New Zealand companies need to improve their climate change disclosure if they are to satisfy investors and customers, according to the Carbon Disclosure Project (CDP), which analysed how NZX 50 and ASX 200 businesses are tackling environmental issues.
This Australia and New Zealand Climate Change Report, written by Deloitte on behalf of 655 institutional investors, provides an annual update on greenhouse gas emissions data and climate change strategies at the largest listed companies in NZ and Australia.
The average carbon disclosure score for NZX 50 companies fell from 49 in 2011 to 47 last year, well below the average scores of their international peers in Australia, the UK and the US. Twenty-eight ASX200 responding companies scored higher than the highest scoring, New Zealand-headquartered NZX50 company on climate change disclosure.
Disclosure scores below 50 are considered to be low quality, while score of 50-70 are mid-range and 70+ high quality. The maximum possible carbon disclosure score is 100.
What do they actually mean, though? The report stresses that the scores are not a metric of a company’s performance in relation to climate change management, as it doesn't make any judgements about mitigating actions. Scores are calculated based on factors including:
• The level of understanding and disclosure of company-specific exposure to climate-related risks and opportunities
• The extent to which a company has measured its carbon emissions
• The frequency and relevance of disclosure to key corporate stakeholders
• Whether the company uses third party for external verification of emissions data to promote greater confidence and usage of the data
Brett Tomkins, chair of the Sustainable Business Council, said it was a call to action to New Zealand as a contributor to global supply chains.
“New Zealand is well behind the rest
of the world and overall has low quality climate change reporting. This
should be a wakeup call for New Zealand business,” Tomkins said.
Five NZX 50 companies were, however, singled out on the CDP NZX 50 Carbon Disclosure Leadership Index for the high quality of their carbon disclosure: ANZ, Telstra, Westpac, Fletcher Building and AMP. Air New Zealand, Telstra and Sky Network TV all also significantly increased their carbon disclosure scores.
The preferred approach to reducing emissions seems to be energy efficiency initiatives. But although 80 percent of respondents had at least one active emissions reduction initiative in the reporting year, less than half had a formal emissions reduction target.
More and more companies are considering climate change risks and opportunities from reputation and changing consumer behaviour, areas often considered less tangible – 37 percent of ASX200 and NZX50 companies report reputational risks, an increase from 34 percent in 2011.
According to Australia and New Zealand director of the Carbon Disclosure Project, James Day, many New Zealand companies have good climate change and sustainability stories that should be backed up with credible, independently verified data.
"For instance, more NZ utilities could be disclosing their carbon efficient electricity generation to their investors through CDP, as NZ’s low carbon electricity grid is not widely known about outside NZ."
The report also found both Australian and New Zealand companies are increasingly comfortable with carbon pricing. While many companies were aware of the potential for carbon pricing to increase operational costs, over a third also indicated that carbon pricing could create new business opportunities.
Only 3 percent of responding companies rated risks associated with carbon pricing as high. In New Zealand, where carbon pricing commenced in 2008, fewer NZX50 companies identify risks from carbon pricing (48 percent) than their ASX200 counterparts (74 percent).
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