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The Air New Zealand executive team identified “sustainability in the bloodstream” this year as a long-term organisation-wide strategic pillar.

The airline says it believes its success is inextricably linked to the success of New Zealand, reflected in its company purpose statement: “Supercharge New Zealand’s success — socially, environmentally and economically.”

“This means tackling highly visible challenges such as reducing our plastic usage, but also facing into climate change (our most material sustainability challenge), supporting local communities, helping Kiwi businesses take their products to the world, and being a diverse and inclusive employer,” says Air New Zealand’s Head of Sustainability Lisa Daniell.

“Sustainability is an integral part of who we are and what we do, so much so that Sustainability in our Bloodstream has recently become one of seven long-term organisation-wide strategic pillars at Air New Zealand,” she says.

The Deloitte Top 200 judges commend the airline’s efforts in sustainability in an industry that contributes between two and four per cent of global emissions, and the transparency with which it reports on it through its sustainability report, released each year prominently alongside the more conventional financial reports.

The MinterEllisonRuddWatts Sustainable Business Leadership award is new to the Deloitte Top 200 Awards this year, recognising businesses that are working toward creation of long-term environmental, social and economic value.

The judging criteria considers governance, leadership and accountability, long-term perspective and purpose, explicit integration of environment, social and governance considerations, along with investments, programmes and projects to support sustainable development.

“Air New Zealand is showing strong leadership in diversity and inclusion as well as other social and governance aspects of this category,” says Deloitte Top 200 judge Cathy Quinn.

While the judges acknowledge the airline’s environmental impact, they applaud it for introducing measures in areas where it can and having a strong impact in social and governance aspects of this category.

“Governance and strategic management are advanced, with systems in place, targets set and being measured with both good and bad news reported, covering a comprehensive range of sustainability issues. There is a sense that there is a strong focus on solutions,” says Quinn.

The airline has improved its aviation fuel efficiency by more than 20 per cent over the past decade, through a combination of more fuel-efficient aircraft and more efficient flight operations.

Air New Zealand’s Airbus neo aircraft — with new generation engines, fuel efficient wingtip devices and more seats — are expected to deliver fuel savings of at least 15 per cent compared with the aircraft they are replacing. Other emission-reduction initiatives include implementing more efficient departure climb profiles and approach-path efficiencies.

Air New Zealand has moved to use electricity to power aircraft while at the gate whenever available, shifting away from consuming jet fuel and generating carbon dioxide emissions. It is also removing unnecessary weight from its domestic jet aircraft such as carrying less portable water on each flight and has removed or replaced nearly 55 million plastic items with lower-impact alternatives.

“The scale of our network and fleet means that any savings we make are substantial, and if we think about the influence we can have across our 4500 suppliers, or the likes of the Climate Leaders Coalition in New Zealand, that’s also really material,” says Daniell.

Air New Zealand’s sustainability report acknowledges that it emits around 3.5 million tonnes of carbon dioxide annually — making it one of New Zealand’s biggest carbon emitters.

The airline has been encouraging passengers to offset their emissions through its FlyNeutral programme. Over the past year, retail customers have partially or fully offset more than 183,600 journeys — up 40 per cent since the previous year. It has also seen a rise in the number of corporate and government customers joining the programme.

But Air New Zealand acknowledges further improvements will become tougher, and the industry now needs ‘to grow in a different way’.

It says: “While we are delivering such benefits and working to minimise our carbon emissions, until aviation biofuels are readily available in New Zealand or there are significant technology breakthroughs such as electric aircraft, we are unlikely to deliver further significant carbon emissions reductions through our own operations.”

Air New Zealand has joined with Z Energy, Refining NZ, Scion and Auckland International Airport to investigate how to transition to biofuel, and whether a biofuel plant in New Zealand could work, but the sustainability report notes that: “the capital investment would be significant and it has not been achieved anywhere in the world without substantial government support to establish production and thereafter ensure fuel pricing remains economically viable.”

It is also working with aircraft manufacturers to explore new propulsion technologies such as hybrid electric aircraft. It has partnered with Zephyr Airworks — the operator of Cora, the world’s first autonomous air taxi.

In his introductory video, incoming chief executive Greg Foran suggests the airline will continue to lead in sustainability.

“My vision for Air New Zealand would be to make it something that other airlines aspire to be,” he says.

“We need to be taking some positive steps around sustainability. There are a number of things that fit into sustainability — from carbon footprints driven by CO2 emissions, to social responsibility around sustainability.

“I think it is vitally important that we lead, not just in New Zealand, but actually around the world in terms of what we can accomplish.”

Finalist: Z Energy

Z Energy says it stands for “an environmentally sustainable New Zealand that is an example to the rest of the world and an inspiration to Kiwis.”

Chief executive Mike Bennetts says ultimately for Z, sustainability means balancing the needs of its people and customers now, with those of its people and customers of tomorrow.

“It means not taking more than we need now, so that those generations coming after us have enough. We do that across the three legs of our sustainability stool — economic, social and environmental,” he says.

Z says it will move from being a part of the climate change problem to the heart of the solution: “We will be bold and provide leadership and a range of solutions to enable our customers, stakeholders and communities to join on the journey to a lower carbon future.”

The Deloitte Top 200 judges recognise Z for leadership on climate when it could have been obstructive.

They also note Z Energy’s excellent annual report: “It is readable, with key metrics throughout, integrated with business strategy,” says Cathy Quinn. “It is an integrated report in its true sense, including both good and bad news and truly engaging its stakeholders.”

Bennetts says Z is focusing on two key things: “maximising our impact on intervening in climate change, and ensuring we do what we said we would in terms of cleaning up our own back yard.”

He explains that means delivering on its commitment to reduce its operational emissions by 30 per cent from a 2017 baseline, with the balance offset in permanent New Zealand forestry — a mix of natives and exotics.

“We have the opportunity to be right at the centre of the transport fuels solution but that will mean nothing if our responses lack integrity,” he says. “We are up for the difficult conversations on how we intervene in climate change that provides harmony across environmental, social and economic sustainability.”

Bennetts acknowledges the company’s big issue is the products it sells, not what it does. But he says that is exactly why Z can have the biggest impact.

“Our intent is to lead and facilitate the much-needed transition to lower carbon transport fuels than default to being a barrier to change,” he says. “The technology exists for lower carbon alternatives like biofuel and hydrogen, but our current challenge is finding a way to make that economically sustainable for our customers given the environmental and social Sustainability in the bloodstream sustainability is obvious enough.”

Bennetts says capital and innovation will come easily when the economics are better balanced, “especially when we price in the reality of social and environmental externalities.”

Z has been investing in alternative, cleaner fuels and alternative mobility technologies, including nearly $30 million in building New Zealand’s first commercial scale biodiesel plant, turning tallow — a by-product of the agricultural industry — into high quality biodiesel. It has also recognised electricity will be part of a clean energy future, investing a majority stake in Wellington-based retail electricity supplier Flick Electric.

At the time, Bennetts said “this is another step towards the long-term sustainability of Z, and the role we play in a lower carbon transport future.”

Z was a founding member of the Climate Leaders Coalition, launched last year to promote business leadership and collective action on the issue of climate change. Bennetts is the convenor of the Coalition, which aims to “help New Zealand transition to a low emissions economy and, in doing so, create a positive future for New Zealanders, business, and the economy.”

Finalist: Mercury

Mercury says sustainability is about delivering on its mission of energy freedom for New Zealand. “It’s about NZ being stronger economically and more sustainable through better use of homegrown, renewable talent.”

The electricity generator-retailer says being sustainable is an essential element of the way it operates: “We consider long-term sustainability across all the areas that matter most for us using our pillars — customer, partnerships, kaitiakitanga, people and commercial. This framework means we assess value and make decisions in an integrated way that includes consideration of commercial, social and environmental factors.”

The Deloitte Top 200 judges say that Mercury is in itself a sustainability solution — its contribution to New Zealand’s zero-carbon goals are significant.

“It has a clear strategy on environmental sustainability and has been proactive in social issues and places a key focus on its relationship with Māori,” says Cathy Quinn.

Mercury’s energy generation comes from 100 per cent renewable sources. The move away from thermal generation has helped the energy company decrease total emissions by 36 per cent since 2015.

This year, it committed to the construction of a new $256m wind farm at Turitea, east of Palmerston North — and recently announced it will pour another $208m to complete the farm at its full scale.

This makes Mercury the only New Zealand energy company with what it describes as “the awesome foursome” of renewable energy in its portfolio; along with the wind farm it has nine hydro stations on the Waikato River, five geothermal stations throughout the central North Island and a solar farm.

“Key initiatives aligned with our strategy have not only lowered Mercury’s carbon footprint, but they have been instrumental in materially reducing the nation’s carbon footprint,” says Mercury.

“We refer here to the transformation of the energy sector that was a consequence of the building, by Mercury and others, of significant geothermal generation capacity in the decade from 2003. Mercury’s geothermal stations include stations run as innovative joint venture partnerships with Māori enterprises.”

Mercury has been climate positive since 2017, with its carbon units exceeding the level of its emissions. It has achieved this through participation in the New Zealand emissions trading scheme, the careful measurement of its GHG emissions, and long-term partnerships with forest owners.

Natural resources and climate change are key focus areas for Mercury, it aspires to be recognised as a leader in the ultra-long-term management of both physical and natural assets by 2030.

For the last two years, Mercury has submitted information to the CDP (formerly the carbon disclosure project). The CDP runs the global disclosure system that enables organisations and government to measure and manage their environmental impacts. Mercury has been rated among New Zealand’s top ten companies — and the only energy company — that made a submission.

Chief executive Fraser Whineray has been a long-time advocate of electric vehicles (EVs). He says with New Zealand generating more than 80 per cent of electrity from renewable sources it is logical to take advantage of that. “It’s another step on what will be a long journey, but it’s one that New Zealand will be in the box seat for with its renewable electricity system,” says Whineray.

Mercury is encouraging New Zealanders to lower their own carbon footprint through the opportunity electric transport provides. It has done this through initiatives including promoting e-bikes and introducing Mercury Drive — an electric vehicle subscription service that launched a pilot this year and was heavily over-subscribed.

It has also reduced its emissions since 2016 by converting over 74 per cent of its fleet to electric vehicles or plug-in hybrid electric vehicles.

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The linear economy, a hallmark of modern economies, takes resources from the ground and turns them into products that ultimately become waste and are thrown away.

It designs and manufactures products for the consumer without accounting for the resources used to make them or what happens to the product at the end of its life.

Often it is considerably more expensive — or impossible — to repair something when it breaks compared to replacing it. This was demonstrated in last week’s Black Friday sales, which saw consumers rush out to the shops to snag a discount deal — often items that will have a short life and be soon destined for the landfill.

In contrast to the “take-make-waste” model of a linear economy, a circular economy is an economic system aimed at eliminating waste and the continual use of resources and is designed to benefit businesses, society, and the environment.

It aims to gradually decouple growth from the consumption of finite resources and is increasingly seen as the driver to help reach the UN’s Sustainable Development Goals.

The New Zealand Government has identified the circular economy approach as an important principle for addressing resource and waste issues for the country’s future.

The Ministry for the Environment defines it as “an alternative to the traditional linear economy in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life.”

It says when a product is designed for the longest use possible — and can be easily repaired, remanufactured or recycled (or used, composted and nutrients returned) — it can be considered to have a circular life cycle. A circular economy is fuelled by renewable energy, such as solar, hydro, wind, tidal and biofuels.

The New Energy Futures Paper: Batteries and the Circular Economy paper, released last week, outlines the six enabling factors required for a circular economy:

1. Systems thinking: Organisations take a holistic approach to understand how individual decisions and activities interact within the wider systems they are a part of (e.g. material, operational, financial, social and ecosystems).

2. Innovation: Organisations continually innovate to create value by enabling the sustainable management of resources through the design of processes, products/services and business models.

3. Collaboration: Organisations collaborate internally and externally through formal and/or informal arrangements to create mutual value.

4. Value optimisation (retaining value): Keeping products, components and materials at their highest value and utility at all times.

5. Transparency (open communication): Organisations are transparent about decisions and activities that affect their ability to transition to a more circular and sustainable mode of operation and are willing to communicate these in a clear, accurate, timely, honest and complete manner.

6. Stewardship: Organisations manage the direct and indirect impacts of their decisions and activities within the wider systems they are part of. This can include product stewardship or Extended Producer Responsibility (EPR), where businesses take back their products to refurbish and resell.

Sustainable Finance: A hydrogen-powered future (NZ Herald)

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Technology is playing a key role in changing the whole energy sector and enabling sustainability, says Vector chief.

Meeting the needs of current generations without compromising the ability of future generations to meet their needs, is about striking the right balance between the environment, society and the economy.

New Zealand’s largest distributor of electricity and gas, Vector, says it is leading the transformation to create a new energy future.

“Meeting the needs of current generations without compromising the ability of future generations to meet their needs, is about striking the right balance between the environment, society and the economy,” it says.

Vector chief executive Simon Mackenzie says that technology is playing a key role in changing the whole energy sector and enabling sustainability.

“Primarily this is through the decarbonisation of the energy space, but also very much through changing the whole consumer interaction in an industry that has been very low on the consumer interface,” he says.

He explains that the old model was always about generation being built and transmitted into cities or regions, with consumers turning on the light with no choice.

“When you think about that from an economic perspective, that was all very much a market-orientated supply side, but with an elastic demand side,” he says.

“What we see now is a massive change to technology, primarily through digital platforms, and also new solutions — whether they are solar, battery, microgrids or digital environments where people can shift energy.”

He says these are all emerging and putting shape into the demand side of the energy sector.

New Zealand’s energy production is different to many other countries in that it uses mainly renewable energy sources including hydropower, geothermal and wind energy. But it is the large fossil fuel generators that are investing massive amounts into emissions-free production to decarbonise their energy production systems.

This is changing the cost curves of these technologies, and is encouraging a shift to a decentralised model. For example, as residents put solar panels on their private property, they are beginning to ask: “I’ve got solar, I’ve got a battery and I’ve got an electric vehicle — how should I use my energy to the best effect?”

And it is here, Mackenzie says, where digital platforms come in — such as Vector’s investment in Internet of Energy (IoE) company mPrest.

He says mPrest’s technology is the most comprehensive monitoring, analytical and control system available anywhere in the world.

“You can think of it as a system of systems. The software sits over customer, market, distributed energy resources and network systems managing performance in real-time.

“Through self-learning, it is able to assess and predict multiple factors including loads, market dynamics, storage, customer demand and capacity. This greatly enhances the resilience, security and efficiency of customer solutions and our network.”

Mackenzie says if you can understand customers’ behaviour and shift them to flatten consumption by 20-30 per cent, then “that’s a massive change in the energy system”.

“Some of these modern electric vehicles (EVs) are turning up in the driveway with in-car battery capacities that are equivalent to seven houses’ worth of demand,” he says.

“This means to charge them quickly, you can have five to seven times the consumption of a house being needed. How do you manage that from an overall efficiency? If you can digitally control when the EV is charged, it is much better than creating new peaks that have to be managed — the costs are significant”.

As an example, EV chargers can help to facilitate energy flow both to and from an EV, allowing it to act as a rechargeable energy source. When connected at home or work, charge from the EV can be used as a power boost for the building, as a cheaper power source when electricity prices are at their peak — and will eventually be able to power homes during power outages.

“Many homes could be powered by their EVs at peak time. Similarly, EVs will be releasing energy back to the grid to support grid demand while taking advantage of a higher peak energy buyback rate,” says Mackenzie. However, he warns that one of the big challenges from a New Zealand perspective in the movement toward sustainability is a risk of complacency.

“We are getting asked questions about our sustainability position and our carbon reporting and we won’t get capital to New Zealand if we are not completely over what the trends are globally and financially.”

He says that just because we are small, at the bottom of the world, and perceived as clean and green, we must not think we are immune from these trends.

“We still have to raise capital from offshore and we need to be able to address questions about our sustainability position and carbon reporting.”

When Vector issued capital bonds, Mackenzie was asked a lot about what Vector is doing in decarbonisation.

“On the capital bond roadshow in New Zealand, some of the brokers were asking the question.

Offshore agencies are also asking about it … it is becoming much more prevalent.”

He says if we are complacent, we will be economically cast adrift.

“We won’t get capital if we aren’t completely over what the trends are globally and financially. But if we act, we can lead the way and create growth opportunities.”

Mackenzie sees this as an opportunity for Vector, because the company can adapt quickly and deploy new technologies.

He has seen rapid advances and focus in this space from global technology players that are developing new digital solutions for the energy sector.

“Vector has great international partnerships, so we see this as a way in which we can demonstrate how a market or a business can respond to these challenges and continue to learn,” he says.

This is an opportunity because Vector’s partners are keen to work with New Zealand to test out new innovation — “almost like a Petri dish”, which Mackenzie says will also provide export and other growth opportunities.

He adds that those who don’t show absolute concrete initiatives and actions will be left in an ever-increasingly difficult situation as social, regulatory and political pressure is applied.

We already hear of flight-shaming, which is encouraging people to shun air travel for the sake of the planet. Mackenzie has no doubt there will be energy shaming at some stage as well.

“Directors and business leaders need to be thinking of their carbon risk and appreciate that carbon is the new tobacco. Pressure will mount on them — including potential legal claims — if they can’t show action.”

This view is shared by the governor of the Bank of England Mark Carney, who earlier this month said companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt.

He said it was possible the global transition needed to tackle the climate crisis could result in an abrupt financial collapse, and the longer action to reverse emissions was delayed, the more the risk of a collapse would grow.

But he noted that great fortunes could be made by those working to end greenhouse gas emissions.

Carney told the Guardian that disclosure by companies of the risks posed by climate change to their business was key to a smooth transition to a zero-carbon world as it enabled investors to back winners.

“There will be industries, sectors and firms that do very well during this process because they will be part of the solution,” he said. “But there will also be ones that lag behind and will be punished.”

Sustainable Finance: No such thing as waste (NZ Herald)

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Infrastructure: Can Auckland be a major hub?

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NZ could be a connector of China and Latin America, but it’s not without its challenges, writes Tim McCready

Developments in air travel are making longer non-stop flights possible and commercially viable. Currently, the longest distance flight is Singapore Airline’s 15,300km between Newark New Jersey and Singapore — not quite reaching the distance to fly direct to South America from China.

The Herald’s aviation editor, Grant Bradley, says new aircraft technology could allow load restricted non-stop flights from Southeast Asia to South America — but those departing from China must still stop along the way.

“By stopping over in New Zealand (or Australia), airlines do get the opportunity to tap into more passenger and freight markets,” he says.

“But in saying that, Auckland Airport’s aim of being something of a mini-hub for Southeast Asia — South America flights could be some way off too; the demand isn’t there yet.

“And worryingly for Auckland, Latam airlines will overfly the city with some of its flights from Sydney to Santiago from the end of the year, instead of calling here.”

The Building the Southern Link conference, held in Auckland earlier this year, sought to leverage the opportunity, suggesting that New Zealand’s place in the world as a major and natural connection between China and South America is an idea whose time has come. It brought together more than 200 international experts and key stakeholders, to discuss the opportunity, and develop recommendations to move forward.

“New Zealand is either first cab off the rank, or the last,” former trade minister Tim Groser told attendees.

He says that for a small country, you must have the wherewithal to not wait for good company, but to get ahead of the queue and move swiftly. This is a central lesson if you survey the history of New Zealand’s relationship with China in particular. China attributes “five firsts” to New Zealand:

  1. In 1997, New Zealand became the first country to agree to China’s accession to the WTO by concluding the bilateral negotiations component of that process.
  2. New Zealand was the first country to recognise China as a market economy in 2004.
  3. New Zealand was the first developed country to commence free trade agreement negotiations with China. In November 2004, New Zealand and China launched free trade agreement negotiations.
  4. In April 2008, New Zealand became the first country to successfully conclude free trade agreement negotiations with China.
  5. In November 2016, New Zealand and China jointly announced the launch of negotiations to upgrade its bilateral free trade agreement, a first for a developed country with China.

Groser says New Zealand has been an outlier in that respect. “Traditionally foreign ministries look for good company — political safety,” he says. “The tendency is to join queues, not to form them. If we’ve had some success, it’s because we’ve taken well calculated risks — because if we don’t, we end up at the back of the queue.”

Trade and Export Growth Minister David Parker says New Zealand’s geographic location — which was once considered a disadvantage — was now a development opportunity. He says the idea of the Southern Link is one that the Government is behind — it fits with their objective of diversifying our economic linkages further.

“What do we need this southern hub to do?

“At the simplest level, the hub should facilitate seamless and convenient exchange of goods and travel for people between the eastern and western sides of the Pacific Ocean,” he said.

“In this sense, New Zealand offers a clear alternative to crowded northern hemisphere airports.”

At the conference, Chinese Ambassador to New Zealand Wu Xi said: “The key features of the Belt and Road Initiative are connectivity, openness and inclusiveness. In many ways, it is like a modern version of the ancient Silk Road.”

She said it has created new energy and momentum for global economic growth, and a framework for ideas like the Southern Link to take shape.

Groser agreed — saying the Belt and Road Initiative, first described in 2013 by Chinese President Xi Jinping (and at that time known as One Belt One Road), is a “mother of a plan — you don’t get bigger vision than BRI”.

New Zealand is a small, sophisticated country — and well organised. The conclusion of working groups at the conference agreed that the potential exists to make the Southern Link a reality, but there are issues that will need to be addressed.

These include political complications, transit visas, air services, customs and biosecurity regulations, trade facilitation and border policies.

Many of these are a lot more complex than they might appear. Stephen Jacobi, executive director of the New Zealand China Council, told the conference that the Southern Link must be a partnership between government and business.

He says we need to convince government that the changes to public policy and regulation are worth making, “because the prize — in terms of increased trade, travel and tourism — is high”.

Groser wrapped up the conference by throwing down a challenge:

“A plan not backed by a vision is a nightmare. But a vision without a plan is hallucination,” he said.

“We have a big idea. I think it’s on the move — and I think we should seize the time.”

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