Channel: Transition is good for the planet – and business

Climate issues are now more important than ever for boards to factor into planning, no matter what industry, says Channel Infrastructure chair James Miller CFInstD.

New Zealand’s leading fuel infrastructure company has made major transformational change over the past few years, partly in response to the climate impacts on its business, says Miller.

“With the business under enormous stress during Covid, and reflecting the government policy direction of the day, the board, supported by an overwhelming majority shareholder vote, took the difficult decision to undertake a structural transformation of the business and transition our operations away from oil refining,” he says. 

“The business model we had was no longer viable, given, among other things, the trajectory for demand of fossil fuel products, with the growth in cleaner energy options expected to continue as different sectors came up with decarbonisation solutions.”

Instead of ignoring the inevitable, Miller says the board leaned into the opportunities for the business and for its shareholders. 

“These opportunities weren’t just financial. It was about continuing to do the right thing for our community, people and New Zealand, and we remain committed to finding ways for us to help facilitate New Zealand’s transition to a lower carbon economy.

“That includes exploring the onshore production of sustainable aviation fuel and other biofuels on our site at Marsden Point, which are active studies under way right now.

“Seeing the climate transition as a positive opportunity that is good for the planet, as well as good for business, is the number one learning for us from these past few years,” he says.

Channel refreshed its long-term strategy in 2023 with climate change central to its thinking. Late last year, the company also released its conceptual master plan for the long-term future of the site – calling it an ‘Energy Precinct for New Zealand’.

“A core part of our strategy refresh was to develop our thinking about both the risks and opportunities from climate change, while also ensuring we are accounting for our climate-related obligations.

“An exciting project that forms a core part of the Energy Precinct is the potential biorefinery project that is under consideration as an anchor tenant in the Energy Precinct, with partners including Qantas and ANZ, and led by Seadra Energy.

“The potential biorefinery would have multiple benefits for us, and crucially it would re-use some of the refinery plant that has been decommissioned to create a valuable product, while also bringing highly skilled jobs back to our site.

“As fuel consumption trends evolve with end-users moving away from traditional fuels to electric-powered vehicles, and as heavy industry and aviation begin their difficult decarbonisation journeys, mitigating our climate impact – and supporting others in doing so – underpins all that we do,” says Miller. 

“These include the new reporting requirements against Aotearoa New Zealand Climate Standards, which all reporting entities are working hard to understand, and they really drove our thinking on how we position the company at the strategic level. 

“A selection of our material ESG targets has also been incorporated into the company scorecard, which we use to determine short-term incentive payments for our people. 

“Channel has also completed a specific climate change physical and transition risk assessment, and a materiality assessment, all of which we report in our annual results in February.”  

Sustainability and climate risk are material to its business, and these issues, alongside the opportunities, directly shaped its strategy refresh, says Miller. 

At the board level, one of its metrics is specifically aimed at ensuring a good mix of skills and experience with energy transition.

“One of our most recent director appointments is someone who brings international experience in future fuels, including sustainable aviation fuel, so I think it is testament to our approach that someone with this level of global experience is willing to join our board,” says Miller.

“Our Audit and Finance Committee oversees reporting on sustainability, environmental, social and climate-related issues and, in 2024, Channel was one of the first companies to publish under the new climate-related disclosures regime.

“Operationally, we have also established a new climate working group within the business, which consists of senior leaders and subject matter experts, and is responsible for providing a corporate representation of climate-related risks, impacts and opportunities to the board. This shows just how seriously we take climate matters.”

That process involved producing a 100-page sustainability report each year. Miller says this process is rigorous, involving engagement right across the business.

Channel tapped external help in the strategy refresh and in preparing for its first climate disclosures, supporting its thinking through the process and identifying gaps in existing reporting.

“We also engaged with expert engineering advisors to undertake the detailed climate change physical and transition risk assessments and undertake a stocktake of our carbon accounting practices,” says Miller. 

External advisers also provide information and insights we may not have, says Miller, helping challenge assumptions about the level of risk, as well as the opportunities for business in supporting the climate transition.

“Accessing external advisors further supports us to adopt best practice and learn from the wider corporate community, particularly as we build a better understanding of our new reporting requirements. 

“At the same time, having directors with real experience in the energy transition is key to ensuring we have the right skills on our board to provide the necessary governance oversight to support the company.”

Channel also works closely with three of New Zealand’s major fuel importers, playing a key role in supporting them to bring down their emissions using Channel’s facilities.

“It is good for New Zealand if we can increase the mix of sustainable energy available to consumers. In addition to work under way on the biorefinery, we also have partnerships with others who are operating in the sustainable energy space, such as ‘first movers’ Fortescue, which is currently undertaking a pre-feasibility study in relation to the production of sustainable aviation fuel on our site to help decarbonise New Zealand’s aviation sector. 

“Attracting two major future fuels projects to Marsden Point in just the early stages of our Energy Precinct plans makes it an exciting time for our industry, and there is so much innovative thinking going on.”

Miller stresses there are huge opportunities to be found from the climate transition – it is not all doom and gloom – and groups like Chapter Zero have a key role in helping directors see positive opportunities.

“The Chapter Zero board is full of deep subject matter experts, with a real passion to make a difference. It is a great forum to hear how other directors are managing the climate change challenge and to connect with the key movers and shakers, from the prime minister to the regulators and other experts.”