Technical / Understanding the requirements on sustainability reporting

Up to 2015/16, there have been two rule books for trust and foundation trust accounts – the Department’s Manual for accounts and what was Monitor’s Annual reporting manual. While both allow for environmental reporting, neither could be said to have been particularly bossy about it.

In a section on performance analysis (paragraph 2.15), the Manual for accounts says that organisations should provide information on its key performance measures. There are no direct requirements for sustainable development reporting, though the Department says requirements for such reporting would be advised of in frequently asked questions. There was no mention of sustainability in any of the FAQs issued by the Department in 2015/16.

The Annual reporting manual goes a little further, but not much. ‘The annual report may, at the NHS foundation trust’s discretion, include additional reporting covering sustainability, equality, and the NHS Constitution,’ it says in paragraph 7.7.

In 2016/17, there will be a single group accounting manual covering the accounts of all NHS bodies. And on the face of it, a tougher stance does seem to be emerging. The consultation draft says helpfully: ‘Reporting entities are expected to comply with mandatory sustainability reporting requirements. It is envisaged that such reporting will be integral throughout the annual report and accounts and not a separate standalone report.’

This begs an obvious question: what are the mandatory reporting requirements? The place to look is the Treasury’s Financial reporting manual (FReM).  Both the 2015/16 and the 2016/17 FReMs (paragraphs 5.2.10 and 5.2.11) repeat the ‘comply with mandatory requirements’ call and underline that reporting should be integral and not separate from the annual report.

It adds that ‘entities falling within the scope of reporting under the Greening government commitments’ should also report performance against sustainability targets.

An annex flags up environmental and sustainability guidance, but even the most recent version of this guidance states explicitly that NHS bodies are not covered by the requirements. It adds that the NHS has its own carbon reduction strategy and also assesses performance using the ‘Good Corporate Citizenship tool developed with the Sustainable Development Commission’.

The lack of clarity – or at least detail – appears to have influenced actual practice. Analysis undertaken by the SDU shows that only one third of annual reports for CCGs and NHS providers included a good sustainability report in 2014/15.

However, there are specific requirements for NHS bodies to report on sustainability. CCG annual reporting guidance for 2013/14 – and still live on the NHS England site – confirms this for CCGs, while, for NHS providers, the requirement comes from the terms and conditions written into the NHS standard contract. A provider must ‘demonstrate progress on climate change adaptation, mitigation and sustainable development’ and, importantly, ‘provide a summary of that progress in its annual report’.

Providers looking for further details are pointed in the direction of Sustainable Development Unit guidance on sustainable development management plans. This does suggest that marginal abatement cost curves could be used in annual reports to explain environmental performance. But that is the only mention of annual reports. For those putting reporting into practice, the SDU produces detailed reporting guidance and provides checklists and reporting templates.

The 2016/17 group accounting manual is currently out for consultation. Healthcare Finance understands that the SDU has been in discussions with the Department about strengthening the clause in paragraph 2.15, and there is an expectation that this will happen.

There is a good argument that sustainability can help organisations meet existing financial challenges. But improving the clarity around reporting requirements would be a good first step.