Director lens on reducing emissions

Summary

New Zealand's first Emissions Reduction Plan (ERP) was released on 16 May and sets out the government strategy to achieve the reductions needed to achieve the emissions budgets. The plan provides an indication of what the future could hold for all sectors and what regulatory and non-regulatory methods may be introduced to drive change. The actions identified are far reaching and will affect all sectors, particularly transportation planning, infrastructure, energy, resources, agriculture, forestry and waste management.

A roadmap for New Zealand

The Plan includes more than 300 policy actions and draws on insights and leadership from across the private and private sectors. It received more than 10,000 submissions and since its release in May has been download more than 8,000 times.

Vicky Robertson, Secretary for the Environment, described it as a plan for all of New Zealand, highlighting that no one sector, nor the government, can do it alone.

One key focus of the plan is around decarbonising the transport and freight sectors. As one of the largest (20%) and fastest growing emitting sectors, the ERP actions aim to make the transport system more affordable and reduce reliance on volatile markets. There are three focus areas, reducing reliance on cars and supporting more mixed modes of transport. Secondly, targets to support the rapid uptake of electric vehicles and making them accessible to more New Zealanders. Thirdly, laying the foundations for future work to decarbonise the heavy transport and freight sector including aviation.

Opportunities for the private sector to lead include:

• Engage with the director community through Chapter Zero NZ and across the private sector via the Aotearoa Circle, Sustainable Business Council, Sustainable Business Network and the Climate Leaders Coalition 
• Consider opportunities for ongoing innovation funding and partnerships
• Understand risk and opportunities for your business in the ERP and use your internal experts
• Understand the implications of the ERP and what this means for your Climate-related Disclosures / TCFD reporting
• Leverage country-level commitments for competitive advantage particularly within supply chains and marketing.

See slides from Vicky Robertson’s presentation

Facing the challenge

Air NZ has outlined its approach to reach net zero carbon emissions by 2050, in a strategy named Flight NZ0 which is the culmination of a sustainability strategy started back in 2014. Air NZ produced its first sustainability report in 2015 and it has gradually progressed and matured with the inclusion of TCFD-style disclosures and impact reporting in 2020.

Ain NZ now has a sustainability advisory panel to provoke thinking on the challenges facing the company and the sector more broadly.

Sustainability is embedded in the work of the Air NZ board and directors’ responsibilities have become more evident. Dame Therese noted that while sustainability has been front and centre for some time now, the company needs to continue to mature and improve its processes, reporting and focus at the board table.

Dean Bracewell added Air NZ was well ahead of other airlines in its approach to sustainability, which is one of the four pillars that drives company strategy. It is embedded in the business plan, with clear objectives and reporting. 

Ensuring climate is a strategic priority

Dame Therese highlighted several requirements for boards to address climate issues. As a first step, put climate on the board agenda, so conversation can begin and a shared understanding can be established. Secondly, ensure the board is getting external perspectives to help understand the real problems and opportunities. This is where scenario planning is important to explore climate risks and how the company could respond. Finally, boards need to understand the second and third order impacts, in terms of suppliers and stakeholders and the ripple effects that start to emerge.  Finally, boards also need to understand the impacts of climate change on their suppliers and stakeholders and how these may with in turn impact their business. 

The role of emerging technology

There are a range of companies both internationally and domestically looking at zero emissions technology such as hybrid or electric aircraft. The most significant development is around the creation of sustainable aviation fuels. Unfortunately there is little international coherence around the approach to sustainable fuels but there are some developments underway. For example, California is incentivising manufacturers and Finland has put mandates in place for the percentage of sustainable fuels used in its airline industry. In New Zealand, the industry is putting out strong demand signals to influence manufacturers but mandates are still under discussion.

Focus on the opportunities

Climate governance is fundamentally about competitive advantage. Dean Bracewell indicated that stakeholders, shareholders and customers are demanding action and if Air NZ doesn’t get it right, it will be felt across the entire business. This requires a greater level of connectedness between the board and management, in particular around resourcing and investment. Bracewell thinks all transport companies need to take a similar approach to ensure the long term sustainability of their organisations.

Dame Therese adds that if the company has a strong purpose and people are inspired by what you are doing, then they will go the extra mile for your customers. And that will in turn, go the extra mile for your shareholders and your other stakeholders. So it's a virtuous circle. The same applies for any industry, be it banking or airlines.

Becoming more adaptable to change

Having been involved in governance now for around 10 years, Dame Therese noted that the complexity has increased with so many more emerging pressures, risks and expectations. Boards need to think carefully about the skills and experience and, increasingly importantly, the diversity of thought and experience of their board members. There’s now a people of different ages and stages of their careers entering governance which is healthy if you can get the right balance. Director education is also important. Chapter Zero is a good example, providing climate tools and resources and a space for directors to discuss and learn from issues facing their organisations.

The session included an extensive Q&A session. For the responses, please refer to the on-demand recording.

See slides from Vicky Robertson’s presentation

These insights are a broad summary of the topics discussed in the webinar and not direct quotes from the panellists.