Six of our lawyers attended last month's inaugural Sustainability Leaders' Summit in Auckland. The Summit provided an insightful platform of cross-industry discussion and connection between some of New Zealand’s most respected sustainability executives.
Here are our top takeaways from the event:
1. Leading with purpose:
A number of speakers emphasised the importance of setting the "why" for their organisation's corporate sustainability journey. The amount of work required on key issues like climate change and biodiversity can feel overwhelming, and starting with a clear purpose can support organisations to identify which initiatives are most worth pursuing.
While financial success remains a critical metric for most organisations, there has been an increasing trend over recent years towards recognising a broader definition of what creates business value, including Environmental, Social and Governance ("ESG") factors. Indeed, in August 2023 section 131 of the Companies Act 1993 was amended to "clarify" that directors may consider broader factors than profit maximisation, including ESG factors, when making decisions about what is in the best interests of the company. While that amendment faced substantial opposition, and is likely to have more of a "signalling" than substantive effect, it arguably reflects a trend towards a more "stakeholder" theory of corporate governance in New Zealand and internationally.
2. Transparency and reporting:
The need for transparency around sustainability matters was a key theme of discussion at the Summit, with conversations focussed on the impacts of New Zealand's mandatory climate-related disclosures regime as well as trends towards voluntary disclosure in broader sustainability areas such as nature-related risks.1 A key reflection was that, while reporting frameworks such as mandatory climate-related disclosures are robust and influence organisations to integrate sustainability issues into their governance and risk management frameworks, stakeholders are most interested in the concrete steps that organisations are taking to implement their sustainability goals.
2023 has been a significant year for the development of frameworks for sustainability reporting. For an overview of recent developments, see our ESG 2023 round-up and trends to watch here.
3. Greenwashing, greenhushing or greenwishing:
Greenwashing has been a major theme throughout 2023, with organisations increasingly aware of the need to ensure that any public statements they make in relation to sustainability matters are fair, not misleading, and able to be substantiated. This theme was reflected upon at the Summit, with discussion also focusing on the need to avoid "greenhushing" (avoiding making public claims about sustainability initiatives to reduce legal risk) and "greenwishing" (making public statements about ESG goals without defensible plans to achieve them). Organisations face both legal and business imperatives not to engage in all three of these behaviours.
Greenwashing litigation has been trending upwards overseas, particularly in relation to claims against fossil fuel companies in relation to their disclosed climate change plans, and we are seeing a similar focus in New Zealand. For example, Lawyers for Climate Action New Zealand has launched a claim against Z Energy in relation to Z Energy's advertised transition plans. While the outcome of that claim remains to be seen, it serves as a reminder that public statements about sustainability issues are likely to be closely scrutinised, including whether high level statements are supportable by reference to more detailed plans.
4. The need to collaborate:
Another key theme of the Summit was the need for organisations, individuals and government to work together to solve their sustainability issues. This extends to both collaboration within an organisation and externally.
In terms of internal collaboration, organisations who do this well will have robust governance processes in place to foster collaboration, including by ensuring that there are clear procedures for identifying, managing and monitoring sustainability-related risks. Ensuring that sustainability permeates all levels of the organisation is key to unlocking opportunities and ensuring that funding flows to the right places.
In relation to external collaboration, as highlighted in our recent update, businesses (especially competitors) wishing to collaborate do need to bear in mind their obligations under the Commerce Act 1986 and ensure that any potential competition law concerns are addressed. The Commerce Commission last week released its final Collaboration and Sustainability Guidelines, which aim to assist businesses to understand when collaboration with competitors for sustainability objectives may raise competition law concerns.
5. More to sustainability than the "E" in ESG:
Finally, while much of the sustainability conversation has focused on environmental (particularly climate change) issues in recent years, speakers at the Summit invited delegates to adopt a broader definition of sustainability, including the broader impact of business operations on communities.
One example of this broader definition of sustainability is the increasing focus on supply chain transparency both in New Zealand and further afield. In that regard, and as highlighted in our recent ESG 2023 round-up and trends to watch, modern slavery legislation has been proposed in New Zealand and we expect the proposals to progress in some form under the new Government.
[1] While some discussion at the Summit centred on the potential for mandatory nature-related reporting to be introduced in New Zealand, the current Government has not signalled a regime of that sort and we consider that any such regime is likely to be some time away (if one emerges at all). See our update
here.