting in the Netherlands

Although popular reporting is not mandatory in the Netherlands,
several initiatives are employed to implement its principles. On the
central government level, the website rijksfinancien.nl was set up,
which presents the official budget documents, open data, and visu-
alisations of government expenditure, aiming to make this informa-
tion transparent to society.
Dutch provinces and municipalities have implemented popular
reporting principles in their budgets and annual reports for a long
time. One of the initiatives taken is the use of the so-called budget at
a glance, a short summary of the budget aimed for use by citizens.
Furthermore, about half of the provinces and municipalities nowa-
days use an interactive website (instead of or in addition to a PDF)
for publishing their budget and annual report.

Box 7.2 Example of popular reporting in Portugal

In Portugal, there is no popular reporting, but there is a «Citizen
Budget», prepared and displayed on the website of the Budget
General Department. It presents the State Budget in a simplified
way, with infographics, to be read by the ‘ordinary citizen’. Also, the
same department displays simplified information on the State
Account (reporting on the budget execution)—see https://online.
dgo.gov.pt/DadosCidadao/Orcamento_CG.Entrada.aspx
 7 POPULAR REPORTING 107

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 CHAPTER 8

Assurance and Auditing of Sustainability

and Non-Financial Reporting

Isabel Brusca

1   Assurance of Sustainability and Non-Financial

Reporting: Objectives and Framework
The assurance or verification of non-financial reporting aims to provide
credibility to data reported, in order to certify that the information is
certain and adequately presents the situation of the entity. It is a control
of the quality of the data and of the process used for preparing the infor-
mation, which search producing stakeholder confidence and provide then
value added.
The origin of sustainability reporting assurance was in the business
sector, at the end of the 1990s, when companies started publishing this
type of information and soon emerged the aim, and to a certain extent the
need, to verify the trust and integrity of sustainability reporting. Initially,
it was totally voluntary for companies, but due to its value for stakeholders

I. Brusca (*)
Department of Accounting and Finance, University of Zaragoza,
Zaragoza, Spain
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 111

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_8
112 I. BRUSCA

and avoiding criticism and lack credibility of sustainability reporting, many

companies started with this practice to legitimize their reports so that a
professional discipline was created. At the same time, some organizations
developed guidelines and standards that could be used as reference in
these processes, such as AccountAbility (2003), the Fédération des Experts
Comptables Européens (FEE, 2002), and the Global Reporting Initiative
GRI (2002). Also, the ISO 14000 and related standards of environmental
management issued in 1996 were considered useful in this aim, although
they were focused on management purposes and not on verification.
Another tool was the EU Eco-Management and Audit Scheme (EMAS),
developed by the European Commission (1993), aiming at assisting orga-
nizations to evaluate and report on environmental performance.
During the last 20 years, this practice has increased considerably in the
private sector and the standards of AccountAbility (AA1000 Assurance
Standard issued in 2003) and GRI have been largely used in practice.
Another standard considered as a reference by accounting professionals
that develop assurance tasks has been “Assurance engagements other than
Audits or Reviews of Historical Financial Information,” issued in 2003 by
the International Auditing and Assurance Standards Board (IASSB, 2003).
In fact, the Association of Chartered Certified Accountants (ACCA, 2023)
points out that there is an increasing demand from investors for delivering
sustainability assurance and there are some challenges for practitioners in
order to meet these requirements such as having the competencies and
skills necessary to perform the work.
The result of the sustainability assurance engagement is included in the
assurance or verification report, similar to the auditor’s report in a finan-
cial audit. It is the tool to communicate to users of the report the outcome
of the work performed (ACCA, 2023).
In this respect, it is important to differentiate between limited and rea-
sonable assurance. The difference can be illustrated by the definitions of
the IAASB (2022, p. 81):

“Reasonable assurance engagement: the practitioner reduces engagement

risk to an acceptably low level in the circumstances of the engagement as the
basis for the practitioner’s conclusion. The practitioner’s conclusion is
expressed in a form that conveys the practitioner’s opinion on the outcome
of the measurement or evaluation of the underlying subject matter against
criteria.”
 8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL… 113

“Limited assurance engagement: the practitioner reduces engagement

risk to a level that is acceptable in the circumstances of the engagement but
where that risk is greater than for a reasonable assurance engagement as the
basis for expressing a conclusion in a form that conveys whether, based on
the procedures performed and evidence obtained, a matter(s) has come to
the practitioner’s attention to cause the practitioner to believe the subject
matter information is materially misstated.”

In the European Union, the Directive of Non-Financial reporting

passed in 2014 was a keystone in the elaboration of non-financial report-
ing by companies, requiring that large public interest entities with over
500 employees disclose environmental and social reporting. However, in
spite of the assurance that the information can create confidence in non-­
financial reporting, the Directive preferred not to make it compulsory.
The Directive only required that the auditor confirms that the entity pro-
vided the required non-financial information (on financial statements or as
a separate report), leaving the Member States the option to state some
additional requirements, such as checking that the non-financial reporting
provided is consistent with financial information, or the assurance of non-­
financial reporting by an independent assurance services provider. As a
consequence, in the private sector, there are differences between coun-
tries: in some of them assurance is compulsory and in others it is voluntary.
In fact, French, Spanish, and Italian adaptations to the Directive required
mandatory assurance of the information (European Parliament, 2021).
After several years of application of the Directive, the European
Commission undertook a process of revision and several preparatory
works in order to modify it. The briefing Implementation Appraisal of the
Non-Financial Reporting Directive developed by the European Parliament
(2021, p. 6) summarizes some of the results of this process of revision and
shows that audit or verification was a controversial issue about the
Directive. For example, the results of a public consultation about Non-­
Financial reporting Directive drawn up by the European Commission evi-
denced that (European Parliament, 2021) a significant majority of
respondents (67%) supported stricter audit requirements for non-financial
reporting (with 78% of users compared to 59% of preparers in favor of
stronger assurance requirements). About the type of assurance, many users
indicated they would prefer reasonable assurance (51%), while a majority
of preparers expressed a preference for limited assurance (52%). Similarly,
69% of respondents preferred that assurance standards be developed.
114 I. BRUSCA

Taking into account all the work carried out by the Commission to
modify the Non-Financial Reporting Directive, and the opinion of all
stakeholders received, in December 2022 the Commission approved the
Directive (EU) 2022/2464 of the European Parliament and of the
Council of 14 December 2022 amending Regulation (EU) No 537/2014,
Directive 2004/109/EC, Directive 2006/43/EC, and Directive
2013/34/EU, as regards Corporate Sustainability Reporting (Directive
on Corporate Social Responsibility). The aim is that non-financial report-
ing has a similar status to financial reporting. The Directive requires large
public entities and small- and medium-listed companies to disclose their
risks and opportunities arising from social and environmental issues, and
the impacts of their activities on people and the environment. Furthermore,
in order to achieve comparability between countries, the Directive states
that the Commission will approve standards for sustainability reporting. It
also contains the requirement to verify sustainability reporting with a pro-
gressive implementation, starting with limited verification and going on
with reasonable verification. The Commission has also the compromise to
elaborate standards for the verification of sustainability reporting.
The above reforms in the European regulations open a new era in the
framework of sustainability reporting and its verification in the business
sector of the European Union Member States, where a professional sector
focused on the verification of sustainability reporting will be consolidated,
being or not part of the statutory audit profession. In this respect, it can
be highlighted that in countries where at the moment verification of non-­
financial reporting is compulsory, in most of the cases, the services are
provided by statutory audit and audit companies, in particular, in Spain, a
high percentage of verification of non-financial reporting is carried out by
the Big Four Audit Companies.
In business sector literature, there is a stream of research about assur-
ance of non-financial reporting with many studies trying to find out what
is the value added of assurance of non-financial reporting. In particular, a
part of the literature has been skeptical about the achievements of assur-
ance of sustainability reporting, arguing that this was more symbolic than
real, questioning transparency and credibility due to independence of
assurers or the uncomplete revision of data reported, lacking, for example,
true and fair reference (Jones & Solomon, 2010). In spite of this criticism,
it can be highlighted that some empirical studies found a positive influence
of assurance on stakeholder confidence in non-financial reporting (Quick
& Inwinkl, 2020).
 8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL… 115

2  The Relevance of Assurance and Auditing

of Sustainability Reporting and Non-financial
Reporting in the Public Sector
In the public sector, transparency and accountability must be the corner-
stone of governance, and these are in fact the main arguments to disclose
sustainability reporting. The aim of disclosing sustainability reporting is to
enhance transparency and accountability of public organizations in terms
of sustainable development, providing information about what they have
done both in their policies and in their activities. As evidenced above, to
achieve the objectives of transparency and accountability, the information
must be audited or verified, so that the control guarantees that the infor-
mation is adequate and has been obtained in a proper way. Only with this
process, the purpose of transparency and accountability of the information
can be assured. How can stakeholders trust the information disclosed by
the organization if it has not been audited?
Consequently, to enhance the transparency and accountability, the
information disclosed by public organizations with respect to social and
environmental performance and impacts should be verified. In the end,
this is also the keystone in the financial information provided by public
organizations so that the auditing function plays a pivotal role in certifying
that the data disclosed in financial reporting are relevant and provide a
faithful representation of the financial situation of public organizations
(Hay & Cordery, 2021).
All these arguments point out the necessary verification of non-financial
reporting as a prerequisite to increase the trust and confidence of citizens.
In the literature, several academics have argued about this requirement,
also evidencing the demand of citizens and stakeholders. In this sense has
pronounced, for example, Kaur and Lodhia (2019, p. 501), who acknowl-
edged that auditing of sustainability information is a key issue in the public
sector context and in particular environmental performance audit (PA).
The issue has become especially relevant with respect to the Sustainable
Development Goals (SDGs), as accountability is one of the main gover-
nance challenges of SDG implementation (Bowen et al., 2017). In the
literature, both from a theoretical and empirical perspective, academics
identified SDG reporting as fundamental to public accountability with
respect to projects related with SDG, which should of course be also
116 I. BRUSCA

audited. Hay and Cordery (2021) point out that there is a need to report
on and audit environmental issues and especially against the UN’s SDGs,
as public organizations are important actors to achieve them.
In the empirical realm, Abhayawansa et al. (2021) analyzed the com-
ments submitted to an Inquiry carried out by the Australian Senate into
the SDGs and evidenced that accountability was thought by respondents
as involving: improving and standardizing SDG performance measure-
ments and communicating them, as well as independent audit. Then, just
providing the information does not assure that accountability is achieved.
To sum up, external audit of non-financial reporting is important in
order to assure transparency and accountability objectives, which at the
end are the most important challenges of governance in the public sec-
tor. The relevance and the role of public organizations in sustainable
development support that public organizations publish sustainability
reports which are audited in accordance with some common standards, in
the line of the recent Directive on Corporate Social Responsibility. If there
is no compulsory requirement to audit the information, it is difficult that
voluntarily the public organizations be interested in auditing sustainability
reporting.

3   An Overview of the Literature

Sustainability and non-financial reporting in the public sector is a growing
area of research in the literature, mainly because as previous chapters have
evidenced there is an international concern about the relevance of public
sector organizations in sustainable development and in particular
with respect to the SDGs. Then, the topic is relevant both in practice and
academia, as evidenced by Manes-Rossi et al. (2020).
However, literature about auditing and verification of non-financial
reporting is still in its infancy in the public sector, reflecting that this is
also a pending issue in practice. In this respect, Manes-Rossi et al. (2020)
in their structured literature review about public sector non-financial
reporting and alternative formats showed that there is a total lack of atten-
tion for auditing and assurance issues (0 articles), with a prevalence of
articles dealing with external reporting (57 out of 91). It is an emerging
research line for the future, as pointed out by Kaur and Lodhia (2019),
who call for studies into sustainability performance audits (encompassing
social and environmental issues) in various contexts.
 8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL… 117

Even if there is not a specific field of research focused on the topic in

the public sector, there are a few papers that consider audit of sustain-
ability reporting, either from a theoretical or empirical perspective.
In the area of empirical research, Niemann and Hoppe (2018) analyzed
sustainability reporting practices at the local level, evidencing that out
of the six governments analyzed only Amsterdam had external audit of
sustainability reporting. Rika and Jacobs (2019) evidenced that in Australia
environmental performance audits are being conducted for some
programs of the Commonwealth.

4  Recent Developments in the Practice

at International Level

Auditing and assurance of non-financial reporting is also a novel topic in

the practice and only a few experiences have been developed at the
international level, with high diversity among countries. In this respect, it
can be highlighted that literature about audit in the public sector has evi-
denced diversity among countries, due to differences in regulation (Manes-­
Rossi et al., 2020), leading to differences, for example, in the types of
audit, the body in charge for the auditing function, and the standards
followed. This diversity of course is maintained with respect to the audit
of sustainability reporting.
Supreme Audit Institutions (SAIs) are responsible for audit of public
organizations in all countries, in spite of differences with respect to the
scope or the type of audit developed, for example, in some countries, local
governments are not included in their functions (Manes-Rossi et al.,
2020). Cordery and Hay (2022) point out that mimetic isomorphism
explains SAIs’ structures, although there is some difference among them
worldwide.
In some countries, certified auditors also participate in the audit of
public organizations, being in a complementary function to the developed
by the SAI or as unique auditor of some types of public organizations.
Taking into account the increasing relevance of the issue and the differ-
ences about the responsibilities of SAIs with respect to the audit of sus-
tainability reporting and financial reporting, we refer to this in the
following section.
118 I. BRUSCA

4.1   The Role of SAIs in Auditing Sustainability

and SDGs Reporting
SAIs are a keystone in the accountability of governments and public sector
organizations in general, as they perform the revision and control of their
activities to assure that they are in accordance with legal requirements and
that resources are used properly. They are also fundamental in preventing
and detecting corruption, as they audit expenditures and financial man-
agement systems.
SAIs can accomplish different types of audits, depending on their pur-
pose and the demands of the regulation of each country. Traditionally,
they have undertaken financial and compliance audits to verify the accu-
racy of financial reporting and compliance with law and regulations respec-
tively, but with the New Public Management, its role has been extended
to performance audit and value-for-money audit to assess efficiency and
effectiveness of public organizations.
It is in this field of performance audit where sustainability reporting
audit can take place, in order to assess environmental and social policies
developed by governments. There are already some experiences of SAI
developing environmental audit. For example, the Australian National
Audit Office (ANAO) develops environmental performance audits for
some programs of the Commonwealth (Rika & Jacobs, 2019).
With the worldwide concern about SDGs and the relevance of public
organizations in achieving them, a new perspective has emerged about the
role of SAIs in SDG audit. In this respect, Monroe-Ellis (2018, p. 1) rec-
ommends SAIs to “be a beacon” for auditing governments’ reporting on
SDGs and to make effective accountable organizations.
Cordery and Hay (2022) highlight the role of SAIs both in environ-
mental audit and in assessing progress toward the SDGs. They remark
(p. 440), “As SDGs are a national commitment, this suggests auditors will
need to monitor and to report on each nation’s progress toward achieving
their SDGs.”
In a similar line, Sułkowski and Dobrowolski (2021) argue that public
auditors should evaluate the governments in respect to energy issues, what
they call “energy accountability,” and that should include all the process
of planning, obtaining, and sustainably using energy.
In most of the cases, the SAIs have a general mandate that can be
applied to all sectors and policies of the government, including the envi-
ronmental sector, energy, or SDGs implementation. As a result, if there is
 8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL… 119

some form of environmental policy, or if some public money is spent on

environmental measures, these SAIs are authorized to audit it (Van
Leeuwen, 2004). In this respect, Cordery et al. (2023) call public auditors
to support and hold a government accountable for its international pledges
to SDGs, including stakeholder engagement and processes of dialogue.
With respect to the state of the practice in this issue, Guillán Montero
and Le Blanc (2019) stated that more than 80 SAIs had audited the pre-
paredness of governments for implementing the SDGs trying to promote
accountability but also to support them in the process. And the ACCA
(2020) points out that SAIs are assessing progress made by governments,
examining their activities and how SDGs have been integrated and their
achievements in this field. The ACCA makes emphasis on the necessary
collaboration between SAIs, governments, and civil society to achieve the
goals, which include SAIs into SDG assessment. Tetteh et al. (2023) ana-
lyzed the case of Ghana and the role of public sector auditors in strategi-
cally responding to institutional pressures to conduct a performance audit
of Sustainable Development Goals (SDGs).
In this respect, it can be mentioned the importance of the International
Organization of Supreme Audit Institutions (INTOSAI) as impulse and
encouragement to SAIs for involving in these issues, recommending a
compromise with environmental audit and reviewing the SDGs and sus-
tainable development efforts at the national level (Cordery & Hay, 2022).
With this aim, the INTOSAI Development Initiative (IDI), a separate
legal entity to support SAIs in strengthening their performance and capac-
ities, issued the IDI’s SDGs Audit Model to support SAIs in conducting
high-quality audits of SDGs (INTOSAI IDI, 2020). The organization
defines the audit of SDGs implementation as a performance audit (PA)
that focuses on the achievement of nationally agreed targets linked to
SDG targets. In this sense, the performance audit should include activities
associated with planning, conducting, reporting and follow-up (Rajaguguk
et al., 2017).
To sum up, SAIs have an important role in assessing governments’
achievements in SDG and also in supporting them to achieve the goals,
which can require some innovation inside the organizations, as well as
collaborative processes. In this respect, Hay and Cordery (2021) point
out that an option, for SDGs reporting assurance, could be to recur to
cooperative audits (i.e., joint, coordinated or parallel audits between SAIs
and other professionals). This is of course something that needs further
120 I. BRUSCA

research for the future to capture the situation and evaluate potential
improvements from a conceptual perspective.
Notwithstanding the foregoing, the mandates and scope of SAIs differ
among countries and also the type of audits, and in particular performance
audit, which is not in play in some countries. Furthermore, although there
are no legal requirements, as assurance of sustainability reporting has been
a fashion in the private sector, it is possible that also public sector organi-
zations aim to contract assurance from private sector professionals.
The following section analyzes the state of the art in several European
countries about assurance and auditing in practice.

5  Comparative Analysis of Assurance and Auditing

of Non-financial Reporting
at the International Level

Table 8.1 presents the country cases in 16 European countries in relation

to assurance and auditing of non-financial reporting practices at different
levels of government (central government, regional government, and local
government). The table shows whether assurance and auditing of sustain-
ability reporting is or not implemented, as well as if it is obligatory or
voluntary and whether relevant legal basis or recommendations that
underpin its implementation in the different levels of government have
been developed.
Based on the table below it is evident that assurance of non-financial
reporting is not very extended in the practice. It is at the central govern-
ment level where there are more countries with experiences in this field,
whether mandatory or voluntary. In 7 out of 16 countries, there is some
type of auditing of sustainability and non-financial reporting at central
government, considered it from a global perspective, that is, including all
types of non-financial reporting included in the above chapters: environ-
mental and sustainability reporting, SDGs budgeting and reporting, gen-
der budgeting and popular reporting. The assurance or auditing of
non-financial reporting is mandatory only for central government in
Austria, Malta, Norway and the UK, but in all the cases it is mainly related
to the policies implemented and the outcome goals achieved that the
reporting properly.
For example, in Austria audit is carried out only related to outcome
goals of information included in budgets, such as those related to SDGs or
Table 8.1 Assurance and auditing sustainability and non-financial reporting: The state-of-the-art in a sample of European
countries
Countries Central Government Regional government Local government

Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/

No Guidelines Voluntary No Guidelines Voluntary No Guidelines Voluntary

Austriaa Y Y M Partly Partly V n/a n/a n/a

Croatia N N N
Finland N Y V N V N V
(Guidelinesb)
France Y Partlyc
Germany N V N V N V
Greece N N N
Italy N N V N N V N N V
Malta Y Y (Law) Implicitly n/a n/a n/a Y Y (Law) Implicitly included
included in the in performance
SAI functions audit
Norway Y Y (National M – – – – – –
strategy)
Portugal Yd Implicitly N
included in the
SAI functions
Spain N N – N N – N N –
Sweden N N – V Y – V
Switzerland N N N Some N V –e N
The N N N
Netherlandsf
8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL…

(continued)
121
Table 8.1 (continued)
122

Countries Central Government Regional government Local government

Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/ Yes/ Law/ Mandatory/

No Guidelines Voluntary No Guidelines Voluntary No Guidelines Voluntary
I. BRUSCA

UK Y Y M N
(Guidelinesg)
Ukraine Y Y (Law) V

Legend: Y = Yes; N = No; M = Mandatory; V = Voluntary

a
Related to outcome goals
b
Sustainability reports of central government organizations are not audited based on State Treasury’s current Guidance on Sustainability Reporting in Central
Government
c
For example, for green bonds reports, assurance by KPMG, Carbone 4, and Vigeo-EIRIS
d
The Supreme Audit Institution has carried out some audits related, direct or indirectly, with the implementation of Agenda 2030, such as protected areas,
air quality, and Management of Urban Plastic Waste
e
No information available
f
As there is no specific regulation on SDG, gender and/or green budgeting and reporting, there is no assurance/auditing practices on these topics
g
HM Treasury—Sustainability Reporting Guidance
 8 ASSURANCE AND AUDITING OF SUSTAINABILITY AND NON-FINANCIAL… 123

gender budgeting. The case of Malta, which can be considered a frontrun-

ner in sustainability reporting, is further analyzed in Box 1.
Also in the UK, it can be considered that gender budgeting is audited.
In accordance with Alonso-Albarran et al. (2021), the UK is one of the
few countries where the budget expenditures associated to gender pro-
grams is audited. There are some recommendations in the HM Treasury—
Sustainability Reporting Guidance.
In Norway, the audit is performed by the Office of the Auditor General
of Norway at the central level and is mainly related to the management
and review of the national follow-up of the sustainable development goals.
In particular, a report published on 19-03-2021 pointed out that “the
investigation reveals that the national follow-up from the Norwegian gov-
ernment has lacked both coordination and a comprehensive plan for
implementation of the 2030 Agenda, and that the quality of information
to the Storting (Parliament) on status and progress has been insufficient
(Office of the Auditor General of Norway, 2021).”
In Portugal, although there is not an explicit mandatory assurance of
non-financial reporting, the Supreme Audit Institution develops some
audits of specific programs and policies that can be considered related to
the SDGs implementations. For example, some programs about education
and environmental issues (air quality and management of plastic waste)
have been audited. In other countries, auditing of non-financial reporting
is not mandatory and some voluntary experiences have been developed.
The development of legal basis or guidelines about auditing of non-­
financial reporting is extended to seven countries, in three of them being
only voluntary. For example, in Finland, sustainability reports of central
government organizations are not audited based on State Treasury’s cur-
rent Guidance on Sustainability Reporting in Central Government.
At the regional government level, it is not mandatory in any country
and there are only some voluntary experiences in Austria (only for out-
come goals) and in Switzerland, even if 6 out of the 16 countries analyzed
can be considered as voluntary practice. Similarly, for local government,
only in Malta there is legal regulation about the audit of non-financial
reporting, which can be considered partly mandatory, as it is included in
performance audit and any program or policy can be audited. In Sweden,
although it is voluntary, assurance auditing exists at the local govern-
ment level.
124 I. BRUSCA

Box 8.1 The case of Malta

The Sustainable Development Annual Report is not audited.
However, the National Audit Office has the power to carry out per-
formance audits of government projects and the implementation of
policies, either ad hoc, or on the request of the Minister responsible
for Finance or the Public Accounts Committee. For example, in
February 2021, the NAO published its report on the performance
audit of the effectiveness of plastic waste management in Malta. This
report was the fruit of an audit initiative across a number of coun-
tries, under the auspices of EUROSAI.
Furthermore, the annual financial audit carried out on the Public
Accounts by the NAO may necessitate the audit of a particular proj-
ect or scheme. For example, the 2021 report included the audit of
the project “Electric Vehicle Charging Pillars,” under the (then)
Ministry for Energy, Enterprise and Sustainable Development. But
the audit focused on procurement procedures, rather than the effec-
tiveness of the project in relation to climate change.

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 CHAPTER 9

All That Glitters Is Not Gold:

The Sustainability Puzzle and the Pieces
in Place

Francesca Manes-Rossi, Marco Bisogno, Isabel Brusca,

Eugenio Caperchione, and Sandra Cohen

1   Introduction
The chapters included in this book show a varied landscape in relation to
the adoption of various tools that can support national and sub-national
governments in achieving sustainable development.
This final chapter, rather than summarising the contributions offered in
the book, aims to stimulate further discussion among academics and

F. Manes-Rossi (*)
Department of Economics, Management, Institutions, University of Naples
Federico II, Naples, Italy
e-mail: [email protected]
M. Bisogno
Department of Management and Innovation Systems, University of Salerno,
Fisciano, Italy
e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature 127

Switzerland AG 2024
M. Bisogno et al. (eds.), Public Sector Financial Management for
Sustainability and SDGs in Europe, Public Sector Financial
Management, https://doi.org/10.1007/978-3-031-55135-2_9
128 F. MANES-ROSSI ET AL.

practitioners regarding the implementation and publication of budgeting

and reporting tools related to actions undertaken in an effort to support
sustainable development. In this way, it responds to Bebbington and
Unerman’s call (2020) to advance accounting research in support of a
sustainable society and creates a continuum with latest research on the
topic (Bisogno et al., 2023; Cohen, 2022; Cohen et al., 2023).

2  The Sustainability Puzzle and Its

Inherent Contradictions
The tools discussed so far in the book refer to the entire set of sustainable
development goals defined by the United Nations (SDGs budgeting and
reporting) or prioritise specific aspects of sustainability (gender and green
budgeting, environmental reporting), while others aim to open up oppor-
tunities for dialogue with citizens, ensuring the availability of reliable data
(popular reporting, assurance/auditing sustainability).
The main issue to be discussed is how sustainability and the SDGs are
challenging public financial management and more specifically public sec-
tor accounting. To do so, an initial clarification is needed. Sustainable
development does not come without contradictions. The definition of
strategies and the development of plans and actions that balance conserva-
tion and environmental protection, social equity and economic develop-
ment should not be taken for granted. How can policymakers choose
between reducing unemployment, creating decent working conditions,
reducing gender inequality through investment in new economic activities
and avoiding the negative environmental impact that new factories could

I. Brusca
Department of Accounting and Finance, University of Zaragoza,
Zaragoza, Spain
e-mail: [email protected]
E. Caperchione
Department of Economics “Marco Biagi”, University of Modena
and Reggio Emilia, Modena, Italy
e-mail: [email protected]
S. Cohen
Department of Business Administration, Athens University of Economics
and Business, Athens, Greece
e-mail: [email protected]
 9 ALL THAT GLITTERS IS NOT GOLD: THE SUSTAINABILITY PUZZLE… 129

create by increasing pollution and reducing green areas for the benefit of
industrial zones? How do we reconcile conversion to clean energy through
the creation of renewable resources and the protection of the landscape,
not to mention that some installations may also disrupt land use and wild-
life habitat? To address these long-standing concerns, policymakers need
managerial support, based on data on the costs associated with the imple-
mentation of new technologies, the financial resources that are necessary
and available, and the ways to obtain additional resources for public invest-
ment (Cohen, 2022). But it is also necessary to initiate a dialogue with
citizens to explain how future actions can create a community benefit that
is sustainable from all points of view. One of the major weaknesses recog-
nised in relation to the Millennium Goals, which preceded the SDGs, and
the shortcomings in their achievement, has been the lack of systemic and
thorough governance and accountability mechanisms (Breuer &
Leininger, 2021).
The implementation of the SDGs requires careful consideration of the
national/local context. Despite the efforts made by the United Nations to
decide on targets and indicators in connection with the 17 goals (Ansell
et al., 2022; UN-SDSN, 2016), national and local governments have the
not-trivial task to adapt these goals by considering the specific local eco-
nomic developments, the institutional setting, the environmental charac-
teristics of their territories, as well as societal and cultural values. A task
further complicated by the limited capability of civil servants in managing
data related to these issues, setting aside the lack of credible sustainability
information and the need to adjust information systems to collect the nec-
essary data (Cohen et al., 2023). There is also the need to involve citizens,
businesses and non-profit entities in the challenge, as the coordination of
public and private actors is necessary for the success of the endeavour.
Networks are deemed essential for the success of the 2030 Agenda.
Addressing complex problems—such as social and economic inequality,
climate change, pollution and biodiversity—and managing the implemen-
tation of related public policies which involve multimember communities
and require the investment of huge financial and human resources, ask for
the support of governance mechanisms, including clear relationships
among the different governmental tiers (Biermann et al., 2022). None of
these is straightforward, mainstream or easy to plan and materialise. A col-
laborative leadership is needed to implement new sustainable public poli-
cies in a specific context (Nevens et al., 2013). Transition management
studies (Grin et al., 2010; Pahl-Wostl, 2009) suggest referring to a long-­
term perspective (Rotmans et al., 2001) to investigate complex
130 F. MANES-ROSSI ET AL.

sustainability challenges due to broad transformation processes, which

require involving several actors. To translate innovative ideas and projects
into a practice management framework, van der Brugge and van Raak
(2007) further suggest focusing on different but related spheres, namely
strategic (problem structuring and establishment of the transition arena),
tactical (developing coalitions and transition agendas, evaluating and
monitoring implementation processes) and operational (mobilising actors
and executing projects). Sustainability budgeting and reporting can
smooth the way for the creation of these network governance mechanisms.

3  The Role of Accounting

in the Sustainability Landscape

Having as a starting point the premise that reporting is essential for sus-
tainability achievement, we can infer that accounting tools are necessary in
the process because they are instrumental to accountability, and account-
ability is a means of supporting network governance. “Language and
information—through, for example, the written reports, numbers and
charts of the performance measurement system—play a key role in these
networks” (Brorström et al., 2018).
Accounting data can support sustainability ambitions in several ways.
Data from management accounting systems can enable the measurement
of expenditures and support cost reductions in the production of public
services. All these data are critical for reporting about activities and their
impact on sustainability (e.g., environmental reporting, SDGs reporting,
sustainability reporting, popular/integrated reporting). In addition, they
can set the stage for planning activities that identify financial and non-­
financial resources to be invested for sustainable economic and social
growth (to be included in gender budgeting, green budgeting, SDGs
budgeting). Performance measurement systems and the use of indicators
can support the achievement of goals and targets, redirect invested
resources, but also overcome the myopia of shortsighted performance
measures towards creating a more sustainable public environment.
In this book, we have paid particular attention to accountability tools
that can help politicians and managers to be accountable for their respon-
sibility but also to promote citizens’ engagement in understanding how to
contribute to the design of public services and the establishment of plans
 9 ALL THAT GLITTERS IS NOT GOLD: THE SUSTAINABILITY PUZZLE… 131

to make sustainable development achievable. The chapters included in the

book not only provide insight into how different (financial and non-­
financial) tools have been embraced by national, regional, and local gov-
ernments but also highlight the extent to which these tools are still in their
infancy in terms of wider adoption and use in creating a dialogue with citi-
zens and partners.
We trust that the development of specific standards, prepared consis-
tently with the changes taking place in the international landscape and in
line with the characteristics of public administrations, could encourage
governments, at all levels, to meet these challenges. These standards could
support public bodies in applying their budgeting and reporting tools in
an effective way. The introduction of appropriate standards would force
assurance and auditing activities to follow suit.

4  Challenges from the Varied Adoption

of Budgeting and Reporting Tools
for Sustainability Issues

The adoption and use of tools related to sustainable development in the

public sector that are relevant to public financial management in terms of
sustainability are well debated throughout the book. This is done by both
presenting a summary of the relevant literature on each topic and provid-
ing an updated overview of the state of the art in 16 European countries.
The academic literature has long debated sustainability issues and the
adoption and use of related tools in the public sector, especially over the
past two decades (Gray, 2002; Lodhia & Jacobs, 2013). In particular, dur-
ing recent years, prominent scholars have been calling for more empirical
research to take stock of the state of the art (Abhayawansa et al., 2021;
Bebbington & Unerman, 2020) on sustainability-related accounting,
accountability and reporting issues. This book makes a rich contribution
to this debate.
The literature review revealed that theorising around sustainability
budgeting and reporting tools is infrequent, while the sporadic empirical
research is mostly focused on individual countries. An interesting theoreti-
cal lens refers to sustainability reporting tools being interpreted as means
for dialogic reporting (Grossi et al., 2021) that opens up cooperation
between public entities, citizens and for-profit/non-profit organisations.
132 F. MANES-ROSSI ET AL.

In particular, popular reporting/popular integrated reporting, which

incorporates financial and non-financial information, can play a role in this
dialogue.
Another relevant theoretical framework, which emphasises one of the
pillars of the SDGs—partnership for goals—can be traced to governmen-
tality (Foucault, 1991), as the plurality of actors involved in achieving
more sustainable growth determines the need for coordination through
common, mutually understandable accounting and performance data
(Brorström et al., 2018). More studies are needed to focus on the internal
and external users of budgeting and reporting documents prepared in the
context of sustainability, in order to consistently define the content to be
addressed.
Another unresolved problem concerns the choice between voluntary
and mandatory adoption of the sustainability instruments discussed.
Currently, despite the emphasis on public financial management tools
related to sustainability, their adoption by public entities, when their appli-
cation is voluntary, is limited to individual cases of virtuous entities, and it
seems that a definitive view on whether or not mandatory adoption is
appropriate has not yet matured in academia. Undoubtedly, in most of the
countries covered in the book, all these tools are prepared on a voluntary
basis, providing very heterogeneous documents, although sometimes with
the support of specific national guidelines (e.g., Green Budgeting at the
central level in Portugal or Environmental Reporting at all levels of gov-
ernment in Finland), while mandatory adoption rarely occurs (e.g.,
Sustainability Reporting for central government in Malta and the United
Kingdom, Environmental Reporting in France). The role of public bodies
as regulators clearly emerges: is there a strong political will to support the
preparation and use—both for decision-making and accountability—of
any of the budget and reporting tools discussed? Could guidelines or laws
play a central role in encouraging and supporting public bodies in prepar-
ing sustainability-related documents? In the international arena, sustain-
ability is a hot topic, and the discussion about the possible adoption of
already known frameworks (e.g., the Global Reporting Initiative) or rather
the creation of a specific framework tailored to the needs of public entity
stakeholders (e.g., the IPSASB project on climate change and sustainabil-
ity reporting) are ongoing and require reflection—also based on empirical
research—from academics and practitioners. Research on the undeniable
 9 ALL THAT GLITTERS IS NOT GOLD: THE SUSTAINABILITY PUZZLE… 133

role of review and assurance in the monitoring and reporting of valid

information through all the tools described in the book can be enhanced
by creating references to specific frameworks (Cordery & Hay, 2022).

5  Do We Need to Decide on Non-financial

Reporting Formats in the Public Sector?
As already mentioned, a significant finding from the country cases and
the literature review touching upon the different tools included in the
book is that sustainability reporting, in all forms, is far more heteroge-
neous than expected. This permits adaptation to context particularities
but, on the other hand, provides a fruitful space for purposeful manipu-
lation and hinders comparability. Standardising or homogenising sus-
tainability information for the public sector is an open question.
However, the example of the private sector shows that some standards
are needed to make sure that all the necessary information is reported,
and comparability is facilitated.
There is absolutely no need for the public sector to follow the sustain-
ability standards of the private sector. On the contrary, the public sector
should set the basic pillars governing sustainability reporting, the needs of
the users, the users per se and set up a conceptual framework to meet the
overarching needs of sustainability information. The public sector can
influence sustainability more than the private sector. The public sector sets
the policies and the legislation, it can provide motives through taxes and
grants, and it can equally set penalties and sanctions in case of no compli-
ance. But despite the public sector’s great power in setting the scene for a
sustainable future, the way it reports on sustainability remains fragmented
and voluntary, more qualitative than quantitative and when quantitative,
more budgetary focused and less cost-related.
So, do we need new international standard-setting bodies for sustain-
ability reporting for the public sector? What is the role of the European
Commission in the process that started with the EU taxonomy for sustain-
able activities and the European Sustainability Reporting Directive
(ESRD)—but with a sole focus on the private sector? Is it time to create a
synthesis of the existing sustainability models and frameworks or to start
from scratch to set up sustainability reporting models? Is there a compro-
mise solution that builds on what seems to work and expands on
134 F. MANES-ROSSI ET AL.

addressing areas that are adequately covered? While there are no clear-cut
answers to any of these questions, sustainability reporting and account-
ability for sustainability cannot be left at the discretion of public sector
governments and poor political will.

6  Concluding Thoughts
While we acknowledge the importance of budgeting, accounting and
reporting as facilitators towards sustainability achievement, we also feel
that some critical reflections on this premise should be made. The first
refers to the actual value-added contribution of these tools to sustainabil-
ity. It remains to be assessed with empirical data and relevant studies
whether the adoption of budgeting and reporting tools with reference to
sustainability ends up with adding an extra burden to public administra-
tions which remain incapable of leading to real change (Niemann &
Hoppe, 2018), or if it even produces a symbolic adherence without con-
crete change. Ad hoc theoretical frameworks—such as transition manage-
ment studies (Grin et al., 2010; van der Brugge & van Raak, 2007)
mentioned previously—are required to conduct research on sustainability,
concentrating on the network governance mechanisms underlying the
implementation of sustainable public policies and the related information
provided through budgeting and reporting tools. It is maintained here
that focusing only on disclosure issues, investigated through, for instance,
the classical dichotomic approach of the legitimacy theory would be insuf-
ficient (Deegan, 2019).
Secondly, scholars still struggle to demonstrate that budgeting and
reporting tools are well received and understood by citizens. Research
findings on the possible creation of a virtuous circle, that is availability of
understandable information on sustainability issues, increased citizen
engagement, co-creation of sustainable public services, sustainable devel-
opment, can not only offer concrete evidence confined to academic dis-
cussions but also affect sustainability reporting actions performed by
practitioners, consultants, policymakers and public managers.
Third, an overlap between different but related tools may arise; for
instance, SDGs, sustainability and environmental reporting could provide
information on similar or identical issues. Having parallel tools without a
clear definition of their scope and then the threshold among them could
determine redundancy and repetition, as well as additional administrative
costs. Furthermore, this overlap could also affect the virtuous circle
 9 ALL THAT GLITTERS IS NOT GOLD: THE SUSTAINABILITY PUZZLE… 135

mentioned above, hindering the development of a dialogue with citizens

and, more generally, all the actors involved in the implementation of sus-
tainable public policies.
We can conclude by echoing a statement regarding the need to recon-
sider accounting when it comes to public value creation: “rethink account-
ing in the light of wider values than the traditional focus on finances,
efficiency or effectiveness, opening up the scope for calculative practices to
account for ecological needs and renewal and for accounts to increasingly
rely on multi-modal and alternative formats, channels and ‘preparers’ than
traditional accounting and accountants” (Bracci et al., 2021, p. 1514).

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