In today’s global business landscape, sustainability has evolved from a buzzword to a core strategic priority. Companies are expected to not only deliver financial returns but also demonstrate environmental and social responsibility.
As New Zealand moves toward becoming a green economy, publishing sustainability reports has become essential for companies seeking to maintain transparency, credibility, and long-term resilience.
What is sustainability reporting?
Sustainability reporting is a type of non-financial reporting that allows companies to inform various stakeholders about the company’s sustainability measures. These measures span from environmental issues to social and governance metrics. The aim is to provide a clear picture of the progress, the risks associated, and the impact created or will create on the future.
Additionally, preparing a formal sustainability report allows the company to provide concrete evidence that they are taking the actions to which they have committed.
Why is sustainability reporting important?
- Enhancing Risk Management
Sustainability is being recognized as a core element of long-term business resilience. As risks tied to climate change, resource depletion, and evolving social expectations grow, sustainability reporting helps organizations identify and address these challenges early on.
For instance, the Carbon Disclosure Project (CDP) reports that 52% of companies have identified climate-related risks that could significantly impact their operations or strategy. At the same time, 63% of firms highlighted climate-related opportunities, demonstrating how structured reporting can uncover both potential threats and areas for value creation.
- Drive efficiency and cost
Monitoring sustainability metrics often reveals inefficiencies that can be corrected. By addressing these inefficiencies, businesses can lower operating costs, especially when sustainability reporting is aligned with energy efficiency programs or more sustainable procurement approaches.
- Helps in strategic decision making
In today’s environment, where businesses are under pressure from regulators, investors, and consumers alike, decisions must be made with greater clarity and foresight. A well-developed sustainability report offers valuable insights into a company’s ESG performance and emerging risks, supporting more informed decision-making across the organization.
It also enables companies to stay ahead of regulatory developments. For example, as mandatory climate-related disclosures become more common globally, companies that already have formal reporting systems in place are better equipped to adapt and comply.
- Build stakeholder trust and engagement
Transparency has become a baseline expectation.
Sustainability reports based on global standards provide a verified and consistent way to communicate a company’s commitments and actions on key issues like climate responsibility, equity, and ethical sourcing.
- Investor appeal
With ESG criteria playing a growing role in investment decisions, clear and credible sustainability reports allow investors to better assess a company’s risk exposure, governance quality, and growth potential.
Overall, sustainability reporting signals that the business is forward-thinking, well-managed, and aligned with global sustainability expectations, making it a more attractive and trustworthy investment option.
Is Sustainability Reporting mandatory in New Zealand?
Sustainability reporting is mandatory for some specific group of large financial entities.
As of 1 January 2023, New Zealand became one of the first countries in the world to mandate climate-related disclosures. This is governed by the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021.
Under the Climate-Related Disclosures Scheme, the following type of entities need to prepare sustainability reports:
- Registered banks, credit unions, and building societies with total assets of more than $1 billion.
- Managers of registered investment schemes who have more than $1 billion in total assets under management.
- Licensed insurers who have more than $1 billion in total assets or have an annual income greater than $250 million.
- Listed issuers of quoted equity securities with a combined market price of more than $60 million.
- Listed issuers of quoted debt securities with a combined face value of quoted debt more than $60 million.
- Authorized Bodies, that are manage registered schemes and operate under the license of another manager, that have total assets under that license (including assets of all authorized bodies) of more than $1 billion.
For non-listed companies, SMEs, and foreign firms operating in New Zealand, sustainability reporting is not yet mandatory.
However, this doesn’t mean that such businesses are exempt from responsibility. In fact, stakeholder expectations, global supply chain pressures, and investor due diligence are pushing even smaller and non-mandated entities toward adopting ESG and sustainability disclosures voluntarily.
What Standards Do Companies in New Zealand Need to Follow While Making Sustainability Reports?
Companies who need to publish sustainability reports in New Zealand need to follow Aotearoa New Zealand Climate Standards (NZ CS). These standards, although similar to IFRS S1 and IFRS S2, have some differences and thus it is important to be familiar with New Zealand’s climate reporting standards.
What are the NZ CS 1-3?
Standard |
Focus Area |
Purpose |
|---|---|---|
NZ CS 1
|
Climate-related Disclosures
|
Main reporting standard, setting out what CREs must disclose under four pillars: Governance, Strategy, Risk Management, Metrics & Targets.
|
NZ CS 2
|
Adoption Provisions
|
Allows transitional relief (e.g., Scope 3 emissions reporting, scenario analysis) during the initial implementation period.
|
NZ CS 3
|
General Requirements
|
Defines fundamental principles like materiality, consistency, and comparability across disclosures.
|
Key Differences Between NZ CS and IFRS S1 & IFRS S2
NZ CS 1-3 are based on the same core principles as the IFRS S1 and IFRS S2, namely, Governance, Strategy, Risk Management and Metrics and Targets. However, there are some key differences.
Aspect |
NZ CS Standards |
IFRS S1 & S2 |
|---|---|---|
Scope
|
Focused only on climate-related disclosures for now (via NZ CS 1)
|
IFRS S1 covers general sustainability; IFRS S2 is climate-specific
|
Target Entities
|
Applies to ~200 Climate Reporting Entities in NZ
|
Global applicability; expected to cover a broader range of entities
|
Local Relevance
|
Developed to reflect NZ’s legal context, and national priorities
|
Designed for global application without jurisdiction-specific adaptations
|
Materiality Definition
|
Focuses on enterprise value, but with optional reference to impact materiality
|
Currently focused only on financial materiality only
|
You can find more detailed information about the NZ CS here.
Sustainability reporting is more than a compliance exercise. It has become a strategic tool for building resilience, improving transparency, and unlocking long-term value. In New Zealand, where regulatory expectations and ESG consciousness are growing rapidly, businesses that adopt sustainability reporting early will be better positioned to lead in the evolving economy.