Healthy Waterways – a corporate governance perspective

I have been picking at the Government discussion document on a national direction for freshwater policy – entitled ‘Action for Healthy Waterways’.  It is a big read and one which can be seen to partner the Government’s proposed legislative changes in response to climate change risks, in the form of the Climate Change Response (Zero Carbon) Amendment Bill.

Environmental matters (and the attendant risks, costs, and opportunities) must be seen as significant parts of the corporate governance landscape – and therefore part of a Board’s risk management agenda.

As a result, the NZX-listed manufacturing company that has included in its 2018 and 2019 annual reports, the statement that:

At this time, [the Company] does not report under a recognised environmental, social and governance (ESG) framework, but aims to provide non-financial information that would be useful to its stakeholders.  In the coming year, [the Company] will seek to better understand the material ESG issues for [the Company] and determine the importance that both the business and external stakeholders place on them.

clearly has some work to do on its response to the requirement to report on the extent to which it has followed the recommendations in the NZX Corporate Governance Code during the relevant financial year.

A Board must consider, and manage, risks that are relevant to the company.  This requirement lies at the heart of a director’s duties.  Consideration of the E part of ESG risks will certainly become a relevant factor for all manner of companies – whether directly or indirectly.

Policy goals

The policy goals described in the discussion document on freshwater are twofold:

• stop further degradation of our freshwater resources – and start making immediate improvements; and
• reverse past damage to bring our freshwater resources, waterways and ecosystems to a healthy state within a generation.

The Government proposed to achieve these goals through greater national direction under the RMA (by means of a National Policy Statement) plus more work on drinking water.  Amongst other things, there are proposals on clarifying policy direction, prioritising ecosystem health, regulating stormwater and wastewater disposal, and improving farm practices. 

It is the latter which has received the most publicity so far, with various claims and counterclaims about the impact on farming, particularly.

The time for change is now

But, to non-expert readers (like me) of the Government’s freshwater policy proposals, urban New Zealand (and therefore the urban-based business community) has just as much, if not more, need to learn and change as those in rural communities.  With claims that a local community is vowing to “take charge” monitoring Henderson Creek and its tributaries, in Auckland, in a bid to stop raw sewage, litter and chemicals polluting it, many company directors will get the impression that a top to bottom shift in views about significance of fresh water issues is occurring in urban communities as well as those in rural areas. 

Consequently, those Boards which address these issues now will position themselves for the future, and be ready to act (and potentially lead) the response to the regulatory changes that are coming (quickly).

Further information

If you would like more information about any of the matters discussed in this note, please contact me.