Comment by Dan Ormond, published in The National Business Review on January 28, 2011.

New Zealand businesses wanting to or already exporting their goods and services will need to demonstrate their sustainability if they want to compete internationally.

Last year’s COP16 climate change conference in Cancún - attended by an estimated 15,000 attendees from 192 countries – was the ideal place to follow global trends in sustainability.

Although much of COP16’s media coverage was negative, businesses attending and following the proceedings could learn an enormous amount, despite the lack of grand accords and statements made in Copenhagen the year before.

Take the case of the world’s largest retailer, Walmart, which has already moved to eliminate 20 million tonnes of greenhouse gas emissions from the life cycles of the products it sells.

As the company explains, “our supply system is many times larger than our company's direct footprint, and the biggest, fastest and most economical greenhouse gas reductions are within the value-chain of consumer products rather than at the retail level”.

Although Walmart is under fire for failing to ensure its suppliers live up to some of the company’s broader corporate social responsibilities, its buying power will still drive international behaviour.

Passing it on

Putting the burden of sustainability on suppliers and partners is a cost-effective way for big businesses to bolster their own sustainability credentials. Expect to see more of it.

This doesn’t mean that New Zealand businesses should resign themselves to dancing to overseas markets’ tunes. Our businesses can put themselves in the driver’s seat by being proactive about engaging sustainability and using it to lead the market and provide product differentiation,

Walmart has reconsidered what products it stocks and what businesses it partners with to take account of sustainability. This creates an opportunity for businesses that have already developed a sustainable product offering to replace the incumbent suppliers.

Walmart has also signalled that if suppliers are not carbon neutral, or on target to do so, it won’t deal with them. This means that instead of competing only on price, producers can now use their sustainability as a lever to access new markets and distribution channels.

That shouldn’t be read as suggesting that sustainability measures are inimical to lowering costs and improving the bottom line. The UN Global Compact’s 2010 survey of almost 800 CEOs found that 93 per cent think “sustainability” will be central to their future. It also found that 80 per cent of them say the economic downturn has increased sustainability’s importance and made it an important source of cost efficiencies and revenue growth.

Good business sense

The reason so many chief executives are falling into line on sustainability is because many of the practices described as ‘sustainable’ are simply good business.

Apart from creating new business opportunities, reducing carbon emissions or energy use and minimising waste lowers operating costs for most businesses. At the same time, developing and communicating a sustainable ethos helps build employee engagement and customer loyalty.

Leading multinationals such as Coca-Cola, Nike, Dow Chemicals, Philips and Siemens all participated in or sponsored side events at COP16 because they understand the competitive advantages that sustainability can generate. In particular, these businesses are leveraging their activities in the sustainability sphere to enhance their brands and reputations and position themselves to take advantage of emerging consumer sentiment.

To that end, high-visibility New Zealand businesses are pursuing domestic initiatives that build sustainability into their communications and marketing mix as well as their product offerings.

The Air New Zealand Wine Awards, which introduced a Sustainable Wine trophy in 2007, has obtained carboNZero certification. KEA Campers New Zealand is another carboNZero certified company that is building its business in part through a strategic goal of operating the most environmentally-friendly and fuel-efficient motorhomes and campervans on the market.

More New Zealand businesses should follow these leads.

Unlike Richard Florida’s rapidly unravelling ‘creative class’ thesis—the idea that cities and states must offer the right mix of social, cultural, and technological infrastructure to attract the people who will drive future economic prosperity—the real draw cards that will attract skilled workers in the future are likely to involve environmental friendliness and/or sustainability.

Better quality of life

New Zealand and its businesses already face a significant brain drain. While we might not be able to compete economically with our larger neighbours, we certainly have the natural resources to offer people a superior quality of life.

But we need to extend this by taking steps to create the low carbon, sustainable enterprises that will appeal to skilled and mobile workers. Otherwise our businesses will increasingly be unable to attract and retain world-class talent.

New Zealand is in a leading position as the only non-EU country with an ETS (emissions trading scheme). But it’s hard to see and communicate what this means to the public.

Simple things, such as the failure to phase out incandescent lightbulbs, could negatively affect New Zealand businesses’ ability to position themselves as sustainable enterprises. And the country risks significant public backlash if the international community discovers that New Zealand is not as clean and green as they expect.