ROOM EVERYTHING'S OKAY, UNTIL IT ISN'T - THE SUSTAINABILITY ISSUE - IOD NZ
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board
OCT / NOV 2017
room
Magazine of the Institute of Directors in New Zealand
Everything’s okay,
until it isn’t
THE SUSTAINABILITY ISSUE
THE SUSTAINABILITY ISSUE
A note from the editor.
Without doubt, sustainability is an issue
that strikes at the heart of governance.
Sustainability really means thinking
about the long term and that is what
directors are responsible for doing.
The Agenda
OCTOBER / NOVEMBER 2017
To drive sustainable business, we
INSIDE IoD
need strong leadership; sustainability
issues are not quick fixes, and they
require commitment and investment. 05 CEO letter
Sustainability issues including action
on climate change and the quality of
06 UpFront
water have been at the centre of public
discussion recently. Increasingly, the
30 GLC update
public and other key stakeholders 33 DirectorVacancies
are calling for business, as well as
government, to take sustainability 46 Out & about
seriously.
A number of New Zealand 48 Events diary
businesses, more than I could fit into
one issue of BoardRoom, are working 50 Contact IoD
hard to make a difference in this space.
Finally! Affordable & easy-to-use Commitment to sustainability from
right at the top is a common thread
FEATURES
software for small to medium business and between companies we profile including GETTING TO THE CORE
09 Getting to the core of
09
New Zealand Post, Meridian Energy, OF SUSTAINABLE sustainable solutions
Tourism Holdings Limited and Air SOLUTIONS / Four
non-profits. Manage your board meetings, New Zealand (page 9) and Wakatū
Incorporation (page 20). In the climate
New Zealand busineses
working hard to create
16 A firm commitment:
Sustainability critical
change space, Emma Herd and Karen
responsibilities and documents in the cloud.
a sustainable future to business success
McWilliams both discuss the risks that
directors need to be aware of but also WAKATŪ / Juggling 20 Wakatū: A cause greater
the opportunities that could come from responsibilities towards than profit
operating in a low-carbon world. A level the land, the people and
28
20
of courage is needed to take advantage profitability Opportunities in a low-
of these opportunities, and directors carbon world
can do a lot to build a courageous
culture within their organisations. 36 Board dynamics: Sharing
the vision
One clear message is that
sustainability is not a side project – it
influences everything an organisation 42 Guiding long-term
sustainable franchising /
does, which is why directors are so Franchize
important in this space.
Emma FROM OUR PARTNERS
emma.sturmfels@iod.org.nz
Start your free 18 The future of food / KPMG
trial today 26 Diversity key to successful
sustainability / Chapman
Tripp
36
34 Climate change and ESG /
Marsh
Get organised Save time Reduce hassle BoardRoom is the magazine
BOARD DYNAMICS /
The specific challenges
of the Institute of Directors in
faced by CEO/company
New Zealand
www.iod.org.nz founders moving to
formal governance
boardprohub.com
Proudly made in New Zealand October / November 2017 3
CEO LETTER
Climate change is
not ‘fake news’, and of child labour or environmental
damage and that their choices
sustainability is contribute to social good.
Recently, the $35 billion
not just about the NZ Super Fund announced
environment. In fact, its reduction in high-carbon
stocks, with 40% of the overall
climate change is fund now low carbon with the
goal of making it more resilient
becoming main stream to climate change. NZ Super
and is now critical to Fund CEO Adrian Orr said its
“focus on addressing climate
long-term business change risk is in line with
current global best practice by
sustainability. institutional investors”.
The NZ Super Fund
transition involved relocating
$950 million worth of shares
A new chapter in away from companies with
exposure to high carbon
sustainability emissions. This is both a global
and a local issue, and New
Zealand companies affected
Tēnā koutou Modern governance allows include Genesis Energy and NZ
boards to take a position on Oil & Gas.
KIRSTEN PATTERSON Climate change is not ‘fake economic and social issues they The new NZX Corporate
CEO, INSTITUTE OF DIRECTORS news’, and sustainability is not could not or would not have Governance Code includes
just about the environment. In done 20 years ago. Sustainability changes around disclosure
fact, climate change is becoming is no longer a fringe issue but is of environmental, economic
mainstream and is now on the agenda for many boards, and social sustainability risks.
critical to long-term business with 56% of directors in the IoD This brings New Zealand into
sustainability. 2016 Director Sentiment Survey line with many other countries
YOUR SUSTAINABLE Despite popular opinion, saying environmental and social and is critical for trust and
BOARDROOM directors are focused on the issues are very important to confidence in our companies
long-term sustainability of their business. and our markets.
Every effort has been made organisations they govern, not Focusing on key strategic, Climate change and other
to guarantee the pages of
this magazine are sustainably just short-term share prices. social, governance and sustainability issues are not
sourced and produced. It has Take the 2016 Paris environmental risks and long- about compliance – actually,
been printed using vegetable
inks, environmentally friendly Agreement on climate change, term business sustainability it’s about survival. We need
binding techniques and which was signed by 175 is fundamental to good leadership and genuine
sustainably produced paper countries including New Zealand. governance. Transparency commitment from all boards
and finally wrapped in eco-
friendly degradable material. The goal is to stabilise global of corporate activities and for long-term sustainability.
Follow the sustainable story warming at less than 2 degrees intentions helps build trust and Whatungarongaro te
with some of the relevant Celsius below pre-industrial aids business resilience and tangata toitū te whenua – as
environmental standards
throughout the magazine: levels and move towards a long-term sustainability. man disappears from sight, the
net zero carbon emissions Investors, shareholders and land remains.
economy by the second half consumers are asking more The business conversation
of the century. The Trump of businesses and getting on climate change is heating
administration announced they tough on environmental and up, and if your business doesn’t
If you could take a look inside, you’d see that an IT network is a beautiful thing. Finding the security gaps and were “definitely, completely social issues. Consumers have the issue on the agenda,
vulnerabilities hidden within is almost an art form. Aura Information Security are trusted experts in cyber FSC MIX and undoubtedly leaving the want to know more about the you’re likely to get left out in
security, providing advice and support to leading New Zealand corporates and government departments. Chain-of-custody certification accord”, yet over 1,500 United origins and composition of the cold.
provides a credible link States businesses worth more products, employee conditions
To test the integrity of your IT network call us on 0800 AURA 12. between responsible
production and consumption than $1.4 trillion have committed and treatment, and corporate Ngā mihi
of forest products. to the agreement despite their practices. They want to know Kirsten (KP)
www.aurainfosec.com President’s opposition. they are not buying products
THE ART OF CYBER SECURITY
October / November 2017 5
UPFRONT
UpFront APPOINTMENTS
IoD BY NUMBERS
as at 30 September 2017
8,554
Members
DISTINGUISHED
FELLOW AWARDED
Sir John Anderson has been
made a Distinguished Fellow
of the Institute of Directors.
Dame Therese Walsh
Chartered Member, 1,210
Chartered Members
The Distinguished Fellow Award is
has been appointed the IoD’s highest accolade, awarded
Corporate sustainability to the Major Events
Investment Panel
and Fellows to members who have sustained a
prominent and distinguished career
starts with a company’s Rod Snodgrass
9.5% as a director or given outstanding
participation and services to the IoD or
value system and a Members under 40 Sir John Anderson, KBE DistFInstD
has been appointed to eminent or special contributions to the
en·to·moph·a·gy
principled approach to doing the board of Metlifecare
Mel Templeton
community or business.
Sir John has had an enduring Television New Zealand, WWF for Nature,
the human use of
business. By incorporating Reon Edwards
has been appointed
Wellington Branch 2016
Emerging Director insects as food
corporate governance career spanning
industries from financial services
NZ Sports Foundation, New Zealand
Cricket board, NZME, Capital Coast
the Global Compact chairman of New Zealand
Rugby League
Award Winner, has been
appointed to the board
to health, sport and entertainment.
Relatively early in his governance
Health DHB and as Commissioner of
Hawke's Bay District Health Board.
principles into strategies, Sheena Henderson
of the Centre for Space
Science Technology FOOD FOR THOUGHT
career, Sir John was appointed chair
of the Petroleum Corporation of New
Recognised by his peers for his
work, Sir John has been the recipient of
policies and procedures, has been appointed to
MOA Group
and the IRD Risk and
Assurance Committee What are the foods of
Zealand, charged with overseeing the
organisation’s restructuring and IPO.
numerous awards including the Sir Peter
Blake Medal for Leadership Excellence
and establishing a culture of the future? Supporters of Sir John say this was (2005), Halberg award for Leadership
Mark Ratcliffe
integrity, companies are not has been appointed to
Congratulations to the
following members who Insects have long been part of the
early recognition from the Crown of
his ability to lead companies through
Excellence in Sporting Organisations
(2010) and the Inaugural Distinguished
only upholding their basic the Housing New Zealand
Corporation Board
were appointed to the
following roles through
diet in many parts of the world,
and now western countries are
exceptional change.
Highly respected, Sir John is known
Fellowship award from INFINZ (2016).
He was appointed a Knight Commander
responsibilities to people and Jo Cribb
DirectorSearch: starting to catch on. Bloomberg
reported in August that consumers
for his strong personal values and
commitment to actively leading and
of the Order of the British Empire for
services to business management,
planet, but also setting the has been appointed to the
board of Literacy Aotearoa
Jo Brosnahan
Chartered Fellow, has been
in Switzerland will soon have the
opportunity to try mealworm burgers.
working with colleagues at the board
table. Sir John has taken on significant
banking and the community in the 1995
New Year Honours.
stage for long-term success. and chair of Scots College appointed chair of Rotorua
Lakes Council Audit and
New Zealand companies, including
Crawlers and Anteater, are betting
leadership roles including as chair of Congratulations Sir John.
Guide to Corporate Sustainability, United Nations Global Compact (2014) Hugh Martyn Risk Committee on insects becoming a larger part
has been appointed to of our diet.
the New Zealand Rugby Judith Stanway
League Board Chartered Fellow, has been IN SYMPATHY
WHAT IS SUSTAINABILITY? appointed deputy chair
Myles Lind of Rotorua Lakes Council The Institute of Directors sends its condolences to the
Profound changes and challenges in the 21st century are has been appointed Vice Audit and Risk Committee family and friends of Distinguished Fellow Sir Pat Goodman,
impacting both business and society. They include climate President of the New who passed away in September.
change, globalisation, geopolitical tensions, demographic shifts, Zealand division of the Andrew Evans
rapid technological and scientific advancements, the Internet Institute of Public Works Chartered Fellow, has been Sir Pat was the founding chairman of community, and in 2002 he was made
of Things and digital connectedness. Engineers Australasia and appointed independent YOUR SUSTAINABLE BOARDROOM Quality Bakers New Zealand, which a Principal Companion of the New
To create value in a sustainable manner requires organisations chair of the IPWEA NZ director of Accessible merged with Fielder Gillespie Davis Zealand Order of Merit.
to shift from short-term to long-term thinking. The drivers Audit and Risk Committee Properties New Zealand ISO 14001 and Allied Mills and Wattie Industries
for future success to ensure viable business models are both Limited Performance to became Goodman Fielder Wattie Alongside his business acumen,
objectives and
commercial and ethical. Jason McDonald environmental in 1987. Sir Pat is remembered for his many
The above extract comes from the recently updated Wellington Branch 2016 Keiran Horne management systems contributions to the Motueka
The Four Pillars of Governance Best Practice, which features Emerging Director Chartered Member, has to prevent pollution, Sir Pat was made a Knight Grand community. He was a former patron
ensure compliance
a new section on sustainability. The Four Pillars is now available Award Winner, has been been appointed a member with regulations and Companion in 1995 for services to of the art gallery and the Nelson Bays
online for members. appointed to the board of of Hamilton City Council achieve continual business management, export and the Arts Advocacy and Marketing Trust.
improvement.
Orion New Zealand Limited Audit and Risk Committee
VISIT IOD.ORG.NZ TO CHECK IT OUT >>
6 BOARDROOM October / November 2017 7
UPFRONT SUSTAINABILITY FEATURE
Getting to
>
8 BOARDROOM October / November 2017 9
SUSTAINABILITY FEATURE > 10 BOARDROOM October / November 2017 11
SUSTAINABILITY FEATURE
Five points on
sustainability
Simon Harvey gives some
pointers for boards thinking
about how to make sustainable ...sustainability
thinking part of their practice.
is not about tying
‘green ribbons’
on the business...
Simon Harvey
strategy, you’re probably not achieving thriving airline. This awareness underpins
anything but a little bit of window dressing. our work to hardwire sustainability at the
You might be doing some good, but unless heart of our business.”
you are embedding its principles into the The airline also sees collaboration as
business, you are not going to create long- a key to tackling the issues New Zealand
term value and you’re not going to change faces. Some of their partnerships include
mindsets and you are not going to create collaboration with the Department of
long-term value. Conservation and iwi partners to improve
“This is good for business, it’s not a biodiversity on New Zealand’s Great Walks.
‘fluffy’ irrelevant thing that sits out to the Meridian Energy has a number of well-
side, and it’s certainly not a cost. It delivers known partnerships, including with the
benefits.” Department of Conservation to protect the
kākāpō. They are important partnerships
CONNECTED TO THE COMMUNITY and reflective of something much wider
than gaining good favour from the bird-
“If you look back at companies that loving public, Moller says. This is good for business, it’s not a ‘fluffy’
have really stood the test of time, it is
those companies that really engage
“When we invest in something like that,
it’s not just because it’s nice, it’s because
irrelevant thing that sits out to the side and
1 2 4 with the society they live in. It’s about we think it’s important to New Zealand it’s certainly not a cost. It delivers benefits.
Goal setting. Identify Committed leadership. Purposeful collaboration. understanding and responding to the communities and to us as one of New Jane Taylor, New Zealand Post
a set of bold North Star Working towards achieving Develop partnerships and holistic world that a company operates in, Zealand’s listed companies.”
goals that truly describe the bold goals will require alliances to solve the more because businesses just don’t exist in a Luxon says its focus on sustainability
what measurable and good leadership and difficult problems based on vacuum,” Taylor says, when considering has had an impact internally and drives
tangible success looks like innovative thinking, with a shared common interest New Zealand Post’s view of sustainability. home the value in standing for something
as a genuinely sustainable unswerving support at and complementary Having existed for more than 150 years, greater than building revenue. It flew one of the aviation industry’s first important in demonstrating commitment
business. This involves board and executive levels. capabilities. the company has always been very aware “Sustainability is incredibly positive for biofuel test flights in 2008. It continues to sustainability.”
taking a whole-systems of its place in New Zealand, Taylor adds. our people, our brand and relationships with to support work in this space, currently Meridian is one of only three New Zealand
perspective, understanding 3 5 “I grew up in a small rural New Zealand customers, our suppliers and investors. alongside Virgin Australia, to strengthen the companies listed on the Dow Jones
the relevant issues and then Empowered Measure, review and town where the post office was the core I also firmly believe people want to be part commercial case for investment in biofuel. Sustainability Indices (DJSI), and the
making firm commitments implementation. report – honestly. of essential services and a central meeting of an organisation where their work has company must meet the standards every
to address the sometimes Making sure a capable, Measuring the right things place for the community. That’s historically a purpose beyond profit. Research shows DRIVEN FROM THE TOP year to stay on list. It's not a tick the box
difficult yet material well-resourced, well- on the right, material issues been a part of the way New Zealand Millennials, now the largest generation in exercise, Moller says, as the bar is raised
challenges like carbon supported and enabled is important for credibility Post operates, so it is very aware of its the global workforce, want to be connected Moller says the belief at Meridian Energy every year. They have also adopted the UN
neutrality, eliminating champion has a mandate and accountability. relationship with society.” to a purpose and to feel proud of their that sustainability is the way forward is Sustainable Development Goals and have
polluting emissions, zero to implement initiatives Providing disclosure about Air New Zealand CEO Christopher Luxon contribution.” non-negotiable, and the culture of the reported against the goals most relevant
waste or creating net social towards the bold goals and past performance and says sustainability is part of the fabric of Sustainability issues are not simple fixes, organisation reflects that belief. to their business as part of their recently
value – challenges that the is incentivised to succeed. future progress towards Air New Zealand and reinforces the link and Luxon says their sustainability agenda “That is right from the top – from the released integrated report for 2017.
company may not yet know the bold goals is a powerful between the airline and the country its is long term. For an airline, one very large board. You have to act in an authentic way Luxon says the involvement of the
exactly how it will solve. way of building trust with name represents. sustainability challenge is reducing its and act with integrity. You have to lead by Air New Zealand board is crucial.
key audiences. “We know our success is inextricably carbon footprint. The airline is ready for the example, and it’s got to be actions, not just “Their advice has been invaluable: from
linked to a flourishing New Zealand, just challenge, aspiring to be the world’s first words. Examples are obviously very tangible guidance on how we deliver on our targets
as New Zealand’s success depends on a fuel-efficient long-haul oceanic operator. to people, but I think symbols are also through to supporting our decision to >>
12 BOARDROOM October / November 2017 13
SUSTAINABILITY FEATURE
CONTRIBUTION
A firm 72 %
commitment THE BUSINESS CASE FOR
SUSTAINABILITY
Companies that integrate sustainability see the
OF NEW ZEALANDERS WANT TO
WORK FOR A COMPANY THAT DOES
THE RIGHT THING FOR SOCIETY AND
Sustainability critical to value turn up in many different places. For many,
it is in improved staff attraction and retention
THE ENVIRONMENT.
business success – perhaps unsurprising when you learn that
three-quarters (72%) of New Zealanders want to
work for a company that does the right thing for REGULATORY DRIVERS
society and the environment.
We live in extraordinary times. It can also result in reduced operating costs. Regulators here and overseas
A body of research found businesses can reduce are responding to global
The digital, environmental, social and their operating costs up to 45% with an improved business trends with new THE OPPORTUNITY
technological forces shaping businesses supply chain, which sustainability helps deliver. It codes of conduct and demands FOR BOARDS
in New Zealand and overseas are, at times, can also result in better risk management and a for greater transparency in
astonishing. Navigating this accelerating lower cost of capital. decision making. It is an exciting time to
change is no easy task. Trust is becoming a critical success factor for From this month on be in business. The private
G
business. A recent consumer survey found 83% (October), the New Zealand sector has an unrivalled
lobal capital markets are transforming as investors of New Zealanders will stop buying a product or Stock Exchange’s revised ability to innovate,
increasingly consider environmental, social and service if they hear a business is operating in an Corporate Governance Code adapt quickly and make
governance issues. An increasing number want unethical way. will apply, asking listed opportunities out of
to know the ethical and environmental credentials of a Forward-thinking businesses also see the companies to report on their change. We’re increasingly
company. When Larry Fink from Blackrock, the world’s opportunities that are emerging. environmental, social and seeing businesses use
BUSINESS LEADERS AND largest investment firm, starts encouraging businesses The Business and Sustainable Development governance (ESG) risks or sustainability as a way
ENTREPRENEURS COULD to focus more on these issues, it signals a sea change Commission estimates business leaders and explain why they haven’t. to do this.
12tn
UNLOCK US in approach. entrepreneurs could unlock US$12 trillion in new Leading New Zealand Fundamentally,
$
This investor behaviour is reflecting a growing consumer sustainable business markets as they work to companies have been sustainability is about
interest in the ethical credentials of the products and meet the UN Sustainable Development Goals voluntarily reporting their ESG creating value over
services they buy. by 2030. risks for years, with a number the long term. In this
Digital technologies are also disrupting markets. Uber, Already I am seeing business leaders in winning international awards for environment, sustainable
Airbnb, Netflix and Pandora are already transforming the New Zealand start to tap into these markets. their efforts, including Sanford, business practices
IN NEW SUSTAINABLE expectations of consumers and businesses. It is thought Z Energy has built a $26 million biofuel plant, Watercare Services, Z Energy, are no longer 'nice to
BUSINESS MARKETS BY 2030 innovations like 3D printing, genome mapping, advanced and companies like Fonterra, Fulton Hogan NZ Post and Mercury. do' projects. They are
robotics and autonomous vehicles will soon revolutionise and Downer have committed to use the new What is significant about a strategic business
the healthcare, transportation and manufacturing industries; B5 biodiesel to reduce their greenhouse gas the updated NZX guidelines is imperative.
their success will make many jobs redundant and radically emissions. that they are part of growing
change the skills the future workforce requires. Westpac has set aside more than a billion global momentum on this issue.
Climate change is now seriously on the agenda as dollars since 2012 to invest in the clean-tech In July, the Financial Stability
businesses start to grapple with the impact it will have sector as part of its sustainability strategy. Board's Task Force on Climate-
on their assets, their risk profile and their people. In a They say they want to drive the growth of related Financial Disclosures
world first, shareholders have filed a lawsuit against the green businesses and industries that develop made recommendations to the
Commonwealth Bank of Australia, claiming the institution’s renewable energy, waste minimisation, forestry G20, urging companies to report
2016 directors’ report did not adequately inform investors and green buildings. on the risks they face from
of climate-change risks. climate change and provide
However, what makes me optimistic is the growing a framework for how to do it.
number of companies using sustainability as a lens to
SUSTAINABLE BUSINESS
navigate these challenges; to shape their strategy and COUNCIL EXECUTIVE DIRECTOR
risk management and create value. ABBIE REYNOLDS
16 BOARDROOM October / November 2017 17
KPMG
The future will need to adhere to as they
of food
seek to capture more value from
the products we grow.
We have no choice but to do
the right things, simply because
they are the right things to
do. Whether it is ensuring that
rivers and streams are truly
Despite the headlines of disruption and the impact swimmable, animals are treated
that fusion technologies of the fourth industrial ethically, staff are kept safe
revolution will have on all aspects of our lives, we and are fairly remunerated or
still talk to many people across the agri-food sector communities are enhanced,
who believe that as the world will always need food, sustainable management emerging that directs people it easier for consumers to
they can keep doing what they have always done provides the platform for towards healthier food options, access nutritious, healthy foods.
and there will be markets willing to pay good prices premiumisation. This will with levies and taxes being Understanding how a consumer
for what they grow. often increase cost without applied to unhealthy products will use a product is central to
immediate financial return. associated with key health unlocking its inherent value.
However chasing a quick dollar issues like obesity, cancer This requires investment to
over a longer-term sustainable and diabetes. The ability to be directed towards ‘assets’
strategy erodes the rights to clinically verify a health attribute that differentiate our products
IAN PROUDFOOT
GLOBAL HEAD OF AGRIBUSINESS, KPMG
We need to play in higher-value markets. migrates a product into the in market (people, brands,
align the Sustainable production is not category of functional food, innovation and consumer
products we in itself sufficient to deliver a
premium. The new rules require
offering opportunities to secure
premiums from regular, loyal
intimacy) rather than the
tangible processing plants the
grow, how we organisations to do much more consumers. industry has been comfortable
produce them to capture a greater share of the As food and health building historically.
T
value that they grow. become inextricably linked, New Zealand is an artisan
he biggest risk to New determine the contribution the ... to meet the Technology needs to be new competitors, chiefly producer of premium food
Zealand’s agri-food sector makes to our economy. needs of the embedded into all facets of a pharmaceutical companies, that is eaten for special events
sector is complacency. Demographics and economic business. From capturing data will emerge in the food sector. and celebrations globally. We
It is critical that development point to the highest-value using IoT sensors to augment They will bring novel foods to will never be the supplier of
governors at all levels of the world needing significantly niche markets. a farmer’s intuition (utilising the market, created to deliver Monday to Friday food for most
industry, from the largest more food, with consumers analytics and algorithms), specific health benefits. We consumers but an expensive
co-operatives and corporates demanding more animal through assuring consumers will see the emergence of new indulgence experienced
through to the smallest farm proteins as wealth increases. about the provenance of a categories of food, particularly occasionally when only the
businesses are alert to how the However, it is apparent that product (using blockchain) to alternative proteins sourced best will do. We are the only
world is changing and analysing current farming practices immersing them on the farm from plants, cell cultures, insects developed country that grows
what these changes mean to the are stretching environmental their food is sourced from and algaes amongst others. most of its wealth. Given our
long-term sustainability of their boundaries, making it hard to (with virtual reality) These will transition traditional limited production capacity
businesses. deliver sufficient, nutritious food technology brings meat and dairy markets into and the need to maximise its
Diets have changed radically to all citizens. Technology will producer and the emerging protein sector. value, responding to the new
in the last 40 years, driven by increasingly shape how food is consumer closer However, there will still be market realities and targeting
the emergence of convenience grown, processed, distributed together. The sector sufficient demand for all the the products we grow to the
food solutions and globalisation and consumed. has been a slow traditionally cultivated products premium niches is critical to the
of cuisines. With billions of Directors need to be able to adopter historically, but this we can grow if production is future prosperity of our country.
dollars being invested annually place New Zealand’s role in the need to align the products we founded to serve their suppliers, must change if our producers sustainable and backed by a
into novel foods and agri-tech, global food system into context. grow, how we produce them and this pivot challenges their DNA, wish to remain relevant. verifiable provenance story.
the food system revolution is We can feed 40 million people innovation we employ post- but to remain relevant and Preventive healthcare There is also a need to think
likely to accelerate. The only – 5 million of them are living or harvest to meet the needs of the to secure the premiums our models offer governments carefully about how products
certainty for the future is that visiting here at any point in time highest-value niche markets. agri-food products deserve, the opportunity to reduce the are consumed. For instance,
human beings will require and the balance are consumers This requires a pivot in the consumer must be at the costs of traditional curative more people will eat on the go
sustenance. New Zealand needs in export markets around the thinking from volume towards centre of every decision made. treatment models. The as cities grow and commutes
to adapt to the new rules of world. We produce less than value; from producer centric This year’s KPMG Agribusiness products people consume lengthen, creating opportunities
the global agri-food system. 1% of global food supply; we to consumer centric. Given Agenda highlighted the rules have a direct correlation to to capture value by presenting
Our relevance will ultimately will never feed the world. We many major co-operatives were consumer-centric organisations their health outcomes. Policy is products in formats that make
18 BOARDROOM October / November 2017 19Whenua Matua vineyard, Moutere
FEATURE
A CAuse
Greater
W
Juggling your responsibility
to the land, to your people
past and future, and running
a profitable, strong and
sustainable business is a great
akatū Incorporation is a Māori business based at the
top of the South Island. Wakatū is a multi-faceted
operation responsible for food and beverage export
arm, Kono, and foundation arm, Whenua. A third
area, Manaaki, focuses on people and culture. Kono brands include
than profit
than 4,000 Wakatū owners, the descendants
of the original families in the area.
“We took possession of our land back in
1977. It was in a bad state, and so were we in
many ways,” says Wakatū chair Paul Morgan,
REACHING OUT
R econnecting with the land has been
a crucial journey for the families
of Wakatū. The board put in place
We can’t afford
to be thinking
challenge. That is just what
the board and management
at Wakatū Incorporation have
Aronui and Tohu wines, Tutū Cider, Annies – Food You Trust, Kiwa
Oysters and Yellow Brick Road seafood. Whenua holds Wakatū
who has been a board member since 1986.
“I’m talking about disconnection from
an education and whānau development
programme more than 20 years ago to short term.
been doing every day and
will continue to do for many
assets, 70% of which are land and water assets. The Incorporation
has grown significantly, from an $11 million asset base in 1977 to
the land and our legacy, our history and
everything associated because of what
bring members of the family together to
learn about their land and the businesses It’s an inter-
hundreds of years. Emma
Sturmfels speaks to chair Paul
a current value of over $300 million.
The history of Wakatū is bound with the history of the
had transpired over the previous hundred
years. For the Wakatū board, both then
growing from it. Today, the programme
starts with children aged 10 to 18 who generational
Morgan and Chief Executive
Kerensa Johnston about living
settlement of New Zealand. When purchasing land in the Nelson
region in the 1840s, the New Zealand Company agreed that one-
and now, the fundamental premise for us
as tangata whenua is the protection and
come together for an annual wānanga.
Academic scholarships are available, and business and
and breathing the values of
kaitiakitanga.
tenth of land in the Nelson, Motueka and Golden Bay area would
be kept for the original land holders. It was known as the Nelson
preservation of our land and the ability to
hand that on to future generations. It’s not
the associate director programme aims
to develop talented leaders from within needs to be
Tenths. That one-tenth was not reserved, and it took until 1977
for legislation to be enacted and a portion of land returned to the
only the physical land, it’s the repository of
history and whakapapa of our whole area.”
the wider Wakatū family.
“It’s a large outreach programme and handed on.
owners’ management. The same year, Wakatū was established to a big investment, and it’s been done for
bring together the interests of the land owner. Today, there are more a number of reasons,” says Morgan. >> Paul Morgan, Chair
20 BOARDROOM October / November 2017 21FEATURE
The corpus land
policy means the It was a really powerful thing to do as a
family. We have an intergenerational focus,”
land value and Johnston says.
“Most businesses plan ahead 5 years
area can never fall or maybe 10 years; some businesses might
look further but not by much. We realised,
below the original in terms of not only what we wanted to
achieve but our responsibility through the
land estate... generations, that wasn’t far enough.”
“We can’t afford to be thinking short
term. It’s an intergenerational business and
needs to be handed on,” says Morgan.
FAMILY – NOT INVESTORS
LIVING AND BREATHING
KAITIAKITANGA
A case study produced
in partnership with
T he board wanted to see formal
documentation of the long-term
plan for Wakatū. They empowered
the associate directors – the next
04
Auckland University
explains that “Wakatū
generation of owners – to reach out to the
younger members of the Wakatū families to ...although Wakatū technically
acknowledges and reveres the
history of its owners … it is the
talk about what the future would look like.
The common understanding of has 4,000 shareholders they are
01
will of the ancestors that has
driven Wakatū to where it is
kaitiakitanga allows the group to hone in on
the things that are of particular importance never called shareholders. They
today, and where it will be in
the future.”
for Wakatū.
“The two constants we saw when are owners. They are family.
Morgan says that we looked back, and forward, were land
kaitiakitanga is at the heart (including our water and the sea) and Kerensa Johnston, Chief Executive
of thinking, philosophy people,” says Johnston.
and culture at Wakatū. The The relationship between Wakatū,
organisation’s long-term plan, its people and its land is reflected in footprint we have, not less,” says Johnston. water or how climate change might affect
Te Pae Tawhiti (the distant the running of the Incorporation. “It is The board also must put forward New Zealand or issues that impact on the
horizon) ,came out of a wide- important that, although Wakatū technically business cases to the owners to operations at Wakatū are frequently had
scale project undertaken has 4,000 shareholders they are never demonstrate how the land will be used. And at the board table.
several years ago with the called shareholders,” Johnston says. “They that’s how it should be, Morgan says. “One of the comments I get is that it
families and owners of Wakatū. are owners. They are family.” “They own the business, and we’re very surprises people, when they join us, how
The plan has a timeline of 500 “I think it does make a big difference. happy to operate like that. It doesn’t hinder we think, how we operate and the breadth
years, which CEO Kerensa We would never call them stakeholders or our development. If anything, it’s supported of that discussion,” Morgan says of the
Johnston acknowledges is shareholders, because we’re conscious that our development. The defining issue scope of conversation board members are
02 03 ambitious, but they work it’s their asset that we are looking after. that holds us all together is the land and involved in at the board table.
01 and 03 Apple harvest, >
22 BOARDROOM October / November 2017 23FEATURE
Leading New Zealand
in smarter building
02
solutions.
01CHAPMAN TRIPP
Diversity
key to
Unless we think Caucasian males ...getting more diversity into Māori have a distinctive contribution
have a lock on wisdom, that the
quality of corporate decision
the boardroom is key to any to offer because sustainability is the
organising principle behind Māori
sustainability agenda.
successful
making is beyond improvement business culture.
or that ‘group think’ is never a Māori-owned businesses are
problem, getting more diversity driven not only by financial outcomes
into the boardroom is key to any Gender-diverse companies are more Ethnically diverse companies are more but by the principles of kaitiakitangi
sustainability
sustainability agenda. likely to outperform their national likely to outperform their national (responsibility), manaakitanga
industry medians by industry medians by (supporting people) and taonga tuku iho
This is now so widely acknowledged that mō ngā uri whakatipu (guardianship of
it has become a truism. the resources for future generations).
McKinsey & Company established back These values tend to promote a
in 2015 that gender-diverse companies were long-term, intergenerational approach
MCKINSEY & COMPANY, 2015
+35%
NICK WELLS, CHIEF RACHEL DUNNE, 15% and ethnically diverse companies 35% that is reflected in iwi balance sheets,
EXECUTIVE PARTNER PARTNER more likely to outperform their national according to a recent in-depth survey
+15%
& LEADER OF TE WAKA SPECIALISING IN industry medians. This performance- of 31 post-settlement iwi and hapū by
TURE, CHAPMAN TRIPP’S CORPORATE AND
MĀORI LEGAL GROUP SECURITIES LAW enhancing effect has been substantiated the ANZ. This showed:
by a river of research since then.
There has been a lot of activity around a relatively high average return on
the issue here and in other advanced assets among iwi corporations – 8.2%
western economies over compared to 7.7% among the top 30
the last 10 years. In New Zealand, this listed companies
has included:
relatively low reported dividends –
the launch in 2012 of the Institute of equivalent to 2% of equity against 7.4%
Directors’ Mentoring for Diversity the top 25 issuers by market capitalisation This is a much sharper instrument than among the top 30.
programme and has risen steadily since 2015, but – anything that has gone before and will
even among this group – the gap is still provoke a more emphatic response. Announcing the results, ANZ Head
the formation in the same year of The 25 large, with female representation sitting And there are other factors at play, of Māori Relationships David Harrison
Percent Group, aimed at lifting female at 13% (up from 11.5%). particularly in relation to diversity said. “In unique and challenging
participation on boards to 25% by 2015 However, we may be about to get beyond gender. Among these are: circumstances, iwi are demonstrating
a little more traction for a number their ability to balance risk and
the introduction by NZX of a Diversity of reasons. the development of a strong governance reward to deliver strong commercial
Listing Rule requiring issuers to provide The first of these is the regulatory pool within the post-settlement iwi outcomes.”
a breakdown of the gender composition of push given by the NZX in its updated corporates Boardroom deliberations can
their directorate and senior management Corporate Governance Code, released only be enriched if this experience
in May this year. This provides at New Zealand’s increasingly multi- and perspective is represented at
the establishment in 2015 of Champions Recommendation 2.5 that: cultural population the table. The same applies to new
for Change – a Global Women initiative immigrants, who will have different
to promote the value of diversity and “An issuer should have a written diversity the impact on boardroom culture of cultural perspectives and international
inclusiveness. policy which includes requirements for the new workplace health and safety connections and intelligence to offer.
the board or a relevant committee of the regime with its emphasis on workforce
But, despite all the empirical evidence and board to set measurable objectives for participation and clear communication
all the good intentions, progress has been achieving diversity (which, at a minimum, channels
slow – even in relation to gender, which has should address gender diversity) and to
been the principal focus to date. assess annually both the objectives and the broader skill set required around
Chapman Tripp’s analysis in August of the the entity’s progress in achieving them. the board table to navigate the issues
top 75 on the Main Board shows the ratio of The issuer should disclose the policy identified with artificial intelligence and
female to male directors is highest among or a summary of it. ” digital disruption.
26 BOARDROOM October / November 2017 27FEATURE
Opportunities
climate change is significant.
The missing gap between US business leaders have also
what everyone is doing been vocal about their intention
in a low-carbon
to honour the agreement,
and what they need to despite what their government
do is a lack of awareness has decided.
Policies around climate
and understanding at
world
change could also impact
management and even at on the broader framework
businesses operate within,
director level... Herd says.
Karen McWilliams “It’s not just about the
politics [of climate change],
it’s also about changing market
Closer to home, Australian Prudential conditions, changing technological drivers,
In a future where extreme weather ‘we believe in climate change, we accept Regulation Authority (APRA) executive impacts for business and what’s required
events are more frequent and the signs, we’re taking steps to manage board member Geoff Summerhayes told for understanding all of that. For directors,
nations are trying to change the our footprint, we have a carbon-offsetting a forum in February this year that, while that framework is increasingly important.”
tide on global warming, investors programme’. Post-Paris, what we want to climate risks have often been seen as a It’s not all doom and gloom. There are
are pulling their dollars away see is quantified analysis of the financial future problem or a non-financial problem, certainly opportunities too for those able
from businesses that have a heavy implications of the macro-trend around this is no longer the case. to adapt.
carbon footprint. climate change. That shift from qualitative “Many of these risks are foreseeable, Marsh New Zealand suggests that
E
statements to quantified analysis is the material and actionable now,” warned addressing risks such as those associated
mma Herd, CEO of the Investor difference pre- and post- Paris.” Summerhayes, adding that climate risks with climate change can be a catalyst for
Group on Climate Change, spoke pose system-wide implications to which innovation rather than a corporate burden.
at the IoD Leadership Conference A RISK NOW, NOT IN THE FUTURE APRA and other regulators will pay closer Some of the immediate and long-term
in May. Herd says directors should attention. rewards could be a strategic market edge,
pay attention to the signs, as investors see Karen McWilliams, Ethics and Sustainability lower operational costs, avoidance of fines,
climate-related risk as part of the broader Leader, Chartered Accountants Australia A BOLD NEW DIRECTION improved bottom line, investor confidence
range of risks influencing their decisions. and New Zealand, says some are asking and operational excellence.
Since 2007, the World Economic Forum why climate risks should be treated Investors and consumers alike are Herd also suggests that the money
Global Risks Report has identified risks differently to any other business risk. increasingly demanding that climate investors take out of one business has
in five categories: economic, technology, Part of the answer is that the scale of risks are taken seriously. McWilliams to go somewhere.
environmental, social and geopolitical. Each the risk and the tough decisions needed says directors need to start having these “[Investors] are actively looking for
year, the top 10 risks are identified under to address it mean it requires more conversations, if they are not already, low-carbon investment opportunities. So
two areas – likelihood and impact. Towards attention. Climate risks have been as part of their organisations’ long-term who are the emerging companies that will
the beginning of that reporting period, there identified at a global level as potentially strategy. deliver the new technologies? Who are the
was a strong focus on economic and social/ causing financial instability. New Zealand has signed on the dotted companies that are much better positioned
geopolitical risks. Since 2011, risks including “The missing gap between what line and needs to start making progress if competitively relative to their peers – who
climate change, flooding, water supply everyone is doing and what they it is to meet the agreed-upon commitments is less exposed, who is the better bet, who
crises and extreme weather events have need to do is a lack of awareness and towards the 2 degree goal. A financial has a particular commodity that is going to
consistently sat in the top five risks for both understanding at management and even shock may well result from changing tack last the longest? How have they diversified
likelihood and impact. at director level around how the effects to meet the Paris goals, but the longer we their assets?”
“Climate change seems like it’s new and of climate change can actually impact on wait, the harder the turn will be. Could New Zealand businesses shift
at that same time like we have been banging a business and what the real implications “It is an incredibly steep turn, and to take up the opportunities? The board
on about it forever. That’s because we have,” are,” says McWilliams. incredibly steep turns usually equal will play a significant role in determining
Herd says. “Failure to mitigate and adapt to The Financial Stability Board’s Task financial shocks,” says Herd. “Unless whether their organisation will be part
climate change is consistently in the top 10 Force on Climate-related Financial we begin to have process around of the future landscape or left behind.
every year.”
What is new is that awareness of climate
Disclosures (TCFD) was set up to identify
the information needed to help investors,
That shift from understanding and managing what we have
all signed up to, including New Zealand, we
risks is being translated into financial- lenders and insurance underwriters qualitative statements are going to face that financial shock at YOUR SUSTAINABLE BOARDROOM
specific language. The Paris Agreement, for
example, has provided a target for signatory
effectively assess and price the potential
risks and opportunities of climate change.
to quantified analysis some point.”
While the US has pulled out of the
CARBON NEUTRAL
is the difference pre-
Products, operations
nations, and having a set of agreed- Climate change risks pose significant Paris Agreement, others, including China, and activities that
and post- Paris.
upon numbers provides a framework for financial challenges and opportunities for have reinforced their commitment to the have had their
emissions calculated,
measuring progress. many organisations and investors. The agreement. For exporting nations such reduced and offset
Emma Herd where possible.
“Before Paris, it was perfectly acceptable TCFD believes climate-related issues are or as New Zealand, with strong trade links
for companies to make statements like could be material for many organisations. with China, Herd says China’s position on
28 BOARDROOM October / November 2017 29GLC UPDATE
[Updated]
03
THE FOUR PILLARS
OF GOVERNANCE LITIGATION FUNDING: NEW REPORT ON GROWING
01
BEST PRACTICE FRIEND OR FOE? MĀORI SOCIAL ENTERPRISES,
FOR NEW ZEALAND PAKIHI WHAI KAUPAPA
DIRECTORS Third-party litigation funding is the financing
of litigation by an independent party, so-called Social enterprise is about creating social impact
litigation funders. A funder will usually contribute all of the costs using commercial business models to finance the
THE FOUR PILLARS IS NOW associated with a plaintiff’s case in exchange for a share of any achievement of social change. It’s “harnessing the
AVAILABLE ONLINE – VISIT
IOD.ORG.NZ TO CHECK IT OUT judgment or settlement proceeds. talents of entrepreneurs who want to create change,
If the case is unsuccessful, the funder will be liable for the costs. and enabling community organisations to
Litigation funding is on the rise in New Zealand, with a number achieve social goals with commercial
of high-profile funded cases involving directors before the courts. rigour and greater financial
05
Our third DirectorsBrief for 2017, Litigation funding: friend or foe?, sustainability” (Social Enterprise and
discusses litigation funding in New Zealand, funded cases before Social Finance: A Path to Growth).
the courts, overseas trends, the pros and cons of companies using It is making a strong contribution to
[Updated] litigation funding, tips for directors and other related matters. social, environmental and economic
CORPORATE GOVERNANCE outcomes in many countries. For
CODES COMPARED TABLE ALL SUBMISSIONS, GUIDES, DIRECTORSBRIEFS AND OTHER
GOVERNANCE RESOURCES ARE AVAILABLE AT IOD.ORG.NZ
example, in Scotland, there are over
5,000 social enterprises employing more
The IoD and Chapman Tripp produced than 112,000 people and contributing GBP1.68
the Corporate Governance Codes billion to the Scottish economy.
Compared table in 2016 to make it easier The concept of social enterprise is not new to te ao
for companies and directors to see the Insights from New Zealand 2 Māori, where it is common practice to pursue broader
similarities and differences between Law Society seminar on Care should be taken when goals and redirect profits from business ventures to
the various corporate governance litigation against companies executing deeds of indemnity improve cultural, social and environmental impact.
codes in New Zealand. Since then, the and directors to cover potential liability. This Released in September during the Social Enterprises
NZX Corporate Governance Code has is because an indemnity can be World Forum in Christchurch, the report, Insights on
been significantly revised, and this has void if it is not compliant with Māori Social Enterprises 2017, Pakihi Whai Kaupapa,
Governance
Directors and companies
introduced a new level of consistency are facing increased risk of the company’s constitution. The aims to support and grow a flourishing economy of
across some of the codes. The table has investigations and litigation, Companies Act 1993 provides Māori social enterprises and has a goal of growing the
been updated in light of this. It covers with regulators (e.g. FMA) being that a company can, if expressly number of enterprises by 30% over the next 3 years.
Leadership
key governance themes such as ethical more active. authorised by its constitution,
standards, diversity, independence, indemnify directors in respect of
committees, remuneration, risk 1 specific matters.
management and non-financial reporting, In a regulatory investigation,
Centre
and shareholder relations and stakeholder the interests of the company, 3
interests. board, individual directors In reviewing D&O policies,
and management may diverge. directors should consider
VISIT IOD.ORG. For example, the board may whether they are appropriately
NZ
02
not always be united, and the covered for costs in relation to
YOUR SUSTAINABLE BOARDROOM
[Update]
directors may blame other investigations and settlement
FELICITY CAIRD directors or management. payments.
ECF
MANAGER, GLC (In these circumstances, Elemental chlorine free is a
independent legal advice will 4 paper-whitening technique
that uses no elemental chlorine
be necessary.) In liability policies, defence costs compounds for the bleaching of
should be ring-fenced or covered wood pulp for paper.
After the release of the Four Pillars, the GLC has Corporate in a separate policy.
updated the corporate governance codes comparison governance codes
table and published a DirectorsBrief on litigation compared FROM RESPONSIBLE
SOURCES
04
funding. The GLC’s also been monitoring the
UPDATED SEPTEMBER 2017
Pulp sourced from forests that
SEE THE INSURANCE AND are independently certified
corporate governance reforms in the UK and global INDEMNITIES SECTION IN THE and audited to ensure they
trends impacting companies, says Felicity Caird, FOUR PILLARS FOR MORE comply with environmentally
INFORMATION
Manager GLC. Corporate governance codes compared 01
sustainable practices.
30 BOARDROOM October / November 2017 31GLC UPDATE DIRECTOR VACANCIES
Director
06
WORKER REPRESENTATION
Referred to the Financial Reporting
Council, “one of three employee
Vacancies The following positions will
remain open until filled:
VILLAGE COMMUNITY TRUST
T/A WORKSTAR
Role: Chairperson, treasurer,
DEMENTIA CANTERBURY
Role: Executive committee/
board chair
engagement mechanisms, a designated DirectorVacancies is FERRYMEAD PARK LIMITED general members Location: Christchurch
non-executive director, a formal a cost-effective way to Role: Directors Location: Nelson
employee advisory council, or a director reach IoD members – Location: Christchurch ASPIRE CANTERBURY
from the workforce”. New Zealand’s largest GLAUCOMA NEW ZEALAND Role: Chairperson and treasurer
pool of director talent. THE HOME OF ST BARNABAS Role: Voluntary board Location: Christchurch
STAKEHOLDER ENGAGEMENT We will list your vacancy TRUST members (x2)
[Reform] The Companies Act 2006 in the UK until the application Role: Board members (x2–3) Location: Auckland THE ORPHEUS CHOIR OF
UK CORPORATE The government’s response to this requires directors to have regard to deadline closes or until Location: St Clair, Dunedin WELLINGTON INC
GOVERNANCE paper was published in September and stakeholder interests in pursuing you find a suitable TIMARU MENTAL HEALTH Role: Board members (x2)
includes there proposed changes: the success of the company. A new candidate. SHOW ME SHORTS FILM SUPPORT TRUST Location: Wellington
Following high-profile corporate requirement is proposed for directors FESTIVAL TRUST Role: Board member
governance failures in the UK, the PAY RATIO to explain how they have regard to KATE EDGAR EDUCATIONS TRUST Role: Trust board member Location: Timaru CONNECT SOUTH
Department for Business, Energy and Listed companies will be required to stakeholders. Role: Trustee Location: Auckland Role: Board members (x2)
Industrial Strategy (BEIS) published its report annually on the ratio of CEO pay Location: Auckland HAMILTON CHARITABLE Location: Dunedin
Green Paper on Corporate Governance to the average pay of their UK workforce. LARGE PRIVATELY HELD BUSINESSES Closes: 1 November 2017 MOSGIEL MEMORIAL RSA INC CHRISTMAS TRUST
Reform in November 2016. The government is looking at developing Role: Board members (x2–3) Role: Trustee
PAY PROTEST REGISTER a voluntary set of corporate governance BEDS R US Location: Mosgiel Location: Hamilton
A public register will be maintained of principles for large private companies Role: Chairperson
listed companies who have received 20% and to legislate to require companies’ Location: Auckland
or more shareholder opposition. disclosure. Closes: 13 November 2017
Planning for the future?
It’s already changed.
The world is moving and adapting at an ever-increasing rate –
artificial intelligence, globalisation, and new ways of thinking. If you’re going
to stay ahead of the pack and stand out, you need to be on the leading edge.
The 2018 IoD Leadership Conference will take you on a journey of the newest
and most exciting governance developments. By putting yourself at the
leading edge, this event will revolutionise the way you govern.
The future is now. Let’s embrace it.
Register now at www.iod.org.nz/conference – Super earlybird closes 31 December
IoD Leadership 10-11 April 2018,
Conference 2018 SKYCITY, Auckland
32 BOARDROOM October / November 2017 33You can also read
