The New Zealand External Reporting Board (XRB) is an independent Crown Entity that provides assurance, oversight, standards and guidance on the quality and consistency of external reporting in New Zealand, such as financing, auditing, sustainability and climate reports.
The board has recently published the New Zealand Climate Standards. The fundamental goal of Aotearoa New Zealand Climate Standards is to help direct capital towards activities that align with transitioning to a climate-resilient, low-emission future. These guidelines will be enforced as of 1st January 2023 and will be enforced by the Financial Markets Authority. The standard is made up of three sections:
The standard requires public companies to disclose their greenhouse gas (GHG) emissions per the Greenhouse Gas Protocol Corporate Standard and to set targets for reducing their emissions. Companies must also inform their climate change governance, strategy and risk management, and plans for transitioning to a low-carbon economy. The standard also encourages reporting frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the New Zealand Climate Change Framework. Companies must report on their progress in meeting these targets and must prepare an annual progress report. Companies are also required to provide additional information to make public, such as the impact of climate change on their business. The standard aims to provide transparency and accountability for companies and to ensure that companies are taking action to reduce their emissions and transition to a low-carbon economy.
Climate Reporting Entities (CRE) must adopt the new climate standards. CRE are organisations that are required by law to report their greenhouse gas emissions, climate-related risks, and opportunities to the public. Around 200 entities will have to make these disclosures, with the criteria expanding in time. These criteria for reporting entities include:
The magnitude of these entities means that the mandatory reporting will have a ripple effect on many small and medium business suppliers. The entities will require more detailed information and data on the products they purchase, and thus, numerous businesses will be affected indirectly.
NZCS1 outlines the climate-related disclosure requirements for Governance, Strategy, Risk Management, Metrics and Targets and the assurance requirements for greenhouse gas emissions disclosures. This standard aims to allow primary users to evaluate the advantages of how entities deal with climate-based risks and opportunities and then make decisions based on those evaluations.
The Aotearoa New Zealand (NZ) Climate Standard 2 guides organisations in reporting climate-related risks and adopting opportunities. It is designed to provide organisations with a framework to identify, assess and report on their climate-related risks and opportunities consistently and transparently.
Adoption provisions include
NZCS3 sets up principles and basic requirements necessary to ensure high-quality climate-related disclosures.
XRB will release supporting guidance in January 2023 but has provided a list of resources to help get companies started in the meantime.
Even if you're not included in the compulsory entities, the criteria are likely to expand, so it is crucial to get ahead! Here are some tips to help prepare:
The New Zealand Climate-Related Disclosures initiative is an essential step in the right direction towards better understanding the impacts of climate change on business and industry. By providing businesses with the tools to understand and disclose their climate-related risks and opportunities, the initiative is helping to ensure that New Zealand businesses are better equipped to respond to a changing climate. The initiative will also help to ensure that the New Zealand public is informed about the risks and opportunities associated with climate-related activities and that businesses are held accountable for their actions. Ultimately, this will help to ensure that New Zealand is better prepared for the challenges of climate change.
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