Valuable Advice from Workshop 3
Climate Change: What are the Opportunities and Challenges for Business in the Coming Decade?
Held on Wednesday 29 August 2018
Most of the world has accepted that accelerated climate change is tied to commercial and industrial activity that paid little or no attention to its environmental impacts. So, as climate change becomes more tangible, society, investors, stakeholders and younger generations are paying more attention to businesses’ environmental performance and their ethical dimension.
Climate change is essentially a tributary of the river businesses must navigate to sustainability. Businesses must anticipate those additional currents and speakers at this workshop advocated using the same critical thinking they applied to sustainability.
Business leaders need to take a broader, more holistic view of the interactions of their business with stakeholders, wider society and the environment. They need to take a long-term view of the business, assess the likely impacts, set goals and make plans to address them. Stakeholders are ready for that conversation.
Note too that while some climate change impacts will be incremental, others, driven by extreme weather events, could be massive and sudden resulting in disruption either onsite, in the supply chain, or in transport links. This, quintessentially, is an issue of sustainability.
Brett Tomkins, Partner at Deloitte
Brett is part of Deloitte’s sustainability practice and has been involved in sustainability for more than a decade. He is passionate about helping organisations to think beyond the financials. Brett says ‘integrated thinking’, which takes a holistic view of value creation, provides better outcomes for all stakeholders over the long term, and provides a secure future for all. He says integrated thinking is more difficult than balance sheet accounting but this makes it exhilarating. Brett’s personal objective of ‘pioneering to make life better’ drives him to make a difference.
Andrew Eagles, Chief Executive of New Zealand Green Building Council
Andrew is an economist with fourteen years’ experience in the built environment. Working for consultancies, associations, government and built environment charities has given him a wealth of knowledge in housing, market mechanisms, advocacy and the construction supply chain. Andrew joined the New Zealand Green Building Council in September 2016 as chief executive.
Ann Smith, CEO of Enviro-Mark Solutions
Ann is a recognised thought-leader and representative on several national and international sustainable business and carbon management forums. She leads Manaaki Whenua-Landcare Research subsidiary Enviro-Mark Solutions, whose science-based certification programmes are highly regarded internationally for their credibility and integrity. She is passionate about helping New Zealand transition to a sustainable low carbon economy.
Helen Jenkins, Sustainability and Environment Manager at Auckland Airport
Helen specialises in carbon reduction, climate change adaption and sustainability in the infrastructure sector. She advocates recognising climate change within risk management processes and embedding climate-related initiatives in business strategies. For the past ten years Helen has worked in the road, rail and utilities sectors here and in the UK to implement climate change reduction and adaption initiatives on major infrastructure projects.
Jennifer Tunna, Principal at Lowndes
Jennifer has broad experience within the finance sector and 12 years’ experience with leading firms in New Zealand and the United Kingdom, particularly in insolvency and restructuring. She has significant experience in executing business and asset sales across a range of industry sectors, particularly in distressed situations, and in various aspects of contentious insolvency. Since 2013, she has been recognised as an ‘Associate to Watch’ by Chambers and Partners.
WHAT THEY SAID
Jennifer Tunna: Where are we going to live?
Jennifer started by pointing out that business and commerce exist to serve the needs of society, and society’s need “doesn’t get much more fundamental than having a habitable planet to live on”.
A sea change in understanding over the past decade means there is now broad acceptance of climate change and business will need to adapt, if society is to survive in anything like its current form.
Last year, The World Economic Forum found that one of the five biggest risks facing the world was weapons of mass destruction. The other four were all climate-related: extreme weather, water crises, natural disasters, and the failure of climate-change mitigation and adaptation measures.
Climate change will also affect business directly, increasing insurance premiums, disrupting transport and decreasing agricultural yields. Rising temperatures will affect worker productivity, perhaps more than $2 trillion by 2030.
Brett Tomkins: A better way to think
Brett fired off an opening salvo saying “none of us are doing enough”. He compared a typical family life in the 1970s – one car, television and phone per household – with the unprecedented prosperity of today. “We now have more stuff than ever.”
But that consumption model – extraction, production, distribution, consumption and disposal – assumed unlimited resources. It didn’t address the realities of resource depletion, pollution and growing inequality.
He pointed out that adaptation to change is not uniform across society. Technology is changing fastest, followed by individuals’ attitudes, then business practices and finally public policy.
“Government and public policy are not going to save us,” said Brett.
The narrow focus of The Companies Act on capital and return on investment didn’t help. “Simplistic thinking creates poor outcomes,” said Brett.
As more board members recognised that sustainability included the sustainability of the business over time, Brett said businesses could hardly do better than to engage stakeholders in discussion about long-term goals. While a more holistic approach – looking at environmental and social impacts, trends in society and climate change – was more difficult, help and tools are available, from Brett’s team and others.
“Understand where you are weak and where you are strong and where to take action.”
Capturing, recording and reporting those data points and acting on them takes resources but integrated reporting drives integrated thinking. The best news is that running a business in a more integrated manner is actually more efficient.
A Harvard study, The Impact of Corporate Sustainability on Organizational Processes and Performance (Eccles, Ioannou and Serafeim 2014) found that among 180 companies, those that had adopted sustainability practices 20 years earlier significantly outperformed their counterparts in share price and accounting performance.
It all goes to show, said Brett, that accountants can save the world.
Ann Smith: Credibility counts
Ann started by saying we know how to cut emissions: through energy efficiency, low-carbon technologies, and halting deforestation. And the tools for driving these actions are equally-well-known: tax, carbon trading and regulation; increased support for technology; and rolling back deforestation.
She welcomed the government’s zero carbon bill, modelled on the Paris climate accord and the UK’s impressive Climate Change Act.
Ann said many businesses were taking climate action. Some were reporting their greenhouse gas emissions although, at 8000 globally, that number was small. Few were setting reduction targets and even fewer were carbon neutral.
To make any real change, to answer “awkward questions from investors” or to make environmental claims, businesses had to obtain real data about their operations.
Ann said the Commerce Commission offered a good guide on making carbon claims, which boiled down to making sure they were third-party verified and accredited. Enviro-mark Solutions offered several pathways to achieving independent endorsement.
New Zealand has a target of an 11 percent reduction in carbon dioxide from 1990 levels. That sounds ambitious but Ann said Enviro-Mark’s top 20 clients had achieved an average carbon footprint reduction of 33 percent, with some going close to 80 per cent.
She said Enviro-Mark itself had achieved a 120 percent carbon emission effect; it is ‘carbon-positive’. It was having its biggest impact working with companies offshore, particularly in the UK, where bigger clients were also driving change through their supply chains. Ann said it was credit to New Zealand that overseas companies recognized the innovation and credibility in our home-grown certification regime.
Ann’s tips included getting serious about capturing, monitoring and reporting; setting long-term targets which helped set short-term targets, and bringing staff along with you.
She said if you were trying to evaluate whether a move was worthwhile, pretend you were the atmosphere. Ask would it really make a difference to the atmosphere.
The big considerations from a climate change point of view were primarily a business’s location; secondly, working with the supply chain to address its vulnerability to disruption; and thirdly, the workforce staff being onsite is important in manufacturing, for example, and in the event of a disruption, could they still get to work?
Ann also addressed off-setting carbon emissions with carbon credits. She said they worked best when they were expensive and drove businesses to achieve neutrality in other ways.
If a business still needed to top up with offsets to achieve carbon neutrality, it should consider co-benefit schemes that also delivered social or health benefits. One of her favourites buys solar cooking stoves to replace coal-fired stoves in China.
Andrew Eagles: We need better buildings – much better
Andrew asked for a show of hands at the start. It confirmed what the research had already told him: that most people worked in ‘buildings’ and lived in ‘houses’ of some kind, so his topic was something the audience could relate to.
He said the New Zealand Green Building Council was set up by the construction and property sector as a not for profit to verify the quality of buildings and reduce environmental impacts. Membership has grown from 31 organisations to over 450. All the major NZ banks, publicly listed real estate companies and councils were involved, as are construction companies, engineers and architects.
The first task of the NZGBC was to develop tools to verify quality. They were currently being applied to 25,000 new build homes, delivering warmer, drier, healthier and more energy-efficient homes through a standard called Homestar.
Andrew says these rating tools were sorely needed in New Zealand. For new builds, the lowest construction cost usually won the business. The true lifetime cost got short shrift. The consequent energy losses and other running costs were the tenants’ problem, so inefficiency was literally built in.
Surely meeting the building code is enough? It’s not. “We should be incredibly embarrassed about our building code,” Andrew said.
The International Energy Agency and an OECD Environmental Performance Review have both made pointed comments that the New Zealand code is below overseas standards. Our code has no requirements covering thermal bridging, water, lighting or heating efficiency, and low standards for insulation and ventilation.
Insulation and ventilation were relevant to over-heating, which will increase as temperatures rise. Andrew said that the Green Building Council often saw projects where homes or buildings were likely to overheat. Clients often raised this without prompting.
Buildings account for 20 percent of New Zealand’s consumption emissions, second only to transport at 44 percent. When a consumption orientated view of green house gas emissions is taken households and businesses could save millions of dollars.
The health and productivity benefits of better buildings were worth noting. Harvard University long term research showed the productivity of people in verified buildings improved 26 per cent in green certified buildings as a result of better air quality, daylight, acoustics and thermal comfort.
This is important for NZ businesses. If even a conservative allowance was made, for instance 10%, a business with 300 staff stands to gain a benefit of $2.6 million a year – and have less absenteeism. Tenants could be using Green Star interiors when they fit out.
Australia had enacted legislation requiring energy efficiency certification at the sale or lease of office spaces above 1000 square metres. Andrew said Tony Abbott’s Liberal government proposed throwing it out but businesses refused. Independent research showed it had delivered a net benefit of $44 million to Australia and productivity gains of $168 million.
Andrew said New Zealand was about 10 years behind Australia and 20 years behind the leading nations in this field. Anyone changing their facilities could make big gains, but Andrew also suggested a way for tenants to get the ball rolling.
“Just ask your landlord what IS this building’s NABERSNZ rating. You have the power to change this. Asking your landlord will signal that you want healthy energy efficient buildings.”
Helen Jenkin: Building the airport of the future
Helen Jenkins’ focus at Auckland International Airport is embedding sustainability into a world that is literally changing around her.
That’s the best time to do it. The sheer scale of the airport’s ongoing development gives her and the company the opportunity to build transformational change into its new infrastructure, and lock in incremental carbon savings in use.
Construction will continue for years over an area more than twice the size of Auckland’s central business district. In addition to expanding the terminal and airfield, the airport is building hotels, multi-modal transport hubs including provision for light rail, separating cargo and passenger facilities and, long-term, a second runway.
Helen endorsed the emphasis on the importance of planning for the long term. She showed a graph showing the airport’s carbon tonnes per square metre reducing from the baseline year of 2012 through to a fixed target in 2025, then at a shallower slope through 2050. It is the first airport in the world to publish science-based targets – as part of the UN-supported Science Based Targets initiative.
“We will still need transformational change,” says Helen.
Auckland Airports carbon reduction programme has worked in five areas: reducing energy use, identifying carbon sources, carbon reduction projects, energy efficiency projects, and transforming energy sources. Climate change adaption is now on the table.
As one questioner pointed out, high temperatures have closed airports in the United States this year, which jolted operators into realizing climate impacts could actually disrupt commerce. Helen says while cooling is an issue, the bigger climate impact in Auckland was likely to be flooding.
The importation of disease-carrying mosquitoes through airports is already a threat and, as the climate changes, the risk of those tropical species establishing here increased. Monitoring and protection against mosquitoes is likely to have to step up as temperatures increase, says Helen.
These and other potential effects are being captured in a climate change adaptation plan. That is being fed into the risk-management framework in existing business strategies, as well as the new infrastructure initiatives.
The big issues for Auckland Airport were heating, cooling and lighting. Among the carbon emissions under its direct control electricity consumption was by far the biggest source with more than twice the impact of natural gas.
The company aimed to transition gas to renewable energy sources when feasible, and is using shadow pricing for carbon as part of reviewing the impact of changes to the energy mix at the airport. “Shadow carbon pricing doesn’t change what we need to do but it moves the time frame,” says Helen.
Waste contributes to the greenhouse gas emissions for the airport, and although half of the waste at the airport is diverted from landfill, waste is a significant greenhouse gas contribution. The company was also the processing facility for waste from every plane that landed at the airport, said Helen. Even so, the carbon impact from waste and the fourth main source, transport, were each less than half the impact of the company’s gas consumption.
The airport also maintains a watching brief on other technologies such as the rapid adoption of electric vehicles. It is ramping up provision of charging stations after demand doubled last year alone, and is making provision for other shifts in transport modes.
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