In October 2021, New Zealand became the first country in the world to pass a law requiring large publicly listed companies and financial organisations to disclose and act on climate-related risks and opportunities. Currently the target catchment is strongly tilted towards financial entities, but many of New Zealand’s leading exporters also face increased obligations to verify their climate-related claims.

The legislation, titled the Financial Sector [Climate-related Disclosures and Other Matters] Amendment Bill, currently applies to around 200 companies in New Zealand – insurers, banks, non-bank deposit takers, investment managers, and publicly listed companies with a market capitalisation of over NZ$60m. This catches over 99% of all entities listed on the New Zealand stock exchange (NZX).

Impacted organisations are now required to produce and verify ‘climate statements’ within their annual financial reports from 1 January 2023, which covers the 2022 financial year for many^[1]. We will watch the wider impacts of mandatory reporting with interest, particularly as the Task Force on Climate-Related Financial Disclosures (TCFD) is actively encouraging voluntary adoption by firms that fall outside the current requirements.

The mandatory disclosures need to conform to standards issued by the External Reporting Board (XRB), which are expected to evolve, as international practices and standards catch up^[2]. It’s the responsibility of the Financial Markets Authority (FMA) to monitor, regulate and enforce mandatory reporting in New Zealand. Failure to report in line with the standards could result in fines for organisations and company directors, with prison terms possible for directors in some circumstances.

So – what are the standards? The XRB is basing the standards on 11 recommendations of the Task Force. These recommendations cover four broad areas: governance, strategy, risk management, and metrics and targets^[3].

The fourth pillar metrics and targets, could pose a challenge to organisations now required to accurately capture and disclose emissions and carbon consumption across its entire operations – both direct and indirect. A traceability solution will be vital for organisations to verify that the company is fulfilling its claims across both its supply chain (including suppliers and third-party vendors) and value chain (the full lifecycle of a product or process, including financial investment).

Forsyth Barr has recently analysed the current ESG and carbon-specific initiatives of some of the largest companies listed on the NZX. Governance is a core component of rankings, accounting for 40% of the total scores^[4]. It is clear that practices to govern, implement, and monitor climate-related risks and opportunities must be driven from the top down.

Companies looking for new and efficient ways to capture the required data under the metrics and reporting umbrella can turn to digital trade solutions such as TradeWindow’s FDA award-winning Assure+ (formerly Rfider). The Assure+ software generates an immutable audit trail across every critical tracking event and key data element along the supply chain, reaching deeper into supply chains to provide traceability right back to the points of cultivation and production, transporting, processing, shipping and distribution. Implementing such a solution results in complete transparency and ensures that firms can meet increasingly complex compliance obligations.

TradeWindow is currently the only player in the New Zealand market providing a vertically integrated digital trade platform that covers compliance, operations, management, data sharing and storage, internal and external stakeholder collaboration, and end-to-end supply chain traceability.

For more information on TradeWindow Assure+ and how we can help your business prepare for mandatory reporting, contact us.

[1] PwC, June 2021, Getting ready for mandatory climate-related financial disclosures in New Zealand: https://www.pwc.co.nz/assets/2021-assets/crfd-thought-leadership.pdf (page 2)

[2] National Business Review, 12 December 2022, XRB: climate-related disclosures ‘not a compliance exercise’: https://www.nbr.co.nz/investment/xrbs-plan-for-reporting-climate-related-disclosures/

[3] Task Force on Climate-Related Disclosures (TCFD), June 2017, Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures: https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf (page 14)

[4] BusinessDesk, 9 December 2022, Big gaps between NZX companies’ green reporting, says Forsyth Barr: https://businessdesk.co.nz/article/sustainable-finance/big-gaps-between-nzx-companies-green-reporting-says-forsyth-barr