Sustainable Business and Finance: The pressure is growing

Belinda Mathers (right) onsite assessing a Toitū carbon-reduction-certified organisation TDX and its CEO Colm Hamrogue.

Toitū-certified organisations are required to measure their carbon emissions to international standards and provide evidence of reduction efforts to stay on the programme.

“There are many pressures on businesses,” says Toitū chief science and advisory officer Belinda Mathers. “They face challenges staying profitable at a time when there are cost increases and other problems to deal with. This means they could view their work dealing with climate change as an add-on. But that’s not what we are seeing. At least not at the best-performing companies.”

That’s because there is a correlation between taking climate action and performance. She says: “The most efficient organisations are low-carbon organisations. Most activities that create emissions cost money, which means emissions reductions often fund themselves over time.

“We have organisations that work with us to do exactly this. They might, say, decide not to spend on carbon credits this year and instead put that money aside for emissions reduction projects. This makes them more efficient over time.”

Toitū's role is to give businesses the science and tools they need to improve their carbon and environmental performance. It is a company owned by Manaaki Whenua — Landcare Research, a government-owned Crown Research Institute.

“We’ve been certifying companies for 20 years now. We started before the standards were written; we were working on frameworks rather than standards in the early days. Some clients have been with us for 15-plus years, measuring their footprints and reducing emissions over time.

“One of our key differentiators is that we are not just about measuring, we are absolutely about emissions reduction. If organisations are not achieving a reduction over time, then they can’t remain in our programmes. If they’re not going in the right direction, then we will suspend them from our programmes.”

There are organisations and industry sectors that Toitū chooses not to work with. “We don’t want to find an organisation is pinning its entire sustainability story around reducing greenhouse gas emissions when it is making major negative impacts elsewhere.”

Toitū is the only accredited greenhouse emissions programme in Australasia. It has been accredited since 2008 by JASANZ, the independent, third-party Joint Accreditation System of Australia and New Zealand.

This gives it internationally recognised accreditation that aligns with overseas standards.

The framework Toitū uses to measure greenhouse gases and carbon emissions is built on ISO standards. This is widely recognised as international best practice. It means that if a supermarket from overseas wants to buy meat from a certified New Zealand business such as Silver Fern Farms, it can be sure the certification is validated and not mere greenwashing.

Mathers says this is essential. “We’re not going to greenwash our way out of climate change. Nor are we going to measure our way out of climate change. We must actually reduce emissions and be really clear that that’s what we are doing.”

The pressure on businesses and organisations to reduce emissions is growing.

Mathers says it comes from company boards, investors and government departments.

At the same time, there is another source of pressure from suppliers, customers and other stakeholders who want to make better decisions for the environment and that extends outside their organisations.

Measuring and reporting on carbon emissions often starts with larger companies and those smaller organisations who want to make a difference. As they require their suppliers to provide information, over time it works down the value chain to smaller businesses. Some of the pressure on New Zealand businesses comes from overseas. “Danone, Nestle and other big companies that use a lot of our dairy products demand that kind of information so they can do their own value chain reporting”.

An example of how this works is with Fonterra.

Toitū certifies the dairy giant’s products which gives it a unique selling point in many international markets and enables it to win tender pitches against rivals.

The bar for emissions reduction continues to climb.

Companies can get further today than they could five years ago. The technology gets better, electricity grids get greener, the fleet is replaced with more electric vehicles. These things all change over time.

Mathers says the rising bar is great for the overall goal of reducing emissions. “We have organisations that have been working with us a long time and there is always a risk they might get to a point where they say there is nothing more they can do.

“But that hasn’t happened yet with any of our customers because something new always comes up. It could be a new technology, or the price comes down for something that was expensive and now it is feasible. At the same time, we review our programmes regularly to make sure that they stay aligned with best practice.”

Mathers often takes part in conversations with colleagues in similar organisations overseas where there is an exchange of ideas.

She says from these discussions it becomes clear that Toitū is up to date with what is going on in the rest of the world despite representing a relatively small, remote nation.

Increasingly, Toitū's work is tied up with investors and the finance sector. Today’s investors can face a reputational risk if they put their money into businesses that have a negative climate impact.

Many financial institutions want to have a better understanding of the climate impact of the investments on their books. It can be to reduce their own value-chain emissions over time, but it is also about managing risk. They also face mandated climate-risk disclosures.

“Somewhere between 170 and 200 of New Zealand’s biggest companies are directly affected by these mandates. We are working with close to half of them. Over time this will trickle down and that will expand.”

Another growing area of activity for Toitū is providing the necessary documentation for sustainable finance loans.

“Usually the loan has an element of greenhouse emissions reporting and reduction requirements. These are often balanced with other environmental and social benefits.

“An example is Summerset, the retirement village operator. It has a sustainability-linked loan with a requirement to reduce emissions over time. There are also requirements about adding dementia care beds to the portfolio, diverting waste from landfill and similar matters.

“It’s a mixture of requirements but it is largely about emissions efficiency over time. That requires certification from us to show the lender the measurements are robust.”

· Toitū Envirocare is an advertising sponsor of the Herald’s Sustainable Business and Finance report.