The Environmental Opportunity
What would a sustainable New Zealand look like? Most would agree it would include a well-educated and healthy population, a successful economy, vibrant communities and a healthy natural environment.
But while these aspects of our lives are dependent upon each other, governments mainly focus on quantitative economic statistics such as GDP growth, communities mainly focus on their current needs and corporates mainly focus on short-to-medium-term profits. Few focus on the health of the ecosystems that all this depends on. New Zealand, more than most, is dependent on looking after its natural environment for its long-term success.
There are encouraging signs of change. There is growing evidence suggesting businesses that proactively manage their impacts on society and the environment achieve broader benefits and competitive advantages than just brand protection and risk management. These include: attraction of talented staff; securing access to resources; anticipation or avoidance of regulation; and identifying new business opportunities.
Companies that have this holistic view of the environment and the society in which they operate, and use it to determine business strategy, achieve better longterm returns for shareholders.
Investors also recognise the importance of having transparent, focused and quality information about how companies manage the risks and opportunities associated with broader environmental and social impacts.
Until recently this information has only been provided on a voluntary basis but capital markets, including those in places like South Africa, Australia and the European Union, have now started to ask for aspects of this information to be disclosed as part of the listing rules.
As an accountant I have always liked the fundamental principle of ‘what gets measured gets managed’.
Bringing in more mandatory reporting of how companies are managing their sustainability issues, and how they are performing in these areas, is a step in the right direction. The challenge will be in understanding what sustainability impacts a company actually has and developing meaningful measures of corporate performance. Boards need to get involved to ensure a company’s sustainability philosophy is integrated into its core strategy or the real benefits will not be achieved.
At national levels, the concept of using GDP as the main indicator for national prosperity is being challenged, with numerous alternative measurements and indices, including “Prosperity without Growth” (UK), “Mismeasuring Our Lives – Why GDP Doesn’t Add Up” (France), the Social Progress Index (socialprogressimperative.org) and others being promulgated.
These all reflect the reality that economic growth is only a means to an end and that we cannot continue to overstretch our natural limits or live safely or prosperously in highly unequal societies.
Closer to home the Treasury has established its Living Standards Framework and The Ministry for the Environment, together with Statistics NZ, have released their proposed Framework for Environmental Reporting.
In answering the question “How will we get to a sustainable 2050?” we need good-quality information about where we are now, agreement on national priorities, to work together collaboratively and measure our progress on the road to achieving our vision for the future.