Cli­mate con­trol

Kirsten Pat­ter­son talks sus­tain­abil­ity

Sunday Star-Times - - BUSINESS -

Cli­mate change is not ‘fake news’ and sus­tain­abil­ity is not just about the en­vi­ron­ment. In fact, cli­mate change is be­com­ing main­stream and is now crit­i­cal to long-term busi­ness sus­tain­abil­ity.

De­spite pop­u­lar opin­ion, di­rec­tors are fo­cused on the longterm sus­tain­abil­ity of or­gan­i­sa­tions they gov­ern, not just short-term share prices.

Take the 2016 Paris Agree­ment on cli­mate change, which was signed by 175 coun­tries in­clud­ing New Zealand.

The goal is to sta­bilise global warm­ing at less than 2 de­grees Cel­sius be­low pre-in­dus­trial lev­els and move to­wards a net zero car­bon emis­sions econ­omy by the sec­ond half of the cen­tury.

The Trump ad­min­is­tra­tion an­nounced is was ’’def­i­nitely, com­pletely and un­doubt­edly leav­ing the ac­cord’’, yet over 1,500 United States busi­nesses worth more than $1.4 tril­lion, in­clud­ing Google and Ap­ple, an­nounced in June that ‘‘We’re still in’’ and have com­mit­ted to the Agree­ment, de­spite their Pres­i­dent’s op­po­si­tion.

Mod­ern gov­er­nance al­lows boards to take a po­si­tion on eco­nomic and so­cial is­sues they could not, or would not have done 20 years ago.

Boards care about cli­mate change. Sus­tain­abil­ity is no longer a fringe is­sue but is on their agenda, with 56 per cent of di­rec­tors in the In­sti­tute of of Di­rec­tors (IoD) Sen­ti­ment Sur­vey say­ing en­vi­ron­men­tal and so­cial is­sues were very im­por­tant to their busi­ness.

To help di­rec­tors thrive in to­day’s dis­rup­tive and chal­leng­ing en­vi­ron­ment and help them nav­i­gate through these volatile and un­cer­tain times, the IoD’s corner­stone pub­li­ca­tion: The Four Pil­lars of Gov­er­nance Best Prac­tice has been up­dated. Re­leased to IoD mem­bers ear­lier this month, it re­flects to­day’s new nor­mal, in­clud­ing a brand new chap­ter on sus­tain­abil­ity.

Chair and CEO of the world’s largest in­vest­ment firm, Black­Rock’s Larry Fink, said in his 2016 cor­po­rate gov­er­nance let­ter to CEOs: ‘‘At com­pa­nies where ESG (en­vi­ron­men­tal, so­cial and gov­er­nance) is­sues are han­dled well, they are of­ten a sig­nal of op­er­a­tional ex­cel­lence.’’

In­vestors, share­hold­ers and con­sumers are ask­ing more of busi­nesses and are get­ting tough on en­vi­ron­men­tal and so­cial is­sues. Con­sumers want to know more about the ori­gins and com­po­si­tion (in­clud­ing sup­ply chain) of prod­ucts, em­ployee con­di­tions and treat­ment, and cor­po­rate prac­tices. They want to know their choices con­trib­ute to so­cial good.

In re­cent weeks, the $35 bil­lion NZ Su­per Fund an­nounced its re­duc­tion in high-car­bon stocks, with 40 per cent of the over­all fund now low-car­bon with the goal of mak­ing it more re­silient to cli­mate change. NZ Su­per Fund CEO Adrian Orr, said its ‘‘fo­cus on ad­dress­ing cli­mate change risk is in line with cur­rent global best prac­tice by in­sti­tu­tional in­vestors.’’

The NZ Su­per Fund tran­si­tion in­volved re­lo­cat­ing $950 mil­lion worth of shares away from com­pa­nies with ex­po­sure to high car­bon emis­sions.

It’s now just weeks away un­til the new NZX Cor­po­rate Gov­er­nance Code comes into ef­fect. It means com­pa­nies will have to dis­close - on a com­ply or ex­plain ba­sis - in­for­ma­tion in re­la­tion to en­vi­ron­men­tal, eco­nomic and so­cial sus­tain­abil­ity risks, how those risks will be man­aged and how tar­gets are mea­sured. This brings New Zealand into line with many other coun­tries and is crit­i­cal for trust and con­fi­dence in our com­pa­nies and our mar­kets.

Cli­mate change is not about com­pli­ance, it’s about sur­vival. We need lead­er­ship and gen­uine com­mit­ment from all boards for long-term sus­tain­abil­ity. Kirsten Pat­ter­son is chief ex­ec­u­tive of the In­sti­tute of Di­rec­tors.

SO­CIAL ME­DIA

Recog­nis­ing cli­mate change and be­ing aware of busi­ness re­spon­si­bil­ity, is now main­stream.

SUP­PLIED

In­sti­tute of Di­rec­tors Chief Ex­ec­u­tive, Kirsten Pat­ter­son

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