Corporate accountability for climate impacts

A climate record card on major New Zealand companies

A new analysis to compare the climate performance of New Zealand’s largest companies released this week provides important insights into which companies are stepping up to the challenge of climate action. As citizens, consumers and investors we need objective information about which companies are on track and which are failing to step up. 

The score cards also provide a useful guide on how to assess company performance. If you read company reports, they’re all leaders. Instead of relying on company claims, we need robust comparative information to compare across the companies. Mindful Money participated as one of the judges in the assessment. 

The challenge

The new assessment of climate science (IPCC 6) has sounded the alarm. Time is running out if we are to avert more frequent and more intense climate disasters than the world has been experiencing recently. Companies on average need to reduce their emissions by around 43% by 2030. New Zealand companies are way off track.

As citizens, consumers and investors we need to know which companies are on track and which are falling behind. If you read company reports, they’re all leaders. Instead of relying on company claims, we need robust comparative information to compare across the companies. This is a key step in holding them to account and influencing them to reduce their emissions. 

Comparing across companies

However, it isn’t easy. Comparing across companies isn’t just a question of looking at their greenhouse gas emissions as a proportion of their revenues (the most commonly used measure). The emissions need to include not only the direct emissions from operations of the company (scope 1 and 2) but also the indirect emissions from its supply chains and usage of the products (scope 3). These measures are not yet reported consistently – current reports to the New Zealand EPA covers only a few large emitters and only direct emissions.

A much improved set of Climate Disclosure rules kicks in during 2023 requiring companies listed on the New Zealand stock market and finance companies managing large pools of funds (banks, investment providers, insurers) to publish their emissions. But it won’t include private companies and most overseas-listed companies. For example, NZX-listed The Warehouse Group will be covered by the requirements but privately-owned chains such as Farmers will not.

The new measures will not allow easy comparison across companies due to difference in the methodologies used and the complexity of comparing across companies with different circumstances. There will still be opportunities for companies and investment funds to make themselves took better through exploiting the flexibility in the measures, scenarios and other information reported.

Assessing company performance
Last year, Stuff’s Climate Editor, Eloise Gibson, initiated a project to look at the relative performance of New Zealand’s largest companies. This first report included the biggest polluters in petrol, gas, dairy, fertiliser and meat (along with the next biggest-emitting competitor for each), and some places where Kiwis spend a lot of money – our biggest supermarkets, power companies and department stores.

Comparing emissions across companies is only part of the story. The research team undertaking the report card realised that a robust framework is needed. This was developed using elements form a number of international initiatives, including UN guidelines on net zero reporting and good practice on corporate reporting. Some of the main principles used are as follows:

• Companies can’t claim to be on track if they’re investing in new fossil fuels developments.
• Companies can’t get to net zero emissions by buying carbon offsets instead of cutting their own emissions.
• Companies can’t just cut emissions per unit of product (known as climate efficiency improvements), they need to cut total emissions, and that includes emissions from their supply chains. 
• Companies can’t claim to be working towards net zero while they’re lobbying to undermine ambitious government climate policies – either directly or through trade associations or other bodies. Also, companies should be open about these affiliations.
• Companies should publish detailed information about their emissions every year, and step by step descriptions of how they’re going to meet their targets, which they should update every five years.

This framework was applied to reports from the companies covering their past and current emissions, showing their record of emissions reductions; their public reporting of climate measures and initiatives; their targets for emissions reductions in the future; and external information on company action to reduce their emissions. The companies  were assessed in three separate categories – impact, transparency and alignment (to a 1.5 degree pathway) and ‘traffic light’ ratings awarded for each category. 

The results

Stuff published a story on 29th March 2023 of the steps the team took to come up with a sound basis for comparing across companies, together with the Climate Action Report Cards of each of the 20 companies that were assessed.

The results of the analysis are revealing about the companies that did not respond to the survey. They need to engage with accountability initiatives. They are BP, Open Country Dairy, Alliance Group, Balance. Todd Energy and OMV.

Those that completed the survey received mixed ratings. None achieved a high rating across all factors and all need to lift their performance to meet the urgent challenge of the transition to net zero. However, all of them have some promising elements to their climate action. The intention is to regularly report on company performance through work to be led by the University of Otago.

The project was run by Eloise Gibson, Stuff’s Climate Change editor; with four judges - Rebecca Mills, sustainability and climate impact consultant; Dr Sara Walton, University of Otago Associate Professor of Sustainable Business; Paul Brownsey, Pathfinder head of Investment; and Barry Coates, Founder and CEO of ethical investment charity, Mindful Money. 

Mindful Money will use these principles as part of our framework for reporting on comparative data about climate change impacts of investment funds. It aims to help members of the public understand the climate performance of their investments in KiwiSaver and managed funds.