Building trust and being transparent is increasingly fundamental to success in our changing world.
Businesses are now expected to provide greater visibility of a broad range of non-financial metrics that drive better social and environmental outcomes.
There is an expectation that wherever your business is operating, your literal and metaphorical footprint should have a positive — or at the very least, neutral — impact on the wider community you operate in.
According to PwC’s Trust in US Business survey, the foundations of trust are built on data protection and cybersecurity, treating employees well, ethical business practices and admitting to mistakes. The research shows 49% of consumers have started or increased their purchases from a company because they trust it and 44% stopped buying from a company due to a lack of trust. Employee trust is also paramount, with 22% saying they left a company because of trust issues and 19% choosing to work at one because they trusted it highly.
This reflects the significant shift in societal expectations of businesses and organisations, who now need to implement environmental, social and governance (ESG) strategies to build trust with a wider group of stakeholders including customers, employees, investors, shareholders and, increasingly, media and communities.
Today’s business leaders are judged on their authenticity in bringing this to life and their ability to consider the broader societal and environmental implications of how they operate and generate revenue.
Where is New Zealand on this journey?
While sustainability and climate change are increasing areas of focus for New Zealand businesses, it’s still an evolving landscape with differing levels of maturity. We know the intention is there; PwC’s 2020 CEO Survey, showed that 70% planned to increase long-term investment in sustainability and ESG initiatives over the following three years and 67% had factored in climate change and environmental damage into their strategic risk management activities. However, without standard reporting frameworks and clearly defined targets, many organisations are left wondering where to start.
The Climate-related Disclosures (CRD) legislation is the first of its kind for New Zealand and has the potential to make a significant contribution to New Zealand’s 2050 carbon neutral goal. The External Reporting Board is in the process of developing the reporting standards to support this legislation which will require entities to disclose according to the standard for accounting periods that start on or after 1 January 2023.
This legislation impacts New Zealand’s largest listed companies and financial institutions, representing around 90% of our financial services sector. It’s worth noting that the reporting scope covers the entire value chain, not just what goes on inside the business.
To understand the maturity of disclosures, PwC New Zealand analysed the current climate-related disclosures provided by the NZX 100 listed entities in their annual sustainability reports against the Task Force on Climate-related Financial Disclosures (TCFD) framework. Our analysis showed while some companies are making good progress, for most there is a large amount of work to be done to bring the TCFD disclosure framework into mainstream reporting.
If we take this as a reflection of the wider ESG space, the single most important thing companies can do is prepare and front foot it.
There are a number of steps businesses can take to prepare, beginning with a formal gap analysis as a starting point to develop and implement a plan of action that’s both tactical and strategic, which can then be embedded into the company culture and decision-making. This is also an opportunity for industry to come together and share their insights to learn and better understand what is expected.
Industry collaboration will benefit all participants in such a rapidly-changing
environment.
