Environment and Social Governance – ESG- Voicing Your Concerns in Our Industry.

As climate change awareness quickly becomes the norm for exporters and their target markets, it is now a responsibility for every organization to disclose how much progress they are making with regards the environment, climate change, and fair trading.

The Big Picture: Export Markets Have Reporting/Trade Measures in Place

• A staggering 80% of New Zealand's export markets have Climate Related Disclosure (CRD) requirements in place. The questions being asked are about your contribution to climate change and what you are doing to mitigate. Another main concern is how secure your company rates as a supplier in the future.
• 40% of NZ exports by value are going to countries with carbon border adjustment mechanisms (CBAM) in place or under consideration. These markets include the EU, the UK, the US, Australia, and Taiwan. In a nutshell, this relates to fees being charged at the border, according to the product's carbon footprint

What it means is that environmental and social governance are becoming leading criteria for NZ (and the rest of the world) to maintain its competitive advantage in exports. Interestingly the market itself is leading the charge. Sure, governments are implementing new regulations as they seek to honor their signature of the Paris agreement or other bilateral commitments. However, de facto enforcement comes from careful scrutiny by the target market.

Enforcement from international authorities is more likely to affect large companies with a considerable footprint, but SMEs in the same supply chain can be indirectly impacted.

Reliable Accreditations

There is a range of accreditation processes available, but none have been singled out as a worldwide leader. They provide a useful set of steps for enterprises to self-assess and show a proactive stance. Let's name 3 of them:

1. B Corp: Probably the most commonly known, it was Founded in 2006 in the USA to make business a force for good. It has a very broad scope across environmental and social governance.

2. Science Based Targets Initiative: SBTI- Established in 2015, it aims to assist companies in their self-assessment to set emission reduction targets. The main references are climate science and the Paris Agreement Goals.

3.The Corporate Sustainability Reporting Directive: CSRD - Came into force in January 2023. Tailored to the European Community policies, it is a new reporting requirement for large companies and listed SMEs. With a modernized approach to environmental and social sustainability, it helps investors " to assess financial risks and opportunities arising from climate change and other sustainability issues." Source- EU Finance Podcast.

Depending on where in the world you operate, or your main export markets, one of the accreditation types may be preferred . For example, B Corp is highly regarded in the USA but gets less traction in the UK. CSRD is very Euro-specific but is mandatory for listed companies.

How Will Regulations Affect SMEs Worldwide?

As discussed, regulations are likely to target large companies, and SMEs are less exposed to enforcement in the near future. However, as international markets start voting with their feet, it is more about leveraging opportunities and avoiding doors being closed.

A Market issue before it becomes a regulatory issue

In a bid to protect their reputation, big brands often have an unbreakable set of rules, acting as a de facto accreditation regime for their suppliers. Their requirements can be more stringent than any enforceable regulations.

Bilateral trade agreements now have enforceable measures in place like the European Community’s ‘Deforestation Criteria’, dictating sustainable sourcing in all supply chains involving timber.

Individual buyers often have their own ESG criteria and will only consider your products if you have a positive story to tell, backed up with credible action plans and their outcomes.

Where do I start?

Each business needs to focus on the most material element or meaningful issue that must be tackled – Chapman Tripp Report – The Aotearoa Circle

The 2 leading issues are in 2 main groups:

• Carbon risks
• Nature risks, including packaging, product sourcing etc…

Leading ‘solid wood’ furniture manufacturers in the USA have accurate records of only purchasing timber in their near vicinity, and from sustainably managed commercial forestry operations. They tackle deforestation issues and carbon footprint of their product.

Ocean Shell- Lumea Values Your Opinion.

Our company has long had a policy of sourcing shells from ethical suppliers. In simple terms, this means being strongly opposed to overfishing and endangering shell species.

We are also embarking on a project to review all our packaging and reduce our impact. More on this later.

But today, we want to hear it from you. What would be your Main Concerns when purchasing shell product from us? Whether you are a client or a casual visitor to our blog, your answers will help us prioritize our action plan for ESG.

Some examples to choose from:

1. Carbon Concerns: Please rate on a scale of 1 to 5
2. · Our footprint related to shipping
3. · Our local operation’s footprint in NZ
4. · Our factory’s footprint.
5. · Other – please detail and rate from 1 to 5

1. Nature Concerns- Please rate on a scale of 1 to 5
2. · Sustainable sourcing of shell and disclosure of provenance
3. · Animal welfare- Marine creatures
4. · What we do to help regenerate shell populations
5. · Biodiversity in the Shell’s ecosystems
6. · Use of synthetics in our products
7. · Packaging
8. · Other – Please detail and rate on a scale of 1 to 5

1. Social Concerns- Please rate on a scale of 1 to 5
2. · Staff wellbeing
3. · Modern Day Slavery issues
4. · Impact – Positive or Negative- on communities where we source the shells
5. · Other- Please detail and rate on a scale of 1 to 5

Please email your responses to [email protected]