The UN's Intergovernmental Panel on Climate Change (IPCC) report released this week has called for radical action on climate change - in their words "any further delay... will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all".
Businesses can all play their part in this. We held a webinar on 2nd March 2022 on the topic of ‘Financial transformation for a more sustainable business’. In the webinar, BDO Sustainability Lead Partner Richard Croucher led a panel discussion to offer practical advice for businesses at different stages of their ESG journey, including to those who are just starting out.
Financial decisions are also social and environmental
Our first speaker, Noel Josephson, founder of Ceres Organics, discussed how it was essential for Ceres to embed ESG into the business from the ground up, recognising right from the start that when you make a financial decision you’re also making a social and an environmental decision.
Ceres’ vision was to bring organic food to New Zealand, understanding that the current agricultural system is destructive to the environment and to people’s health. In 2010, BDO advised Ceres to get its carbon footprint measured – this has had a huge impact on how the business operates, understanding that while offsetting has its place, Ceres believes genuine transformation is the way forward.
Noel acknowledged that the ESG journey will always include difficult decisions. For Ceres, they have tried to minimise the environmental impact of their supply chain, for example by sourcing almonds from Chile as well as California.
It’s also been important for Ceres to become a truly human-centric organisation, acknowledging that though your people aren’t on your balance sheet, they are a key source of productivity. It’s therefore imperative to create a business that truly focuses on its people, and while Ceres is still on the early stages of that journey, Noel is very excited about the path they are going down in that area.
Noel finished by giving practical advice to businesses starting on their sustainability journey - saying it’s important to start somewhere even if it’s just little steps. He emphasised that this is a continuous journey - over time, there’s a huge amount you can do to transform your operations to begin to come back into harmony with earth and with human beings, which is what ESG is all about.
Māori business following sustainability for centuries
We then heard from Angela Edwards, BDO Māori Business Sector Lead, who made the point that Māori business has always recognised the harmony between earth and people. For centuries, Māori businesses have understood that they operate in an ecosystem and that people, environment and financial decisions go hand in hand.
Angela then spoke about her work with Te Kotahitanga e Mahi Kaha Trust (TKEMKT), a charitable trust based in Kaikohe, Northland, which offers educational and training outcomes for youth.
TKEMT has historically been largely reliant on third-party funding, but they were keen to start generating revenue themselves. The trust was formed with ESG at the core, so they decided to embark on a number of programmes to increase revenue, including planting a vineyard and community garden, building a native nursery, and having kaumātua come into the garden to teach youth about traditional planting techniques and native plants.
At the same time, BDO came in as chief financial whānau to provide financial reports and cash flow management assistance, as well as ensure TKEMKT’s systems were streamlined, including providing training to staff to use the systems. This financial support was essential for underpinning the ESG elements of the organisation’s development.
The importance of governance in ESG
Next we heard from Phillip Roth who spoke about Okains Bay Longline fishing and how they have taken a traditional fishing business and transformed it to place ESG at the core.
This had to be not just a case of pure offsetting which is becoming challenging, instead it’s about being truly transformative, ensuring that when they say they’re carbon neutral they have strong processes in place, that they can measure and manage it to ensure they are making the right decisions. Phil mentioned that the waste streams are often proving more valuable than the fillet of fish.
Phil next spoke about Waikene station, a semi-derelict and unsustainable piece of land, which Okains Bay has turned into purely native forest, going from something that was making a significant trading loss to getting qualitative returns.
For Phil, it’s really important to put ESG on the governance agenda – it’s about being good leaders with a call to action, seeking the right personnel, people who have a passion and who have the same value sets and can share knowledge in a trusting environment.
Working more collaboratively on ESG issues
Finally, Chris Harvey shared his experience advising Waimacher Farms, where changing consumer demands, as well as the owners’ passion for sustainability, prompted a complete rethink of their operations. The dairy farm had faced traditional challenges with high altitude and effluent run off. To counter these issues they decided to build a herd home, which required significant investment. Chris came into advise on the farms’ capital structure and explore a number of options to ensure ESG was taken into account while also being profitable.
While the herd shelter impacted the bottom line initially, it ultimately achieved so much more for Waimacher Farms’ vision for the long-term and leaving the place in a better position for their children and grandchildren.
Chris also spoke about the need for farmers and other businesses to work more collaboratively to stay across competing demands.
Practical tips for businesses starting on their ESG journey:
- Start somewhere – take little steps if you need to, understanding that ESG is a continuous journey – over time, there’s a huge amount you can do to transform your operations.
- Understand that your business operates in an ecosystem – any financial decision you make also has a social and environmental impact.
- Put ESG on the governance agenda – make it a rolling agenda item on your board.
- Seek the right personnel who are passionate and have the same values as you to share knowledge with.
- Make sure your business finances are in order – your structure may need to change depending on the transformations you are making.
- Work collaboratively – there are others going through the same challenges and unlocking the same opportunities as you.
If you’d like more information on how to meet your ESG targets this coming year, please get in touch with your local BDO office and review our sustainability pages here.
More resources:
· Waimacher farms | A sustainability journey
· Ceres Organics sourcing philosophy
· The Okains Bay story
· Sustainability reporting – 10 questions boards should know the answer to
· The 2021 BDO Māori Business Sector Report
· World Economic Forum - Key takeaways from the IPCC report on climate impacts and adaptation