Corporates under pressure to front up on their environmental impact

Sunday, 10 September 2023

Plastic waste is polluting the world’s oceans. The companies that generate the plastic are not held to account for the damage their products cause.

Big businesses are doing boot camps to prepare for a world demanding they come clean over their impact on nature and biodiversity.

Fonterra, Genesis Energy, Mercury, ANZ, Westpac, Silver Fern Farms and Zespri are all boot-camping in preparation for the next big thing in company reporting; Nature-related financial disclosure.

Corporate New Zealand continues to gear up for the first year of legally-mandated climate-related financial disclosure, which requires them to reveal their emissions, and the risks that climate change poses to their business.

But in September, the first global standards for nature-related financial disclosure will be published by the Taskforce on Nature-related financial disclosures, which is funded by multi-national companies, and some governments, including Australia, but not New Zealand.

At first nature reporting will be voluntary, but big companies anticipate it will not be long before they are adopted into domestic law.

Genesis Energy’s sustainability general manager Kate van Praagh expects it to follow the same path as climate-related disclosures for large companies and fund managers, which began as voluntary, but ended up being written into law.

2023 was a tough year for the whio as the number of breeding pairs measured nationally dropped by 15% to 587. The decrease is linked to flood damage which made it difficult for traps to be reset. Video supplied by Genesis Energy.

But it will happen much faster, she says.

It will not make much sense to require climate-reporting, but not nature reporting, she says.

“It’s two sides of the same coin, climate impacts and biodiversity impacts. You can’t have one without the other, and that’s being increasingly acknowledged.” she says.

”There has to be more scrutiny on it.”

Annabelle Chartres, sustainability partner at PwC, has been running the Aotearoa Circle’s boot camps for big businesses.

The boot camps are focused on domestic nature impacts, which is why the farming sector, and the banks, which lend to local businesses, participated.

It is also probably why big retailers did not participate. Larger retailers like The Warehouse Group source products grown and manufactured from all over the world, with their suppliers having their own impacts on nature and biodiversity.

In climate-related disclosure the climate impacts of suppliers are called scope 3 emissions, and retailers are already showing they know they bear responsibility for the nature impact equivalent of the products they sell.

The Warehouse Group, for example, stocks a mind boggling number of products, many wrapped in plastic. The Ministry for the Environment Manatū mō te Taiao estimated in 2020 less than 30% of the country’s plastic waste ended up being recycled.

Just how many products The Warehouse Group stocks is indicated by its claim that 35,600 of its private label products have some “sustainable attributes”, though these products represented just $213 million of its total sales of $1.8 billion.

Those big retailers, have the biggest task ahead of them, Chartres says, along with big KiwiSaver managers.

Larger KiwiSaver funds can hold investments in thousands of companies all over the world, each one with their own impacts on nature and biodiversity.

“Nature, and the complexity around it, is by an order of magnitude, so much larger and more complex,” Chartres says.

Annabelle Chartres from PwC has been leading boot camps to teach large companies how to tell the public about their impacts on nature.

“When companies start to look at this it strikes a little bit of fear into their hearts.”

The aim of nature-related financial disclosure has the same aim as climate-related financial disclosure – to increase transparency, and force companies to reduce their impact on the planet.

But while it’s a big thing for companies, the public appears to see nature-related impacts as lower down their priority list than climate, and is currently crowded out by cost-of-living pressures.

Private companies have enormous impacts on natural systems such as rivers. In the future, large listed building companies look likely to have to address issues in their supply chains like forestry slash.

Genesis latest annual report indicated power company’s ’ environmental footprint (distinct from climate emissions) was joint fourth of the 10 most important issues for “stakeholders”, but it was lower still when only the bill-paying general public was concerned, van Praagh.

Nature-related reporting by large companies currently engage in is not comprehensive, and tends to focus on positive stories, such as Genesis’ joint work on the Whio Forever project with the Department of Conservation.

The whio, sometimes still called the Blue Duck, evolved to live on fast-moving streams, and Genesis’ project with DOC grew out of a recognition of the impact Genesis’ dams have on the waterways whio live in.

Though it’s been a bad year for the whio because of the extreme weather in January and February, the project has doubled the number of breeding pairs since 2011.

“For retail customers, whenever we go out and ask specific questions, there’s a real positive response on that,” van Praagh says.

Kiwibank customers do not see the bank’s impact on nature as something they worry about.

“But if you look at the rest of our materiality assessment, keeping the lights on, and energy wellbeing are going to win every time.”

Kiwibank’s stakeholders put “biodiversity and ecosystems” as the second-lowest of 20 important issues, ahead of only “financial performance and shareholder value”.

Kiwibank rated it as the one it had the least ability to make an impact on.

But that kind of attitude has now started to change in banking when it comes to climate change, with bank KiwiSaver schemes ejecting fossil, and even smaller banks beginning to assess the environmental credentials of borrowers.

On Tuesday, Heartland Bank, the country’s eighth-largest retail bank, said it had for the first time introduced an “environmental risk screening tool” to assess the sustainability credentials of business and rural loan applicants.

Nature-based reporting is likely to focus big KiwiSaver managers on the nature impacts of the companies they invest in, says Kate Brownsey, a sustainability analyst at the ethical Pathfinder KiwiSaver scheme.

“It’s coming. Not enough people are doing it yet, but they are increasingly being expected to,” she says.

KiwiSaver managers have had to scramble to respond to many failures to invest in the way the majority of their customers expect; on land mines, on cluster munitions, on nuclear weapons, on tobacco, on fossil fuels, on misinformation, and on animal cruelty in the cosmetics industry.

But there are still new nature-related issues KiwiSaver schemes will have to face up to, and, if nature-related financial disclosure does become accepted, even law, will increasingly have to report on.

Plastic waste is polluting our environment.

“Plastic is coming up. Babies are born with microplastics in their systems,” she says.

It doesn’t take much drilling down into big KiwiSaver funds to find investments in companies copping flack, for example, on plastic packaging.

Buried in ANZ’s KiwiSaver portfolios is an United States retailer that individually-wraps potatoes in plastic for sale.

Estelle Parker, executive manager of programmes at Responsible Investment Association Australasia.

Other examples of companies that have a high use of plastic include Coca-Cola, Pepsico and Walmart in the US. There are also big Australian and New Zealand retailers like The Warehouse along with China General Plastics and Dow Chemical.

New Zealand is taking part in global negotiations to establish an international plastics treaty.

Climate, and nature-based financial disclosure is also concerned with revealing emerging risks to investors.

Under the climate-related financial disclosure laws, banks and insurers are having to tell investors what climate change, sea level rise, and weather pattern changes will mean for their businesses.

Auckland lawyer Lydia Chai tells Parliament's Environment Select Committee in June why politicians should ban exports of plastic to developing countries.

Nature-based financial disclosure was one of the topics at August’s Responsible Investment Association of Australasia’s (RIAA) conference in Auckland.

RIAA’s Estelle Parker says there are large companies in Australia and New Zealand that have “pilot-tested” the developing nature-related financial disclosures, but there is a feeling among some of being “overwhelmed”.

Fund managers recognised this, and are putting pressure on companies they have money invested in to identify those risks, she says.

“They have a whole lot of major risks on their balance sheets that they have not identified.”

Perhaps highlighting the risks that can suddenly emerge for companies in the plastics area is Lydia Chai’s bid to have Parliament ban the export of plastic to be recycled to developing countries.

Her petition, which followed her discovering the extent of plastic pollution in the land of her birth, Malaysia, resulted in a Parliamentary select committee inquiry, which has now recommended plastic exports be restricted and monitoring increased.

Australia brought in such a ban, forcing the country to deal with its plastic waste itself, though it has had to temporarily roll that back as plastic mountains grew.

Public demand for companies to report on their impacts on nature is beginning to grow.

“Nature is so much part of the New Zealand identity,” Chartres says.

“We can touch it and feel it, and think about this country, and its natural beauty and its tangible assets.

“The idea of protecting it, restoring it, valuing it really resonates,” she says.