Climate change presents a core business risk that, if navigated with careful governance, can unlock enormous opportunity.
This insight lies at the heart of a new, free resource for non-executive directors of private and public sector organisations.
The Directors’ Guide to Climate Governance lays out what the new climate disclosure regime means for directors and offers checklists of questions directors can ask to get ahead of the curve on climate resilience and business opportunities in the transition to a low carbon economy.
The guide was developed by Deloitte in partnership with Toitū Tahua: Centre for Sustainable Finance and the Sustainable Business Council (SBC). It includes insights shared by directors in a workshop series piloted by the three organisations and aligns with international principles as well as the New Zealand Climate Standards effective January 2023.
“We need to share resources as we build capability within our organisations. That’s why we’ve made the guide available to all New Zealand directors,” said Simone Robbers, a board member of Toitū Tahua and Assistant Governor – GM Strategy, Governance and Sustainability at the Reserve Bank.
Michele Embling, fellow Toitū Tahua board member and Chair of the External Reporting Board, said, “Rather than being seen as a compliance exercise, the hope is that the new climate standards will help boards and organisations better manage risk and unlock opportunities. This requires shifting from a historic to future focus, and directors getting comfortable with disclosure about things that may happen well beyond their tenure on a board.
“Where we need to get to ultimately is having the same expectation of risk and controls and rigour around our non-financial as around our financial reporting,” Embling said.
Deloitte NZ Climate & Sustainability Director Rikki Stancich said, “Investors are increasingly concerned with whether businesses have credible, long term transition plans. Directors need to understand not only the risks climate change presents for the business, but also the strategic opportunity that effective climate risk governance confers. Our guide is designed to empower New Zealand Directors to step up to the plate and guide their businesses to embed climate risk management into long term planning and investment strategies.”
Participant Alison Barrass, independent director of companies including Spark and Zespri, and Chair of Babich Wines and Tom & Luke, said the workshops “provided real clarity around how risk areas should be reported up to boards and how directors should be supporting executive teams to rapidly evolve their understanding of climate risk impacts.”
Fellow participant Mark Cross, Chair of Chorus, director of Xero, board member of ACC and Chair of the ACC Investment Committee, said, “Climate governance is an essential topic that all directors need to be across, and the workshops emphasised the integral link with broader strategic risks and opportunities. Distilling the workshops into a guide offers an excellent resource.”
Insights from the guide include:
- Climate is core to business strategy, and this should be reflected in board composition (do you have the expertise?) and which committee climate sits with
- Perfection shouldn’t be the enemy of progress – you will need to make decisions based on incomplete information and data in a fast-changing regulatory and practice landscape
- Climate realities require a new way of thinking about risk that can deal with the chronic as well as the acute.