Attending the largest governance conference in New Zealand there were five trends emerging that will have broad implications far beyond the Boardroom.  Held in early May more than 600 gathered in Auckland for the two day ‘Leadership Conference’ of the Institute of Directors in New Zealand.  These were the key conversations that mattered most:

Theme one: The megatrends driving us towards ‘net positive’ impact 

There is a lot of talk about the need for net zero – a currently mythical world where emissions balance out at some point in the distant future.  But author Andrew Winston beamed in from America to talk about the more important trend being one towards ‘net positive’.  That is, a company gives back more than it uses.  He pointed out the two fundamental megatrends underlying this shift of rising transparency and generational change. 

• Transparency: In consumer products, people increasingly want to know what is in the product, the carbon footprint of it, even if employees were paid enough.  There is already a move to report on how climate affects your company, recently required for the largest NZ companies by XRB changes.  It’s easy to see the biggest future change will be reporting on how your company is affecting the climate, and even how your own suppliers or customers are doing as well.
  

• Generational change: The second trend is that the next generation demands these shifts and will drive the real impact shift.  This isn’t a ‘theory of change’ – the business case will be there for change because of what your kids think.  Millennials and Gen Z won’t take a job if the company doesn’t have an environmental position – so what type of companies will attract and retain talent, and customers? 

Like playing 18 holes of mini golf and thinking you could play in the PGA, the gap between companies who talk and companies who really change will grow.  As a result of these megatrends, only those who have made a shift towards net positive will survive. 

Theme two: The need for ‘slow panic’ in the face of disinformation and uncertainty

The Chair and the CEO of Air New Zealand shared about their relationship.  As Greg Foran had started with the pandemic they shared a philosophy of transparent communication with an approach of ‘slow panic’, obtaining the information needed to make decisions in light of crisis.  This was echoed in another panel about the growth of disinformation and the interest groups out there deliberately spreading content to sway perceptions.  Such disinformation is combining lethally when you throw in the added ingredients of uncertainty and fear. 

That uncertainty is due to many factors and former Cabinet Minister and Ambassador to the United States Tim Grosman noted in his talk that 15 years ago the writer Thomas Friedman suggested 15 years ago that globalisation would lead to peace with the “global arches theory”.  That is, if two countries have McDonalds, they do not fight each other.  However, that theory is done as McDonalds now has closed all branches in Russia. Uncertainty is real as the Russia/Ukraine war is the first time in 70 years the boundaries of Europe have been put into question, US Dollar dominance is no longer assumed, population declines in East Asia will see power shift towards India and we are moving from a US led world to one where China is growing.  

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Theme three: The lesser known cousin in the ‘ESG’ family 

The lights shine on the E of ‘Environment’ today, but a panel discussed the ‘Social’ of ESG and concluded that this factor will increase in importance.  This is in evidence with a move away from the S often being code for ‘Shareholders’, and a maniacal focus on profit returns to them. Instead ‘Stakeholder capitalism’ emphases the many groups to consider, ranging from Mana Whenua to customers, suppliers and employees. 

As an example, if a company is truly concerned to demonstrate the social side of how it cares, then it must start with its own employees and really know them and whether they are struggling to survive due to low wages.  More and more people are choosing where to invest based on authentic action and not social or green washed talk – while the ‘E’ is currently the big one of the three in ESG, the ‘S’ is growing in importance.  This means that companies and their boards must move towards a new paradigm of thinking, with a focus on producing profitable solutions to the problems of both people and the planet. 

Theme four: Embracing our uniqueness

The conference speakers offered insights on what makes a discussion about governance and business unique in the Aotearoa New Zealand context.  Many of the Māori speakers shared from their Tangata Whenua perspective, for whom many of these trends are already built into their long term intergenerational approach which considers many stakeholders, not just shareholders. 

That approach aligns with international trends, shown by a quote Andrew Winston had in his presentation from Larry Fink, the head of Blackrock Investments (the worlds’ largest investment company with trillions invested): “A company must create value for and be valued by its full range of stakeholders to deliver long term value for shareholders…Stakeholder capitalism is not politics, it’s not ‘woke’.” 

One aspect of stakeholder engagement is to consider with more seriousness what it is that makes our context here unique and the perspectives that Te Ao Māori offers us to learn.  Not in a tokenistic way which perpetuates a colonial mindset of taking from indigenous thought, but in a really meaningful way that involves true paradigm shifts of thinking to understand the place of Te Reo Māori, Tikanga and Te Tiriti. 

Theme five: Governance sets the tone

Board members set the tone from the top for an organisation.  Each of these trends emphasise that those in governance need to be open and ready to learn new things.  Jason Fox from Australia noted that often our default is to say we are ‘busy’ but we can become too busy, so we do not make progress and this has been highlighted as the boundaries between work and home have disappeared, influenced by the advertising platforms we call social media. 

Being busy we then favour default ways of doing things, but they represent safety.  That can lead to loss of new thinking which is dangerous as the life cycle of an organisation runs from Start-up -> Growth -> Maturity -> Decline.  At the start-up phase it is curiosity which drives us and a willingness to try new things.  Later on we stop engaging in the world as we mature and then eventually decline, because we become ‘busy’ and eventually irrelevant. 

So setting the tone from the top is important to foster a learning and questioning attitude, even if that means welcoming in hard questions that make us uncomfortable.  That is what true governance provides, the ability to ask the long term 10, 50 or 100 year questions to shape the strategy of where we are headed. 

These were forward looking themes that were not settled in complacency around the role of companies today.  Kirsten Patterson, the CEO of the IOD, finished with a thought provoking question in light of the concepts that were being discussed that encapsulates an approach: “When was the last time that you actually changed your mind on an issue?”  It’s worth thinking about that answer and those 5 themes might give us the door to change our minds.