A new report says the pressure is on New Zealand exporters to prove that their environmental credentials are sound.
It says this is essential to protect the country’s competitive advantage, in light of steadily expanding scrutiny overseas regarding climate change, and environmental, social and governance (ESG) reporting.
The report was issued by the law firm Chapman Tripp and an environmental lobby group, The Aotearoa Circle, which was founded by the late Sir Rob Fenwick.
It says over 60% of world GDP is now subject to mandatory climate-related disclosure (CRD) measures, either proposed or already in force.
It cites a global body, the Task Force on Climate-related Financial Disclosures, for this information.
The report says these rules affect important markets for NZ exports, and could apply to large exporting companies and even reach down to smaller groups that are part of their supply chains.
“A New Zealand exporter who supplies an overseas customer that is subject to mandatory CRD may face requirements to supply climate-related information and/or meet low emissions targets to continue supplying that customer,” the report says.
It says there is a growing matrix of agreements and voluntary undertakings to impose either mandatory rules or wide-ranging consumer preferences which will have to be faced up to by exporting companies. These deal with many social and environmental issues, such a greenhouse gas emissions, deforestation, and labour standards, such as child labour or even slavery.
“In addition to established frameworks such as the Global Reporting Initiative Greenhouse Gas Protocol and the Science-based Targets Initiative, there is now also widespread uptake of voluntary reporting under new initiatives such as the Task Force on Nature-related Financial Disclosures,” it says.
“The interplay between these private standards and requirements and regulatory requirements is an evolving picture.”
The report goes on to say climate protection is built in to free trade agreements with the UK and EU, and any backsliding could theoretically bring back the tariffs that were so painstakingly wound down.
“With 80% of New Zealand’s exports by value going to markets that have mandatory ESG reporting in force or proposed, businesses which want to proactively manage ESG trade risk would do well to stay attuned to these developments.”
The Chapman Tripp / Aotearoa Circle report cites Fonterra as a company that announced on-farm emissions reduction targets last year, in response to 30% of its customers being expected to require measures like these by 2030.
It says Zespri has made 88% of its packaging either recyclable, reusable or compostable. And Silver Fern Farms has produced certified grass-fed Net Carbon Zero red meat, where the equivalent of 100% of end-to-end emissions have been absorbed by vegetation growing on the farms where the animals were raised.
The report contains a map showing just how big the challenge is. All the big markets – the European Union, United States, India, Japan and Brazil – have mandatory CRD reporting, and a second tier of nations – Canada, Australia – are following in their wake.
The thresholds for compliance vary, according to criteria such as the size of turnover or whether exporting companies have a branch in the market they are exporting to.
The report carries an important message, according to Chapman Tripp partner and co-author Nicola Swan.
“New Zealand is increasingly dependent on trade and offshore capital – we cannot afford to fall behind on increasing global demands on climate risk, Greenhouse Gas Emissions and broader ESG capability,” she said.
The CEO of The Aotearoa Circle, Vicki Watson, said her organisation was built to focus on the restoration of natural capital.
“So we are well aware of the rapid change that is happening in ESG reporting worldwide,” she said.
“But seeing a snapshot of these in one place is telling … this trend is not going away.”
