Events such as the COVID-19 pandemic, geopolitical tensions, and global economic uncertainty have contributed to the recent shift towards nationalism and a focus on domestic economic growth among New Zealand's trading partners. As a result, Environmental, Social, and Governance (ESG) policy adoption in New Zealand faces increased challenges.
Potential ESG impacts associated with this shift includes:
Weakened Climate Commitments: Nationalist policies often prioritise domestic industries, especially traditional energy sectors like oil, gas, and coal, which can slow down decarbonisation efforts.
Regulatory Divergence: A shift away from international cooperation leads to fragmented ESG regulations. Multinational corporations face difficulties aligning their ESG strategies across different jurisdictions.
Reduced Global Cooperation on Social Issues: Nationalism often reduces cross-border collaboration on labour rights, human rights, and fair trade, leading to inconsistent enforcement of social standards.
Backlash Against "Woke Capitalism": Some movements criticise ESG as corporate overreach, leading to pushback against DEI (Diversity, Equity, and Inclusion) initiatives.
Weakened Global Standards: If countries push back against international ESG norms, companies may reduce transparency in reporting ESG metrics.
Geopolitical Risk & Compliance Challenges: Businesses operating across multiple countries must navigate varying governance expectations, making ESG compliance more complex.
During this period of change, New Zealand’s approach to ESG appears to have taken a pragmatic and business-friendly approach requiring businesses to be responsible stewards of the environment and society, but not at the expense of economic growth. This is best demonstrated by recent policy changes including:
- Revised emission targets to a 51%-55% cut by 2035, reinforcing New Zealand’s commitment to net-zero emissions by 2050, however, agricultural emissions pricing has been delayed by five years, due to concerns over the economic burden on farmers.
- Investment in resilient infrastructure and clean energy but also lifting restrictions on offshore oil and gas exploration to boost energy security.
- Renewed interest in mining, with efforts to attract investment and streamline the approval process.
- Cancellation of selected "clean, green" policies, because of their harmful impacts to economic growth and competitiveness.
- Maintaining mandatory climate-related financial disclosures, however these requirements are under review in order to reduce compliance burdens.
These policy directions indicate a balancing act between advancing environmental commitments and stimulating economic growth.
Due to ongoing ESG policy evolution, New Zealand businesses should adopt a flexible ESG strategy that allows them to meet evolving domestic and international standards while staying competitive in a shifting trade landscape.
The Importance of ESG in New Zealand
Advancement in ESG adoption continues to be well supported in New Zealand due to several key commercial factors:
Investor and Market Demand: Sustainable investing is on the rise, with major financial institutions integrating ESG criteria into their decision-making processes. Businesses that demonstrate strong ESG credentials are likely to gain great access to investors, lenders, and partners.
Regulatory Changes and Compliance: New Zealand has introduced mandatory climate-related financial disclosures for large financial institutions and publicly listed companies. More regulatory requirements are expected in areas such as emissions reporting, supply chain transparency, and sustainable finance.
Consumer and Employee Expectations: Customers and employees are prioritising ethical and sustainable practices. Companies with strong ESG commitments can build brand loyalty, attract top talent, and improve employee retention.
Risk Mitigation and Resilience: Businesses that proactively manage environmental and social risks such as climate change impacts and ethical governance, are better positioned to navigate disruptions and maintain long-term stability.
For these reasons it is important New Zealand businesses maintain focus on ESG and take a strategic, adaptive approach to ESG balancing compliance with international standards while remaining competitive in domestic and global markets.
This will require particular scrutiny on their environmental impact, which despite some policy softening, continues to have strong universal support particularly concerning carbon emissions and sustainability.
EGS adoption that balances sustainability with economic pragmatism will vary depending on the scale and industry of the business, however the following are prevalent factors that should be considered in order to position the business effectively:
Align with International ESG Expectations for Trade Access
- Export-Focused Businesses: Given that over 80% of NZ exports go to countries with existing or proposed mandatory climate-related disclosures, businesses should maintain strong ESG reporting to ensure market access.
- Stay Ahead of Global ESG Regulations: The EU, US, and parts of Asia continue enforcing strict ESG measures. NZ exporters should integrate carbon accounting, supply chain transparency, and ethical sourcing into their operations.
Adapt to the Government’s Business-Friendly ESG Approach
- Less Regulation, More Incentives: The government has softened some ESG policies (e.g., delaying agricultural emissions pricing), meaning businesses can focus on voluntary sustainability initiatives rather than costly regulatory compliance.
- Leverage Government Support: With investments in clean energy, infrastructure resilience, and trade agreements, businesses can seek funding and partnerships in these areas to align ESG goals with economic growth.
Position ESG as a Competitive Advantage
- Attract ESG-Focused Investors: Increasingly global and domestic investors still prioritise ESG-friendly companies. Strong ESG practices can enhance access to capital and partnerships.
- Meet Consumer and Supply Chain Expectations: Even if regulations are relaxed, consumers and corporate buyers still demand ethical and sustainable products. Businesses should continue measuring and communicating their ESG impact.
Balance Short-Term Economic Pressures with Long-Term ESG Goals
- Energy and Resource Companies: With the lifting of bans on offshore oil and gas exploration, businesses in this sector should balance short-term opportunities with long-term sustainability transitions.
- Agriculture and Food Producers: Given the delay in agricultural emissions pricing, companies should use this time to proactively reduce emissions and prepare for future requirements.
- Manufacturers and Retailers: Should assess supply chain risks related to international ESG policies (e.g. labour laws, carbon emissions tracking) and implement due diligence frameworks.
Future-Proof ESG Strategies Against Policy Shifts
- Remain Flexible: Political landscapes shift. Future governments may tighten ESG regulations, and international markets may increase compliance requirements.
- Invest in Resilient, Low-Carbon Business Models: Businesses that future-proof their energy use, emissions, and governance will be better positioned long-term.
- Use ESG as Risk Management: Strong ESG strategies can mitigate financial, reputational, and supply chain risks, especially as global economic uncertainties grow.
New Zealand businesses should embrace ESG not just as a regulatory burden but as a competitive advantage in securing trade access, attracting investment, and ensuring long-term resilience.
ESG should be considered a smart business strategy, not just compliance.
Integrating ESG into Business Strategy
Successfully embedding ESG into business strategy requires a structured approach. Here’s how businesses can take action:
- Assess Your ESG Position: Start with an ESG audit to evaluate current practices, identify risks, and understand opportunities for improvement. Consider factors such as carbon footprint, who is part of your supply chain, and governance frameworks.
- Set Clear ESG Goals: Establish measurable ESG objectives, such as reducing emissions by 20% over five years or reducing waste management to 1% of production by 2030. Ensure these goals align with overall business strategy and financial planning.
- Align ESG with Financial and Business Planning: Incorporate ESG considerations into financial decision-making, budgeting, and investment strategies. Businesses that integrate ESG into risk management and forecasting can improve long-term financial performance and resilience.
- Implement ESG Reporting and Transparency: Accurate and transparent ESG reporting is crucial. Businesses should use industry frameworks such as Global Reporting Initiative (GRI) to standardise ESG disclosures.
- Engage Stakeholders and Communicate Progress: Regularly update investors, customers, and employees on ESG initiatives. Strong ESG communication enhances trust and accountability.
The Role of Financial Advisors in ESG Integration
Navigating ESG complexities can be challenging, but financial advisors play a key role in helping businesses:
- Develop ESG-aligned financial strategies.
- Identify sustainable investment opportunities.
- Ensure compliance with ESG regulations and reporting standards.
- Improve financial performance while meeting ESG objectives.
We provide expert advice to help businesses integrate ESG into their financial and strategic planning, ensuring long-term growth and resilience.
Is your business ready to embrace ESG? Contact us today to explore how we can help you develop a robust ESG strategy that drives sustainable growth.
Author - Nick Savill
