18th Jun 2024 Gemini 1.5 Pro
Geri Ward, Director of Climate Change and Sustainability Services at EY New Zealand, expresses a profound sense of regret among corporate sustainability professionals. This sentiment stems from the awareness that the current environmental crisis, including floods, droughts, wildfires, and species extinction, was foreseeable and preventable. Despite years of efforts to promote sustainability, the global environmental indicators continue to worsen. Ward attributes this failure to the approach taken by corporate sustainability advocates, which often involved downplaying the true costs and challenges associated with sustainability. She argues that a more honest and direct approach, acknowledging the need for significant changes in business practices, would have been more effective.
Ward highlights the stark contrast between the alarming trends in environmental degradation and the inadequate response from corporations. While there has been a significant increase in the number of companies setting sustainability targets, these targets have not translated into meaningful action. This discrepancy, she argues, stems from a culture of minimizing the urgency and magnitude of the issue, leading to a disconnect between the stated importance of sustainability and the concrete actions taken.
I would go way further than sobering. You know, I think there's an enormous sense of regret in corporate sustainability in New Zealand at the moment for those of us that have worked in it for a long time because it's kind of like, you know, we saw this train coming down the tracks and we knew this was going to happen and now it's happening.
Ward points to a consistent global trend known as the “value action gap.” This gap reflects the discrepancy between the high value that people place on sustainability and the limited actions they take to support it. While a majority of individuals acknowledge the importance of sustainability, only a small percentage make conscious consumption choices that align with their values.
This gap is particularly pronounced in New Zealand, where factors like a high reliance on renewable energy sources and rising living costs create unique challenges. The availability of renewable energy reduces the perceived urgency for individual action, while increasing living costs make sustainable choices, which are often more expensive, less accessible for many.
Everyone in the world says that sustainability is important to them, right? ... But then only about 17-20% of people are actually making those decisions. So the value is there. People are valuing sustainability, but the action is not.
A significant development in New Zealand’s corporate sustainability landscape is the mandatory adoption of the Task Force for Climate-Related Financial Disclosures (TCFD) framework. New Zealand is the first country in the world to implement this framework, requiring 200 of its largest companies to disclose their climate-related risks in their annual reports. This move represents a significant shift in the regulatory landscape, pushing businesses to concretely assess and address their climate risks.
This mandatory disclosure framework is already influencing boardroom conversations, as climate change is no longer seen as a distant threat but a present financial risk. Companies are now required to develop and disclose transition plans outlining their strategies for adapting to a low-carbon economy. This shift in perspective is forcing businesses to consider the long-term viability of their operations in the face of climate change.
So from this year, New Zealand companies mandated legally, 200 New Zealand companies are mandated legally to disclose their climate-related risks as part of their annual report, which is huge. That's a globally significant move from New Zealand, and that's great.
Ward acknowledges the influence of Environmental, Social, and Governance (ESG) investing, primarily driven by initiatives in the United States. She cites Larry Fink, CEO of BlackRock, as a pivotal figure in shifting the perception of ESG investing from altruistic to financially sound. Fink's advocacy for "conscious capitalism" frames ESG considerations as essential for long-term profitability.
However, Ward emphasizes the need to go beyond mere compliance and reporting in ESG efforts. She stresses that genuine sustainability efforts require a holistic approach, recognizing the interconnectedness of environmental and social issues. She highlights the importance of viewing climate change and nature degradation as inseparable challenges, as climate change exacerbates existing social inequalities and disproportionately impacts vulnerable communities.
I'm really heartened to see the leaders globally and in New Zealand start talking about climate and nature as one thing. Because if you look at the increasing extreme weather events as a result of climate change, the thing that is impacted more than anything is nature, right? So they cannot be disassociated from each other.
Ward emphasizes the crucial role of regulation in driving meaningful change in corporate sustainability practices. She draws parallels with New Zealand’s robust health and safety culture, attributing its success to strong regulations and director liability. She argues that similar legal frameworks are necessary to ensure that sustainability becomes ingrained in corporate behavior.
She acknowledges the challenges businesses face in adapting to these changing expectations, including resource constraints and a lack of expertise. However, she maintains an optimistic outlook, suggesting that this transition period will lead to a future where sustainability becomes everyone’s responsibility, integrated into all aspects of business operations.
The board are liable for the climate outcomes of the industry, entity that they sit on the board of. So interestingly, that comes through from the board level. Everyone's like, I don't know or care about sustainability. I don't even believe in climate change, but all of a sudden I'm personally on the hook for this. All of a sudden I'm sitting up and paying attention.
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