Last month, Russell McVeagh and Te Whakahaere were pleased to host a "Nature for Business" seminar in Wellington and online with Vicky Robertson, ex-Chief Executive of the Ministry for the Environment.
After sharing her reflections on the interrelationship between New Zealand's economic interests and the protection of nature, Vicky joined Russell McVeagh's Head of Climate Change, Hannah Bain, for a fireside discussion of some of the issues facing businesses in this fast-moving area.
Below, we reflect on four key nature trends for businesses to watch, reflecting Vicky's insights as to how businesses can drive change in this area.
Understanding and disclosing nature-related risks and opportunities
Both the New Zealand economy as a whole and many individual organisations in it are heavily dependent on natural capital. At the same time, New Zealand's biodiversity is in crisis, with the Ministry for the Environment highlighting in its Environment Aotearoa 2022 report the significant threats to our native species and ecosystems. Internationally and domestically, threats to biodiversity are receiving increased attention from investors and consumers, and failure to take action to protect biodiversity can cause significant market and reputational risks for New Zealand businesses.
Against that background, Vicky highlighted that organisations that wish to ensure their long-term resilience can be taking steps now to understand and respond to their nature-related risks, impacts and opportunities, with the key message being "just start". While understanding risks is a critical part of this, organisations that understand their opportunities will also be well placed to access capital for future growth.
Internationally, pressure is building for organisations to not only understand their nature-related risks, opportunities and impacts, but also to report them in disclosures similar to the climate disclosures being widely adopted internationally (including in New Zealand). A major source of this pressure is investors and consumers, although the following regulatory developments are also relevant:
In late 2022, the United Nations Biodiversity Conference (COP15) culminated in the adoption by 188 governments (including New Zealand) of the Kunming-Montreal Global Biodiversity Framework (GBF), which aims to halt and reverse biodiversity loss by 2030. The GBF is made up of four overarching goals, together with 23 targets. At a high level, target 15 of the GBF sets an expectation for parties should take legal, administrative or policy measures to encourage and enable business to regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity. While the GBF is not legally binding, New Zealand's political commitment to target 15 contributes to growing international pressure on this issue.
The Taskforce on Nature-related Financial Disclosures (TNFD) released its final framework for the disclosure of nature-related financial risks in September of this year. The TNFD has received international support through endorsement by G7 Finance Ministers, and (if adopted) requires organisations to report on their nature-related risks and opportunities using the same four pillars as adopted by the Taskforce on Climate-related Financial Disclosures (TCFD), being governance, risk management, strategy and metrics and targets. The parallels between the TNFD and the TCFD are deliberate and should encourage entities globally to think about assessment and disclosure of nature- and climate-related risks and opportunities in an integrated way.
More broadly, the international landscape for nature-related reporting is continuing to develop. For example, the EU requires nature-related disclosures as part of its Corporate Sustainability Reporting Directive, the UK has signalled the potential introduction of TNFD-style reporting, and nature is also relevant under the International Sustainability Standards' Board's recently released standard IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information.
We are not aware that any of New Zealand's major political parties have signalled the introduction of a mandatory nature-related disclosures regime in New Zealand, with the result that any such regime is likely to be some time away (if at emerges at all). We expect, however, the voluntary adoption of nature-related disclosures to increase over time as organisations respond to the increased trend towards disclosure overseas. We also expect the pace of change to be swifter than in relation to climate-related reporting, reflecting the pressure from the market together with organisations being able to leverage the good work already done in the climate space. Company directors will also be mindful of their directors' duties, which are increasingly being understood in light of the risks posed by the twin climate and biodiversity crises.
Given the well-documented interrelationships between climate change and biodiversity issues, businesses that seek to assess their climate-related and nature-related risk in an integrated fashion will be best placed to both protect themselves against the impacts of climate change and the biodiversity crisis, and to take advantage of commercial opportunities in the green economy.
Collaboration is key
Given the interconnectedness of New Zealand's ecosystems and natural resources, collaboration (both inter-business, and between business and government) will be essential to tackling the biodiversity crisis and ensuring that businesses are well prepared for changes in natural systems over the coming years.
In our discussion, Vicky highlighted that organisations and other groups that have done the work and can bring system- or sector-level solutions to the table for discussion with government will be well positioned to influence the policy and regulatory change required to turn their nature-related ambitions into reality.
The need to collaborate to solve big problems is not new. Indeed, it is widely recognised in the context of the climate crisis, given that many of the transformations needed to transition to a low-emissions economy require systems-level approaches. However, 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. Earlier this year, the Commerce Commission released its draft Collaboration and Sustainability Guidelines, which aim to assist businesses to understand when collaboration with competitors for sustainability objectives may raise competition law concerns, and the final version is scheduled to be released this month.
Biodiversity-related litigation: a growing risk
In light of the severity of the biodiversity crisis the world is facing, it is perhaps unsurprising that biodiversity-related litigation is also on the rise globally. Recent examples include:
a claim brought by ClientEarth and environmental NGOs against the Portuguese government arguing that the government failed to take into account the impact on a protected nature reserve and other countries visited by resident bird populations in deciding to approve a new airport; and
a claim brought by eleven NGOs against the French supermarket chain Casino in relation to its involvement in the cattle industry in Brazil and Colombia, which the claimants argue contributes to deforestation.
While we are yet to see significant biodiversity-related litigation brought in New Zealand outside of the resource management framework, claimants internationally and domestically are continually looking for creative ways to hold both governments and private companies to account in relation to their impacts on nature, and claimants may look to use litigation strategically with a view to influencing organisations to change their behaviour, as they have done both in New Zealand and internationally in relation to climate change. Climate cases have relied on a range of different causes of action, including judicial review, tort-based claims, greenwashing claims grounded in consumer law, and human rights-based claims, and there is scope for each of those to translate into the biodiversity realm.
The Ministry for the Environment and the Department of Conservation have over the past three months been consulting on whether a biodiversity credit system (BCS) could help to incentivise the protection and restoration of nature in Aotearoa New Zealand (available here). In our discussion, Vicky highlighted that organisations should consider the discussion document and its implications for their businesses.
In essence, a BCS aims to fund "nature-positive" projects by unlocking private investment, reflecting trends developing overseas. At a basic level, landowners taking steps on their land to protect, maintain and enhance biodiversity could be rewarded with a "credit" (which is a certified legal instrument) that could then be on-sold to buyers in the market, who may wish to use that credit to make "nature-positive" or other public claims.
The consultation considers a number of different options for how credits produced by project or landholders could be issued for sale to prospective buyers, with various levels of government involvement in overseeing and managing the system. Consultation closed on 3 November, and it remains to be seen how the proposals outlined in the consultation document will progress under a new government.
If a BCS emerges in New Zealand, there will be many points of detail to work through before it becomes operational, with one of the most important being how to ensure that biodiversity credits generated by the system (and public claims made by businesses in relation to those credits) have integrity. In the meantime, New Zealand organisations wishing to make public statements about biodiversity projects they are funding or their impact on nature more generally will need to ensure that those statements meet New Zealand's consumer protection laws and do not amount to "greenwashing".
Vicky Robertson is currently a Commissioner of the New Zealand Productivity Commission and a consultant to Te Whakahaere climate advisory. Nature-related issues are increasing in importance for New Zealand businesses, and the Russell McVeagh and Te Whakahaere teams are here to help. If you would like to discuss further, please get in touch with one of the experts below or your usual Russell McVeagh or Te Whakahaere contact.