Climate is now a governance priority
Last year, the New Zealand Government made climate communications a governance priority when it passed legislation mandating climate-related disclosures for around 200 entities.
Boards need to focus on elevating climate communications in a way that meets reporting requirements and supports reputation.
In the webinar, Jane Sweeney, Executive Chair of Anthem, outlined some basics for effective climate reporting.
She noted that this is new territory for many boards and the metrics and terminology can be overwhelming for those new to climate reporting. However, the principles and standards frameworks which form the climate-related disclosures provide some useful structure for communications.
Learning from the early adopters
A 2021 Forsyth Barr report on market-leading disclosure highlighted a number of companies in the electricity sector who were actively communicating their climate story. The report outlined how they were able to articulate the risks from physical changes brought on by climate change but also demonstrated to their stakeholders that the benefits should exceed the risks.
Fonterra recently won the Australasian Reporting Award Gold Award for Sustainability Reporting for its 2021 report. Other organisations to have gained recognition for the quality of their reporting on climate matters include Sanford, Port of Tauranga, Transpower and the Zealandia – Karori Trust.
The key to their success included their conciseness, the external verification of their data, using international reporting frameworks to provide a comprehensive analysis and commentary, holding themselves accountable, and discussing where they have yet to meet their climate goals.
Each went beyond the requirements and standards and recognised that a cookie-cutter approach that only ticks regulatory requirements will be tuned out.
Named and Shamed
Laggards, those who engage in greenwashing or those who don’t take climate risks and opportunities seriously could face issues in raising capital and reputational damage. Jane highlighted that boards that sign off on sub-standard or misleading climate reporting risk being named and shamed.
She discuss a case study of criticism faced by global retail chain H&M which caused them to take a global reputation hit. And she outlined that boards really need to improve their climate reporting. She highlighted a PWC review in July 2022 of New Zealand climate reporting performance which found that local companies barely scored a pass mark for climate risk reporting. Only three out of 15 companies examined discussed the impact of climate-related risks in their financial statements.
Principles of good climate reporting
Jane highlighted that good climate reporting must be rooted in verifiable facts – not fiction – and provided some core principles:
- Measured and realistic
- Progress and honesty
- Reasonable expectations
- Honest, authentic, and a little bit bold
- Avoid jargon
- Acknowledge stakeholder interests
- Avoid box ticking.
Before considering what your company or organisation has to say about climate, there are two vital questions every board needs to ask:
- who are we talking to?
- how are we addressing climate risks and opportunities in our business strategy?
Organisations need to take a broader view – using an outward-looking lens that tells the story about the climate impacts they are managing and responding to that will also impact stakeholders and ultimately the value and reputation of the organisation.
Carolyn Mortland was the Director of Global Sustainability at Fonterra until 2021 and is now a director and sustainability advisor. She highlighted that the board has both the opportunity and responsibility to set the strategy for climate action. Reporting needs substance and the board must drive the strategy first and foremost.
Her simple advice was to be transparent, honest and bold. For authentic communication paint the vision of where your business and your industry needs to go, backed up by targets and don’t be afraid to share challenges and failures.
Fonterra as an early exemplar
When approaching the disclosure process, the Fonterra board asked for guidance and chose to adopt the Global Reporting Initiative (GRI) framework. This framework helped the board in terms of identifying what needs to be disclosed, similar to a financial or audit process.
Fonterra already had an established disclosure subcommittee which was critical for this new content. The subcommittee was able to determine how to incorporate the risks, challenges and failures. Regular reporting from management throughout the year also made it easier to approve the annual disclosures.
Carolyn suggested that adopting a disclosure framework, even if not yet mandatory, gets you to the standard you need to be for future investment and growth. The XRB standards provide a useful tool to embed climate into business operations.
Collective action to drive change
Caren Rangi, among other roles is Chair of the Arts Council of New Zealand Toi Aotearoa, and Director of Pacific Cooperation Broadcasting Limited. She emphasised that significant change is only going to happen from significant collective action. Boards are the decision makers and stewards of our organisations and need to play a key role to be the stewards of our environment.
Caren highlighted that the Pacific region is the most impacted in the world by climate change. Directors in New Zealand have a responsibility to our neighbours in the region who are feeling the physical effects of climate change on a daily basis. The actions and mitigations we take will impact the region as a whole.
Holding companies to account
Caren discussed the role of the media as an instrument to amplify narratives and embed climate action in the public psyche. There must be a larger responsibility on the media to be using that lever for good especially in public broadcasting. The media must be clear about the process businesses are undertaking and doing so in a transparent way. Collective responsibility is critical.
Advice for creative and NFP sectors
While not yet subject to mandatory climate-related disclosures, Caren outlined her motivation to propel herself and her boards into starting this journey. While there are less evident markers in creative sector, it doesn’t mean climate change is not an issue.
Caren’s advice was to understand the impact and footprint of the organisation, to educate yourself through tools such as the Climate Lexicon and to join up with others where there are common issues, risks and see how we might tackle this together.
Where to start
Caren’s advice was to take it back to the purpose of the organisation and understand the impact that climate change will have on our ability to achieve that purpose. Work out the opportunities and risks that are involved and use those as a starting point to develop strategy.
Reporting is just part of the journey. A company can win award for their open, transparent, robust reporting but still not make the progress needed in meeting their climate goals.
Reporting also tends to be backward looking. Today we need to be forward looking and move beyond the emissions discussion to adaptation. There will be moments where the metrics are not met or there are changes in strategy but we need to be clear on what our objectives are. While there is an element of caution, there will be more sympathy for companies who are prepared to put their goals on the table and say what it is we stand for. The frameworks will evolve over time but the advice is to start and start well.
Opportunity for innovation and engagement
Climate change is going to drive massive innovation. We are already seeing examples in the energy and food sectors and we will start to see it across sectors – through the evolution of processes, products and business models. This challenge will drive change which makes it an exciting time to be a director. It will also drive engagement with employees, customers and communities - throwing businesses right into the middle of issues that are impacting our society.
The session included a Q&A session. For the responses, please refer to the on-demand recording.
These insights are a broad summary of the topics discussed in the webinar and not direct quotes from the panellists.