Staff Article

The Dawn of Sustainable Accountability: Integrating Sustainability Reporting into Zimbabwe's Public Sector Accounting

Zimbabwe is at a pivotal moment, embracing a journey towards enhanced transparency and accountability in both, the public sector and the private sector. While private entities are already stepping into the realm of mandating sustainability reporting, a compelling case is emerging for the public sector to follow suit, given the public interest in the nation’s most vital resources. This article explores the evolving landscape of sustainability reporting and public sector accounting in Zimbabwe, highlighting the wins, some challenges, and the undeniable need for Government entities to embrace this comprehensive form of accountability, alongside their adoption of International Public Sector Accounting Standards (IPSAS).

The imperative of sustainability reporting

Sustainability reporting, which covers Environmental, Social, and Governance (ESG) matters, extends beyond traditional financial reporting/statements, to provide a holistic view of an entity’s impact on society and the environment. For the public sector, this could include transparency in disclosing how Government ministries, departments, parastatals, and local authorities manage public resources, deliver services, and contribute to the well-being of current and future generations.

Globally, sustainability reporting has moved from a voluntary, principles-based exercise to a more structured and, in many jurisdictions, mandatory component of corporate reporting. Standard-setters such as the International Sustainability Standards Board have issued comprehensive frameworks, International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (notably IFRS S1 and S2) aimed at enhancing consistency, comparability, and decision-usefulness of sustainability disclosures. At the same time, regulators across major economies, including the European Union through the Corporate Sustainability Reporting Directive (CSRD), are embedding sustainability reporting into legal and regulatory requirements. These developments reflect a broader global shift toward transparency on ESG matters, driven by investor demand, climate risk considerations, and the need for long-term value creation.

Against this backdrop, Zimbabwe has also made notable strides, In Zimbabwe, the push for sustainability reporting has gained significant momentum. Regulators, in particular,  the Public Accountants and Auditors Board (PAAB), the Zimbabwe Stock Exchange (ZSE), and the Victoria Falls Stock Exchange (VFEX), have announced mandatory submission of sustainability reports for  listed entities with financial years commencing on or after 1 January 2024 (Joint Regulatory Statement on Sustainability Reporting – PAAB, ZSE, and VFEX). This critical development in the private sector sets a powerful precedent, building capacity and expertise that can, and should, eventually cascade to public entities.

The adoption of IFRS S1 and S2 by Zimbabwe, though their mandatory implementation for all entities is still being phased in, signifies a commitment to aligning with global best practices. This move is crucial for enhancing investor confidence and promoting responsible resource management across the economy.

International Public Sector Accounting Standards (IPSAS): A foundation for sustainability reporting

Sound public sector accounting is the bedrock upon which effective sustainability reporting can be built. Zimbabwe embarked on a significant reform journey with the formal adoption and launch of the International Public Sector Accounting Standards (IPSAS) implementation plan in 2019. This transition from a cash-based to an accrual-based accounting system, with a target for full implementation across central government, local authorities, and selected parastatals, is a monumental step towards greater transparency, accountability, and uniformity in financial reporting.    

IPSAS, by providing a comprehensive framework for recognising, measuring, presenting, and disclosing financial information, inherently supports sustainability reporting. It enables public entities to better track their assets and liabilities, including potential environmental liabilities and investments in sustainable infrastructure. This accrual basis of accounting allows for a more complete picture of the long-term financial implications of public sector activities, which is vital for assessing their sustainability.

The elephant in the room: Government’s resource stewardship and why IPSAS alone is not enough

Unlike private entities, the Zimbabwean Government, through its various ministries, departments, parastatals, and local authorities, is not merely a stakeholder in the nation’s resource management, it is the primary steward. For example, the vast swaths of national assets and critical services under public control include, but not limited to:

  • Mineral mining – Government-owned or controlled mining entities often dictate the pace and methods of extraction, directly impacting the environment, local communities, and the long-term availability of finite resources.
  • Road construction and infrastructure development – Decisions on infrastructure projects, from material sourcing to environmental impact assessments and community displacement, have profound and lasting sustainability implications.
  • Wildlife and national parks– The management of Zimbabwe’s invaluable wildlife resources, a cornerstone of its tourism industry and biodiversity, rests squarely with government agencies.
  • Electricity generation – The energy mix, whether reliant on fossil fuels or renewable sources, is a direct outcome of government policy and investment, determining the nation’s carbon footprint and energy security.
  • Water resources – From dams to irrigation schemes and urban water supply, the sustainable management of this vital resource falls under public purview.
  • Money supply and economic policy – Broader economic policies and resource allocation decisions by the government profoundly influence societal equity, poverty reduction, and the overall trajectory of sustainable development.

In essence, the Zimbabwean Government’s actions, or inactions, on these fronts directly shape the environmental, social, and economic well-being of the nation. Without transparent reporting on these impacts, citizens, investors, and international partners are left in the dark.

While IPSAS provides enhanced financial transparency, it primarily focuses on monetary value. It may show the cost of a mining operation or an environmental clean-up, but it doesn’t explicitly reveal:

  • The environmental impact of mining (e.g., deforestation, water pollution, greenhouse gas emissions).
  • The social consequences of infrastructure (e.g., community displacement, job creation, impact on indigenous populations).
  • The governance structures that ensure ethical and sustainable management of wildlife or water resources (e.g., anti-corruption measures, stakeholder engagement).
  • The long-term sustainability of current consumption patterns for finite resources.

This is precisely where sustainability reporting fills the critical gap, providing the qualitative and quantitative non-financial data necessary to assess the Government’s performance in managing the very resources it controls for the benefit of all.

The compelling case for public sector sustainability reporting

The need for Zimbabwean Government entities to embrace sustainability reporting, alongside their IPSAS journey, is justified by several compelling reasons:

  1. Enhanced accountability and trust – As the primary custodian of national resources, the government has a fundamental duty to be accountable to its citizens. Sustainability reports offer a transparent window into how public entities are managing environmental assets, addressing social inequalities, and upholding good governance. This fosters greater public trust and legitimacy, vital for national cohesion.
  2. Informed decision-making and resource allocation – With comprehensive sustainability data, Government planners and policymakers can make more informed decisions regarding resource allocation, infrastructure development, and policy interventions. This allows for a proactive approach to mitigating risks (e.g., climate change impacts, resource depletion) and capitalising on opportunities (e.g., green economy initiatives).
  3. Attracting responsible investment and development aid – Global investors, development partners, and financial institutions are increasingly scrutinizing ESG performance. Transparent sustainability reporting by government entities signals a commitment to responsible governance and resource management, enhancing Zimbabwe’s attractiveness for much-needed foreign direct investment, concessional loans, and development aid that aligns with sustainable development goals.
  4. Meeting international obligations and UN Sustainable Development Goals (SDGs) – Zimbabwe is a signatory to numerous international agreements on climate change (e.g., Paris Agreement) and sustainable development. Sustainability reporting provides a go-to framework for Government entities to systematically track, measure, and report on their contributions towards these national and international commitments.
  5. Risk management and resilience building – Reporting on environmental risks (e.g., drought, flooding, biodiversity loss) and social risks (e.g., inequality, public health crises) allows government entities to identify vulnerabilities and develop robust strategies for mitigation and adaptation, building national resilience.
  6. Improved efficiency and cost savings – The process of preparing sustainability reports often forces entities to assess their resource consumption (e.g., energy, water) and waste generation. This can uncover inefficiencies, leading to cost savings through improved operational practices.
  7. Driving behavioural change and innovation – By setting sustainability targets and publicly reporting on them, government entities can incentivise internal behavioural change, promote innovation in sustainable practices, and encourage responsible conduct throughout their operations.
  8. Responding to evolving stakeholder expectations – Citizens, civil society organisations, and even employees are increasingly demanding more than just financial performance from their governments. They want to know that public entities are acting responsibly and contributing positively to society and the environment. Sustainability reporting addresses these evolving expectations.

Progress and Challenges on the Path Forward

Zimbabwe’s commitment to sustainability is evident in various ongoing initiatives:

  • National Development Strategy 1 (NDS1) – This national blueprint integrates sustainability principles across various sectors, promoting climate-resilient agriculture and natural resource management.
  • Renewable energy drive– Significant investments are being made in solar energy and other renewable sources.
  • Nationwide tree planting initiatives – Efforts to combat deforestation and improve air quality through extensive tree planting campaigns are underway.
  • Clean Green Zimbabwe Initiative – This UNICEF-supported programme focuses on strengthening climate resilience by empowering children and young people as environmental stewards.
  • Professionalisation of Public Sector Accountants – The Institute of Chartered Accountants of Zimbabwe (ICAZ) and other professional bodies are offering IPSAS certification programs to equip public sector finance professionals with the necessary skills for accrual-based accounting and, implicitly, for future sustainability reporting.

Despite this progress, Zimbabwe faces several challenges in fully embedding sustainability reporting within its public sector:

  1. Capacity building and expertise – A significant hurdle is the shortage of skilled personnel in public entities who understand both accounting standards and sustainability principles.
  2. Data collection and management – Gathering accurate and comprehensive data on environmental, social, and governance metrics can be complex.
  3. Lack of a coherent policy framework – While broad policies exist, a more detailed and specific framework guiding sustainability reporting for public entities, beyond what is currently mandated for listed companies, is needed.
  4. Funding and resources – Implementing robust sustainability reporting systems requires financial investment in technology, training, and personnel.
  5. Political interference and corruption – As noted in various studies, challenges such as political interference, inconsistencies, and corruption can undermine efforts to achieve transparency and accountability.

Recommendations going forward: Integrating IPSAS and Sustainability

For Zimbabwe to fully harness the benefits of sustainability reporting in its public sector, a concerted and collaborative approach is essential, and the following actionable items are suggested:

  • Develop a national sustainability reporting framework for the public sector – Building on existing regulations for listed entities and the IPSAS implementation, a tailored framework for government entities would provide much-needed clarity and consistency.
  • Invest in human capital development – Comprehensive training programs for public sector accountants and other relevant staff on sustainability reporting standards, data collection, and analysis are paramount.
  • Leverage on technology – Investing in integrated financial management information systems (FMIS) and sustainability management software can streamline data collection, analysis, and reporting.
  • Promote a culture of sustainability – Beyond mere compliance, there is a need to foster a deeper understanding and appreciation for sustainability principles within the public sector, from leadership down to operational levels.
  • Enhance stakeholder engagement – Public entities should actively engage with citizens, civil society organisations, and other stakeholders in identifying material sustainability issues and communicating their performance transparently.
  • Strengthen oversight and Assurance – While assurance of sustainability reports is not yet mandatory, the long-term goal should be to incorporate independent assurance to enhance the credibility and reliability of reported information.

Zimbabwe’s journey towards comprehensive accountability is dual-faceted. The ongoing IPSAS implementation provides a strong financial backbone for public sector entities. However, the true measure of a government’s stewardship, particularly since it controls the majority of a nation’s resources like minerals, wildlife, and infrastructure, lies in its commitment to sustainable practices, and comprehensive sustainability reporting. By integrating robust sustainability reporting with the financial discipline of IPSAS, Zimbabwe’s public sector can become a leading force in driving the nation’s sustainable future, ensuring that public resources are managed with the long-term well-being of its citizens and the environment in mind. The time for the public sector to lead by example in sustainable accountability, just as its private counterparts are now mandated to do, is unequivocally now.

– Richard Rapozo