ACCA Urges Use Of Green Budgeting To Help Malaysia Achieve Sustainability Goals

ACCA (the Association of Chartered Certified Accountants) applauds the intention of the Malaysian government to make green economy one of the key focus areas under the upcoming revised Budget 2023.

In line with this objective, the global professional accounting body encourages the Malaysian government to adopt green budgeting to identify priorities and options for action to enable the country to achieve an environmentally sustainable economy and fulfil its commitments against climate change.

ACCA sees climate change as the defining challenge of the present generation, increasingly affecting lives and livelihoods worldwide each year. Malaysia is not spared from this global challenge, and therefore, as in the case for public sector organisations across the world, it is crucial for the Malaysian government to take the lead in the country’s response to the challenges associated with climate change, and set an example by minimising the impact of its own activities on the climate and the environment.

“One of the most powerful tools a government can use for climate action is its annual budgets. National budgets matter, as they not only provide a statement of intent, but they also put government objectives into action. And therein lies the importance of green budgeting, which is an approach that integrates climate change and environmental considerations into budget processes and decision-making,” Andrew Lim, Portfolio Head, ACCA Maritime Southeast Asia explains.

“We believe it is timely and urgent for the Malaysian government to adopt green budgeting to ensure that the country remains on the right track to realising its goals of reducing its greenhouse gas emission intensity by 45% across the economy based on the gross domestic product by 2030, compared to 2005 levels, and eventually, becoming carbon neutral by 2050, as outlined under the 12th Malaysia Plan covering 2021-2025,” Lim adds.

In its recently published Professional Insights (PI) report, titled “Green Budgeting: A Toolkit for Public Sector Finance Professionals”, ACCA sets out the reasons for considering green budgeting and the methods that can be adopted. It notes that green budgeting is a wide-ranging concept and can involve different approaches.

The toolkit also outlines the basics of green budgeting, focusing on the role of finance professionals in turning goals and ambitions into tangible plans. It highlights examples of green budgeting methods and sets out the steps for making green budgeting a success, while emphasising the importance of ownership by the finance function to make climate action a priority.

“Essentially, our toolkit is a handy guide that provides practical and simple steps that finance professionals can take to implement green budgeting approaches in their organisations,” says Lim.

In addition, the toolkit includes case studies from public sector organisations across the world that have implemented green budgeting approaches, highlighting examples from Singapore, London, Canada, Kenya and Odisha, India.

“Public sector organisations across the world are increasingly using the tools and methods of green budgeting to implement plans to help them meet their climate and environmental targets. Their efforts set examples from which other countries, including Malaysia, can learn,” Lim adds.

At a recent dialogue session for the revised Budget 2023, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim reportedly said green economy would be one of the priorities of the new government. He emphasised that sustainability must be taken into account for long-term economic growth of Malaysia.

According to ACCA, there are three overarching principles to consider at the outset of implementing green budgeting for the best chance of success. These key principles are: political will, building on existing processes, and a whole public sector approach.

“Political will, especially at the outset, is a crucial enabling factor for green budgeting to succeed. While the process is often initiated by officials, securing support from the political leadership of the government will ensure this approach is more likely to take root.

“We know that public sector organisations face resource constraints, which have only increased since the pandemic. However, green budgeting does not require costly new systems or extensive external support. Most green budgeting practices can build on existing systems and processes, and still allows policymakers to align budgets more closely with their climate change and sustainability goals.

“Nevertheless, for green budgeting to be effective, it must be adopted at different levels of the public sector. Implementing this at every level of the public sector will help the government develop a coordinated approach, enabling all organisations to share good practice and provide opportunities to innovate,” says Lim.

Above all, finance professionals must be at the centre of green budgeting approaches in public sector organisations, ACCA argues. It points out that professional accountants’ skills and the roles they undertake in the public sector equip them to support their organisations in each of the five key steps to implementing green budgeting, namely,

  • developing a baseline
  • prioritising spending with the most impact
  • categorising and monitoring spending
  • ensuring external review; and
  • learning and improving.

These steps also highlight two of the most widely used practices, that is, green budget tagging and evaluation approaches such as environmental impact assessments and environmental cost-benefit analysis.

“Over time, green budgeting should enable the Malaysian government to divert from activities and investments with negative impact on the environment towards more sustainable and climate positive actions, and thus, accelerate the transition to a more sustainable society,” concludes Lim.

To read the full “Green Budgeting: A Toolkit for Public Sector Finance Professionals” PI Report, kindly download from this link. For more information, kindly log on to www.accaglobal.com.

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