28 Jan 2020
By Nikki Wright
They say what happens in Vegas stays in Vegas.
What happens in Davos, on the other hand, is talked about around the world – and Kiwi businesses will be wise to pay attention.
Davos, officially known as the World Economic Forum, is a nexus of business leaders and politicians who spend their days together discussing global, regional and industry agendas, looking at pandemics, the digital economy, gender pay parity, and the future of capitalism.
However, this year’s summit, the 50th, took a more singular tack and stuck to the theme: ‘Stakeholders for a Cohesive and Sustainable World.’
For the first time in the history of WEF's Global Risk Report’s 10-year outlook, the top five global risks in terms of likelihood were all environmental. The report sounded the alarm on:
The Forum’s declaration of an environmental crisis was backed up in late January by António Guterres, Secretary-General of the United Nations, who described our poor treatment of natural resources as one of "four horsemen" that threaten our world. The other three were surging geopolitical tension, global mistrust and the dark side of technology.
John Drzik, Chairman of Marsh & McLennan Insights, the research wing of the global management consultancy, told the WEF there is mounting pressure on companies from investors, regulators, customers, and employees to demonstrate their resilience to rising climate volatility.
“Scientific advances mean that climate risks can now be modelled with greater accuracy and incorporated into risk management and business plans. High profile events, like recent wildfires in Australia and California, are adding pressure on companies to take action on climate risk at a time when they also face greater geopolitical and cyber risk challenges,” he said.
Locally we have seen a few businesses commence climate risk scenario analyses and reference the Taskforce on Climate-related Financial Disclosures (TCFD) in their annual reports which summarises the results of climate impact modelling. We expect to see more companies, particularly listed entities and public sector organisations adopt this reporting standard in 2020.
To younger generations, the state of the planet is even more alarming. The WEF’s Global Risk Report highlights how risks are seen by those born after 1980. They ranked environmental risks higher than other respondents. Almost 90% of these respondents believe “extreme heat waves”, “destruction of ecosystems” and “health impacted by pollution” will be aggravated in 2020.
The New Zealand Institute of Directors has backed this up in its Top Five Issues for Directors in 2020. Top of the list? Climate action.
As the IoD said in a January announcement: “Climate action is not optional — all boards will need to step up.”
I congratulate the many businesses Wright Communications has worked with to announce sustainability achievements. Are most Kiwi businesses keeping up, though? Not quite, according to the recent IoD/ASB 2019 Director Sentiment Survey. Only 35% of boards claimed they were engaged and proactive on climate change.
IoD Chief Executive Kirsten Patterson said, “The rise of climate action and stakeholder activity has elevated climate and the impacts of climate change to the very top of organisations. It is no longer optional - action is becoming an expected requirement.”
IoD referenced the Aotearoa Circle’s Sustainable Finance Forum which in October 2019 published a legal opinion stating directors may soon have legal obligations in relation to climate risk. IoD also mentioned the Government is considering adopting mandatory climate-related disclosures (on a comply or explain basis) for asset owners, asset managers, listed issuers, banks and general insurers.
Front-footing your sustainability story now is an investment in goodwill with the public. It takes strong leadership, collaboration (internally and externally), target setting, reporting and in many instances’ new approaches to business activities.
Taking meaningful steps towards mitigating your biggest material impacts will buy you a lot of credit for the future and reduce reputation risk this year.
With sustainability being front and centre, you should feel empowered to make 2020 the year to start telling your organisation’s sustainability story.
Give us a call, send us a message or call in and see us. We’d love to hear from you.