Dynamic Business: Sustainability central to strategy (NZ Herald)

When Kathmandu achieved B-Corp certification in 2019, it became the largest Australasian retailer to be certified through the stringent process which recognises the highest standards of environmental and social performance.

“Part of being a certified B-Corp is looking at how we can benefit everyone that our brand comes in contact with, from suppliers to customers,” says Kathmandu CEO Reuben Casey.

“It helps us on that path of continuous improvement and demonstrates to our customers, shareholders, investors and suppliers that we are committed to doing the right thing.”

The Deloitte Top 200 judges commended Kathmandu Holdings for putting sustainability right at the heart of its strategy, and say this is why Kathmandu has been recognised as the winner of the 2021 Sustainable Business Leadership award. They are impressed by the leadership it demonstrates across ESG (environmental, social, governance) to drive long-term value for its shareholders and for the planet.

The Kathmandu brand was established in 1987, with Kathmandu Holdings formed in 2009 as a publicly listed company. The subsequent acquisition of hiking footwear brand Oboz (2018) and surfwear brand Rip Curl (2019) has seen Kathmandu Holdings transform from an Australasian retailer to a brand-led global multi-channel business. The Group is now working to extend Kathmandu’s B-Corp accreditation across its other key brands — Rip Curl and Oboz.

“Sustainability is central to Kathmandu’s strategy and is felt by all divisions of the company,” says Top 200 judge and Direct Capital managing director Ross George. “We were impressed with this ‘whole of company’ involvement — it is transnational and embraced by the board, management, and all levels of staff.”

Last year, Kathmandu Holdings completed an ESG materiality assessment across the group, speaking with stakeholders about where it can do better and what it should be focused on.
It also recently secured NZ’s largest syndicated sustainability-linked loan. The A$100m loan is tied to ESG and will be measured against a reduction in greenhouse gas emissions, B Corp certification, and improving the transparency, wellbeing and labour conditions for workers in its supply chain. If targets are hit, the interest rate on the loan decreases.

The judges were impressed by the bold ESG targets Kathmandu has set out to achieve by 2025, as it continues to consider how it can improve at every touch point. One of these targets was to become carbon zero by 2025. Kathmandu reached this target four years ahead of schedule, after offsetting its operational carbon footprint through Toitū carbonzero certification.

Casey says while this is a huge step, Kathmandu will continue to work towards its larger goal of net zero environmental harm by 2025. In 2022, it will set science-based targets that align with the Paris Agreement, and will hold itself accountable to those targets.

“This forces us to really understand the wider impact across the wider supply chain and value chain, as opposed to just doing what we can control,” he says. “It also helps us to influence our suppliers a bit more as well.”

Another of Kathmandu’s targets is to have 100 per cent of its products designed, developed and manufactured using elements of circularity principles.

In a first step, last year Kathmandu released its Pelorus Biofleece, made from 100 per cent recycled fabric which can degrade by 93.8 per cent in landfills at the end of its life. Later this year, it will release a 100 per cent biodegradable down jacket, with every component of the jacket able to biodegrade in landfill and marine environments.

“We are trying to demonstrate leadership and push forward the boundaries of what is possible,” says Casey. Kathmandu Holdings’ other brands are making progress towards its aim to achieve B-Corp certification across the entire group.

Rip Curl undertook a carbon audit and established a new ESG team to reflect Rip Curl’s increased focus on sustainability and take steps toward B Corp certification. The business sources its sustainable cotton in line with the Better Cotton Initiative, and this year launched a wetsuit take-back programme.

Oboz has embarked on its first materiality assessment and carbon footprint audit. Over the next 12 months it aims to work aggressively to surpass the 80-point minimum requirement to become B Corp certified. The company plants a tree for every pair of footwear sold and has 95 per cent environmentally preferred leather materials in its product range.

Finalist: Lion

Country Director for Lion New Zealand Craig Baldie says the company’s success hinges on its ability to operate ethically and in the best interest of society, including looking after the environment.

The beverage brewer and manufacturer’s sustainability approach aims to strengthen the resilience of the communities in which it operates, champion responsible use of its products, and ensure its environmental legacy has a positive impact now and for future generations.

The Top 200 judges commended Lion for recognising the importance of operating ethically given the product they sell, and its focus on creating a balanced portfolio of products — including low and no alcohol options.

“Lion has been a New Zealand leader in creating a culture of responsible drinking which it calls mindful consumption,” says Top 200 judge Ross George. “It runs alcohol education programmes and is a member of the responsible drinking charity, Cheers.”

“On the employment front, Lion is an inclusive, flexible and diversified workplace.”
Baldie says Lion’s ability to operate is a privilege, not a right.

“Businesses who do the right thing for the long term are the ones that will endure,” he says. “For Lion as New Zealand’s largest alcohol beverage company, this means contributing to a positive and safe drinking culture is of primary importance.”

The judges were also impressed by Lion’s very direct commitment to the circular economy concept and its responsible practices in the supply chain, which are reflected in its commitment to a net zero value chain by 2050. This involves partnering with suppliers to measure and reduce collective lifecycle emissions.

As part of this strategy, Lion has committed to use 100 per cent renewable electricity to brew its beers by 2025 and has further stretched itself by adapting its existing science-based target to limit global warming to under 1.5 degrees. This sets a reduction target of 55 per cent by 2030 for its direct emissions from a 2019 baseline. The circular economy concept is embedded in Lion’s business performance and targets, as well as parent company Kirin Holdings’ Environmental Vision 2050.

The judges note that Lion has already made good progress.

Since 2015, it has achieved a 28 per cent absolute reduction in its carbon footprint. It has become the first large-scale carbon neutral brewer in both Australia and New Zealand and New Zealand’s largest beverage manufacturer to be certified as carbon zero.

One of its core brands, Steinlager, became New Zealand’s first large-scale beer brand to achieve carbon zero certification. To reach this milestone, Lion says it focused on reducing emissions throughout Steinlager’s product lifecycle — from growing the hops and barley, and brewing the beer, to packaging and transport.

Lion has also invested in water efficiency initiatives, reduced its waste, and is making its packaging more recyclable and reusable. Already over 97 per cent of Lion’s packaging materials are recyclable and it is targeting 100 per cent of packaging to be reusable, recyclable, or compostable by 2025.

Finalist: Synlait Milk

Synlait Milk has bold ambitions to be “net positive for the planet” and instrumental in its industry’s response to climate change — a significant feat given agriculture is responsible for 30 per cent of the world’s greenhouse gas emissions and 70 per cent of freshwater use.

Synlait combines expert farming with state-of-the-art processing to produce a range of nutritional milk products for its global customers. It has put sustainability at the centre of its corporate purpose, and in 2018 set 10-year targets and an aspiration to become B-Corp certified — which it achieved last year.

“When we set these bold goals for ourselves, we didn’t know how we would achieve them,” says Hamish Reid, Synlait Director for Sustainability, Brand, Beverages and Cream.

“We are on track to beat our targets that no one thought we would achieve, and beat the timeframe as well. It’s an example of when you are really brave and put yourself out there, people galvanise around that.”

The Top 200 judges say Synlait’s executives are backing ESG strongly, and as a result the company scores well on these metrics.

“In a challenging year for the company, its focus on sustainability has not waned and it remains an industry leader with ambitious ESG targets,” says Top 200 judge Ross George.

“These are ambitious targets, both on-farm and off-farm, and have recently been updated under the Science Based Targets initiative.”

One of these targets is a reduction in emissions from the manufacturing process. Synlait is transitioning to renewable energy and has committed to not build another coal-fired manufacturing facility. A trial last year to replace a coal boiler with renewable biomass has progressed to become a permanent project.

“We now have a very clear path forward. From next financial year, we are commencing our rapid transition off coal,” says Reid. “Our original intention was early next decade, but we now think this will be entirely feasible as early as 2024 or 2025.”

Synlait works with its farmer suppliers to evolve New Zealand’s reputation as a responsible and sustainable producer of food, and help farmers understand how their management of the farm impacts on greenhouse gas emissions.

“This allows us to attract the most innovative farmers that are thinking about the future of the food system and where transitions might be happening,” says Reid. “It immediately gave us a greater supply base, because people were really interested in understanding and working together with the processor on how they might future-proof their businesses for success.”

This has resulted in on-farm emissions intensity, per kg of milk solids, reducing 5 per cent over the last year, or 10 per cent compared to its 2018 base year when its targets were first established.

Total off-farm emissions have remained stable since last year, however the emissions intensity, per kg of product, has reduced by 24 per cent compared to 2018.

“No one thought we would achieve what we have — including ourselves,” says Reid. “We didn’t think it would be possible to reduce our emissions by 10 per cent, and we have already hit the Government’s 2030 target.”