Today's business leaders are now judged on their authenticity in bringing this to life and their ability to consider the broader societal and environmental implications of how they operate and generate revenue.
Where is New Zealand in regard to this journey?
While sustainability and climate change are increasing areas of focus for New Zealand businesses, it's still an evolving landscape with differing levels of maturity. We know the intention is there; PwC's 2020 CEO Survey, showed that 70 per cent planned to increase long-term investment in sustainability and ESG initiatives over the following three years and 67 per cent had factored in climate change and environmental damage into their strategic risk management activities. However, without standard reporting frameworks and clearly defined targets, many organisations are left wondering where to start. The recently passed Climate-related Disclosures (CRD) legislation is the first of its kind for New Zealand and has the potential to make a significant contribution to New Zealand's 2050 carbon neutral goal. The External Reporting Board is in the process of developing the reporting standards to support this legislation which will require entities to disclose according to the standard for accounting periods that start on or after 1 January 2023.
This legislation impacts New Zealand's largest listed companies and financial institutions, representing around 90 per cent of our financial services sector. It's worth noting that the reporting scope covers the entire value chain, not just what goes on inside the business.
To understand the maturity of disclosures, PwC New Zealand analysed the current climate-related disclosures provided by the NZX 100 listed entities in their annual sustainability reports against the Task Force on Climate-related Financial Disclosures (TCFD) framework. Our analysis showed while some companies are making good progress, for most there is a large amount of work to be done to bring the TCFD disclosure framework into mainstream reporting.
If we take this as a reflection of the wider ESG space, the single most important thing companies can do is prepare and front foot it.
There are a number of steps businesses can take to prepare, beginning with a formal gap analysis as a starting point to develop and implement a plan of action that's both tactical and strategic, which can then be embedded into the company culture and decision-making. This is also an opportunity for industry to come together and share their insights to learn and better understand what is expected.
Industry collaboration will benefit all participants in such a rapidly-changing environment.
Global expectations
This is also crucial for Aotearoa because, as a small trading nation, we're incredibly reliant on our international trading relationships. Our products need to stand up to the scrutiny of global supply chains and giants such as Walmart, Unilever and Nestle who have set ambitious sustainability targets that leave no room for superficial efforts. One-fifth of the 2,000 largest companies in the world have made commitments to be net zero, and these companies have excellent brands, governance and boards. Any business within their supply chain will also need to meet those commitments and the message is clear — companies that adapt will win more business, those that don't will lose business.
All of us need to play our part to ensure trust in Aotearoa — and our place in these supply chains — is high, as the repercussions of not doing this are huge.
Trusted leaders and brands are tied to accountability and authenticity in a way we've never seen before. Those that don't adapt, risk losing their licence to operate. Expectations of company behaviour are changing incredibly rapidly, impacting access to markets, customer loyalty and purchasing decisions, and the attraction and retention of talent. Organisations are changing and anyone that fails to embrace a view of value that reflects a more holistic and clearly defined set of core values risks being left behind.
Where there is risk, there is opportunity, and the benefit is an increasing substance to how companies are "showing up" in the markets they operate in, the products and services they sell, the environmental, ethical and social impact of their value chains and the corporate culture they seek to espouse.
● Annabell Chartres is Partner Sustainability & Climate Change Leader, PwC New Zealand.
