Sustainability measures could soon be the price of admittance to supply chains in some major companies such as international supermarkets. Photo / Alex Cairns
Sustainability measures could soon be the price of admittance to supply chains in some major companies such as international supermarkets. Photo / Alex Cairns
Climate and sustainability measures are increasingly under scrutiny in border levies and trade negotiations. That’s according to a new report which warns Kiwi exporters are under pressure to keep up with the pace of international expectations.
The report, Protecting New Zealand’s Competitive Advantage, by law firm Chapman Tripp for theAotearoa Circle, highlights two major trends in trading partner and business expectations: new climate and sustainability reporting requirements, including climate-related disclosures; and emerging trade measures relating to climate and sustainability.
An example of the latter trend was the European Union’s Carbon Border Adjustment Mechanism, in force since late last year, which now imposes a cost on embedded emissions in certain carbon-intensive exports to the bloc.
“Measures like this in various jurisdictions are anticipated to levy the carbon cost differential between domestically produced products and imports, depending on their carbon footprint and the equivalence of emissions regulation in their country of origin,” the report said.
Chapman Tripp partner and report co-author Nicola Swan said the extent and speed of changes may come as a surprise to some exporters.
“The fact that more than 80 per cent of New Zealand’s exports by value are now going to countries with [climate disclosures] either in force or proposed, presents a challenge to exporters and their supply chains,” Swan said.
“New Zealand is heavily dependent on trade and offshore capital - we cannot afford to fall behind on increasing global demands for reporting on climate risk, [greenhouse gas] emissions and broader environment, social and governance (ESG) capability.”
The report notes that beyond the price premiums that research shows consumers of New Zealand food are willing to pay for sustainability and other attributes, trends suggest sustainability measures are becoming the price of admittance to the supply chain of some major corporates such as international supermarkets.
The report aims to help the Government and business recognise important trends that are shifting the global operating environment. It spotlights specific regulations that may affect NZ Inc.
It appears free on the website of the Aotearoa Circle, a leadership organisation of about 50 public and private sector partners working to restore New Zealand’s natural capital.
The report said that as well as featuring in trade measures and local regulations, environment, social and governance demands may include clauses in free trade agreements which focus on climate and environmental standards.
It pulls together for the first time a summary of the raft of regulatory changes happening offshore, said the Aoetearoa Circle chief executive Vicki Watson, who described the scale of the requirements in the report as “a revelation”.
“As an organisation built to focus on the restoration of natural capital, we are well aware that rapid change is happening in ESG reporting worldwide, at both a government and major customer level. But seeing a snapshot of these all in one place is telling - over 60 per cent of world GDP is now subject to mandatory [climate disclosure] measures, either proposed or already in force.”
New Zealand cannot afford to fall behind on increasing global demands for reporting on climate risk and environmental protection standards, says new report.
The report notes that according to the World Economic Forum, four of the five top risks facing the world in the next decade are environmental. It observes that governments are starting to respond, and that this year, more than two billion people across 50 countries will go to the polls.
“How voters respond to this changing environment will shape their economies and international trade. The policy and legislative agendas of our key trading partners will have repercussions for New Zealand companies that are internationally engaged - including exporting to, or drawing capital from, offshore markets.”
The report said New Zealand’s ability to demonstrate an understanding of, and support, climate-related reporting will become an important competitive advantage for businesses.
Offshore customers were increasingly looking to New Zealand suppliers to help them meet science-based emission reduction targets, the report said.
“ESG performance is increasingly playing a role in capital raising too, with many proactively innovating to continue to receive favourable ESG ratings and attract favourable trading terms and/or capital from institutional investors or index funds seeking to align their portfolio with the Paris Agreement.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
