Will Sustainability Reporting Become Mandatory in New Zealand?
- Business Studio
- 4 days ago
- 3 min read
Sustainability reporting has become a significant aspect of corporate responsibility worldwide. Whether sustainability reporting will become mandatory for smaller entities in New Zealand is a topic of growing interest among businesses, investors, and consumers. What can we expect in a rapidly changing industry?
Current Government Stance
Climate-related disclosures became mandatory for large-listed entities on January 1st, 2023. The New Zealand government has not mandated sustainability reporting for all businesses. The XRB requires large-listed companies, banks, insurers, and asset managers to adhere to climate-related disclosure standards to enhance transparency and accountability regarding climate risks and opportunities.
However, there are concerns that these standards might be weakened, with rumours suggesting the current government may reduce the number of entities required to report. While voluntary guidelines and frameworks are available, smaller businesses are not legally required to conduct comprehensive sustainability reporting.
Consumer-Driven Change
Even without mandatory regulations, consumer interest in sustainability is driving the movement faster than government change. New Zealand consumers increasingly prioritise sustainability in their purchasing decisions, demanding greater transparency and accountability from businesses. This shift in consumer behaviour is compelling businesses to adopt and report on sustainable practices to maintain their market position and reputation.
The Role of Investors
Investors also play a crucial role in promoting sustainability reporting. Many investors now consider ESG factors when making investment decisions, recognising that sustainable practices can lead to long-term financial performance and risk management. This investor pressure encourages more companies to disclose their sustainability efforts, even without mandatory requirements. Most notably, banks are expecting to have the conversation with you to understand your attitude towards sustainability.
Future Prospects
While the current government stance does not indicate an imminent move towards mandatory sustainability reporting, the future remains uncertain. Several factors could influence a shift towards mandatory reporting:
International Trends: As more countries around the world implement mandatory sustainability reporting, it may be a requirement for New Zealand businesses to be market-relevant in the global market.
Regulatory Changes: Future governments may prioritise sustainability and introduce regulations requiring businesses to report on their ESG performance.
Market Pressure: Continued consumer and investor demand for transparency could lead to industry self-regulation, where businesses voluntarily adopt comprehensive reporting practices to meet stakeholder expectations.
Preparing for Potential Changes
Businesses in New Zealand should consider the following steps to prepare for potential changes in sustainability reporting requirements:
Adopt Voluntary Frameworks: Start by adopting recognised sustainability reporting frameworks such as the GRI Standards, SASB Standards or TCFD. The utilisation of standards will help build a foundation for comprehensive reporting.
Engage Stakeholders: Actively engage with stakeholders, including customers, employees, investors, and the community, to understand their sustainability concerns and expectations.
Enhance Data Collection: Invest in systems and processes to collect and analyse ESG data. Accurate and reliable data sources are essential for effective reporting.
Stay Informed: Keep on top of regulatory developments and industry trends related to sustainability reporting. Staying informed will help your business anticipate and adapt to potential changes.
Conclusion
So, will sustainability become mandatory in New Zealand? Maybe, however, we don’t see that happening in the immediate future. However if you supply big business or export, in that case, the potential for you to need to be reporting on sustainability increases tenfold.
While it might not be mandatory, consumers and investors drive corporate responsibility. Rather than being left behind, we recommend joining the changing market and proactively adopting sustainability reporting. In doing so, it is likely your business will be better positioned to meet stakeholder expectations and navigate potential future regulatory changes as they come.
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