Pip Best is the sustainability and climate change lead at EY, advising businesses on how to prepare for the rapid changes that lie ahead. She spoke to Jeremy Hansen about the challenges for New Zealand businesses as part of our Seven Plans for a Better Planet interview series.
JEREMY HANSEN: Pip, your work at EY focuses on giving advice to clients on climate change and sustainability. Can you tell me a bit more about that?
Pip Best: Sure. I run EY New Zealand’s climate change and sustainability practice. We work on a broad suite of issues for companies or governments, helping them deal with a range of topics including climate change, but also helping them address other sustainability challenges that their organisations might be facing.
JH: How would you characterise the preparedness and the openness of the companies you work with to the scale of change that might be necessary?
PB: The openness and the ambition across New Zealand is there. And I think New Zealand does really understand the concept of natural capital – the value of nature and what it means to the country. But there is quite a lot of work to be done in terms of preparedness. To me the biggest issue is having the data to understand what your organisation’s inputs and outputs are, and then being able to work out what changes you need to make so that you become more sustainable.
JH: This is pretty basic stuff, right? You’re talking about the work organisations have to do before they get on track to reducing their emissions.
PB: It is really basic. To me it is a reflection of the way that organisations have historically worked. If we were talking about financial information, this data would be well captured and understood. There would be specific methodologies about how to quantify that and calculate the different impacts. We haven’t done such a good job in setting up the same systems for our non-financial inputs and outputs.
JH: I guess this is one of the big challenges that faces a lot of businesses: the work they happen to do on the sustainability front does not necessarily have a measurable outcome on the bottom line, at least in the short term.
PB: Absolutely. And that is the key challenge. You have to be financially sustainable as well as environmentally sustainable and socially sustainable. And our system has optimised around the short-term financial elements. In the past we haven’t well understood the long-term implications of our business models. And I guess what we’re seeing happen is, as we approach a planetary boundary, those implications are now starting to come through into the bottom line. I think we’re starting to understand the financial impact, particularly with the emissions trading scheme in New Zealand. There’s a variety of other environmental and social inputs our businesses use and we haven’t yet put a price on them. We’ll start to pretty rapidly understand that these things do have value and those costs will probably exponentially grow as we start approaching some of those [planetary] thresholds.
JH: Are things changing faster now than they were five years ago?
PB: They are. What’s driving this at the moment is a very rapid change in international investor expectations and consumer expectations. People are very quickly changing their buying habits. We’re also seeing moves by investors that require a business to have an understanding of climate change and to have taken some steps to addressing that issue as a precursor to accessing capital. So it probably is quite sudden for some organisations to start realising this and addressing this issue.
JH: What interests you about this sustainability space personally, and how did you begin your journey into it?
PB: I’m an engineer by background. I love numbers. I then worked in the finance side of things making, I guess, short-term, financially optimal decisions. And it did strike me that something was missing there in terms of how we valued anything. Because I come from a background of financial trading, I am intrigued by a mispriced asset. We have vastly mispriced our environmental and our social inputs and outputs over the very long term in a way that will have serious consequences. And so it’s really that bit that I guess is my mission, my purpose, and the area that I focus on.
JH: Are you confident that we can achieve the systemic transformation that we need to make climate change less of a problem?
PB: I think this is one of the key challenges. There’s a temporal element to all these things. Climate change is quite a long-term issue. What we do now is going to impact us beyond 2050. That I think creates a very tricky challenge for us, because as people we operate within our lifetimes, which is a different timeframe. Every job we have, it’s maybe a five-year time horizon or a 10-year time horizon we’re looking at. So that mismatch of time horizons is going to be a huge challenge for organisations to overcome so that we can actually drive long-term outcomes.
JH: Are there advantages for New Zealand as a whole if the country is able to become a leader in this field?
PB: I think New Zealand has the potential to see huge opportunities out of the change we need to make. But the rapid pace of commitments from other countries is accelerating. The EU is moving quite quickly towards having a carbon adjustment tax, a border tax that importers into the EU will have to pay based on the carbon intensity of their products. The EU is also quickly moving towards having circular systems, so if you’re a producer into the EU, you need to meet the requirements of product stewardship schemes that are in place to address your waste stream and to reduce it.
China has also pledged to be carbon neutral by 2060. That is pretty phenomenal for that country.. We would expect to see the US, which is the other kind of significant player in this international space, to change their behaviour and political and regulatory structure reasonably quickly after the last election. And that should drive significant momentum.
So there are numerous countries that have similar ambition to New Zealand but probably are moving quicker in terms of the implementation of actions that align them to those commitments.
JH: I wanted to ask you about two industries specifically, and they’re both very important to New Zealand: dairying and tourism. Both are carbon intensive in their own ways. Does the New Zealand economic base have to broaden in order to ensure a prosperous future?
PB: There is the ability to transform. We can see the technologies on the horizon – not all are commercially viable in the agricultural space yet, but they’re on the horizon and the actual innovation going on is pretty incredible. If we put the effort into the transformation of agriculture in New Zealand there is a huge opportunity to be a leader in that space. If we don’t make that transformation, then we will need to diversify the economy if we’re going to align to the Paris agreement.
The tourism sector is a really complex question. A lot of the modelling that’s done shows that aviation will still be an emissions source into the future as commercially viable zero-emissions technologies are not on the near term radar. Having a green tourism sector outside of aviation is going to probably be something that’s hugely beneficial. We need to have a path to get us to zero emissions over the longer term.
JH: Does all this make you an optimist or a pessimist?
PB: I’m an optimist. I guess I might be pessimistic on our ability to rapidly change to an economic model that’s going to start valuing all our environmental and social inputs and optimise for that long-term value piece. I think that’s going to take a very long time. But I am an optimist in our ability to change. I do think that we see these thresholds or planetary boundaries on the horizon and suddenly price signals do come through or regulation does come through. I think our ability to innovate is a huge asset that we have. I do think that humans have the ability to rapidly change.
Illustration by Lucy Han