Sustainability: Sustainable and profitable

By James Russell

Consumers are prepared to pay more, writes James Russell
All Good Organics co-director Simon Coley says the people who are motivated to make a difference through their spending aren't always from a wealthy demographic. Photo / Chris Gorman
All Good Organics co-director Simon Coley says the people who are motivated to make a difference through their spending aren't always from a wealthy demographic. Photo / Chris Gorman

Rachel Brown, chief executive of the Sustainable Business Network, is on a roll.

Over the past year, SBN membership has blossomed, increasing by 15 per cent to a healthy 550 members.

"The other notable change is that our membership is much more active," says Brown. "They're actively seeking solutions for sustainability, energy efficiency, environmental stewardship and socially responsible business practices."

Brown says that following close behind the corporates are the councils -- which is good for business. "The large councils -- Auckland, Wellington, Christchurch -- are driving change through the pursuit of knowledge around how to create low-carbon cities. Auckland Council is part of the C40 Compact of Mayors movement. They're also putting into place sustainable supply chain criteria -- similar to Govt 3 [a sustainable procurement programme put in place by the Labour Government in 2003 but canned by National in 2009] -- which is incentivising a huge amount of businesses supplying those councils to pull up their socks.

It has a huge knock-on effect."

Brown says that while consumers in New Zealand are ready and willing to make the right buying choices to support businesses producing ethically sourced, low-carbon products and services, they don't alway know who they are.

"There's some scepticism around green claims, which is understandable when you look at the likes of the VW scandal, but also a large proportion of the population are unsure of which of our businesses are creating truly sustainable products and services."

One company bucking that trend, and arguably New Zealand's most sustainable company, is All Good -- the business behind All Good Bananas and All Good Drinks.

Co-director Simon Coley says while it's certainly important for the directors that its operations cause no environmental degradation or social exploitation, it's also just simple good business to operate the way that they do and makes for a good narrative story for the products. The company often tells the story of its suppliers -- be they cola nut growers in Sierra Leone or Ecuadorian banana farmers.

"We charge a premium for our products because they are organic and/or Fairtrade. Initially the outlets we were talking to were pretty sceptical that people would pay more for them, but we've actually been surprised by the breadth of people buying them," says Coley.

"The people who are motivated to make a difference through their spending aren't always from a wealthy demographic."

Those 'conscious consumers' have been the subject of an ongoing piece of research by Colmar Brunton called the Better Futures Report.

Trust builds reputation and that's where the biggest payback lies.
Sara Bolger, Colmar Brunton

Sarah Bolger, chief client officer for Colmar Brunton, says the latest research shows that about three-quarters of consumers' goods purchasing decisions, and around half of service purchases, factor in "sustainability" or "goodness".

Bolger says the payoff for companies that have sustainability on the agenda is a heightened level of trust from the consumers who purchase their brands and products.

"Trust builds reputation and that's where the biggest payback lies," she says. "On average, in New Zealand, the brand with the best reputation in a category achieves 40 per cent higher levels of advocacy than their competitors. Advocacy is where consumers will speak favourably about your brand or product spontaneously or when asked."

The 2015 study showed that 31 per cent of New Zealanders will "choose sustainable" more often in the next year, 64 per cent will pay a bit more for sustainable products and 74 per cent want to work for a company that is socially and environmentally responsible. "We are seeing stronger increases in these behaviours amongst the younger generations," she says.

Simon Millar, CEO of Pure Advantage -- a non-profit formed by a group of business leaders to explore green growth opportunities -- believes there is, finally, a subtle shift occurring in government.

Sara Bolger. Photo / Supplied
Sara Bolger. Photo / Supplied

"Receptivity from the Government to issues of climate change, biodiversity and emission reduction is certainly on the rise, which is great news, because business can't do it alone," he says.

"In New Zealand the government is such a large part of our business -- it's so intertwined. It's not like we have an organisation as wealthy as Apple, headquartered in a forward-leaning state like California, which can decide what it wants to do and invest with R&D and implement sweeping corporate policy changes and have a huge leadership impact."

Millar points to the Government plan around electric vehicles, which he describes as encouraging, but a low goal. "64,000 vehicles by 2021 isn't ambitious. We have market constraints of course but if we really want to electrify transportation we could meet that goal in our sleep."

He's more optimistic about the recent announcement of a plan to make New Zealand predator-free. "If it can be achieved it will go some way to living up to how the world perceives us. Our natural environment is our biggest asset, and tourism is our biggest industry -- most of which revolves around enjoying our environment."

Millar says the Government still has not communicated a viable plan or emission reduction pathway for the country.

I think perhaps we are a bit complacent because here in New Zealand we're not too far from farm to table. Most of the rest of the world isn't like that.

Millar also believes it's up to New Zealand businesses to get better about building a narrative around their sustainability practices, or their quality of product and service.

"The companies who are doing that well are getting good traction overseas and it's the narrative that consumers are buying. They want to see traceability; companies like Marks and Spencer want to offer that to their customers.

"I think perhaps we are a bit complacent because here in New Zealand we're not too far from farm to table. Most of the rest of the world isn't like that. If we're producing good stuff but not telling the story properly then we aren't capitalising on our natural competitive advantage."

Pure Advantage intends to continue its recent focus on best-practice primary industry -- from forestry to looking at the opportunities for greater soil carbon retention and biological farming to organics.

While government has been reluctant to implement emissions pricing on the most polluting of industries -- such as energy and farming -- a new study from a University of Auckland researcher finds that oft-repeated concerns about strict carbon pricing putting the kibosh on the economy are unfounded.

Sina Mashinchi says his research shows that imposing a carbon tax on emissions-intensive industries, along with an overhauled emissions trading scheme (ETS), would actually boost economic growth and afford the government the luxury of cutting GST to 12.5 per cent.

Using a software modelling tool developed by Cambridge University in the UK, Mashinchi fed in 45 years of economic, environmental and energy data from New Zealand, spanning 1970 to 2014, and created eight scenarios using various combinations and levels of carbon prices and taxes.

Mashinchi's modelling showed that even if the price of carbon credits spiralled to $300 per tonne, it would still be too low to turn around the current trend of rising emissions. Instead, he found if the price of Sustainable business proves profitable for some

Carbon credits increased to $75 right now, and rose by $20 a year from now on, and a carbon tax for non-ETS sectors was introduced and set at the same levels, the government could use the extra tax take to lower GST by 2.5 percentage points to 12.5 per cent. Businesses would either pay a carbon tax or take part in the ETS, but not both.

According to the modelling, this would stimulate the economy, encourage investment in new technologies, energy efficiencies and public transport, and create jobs. GDP would rise by an average 2.2 per cent per year from 2016-50, while emissions would fall 14.2 per cent from current levels in 2030.

- NZ Herald

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