Race of our lives

What is Chapter Zero New Zealand and why should directors be interested in it?

Climate change is the topic everyone is talking about and New Zealand directors have identified climate as one of their top governance concerns for several years. But now is the time for action and the IoD recognised that being part of the Climate Governance Initiative (CGI) and hosting Chapter Zero New Zealand is a crucial step to support directors through this challenge. The CGI is a global network of directors in collaboration with the World Economic Forum and has a presence now in over 30 countries. It is important for New Zealand to add itself to the list and utilise the power of this global movement to drive change. Chapter Zero focuses specifically on addressing climate change at the governance level. The objective is to bring us all together as a director community so we can mobilise, learn and equip ourselves with information and best-practice tools, so we can do our job properly.

How has boardroom awareness of climate issues changed over the past decade – and what are the pressing climate issues for 2022?

In the past decade, awareness of climate issues has evolved significantly. Ten years ago, there were a few targeted conversations around climate change, mostly among those with subject matter expertise, but it wasn’t a broad strategic issue that every director concerned themselves with. It didn’t make every board agenda by any stretch of the imagination. But now, of course, the topic is up in lights. We are all talking about it and thinking about it, and trying to incorporate it into our strategies and risk frameworks.

There are greater expectations from customers, stakeholders and regulators, and obligations to govern for the benefit of future generations. Now that we have a groundswell of engagement in the issue, it is important for directors to start taking action in their companies. And with covid-19, you have an example of how a previously unintrusive risk can dominate our companies and the economy.

Companies will be looking at many things in 2022, from climate-related disclosures, sustainable procurement, sustainable finance and how they adapt and transition into new business models that are climate efficient. In a way, it is a race because those that maximise the opportunities and make the required adjustments to their business model will absolutely have an advantage in terms of their organisation’s success. We already know that important parts of New Zealand’s economy, such as agriculture and tourism, are significantly impacted by climate change. As a country we are grappling with land use, how resources are allocated while figuring out which industries will pivot into new business models and seize the opportunity. There are lots of innovations coming through, but there is still a long way to go. And there are lots of discussions going on about future industries that New Zealand will be targeting or be known for – perhaps the same ones we have today but different technologies? Directors have got to be hungry for information, techniques and approaches to give us the ability to be able to govern successfully in this new world. And that is where Chapter Zero NZ can support.

How has the pandemic impacted board discussions of climate change?

Covid-19 has given companies a taste of how disruptive some of these macro risks can be – those risks that you don’t spend a lot of time on in the boardroom and don’t always get a lot of attention. It has made us think even more clearly about climate change and the disruptive impact it could have on our economy. It’s provided us with an illustration of how wide-ranging these impacts can be and the systemic consequences that can unfold.

The pandemic surprised us; climate change is no surprise. Covid has given us a warning shot about how we need to be prepared but also highlighted the benefits of a collaborative response. This means board discussions are inevitably more focused around collaboration and leadership for our country, our communities and our stakeholders – contributing to the greater good as well as your own company’s success. There are exciting opportunities to work together and share best practice on this challenge, whether it’s at a sector level or economy level. I think this is the lens the pandemic has brought to our board tables. 

In practical terms, what questions should kiwi directors ask when the topic of climate action comes up this year? And where can they look for answers?

This is the area where Chapter Zero NZ is going to try to assist and where it should come into its own. In terms of action on climate, firstly chairs and directors need to be driving conversations on sustainability and prioritising them on board agendas, because if we don’t they just won’t get enough air time. The second thing is that we need to be more educated about the topic. It’s all very well to understand the risk exists and the crux of the issue, but we need to further understand what we can do and what we should be doing to address it. Equipping ourselves with knowledge is really important. This means research, discussions, upskilling and keeping up to date. It is also important to access practical tools, resources and training to help guide boards through these conversations.

This year, the new mandatory Climate Related Disclosures will be front of mind for many directors in New Zealand. There are governance implications for this reporting which will apply from 2023 and directors need to understand what is required. Given New Zealand will be the first in the world to introduce this mandatory reporting, Chapter Zero NZ will be a great source of information about the new standards - but specifically focused through a governance lens, providing directors with relevant information that will support them in their governance activities.  

Why did you take on this role?

I want to know more. I want to learn and I want to be part of it. I believe this is something positive and something helpful. The two organisations I chair have very different climate challenges. I’m the chair of Air New Zealand and when we fly, we burn fossil fuels which puts us at the forefront of this issue. So it is crucial we focus on a sustainable business model for the future. We need to answer the question at the board table – what does the future of aviation look like? For example, high on the agenda is disruption, electric aircraft and sustainable aviation fuels. If I take ASB Bank, it is working to reduce its own climate footprint. But it also plays a role to support the business customers it finances, who themselves are having to deal with the impacts of climate change. There is a real responsibility to be engaged on that topic with our customers. So I see the risk in very different ways in different organisations, but always as a key issue. It wasn’t a difficult decision for me to get involved in Chapter Zero NZ and I am looking forward to seeing the community of directors grow around this challenge. 

This article is featured in the Boardroom Magazine Autumn 2022 issue