How nature-related disclosures might just trigger the mindset game-change?

Mention regenerative sustainability in the boardroom and you'll hear responses like: "what does that even mean?", or "we're not ready for that yet" or "yes but, we need to be pragmatic". Now, with the World Business Council for Sustainable Development starting the ball rolling on nature-related financial disclosures, talk of a 'just and regenerative' future is going to become commonplace. Boards and executives should start following this conversation now to be well-prepared for what's quickly coming next.

A shift to 'just and regenerative' business expectations is a significant transformation that will require a change of mindset; as well as a diverse range of new talented leaders to shape the new business models of the future. To attract those people, businesses need to start their journey sooner rather than later. How can companies accelerate the shift of mindset required to get on that road more quickly?

Recent informal research conducted by Proxima suggests that perhaps as many as 90% of directors are not really understanding sustainability as a core and integrated strategic issue. So, instead of being fully aligned with the company's purpose, strategy, culture and risk management, sustainability is largely being dealt with as 'ESG', covered-off by an ever-growing set of metrics for investment analysts. This suggests that the language has changed but the mindset has not.

Nature-related disclosures will bring more pressure for businesses to have a viable transformation plan from BAU to BFG - Business For Good. This is much more than a transition plan for a low carbon economy based on EVs, flexible working, a few solar panels and some carbon offsets.

And it's exciting. This inevitable evolution of the sustainability dialogue is going to force businesses to be more innovative within a set of design constraints that reflect the reality of biology. Finally, we're at a point where business is going to be required to protect nature and halt the erosion of biosphere integrity; with the simple aim of ensuring the possibility that life on Earth can thrive indefinitely.

As companies across the economy scramble to prepare for climate-related financial disclosures, nature-related financial disclosures are looming. The World Business Council for Sustainable Development, the global mothership of our own local SBC, is already working with a group of 60 companies worth more than USD$2 trillion in market cap to develop a set of draft guidelines that have just been published for feedback.

In anticipation of future science-based targets (SBTs) for nature and nature-related financial disclosures, WBCSD membership criteria will require companies to set ambitious, science-informed goals aligned with societal and planetary boundaries. These require short and medium-term environmental goals that contribute to net-positive nature by 2030 and nature recovery by 2050; and to report progress annually in standard, external communications. That's quite some way more advanced than our own Climate Leaders Coalition, which has just recently updated its membership criteria to reflect global good practice for greenhouse gas measurement, reduction and reporting. It seems that leadership requirements are quickly being extended.

The WBCSD guidelines focus on three socio-economic systems – food, land and ocean use; infrastructure and the built environment; and extractives and energy. WBCSD's Roadmaps to Nature Positive explain how these three together drive threats that endanger almost 80% of all threatened and near-threatened species. Pressures on ecosystem integrity are to blame, for example through the over-abstraction of groundwater for irrigation and land degradation through deforestation, as well as climate change, pollution and invasive species.

All this is going to be very relevant to Aotearoa's agri and tourism economy. Organisations which are already considering and planning for more holistic and regenerative approaches to sustainability will be better prepared, but those are just a few. Most still adopt a more fragmented approach, focusing on select material topics; and are only just coming to terms with the enormity of preparing for XRB's Climate Standards reporting (which will come into effect for financial reporting years starting after 1st January 2023).

With agriculture and tourism being squarely within the more productive and consumptive ends of the value chain, they will be more directly affected. The construction and development sector will also be caught in the cross-hairs. Developers will have to start taking more responsibility for the nature and biodiversity related impacts of land-use change; and update industrial monoculture approaches to land development to align with nature. This will inevitably result in better places for people to live, because people love being close to nature. It's called biophilia (human's love of nature) and is scientifically proven.

There are already some leading lights showing the way. They will be looking forward to the opportunity to showcase their alignment with thriving natural systems, in ways that also create value for investors, customers, communities and workers.

Pāmu (Landcorp Farming) has been doing some good work in that space, along with a growing number of smaller operators exploring regenerative agriculture. MPI is supporting a number of regenerative agriculture projects through its Sustainable Food and Fibre Futures projects, including $17m of funding for the 7-year Whenua Haumanu project and another $8m over 7-years for the Te Whenua Hou Te Whenua Whitiora project in North Canterbury.

As a sector, tourism is perhaps the most developed. With support from Proxima, the Queenstown Lakes District developed a ground-breaking regenerative tourism Destination Management Plan earlier this year with a central commitment to decarbonising the tourism industry to carbon zero by 2030. That integrated plan will stand the district in good stead if it can be implemented successfully. RealNZ, which consolidates a range of South Island tourism brands and experiences, is another stand-out example which has made an explicit commitment to regenerative tourism as a conservation business fueled by a tourism business model. Tourism Holdings, now the world's largest campervan and RV operator, has adopted the strategic science-based Future-Fit Business Benchmark to guide and report its progress across 23 goals that define zero harm to people or planet.

In the development field Ngāi Tūhoe has unofficially adopted the Living Building Challenge as its tribal building code aligned with Iwi values. The LBC is the world's most stringent green building code and inherently regenerative. It provides a certification for buildings that are designed like nature itself and restore, rather than inhibit the health of nature and humans.

It's hugely encouraging to see this sort of leadership which genuinely backs up Aotearoa New Zealand's brand promise to the world, and our indigenous cultural heritage, which is truly our unique competitive point of difference.

WBCSD is proposing a maturity-based approach that reflects the reality of companies starting from different points. They call it: starting, developing, advancing and leading. The expectations increase as maturity increases using the same Assess, Commit, Transform - Disclose methodology. Leading companies will be expected to consider all upstream and downstream impacts, with a fully integrated management approach that reflects a commitment to the philosophy of a 'just and regenerative' future.

WBCSD's use of a 'mindset' scale is interesting and helpful. In just a few words it summarises the journey that companies, and importantly directors, will need to go on. The scale advances from 'risk mitigation', to 'do no harm', to 'do good', with 'just and regenerative' being the pinnacle. That's quite a journey!

The sooner that directors start to grapple with this shift, the sooner they will be able to visualise the future business models that we'll need to protect and restore nature. The looming prospect of a nature-related financial disclosure regime is likely to prompt early adopter leaders to start that journey sooner rather than later. There's already plenty of information and education available for those who are proactive because, whilst this may be new to some, elsewhere others have been working in this direction for over 10 years.

Many companies have left climate-related disclosures rather to the last minute. This means that Aotearoa probably won't achieve as many gross emission reductions as could have been the case with more careful thought. That's increasingly seen as irresponsible by the people companies want to employ, and by informed citizens who buy their products. That erodes goodwill and company value.

We recommend preparing early for the broader nature-related disclosures and integrating the basic principles into business thinking and decisions now. If for no other reason, it will enhance potential to employ the talented young leaders who will help companies make the inevitable necessary transformation to a just and regenerative future.