Corporate sustainability trends from Europe, the US and Australia have flowed steadily towards Aotearoa/New Zealand, lifting the bar for Kiwi companies.
Corporate sustainability work has changed in three main ways: it is increasingly specialised, strategically connected and scrutinised.
- More specialised because we’re seeing the end of general, catch-all processes that take a wide-but-shallow view of a company’s sustainability performance. Instead, companies are being asked to explore sustainability ‘niches’: climate risks and strategy, modern slavery risks and mitigative measures, and (soon) biodiversity risks and responses. Doing this effectively requires both expertise and tailor-made processes.
- More strategically connected because sustainability concerns have been reframed in the corporate language of ‘risks’. Companies are also being asked to give explicit attention to the impact on their operating environment, business strategy and (ultimately) financial performance. The emergence of double materiality, for example, connects sustainability directly to a company’s financial performance. Meeting this challenge requires collaborative efforts across teams, including procurement, finance, risk and strategy.
- More scrutinised because the audience for a company’s sustainability performance is both wider and better-informed than ever before. Regulators and investors are demanding richer, more sophisticated information on a company’s sustainability risks. Audiences will no longer tolerate anything that whiffs of a box checking exercise.
But where’s the proof? Where are these trends visible? Consider the emergence of the following pieces of corporate sustainability work, triggered by legislation and evolving norms in reporting, from Europe, the US and Australia.
In 2017, the European Commission recommended the use of ‘double materiality’ as an extension to dangerously vague traditional materiality processes. Simultaneously, in 2017, the Taskforce of Climate-related Financial Disclosures (TCFD) published its initial recommendations and guidance for corporate climate-related disclosures, focused on climate risks and impacts on strategy. The TCFD followed up last year with several vital pieces of updated and supplementary guidance.
In 2018, Australia introduced legislation to combat the risks of modern slavery domestically and in the supply chains of Australian companies. Its Modern Slavery Act followed the style and form of the UK’s own Act from 2015. Dozens of Kiwi companies were captured under the Australian legislation.
Within Aotearoa, a handful of companies have already heeded these developments, either by legal necessity (modern slavery) or ‘voluntarily’ (though perhaps through investor pressure; TCFD, double materiality). New domestic legislation will make these pieces of sustainability work more relevant. Specifically, the External Reporting Board (XRB) is already well down the path of installing New Zealand’s mandatory climate reporting regime, modelled on the TCFD framework and set for implementation in 2023. Kiwi companies with turnover of more than $20 million look set to be eligible for new requirements under New Zealand’s proposed modern slavery legislation.
To remain high-performing or even credible on sustainability, good businesses in Aotearoa need to quickly begin adapting to these changes.
BWD is a boutique sustainability strategy and design firm based in Sydney, Australia, and operating around the Asia-Pacific, the US, and here in Aotearoa/New Zealand. Using our award-winning sustainability processes and sophisticated design skills, BWD has already delivered examples of each of these pieces of sustainability work to NZX-listed companies within Aotearoa. Given the growing need, we’re now looking to expand our domestic client base further, specifically with companies looking for professionally rewarding, amiable and high-performing partnerships with their expert providers for sustainability and design.