Climate action is good for business

Businesses, both small and large, face a number of real and perceived barriers to taking climate action. However, the evidence shows that there are substantial advantages – many of which are hidden – to acting now.

The opportunity for your business

Businesses leading on climate action are discovering significant benefits to climate change investments. Sustainability is fast becoming essential for business, and there’s an opportunity now for businesses to get ahead of the game.

• Cost savings — reduce operating costs through energy efficiency and fuel switching.
• Social license — improve your reputation with socially responsible consumers and investors.
• Brand value — tap into new markets, spark innovation and create business opportunities.
• Employee engagement — attract and retain talent.
• Compliance — stay ahead of regulation for climate change mitigation.

Saving energy saves emissions and money

“Generally speaking, carbon is emitted on things that cost money,” says Paul Chambers, CFO and COO of Kiwi Bank. “A good rule of thumb is that if you’re reducing emissions, you’re also saving money at the same time.”

Carbon is emitted when we burn fossil fuels to create energy. Roughly 40% of New Zealand’s greenhouse gas emissions are attributed to energy use, and over two thirds of our total energy use comes from non-renewable sources. For example, we use petrol and diesel used to power vehicles, coal or gas for heating, and our national electricity grid is not yet 100% renewable.

New Zealand’s emissions

Climate change and the electricity grid

To incentivise businesses to switch to low-carbon energy sources, the New Zealand Emissions Trading Scheme adds a cost to the supply of carbon-emitting fuels. This cost is passed down the supply chain and is intended to rise, making the price of coal, gas, petrol and diesel higher over time compared to electricity, sustainable biomass (wood), and other low-carbon alternatives.

As a business you have to pay for your energy use, so if you can use less energy and/or switch to cleaner fuel sources, you will save both money and emissions.

The most cost-effective way to reduce your business’ carbon emissions is usually to improve energy efficiency by optimising current processes or introducing new, more efficient, technology to existing systems (such as switching to LED lighting).

This is because operating and maintaining equipment and facilities uses a lot of energy – from lighting to heating and everything in between. 

Although there may be up-front costs to investing in low-carbon technologies, this is typically offset by lower running costs.

Further to this, by investing in sustainability, you can unlock opportunities for value creation. In a Sustainable Value Study undertaken by EY, 69% of survey respondents say that financial value from climate change initiatives exceeds their expectations.

How can slowing climate change accelerate your financial performance | EY(external link)

Customers value sustainability

81% of New Zealand consumers want businesses to do more to reduce their environmental impact, according to EECA’s September 2022 Consumer Monitor — that's over three million adult Kiwis. Tapping into this market can significantly improve sales and therefore business performance.

The 2022 Better Futures report by Kantar and the Sustainable Business Council found that 75% of New Zealanders agree that although brands with a clear sustainability message will continue to win, others need to work harder to improve their credentials. In addition, 76% are influenced by a brand’s involvement in environmental and social issues before purchasing.

Consumer Monitor September 2022| EECA(external link)

Better Futures 2022 report | SBC(external link)

Business-to-business opportunity

Sustainability credentials open up business-to-business opportunities, and are increasingly becoming a must-have. International business giants, such as Tesco – one of the world’s largest retailers – are raising the standards when it comes to climate action. Tesco has taken on a commitment to become carbon zero across its entire footprint “from farm to fork” – which presents significant implications and opportunities for its suppliers.

It’s a trend that is taking hold in the New Zealand context too, as businesses and investors are increasingly prioritising working with businesses who share the same sustainability practices and values.

“From a business perspective, it opens doors.” says Paul Chambers, CFO and COO of Kiwi Bank. “There are certain activities that we won’t fund, because the risk of your business is higher if you’re not sustainable.”

Why investors are putting sustainability at the top of the agenda | EY(external link)

Staff engagement

Employees are expecting more action and clear direction from their business leaders. A 2022 Gen Z and Millennial survey undertaken by Deloitte found that after cost of living, the biggest concern is climate change. 75% of participants believe large businesses are not taking tangible action to fight climate change, despite almost half saying they personally put pressure on their employer to act.

The Deloitte Global 2022 Gen Z and Millennial Survey(external link)

A survey posted by Gallup reports that 69% of survey respondents consider a company’s environmental record as a factor when determining whether they would like to take the job. By acting urgently to shape sustainable strategies and practices, businesses can experience better recruitment and staff retention.

Environmental Record a Factor for Most U.S. Job Seekers(external link)

Even if your business is just at the start of your climate action journey, getting your team on board and giving them the opportunity to make an impact through their work is a great way to increase engagement and retention.

Get your team on board

Compliance & future-proofing

Businesses need to be aware of climate-related regulations, trading agreements and reporting requirements. New Zealand has a legislated emissions-reduction target of net-zero carbon emissions by 2050. To achieve this, businesses large and small must play their part.

Developing a good understanding of what emissions measurement and reduction involves, and getting started on your journey early, will help future-proof your business operations.

Here are some of the key policies in New Zealand around business and climate action.

The New Zealand Emissions Trading Scheme (NZ ETS)

Launched in 2008, the NZ ETS is one of the Government’s key tools for meeting our emissions reduction targets. It applies to activities right at the top of the supply chain.

The emissions trading scheme explained

Mandatory emissions reporting for some businesses

Businesses that are involved in the NZ ETS must report on emissions, and this requirement is planned to spread to other businesses and organisations too. A number of government agencies and Crown agents are required to report on emissions from the 2022/2023 financial year onwards, as part of the Carbon Neutral Government Programme.

Carbon Neutral Government Programme(external link)

In October 2021, the Government passed world-first legislation making climate-related disclosures mandatory for some large financial market participants, including for large publicly listed companies, insurers, banks, non-bank deposit takers and investment managers.

Mandatory climate-related disclosures | MBIE(external link)

Emissions reporting requirements could expand to include supply chain emissions

In April 2022, the Government launched Te rautaki ueā me te rautaki whakawhiwhinga o Aotearoa – New Zealand freight and supply chain issues paper. One of the key considerations of the paper is future proofing the system against climate change, which will have a large emphasis on decarbonising the supply chain. The issues paper discusses the idea of businesses reporting on scope 3 emissions (which includes emissions generated through supply and distribution chains).

New Zealand freight and supply chain issues paper | Ministry of Transport(external link)

The emissions reduction plan

On 16 May 2022, the Government released Aotearoa New Zealand’s first emissions reduction plan (ERP) which outlines an action plan to reach our legislated emissions targets, including how the government will work with industry to reduce business-related emissions.

The emissions reduction plan explained

Emissions reduction plan – executive summary(external link)