Released 6 August 2021, the report Will the Future be Pleased with Us? examines the business sustainability approaches of New Zealand’s twenty largest businesses by revenue. Its purpose is to aid discussion within the business community about the challenges facing larger firms as they seek to mature their business sustainability practice and integrate sustainability into their core business.
Read the executive summary and key findings, below.
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Will The Future Be Pleased With Us?
NZ Inc Sustainability: an examination of approaches
New Zealand’s largest businesses can be pleased with the sustainability platforms they have built to date. All the Rev20 businesses have a non-financial purpose or commitment. Almost all report their sustainability performance, use the SDG framework, consider climate change mitigation to be material and support SDG 13 with GHG targets, including some scope 3 emissions. Most also consider company culture and capabilities to be material, and produce a modern slavery statement. Many have an executive in charge of sustainability, require sustainability competences on the board and consider climate change adaptation to be material.
This is firm ground from which the Rev20 can step up to global best practices and leap further into leading nationally on emerging topics. They can easily enhance enterprise value through incremental improvements in ESG. They should be really excited about their potential to develop long term value through more fully integrated strategies and substantial (and substantiated) impacts, which remain relatively uncharted waters.
Rev20 businesses have very light international sustainability profiles, which affects how they are perceived by global investors and other bench-marking bodies. On the world stage, Rev20 businesses demonstrate competence but not leadership in their approach to sustainability, adopting best practices at a mainstream pace. The investment world sees New Zealand’s large, listed businesses as low to middle performers on sustainability criteria, representing medium to high ESG risk. The sustainable development world sees New Zealand’s influential players as slow starters, just beginning their journeys into systemic industry transformation. These perceptions suggest that current business sustainability approaches in New Zealand are not delivering a world class bang for their buck, and consideration must be given to adopting new approaches in order to catch up, and keep up, internationally.
A lack of sustainability-related regulation creates an uneven playing field. Those businesses that operate in Australia adhere to its modern slavery regulations, while others need not; listed issuers will adhere to a new law mandating TCFD reporting, while others need not. The Government must work harder to support progressive business change and ensure that sustainability is a competitive proposition.
Rev20 businesses are hugely varied in key areas of sustainability management. Roughly half do, and half do not, obtain independent assurance of ESG data, submit environmental data to CDP, use GRI disclosure standards, produce a TCFD statement, publish GHG emissions data in a separate report, integrate sustainability elements into core business strategy, consider equity, diversity and inclusion to be material or have a Rainbow Tick. Those that do not do these things are behind their peers.
Next steps are harder, but will bring opportunities and rewards, because changing from BAU, however it is done, is a marketable asset and an investor drawcard.
Rev20 sustainability leaders have reached a decision point on climate action. Having exhausted many of their most obvious incrementalistic opportunities, they are faced with making changes to their business model in order to move to the next level. Some have begun to integrate climate action into core strategic thinking, but are hesitating to radically shift their business model to achieve their climate ambitions. Their question should not be what is the business ready to do next, but backcasting from the 2050s, what will future executives be glad the business chose to do.
Being a sustainable business means making an effective contribution to sustainable development. This isn’t about hyping small impacts. It is about net positive value across the whole business shared by shareholders, society and the environment.
Unlocking 21st century value will demand bold change in the boardroom. Everything pivots on a governance body that is across the issues, has its eyes on the horizon and its mind on what lies beyond, and is prepared to let go of the rope of BAU. Boards need to have a sustainability committee and ought to be considering appointing an advisory panel populated with provocateurs and strong subject matter experts, and getting comfortable with being made to feel uncomfortable on a variety of environmental and social impact topics.
Sustainability management roadmaps should include adopting double materiality and widely assessing material topics, targeting all scope 3 emissions, progressing from GRI Core option to Comprehensive option, providing reasonable assurance of disclosures, following SDG Impact Standards and SDG Disclosure Recommendations, achieving the Gender and Accessibility Ticks, moving circularity up the ladder, setting verified science-based GHG targets, setting other science-based targets (eg water, air quality) and factoring nature loss mitigation and adaptation into business decisions.
Rev20 businesses eager to join the leading edge of business sustainability can commission impact assessments, map business effects quantitatively to SDGs and adopt progressive impact accounting techniques, all of which demonstrate to impact-driven investors in clear, familiar terms that decision-making is informed and shared value is real. The future would be pleased.
The graph below shows the number of Rev20 businesses that do (red) or do not (blue) demonstrate a sustainability approach.