US Business Summit 2022: MC conference opening (video)

CALL TO ORDER
Tim McCready, MC

 

Project Auckland: Phil Goff on his greatest regret as mayor of Auckland (NZ Herald)

Project Auckland: Phil Goff on his greatest regret as mayor of Auckland (NZ Herald)

After almost six years as Mayor of Auckland, Phil Goff has decided to end to his 41-year political career and will not seek re-election in October.

After two terms leading the Super City, he points to his achievements: Auckland Council has maintained its credit rating through prudent borrowing, it pays its employees a liveable wage, the Central Interceptor is on track to reduce wastewater overflows into waterways, funding is available for transport infrastructure has nearly doubled, and the Unitary Plan has unlocked future housing growth.

“Environmentally, economically, infrastructure-wise, there have been some big steps forward — notwithstanding the difficulty of the environment in which we’re operating,” Goff says.

But it is the pandemic that has been the most dominant factor in his mayoralty, contributing toward his biggest challenges and regrets.

“My greatest regret would be the impact that Covid has had in delaying or holding up the changes that we were busy making,” he says.

“Suddenly it came along and ripped $900 million out of our revenue — and that’s ongoing.”

Auckland Council has warned of its worsening finances. Earlier this month it released a statement indicating the impact of the pandemic on its revenue is a result of a slower than expected recovery in revenue from public transport, events and facilities, and a slower recovery of dividends from Auckland International Airport.

On the cost side, it said payments to staff and suppliers, finance costs and depreciation expenses are all increasing faster than anticipated.

Considerable savings have been made. Last year, the council found $126 million in cost savings and budgeted a further $90m this year and beyond.

“We have sold surplus assets, and we’re looking at what we might do with carpark buildings and various other buildings that aren’t critical to what we do,” Goff says.

“We are going to have to focus on what our priorities are.”

Further mitigations being considered include the deferral of non-critical capital expenditure projects that are not yet subject to contractual commitments, permanent operating expenditure reductions, and fully utilising the $127m in central government Better Off funding associated with its Three Waters reform to fund operating expenditure, and possible future rates increases.

“It has been bloody tough,” says Goff. “And it has meant we couldn’t fully realise the dreams and ambitions we had.”

“But having said that, when you look at similar councils like Tauranga with the same growth problems as Auckland, we have had stable governance, we have got through our business and had clear majorities for our budgets, and the council has been in safe hands.

“There are those things to celebrate — but the job has been really tough because of the environmental circumstances that we face.”

Not enough progress on homelessness

One of Goff’s cornerstone commitments before becoming mayor was to end Auckland’s chronic homelessness. But it will be obvious to anyone that has visited the city centre over the past year that sufficient progress has not been made. The mayor accepts this. But he says Auckland Council’s instruments are limited.

He says a significant problem is the lack of housing — not enough homes were being built when the city was growing rapidly.

Statehouses were sold off, and the cost of housing in Auckland has risen.

There is movement. Kāinga Ora is creating a pipeline of small, medium and large-scale housing developments in Auckland over the next 10 years and the Auckland Unitary Plan allows for 900,000 dwellings to be built within residential areas.

Goff is a big believer in Housing First, an initiative tasked with ending homelessness that he has supported since 2017.

It provides housing to the homeless, but also wrap-around support that addresses the causes of their homelessness and helps to provide stability.

Goff was instrumental in converting council building facilities during the Covid-19 lockdown to help provide meals for the homeless. “But we need to do more of all of these things,” he says. “Because we’re still we’re still a long way from tackling the problem of rising homelessness.”

Working with different governments

In his time as mayor, Goff has worked with three different Prime Ministers: Sir John Key, Sir Bill English and now Jacinda Ardern.

He says his role as mayor is to work for whoever is in government.

“I don’t care what someone’s political background is, as long as they are there and willing to use their integrity, energy and determination to tackle the problems and not simply play politics with it.”

A former Labour MP for 32 years, Goff said the shift from a National-led government to a Labour-led government had some advantages.

“I can pick up the phone and ring Jacinda, I can ring Grant Robertson, I can talk to Michael Wood,” he says.

“That’s not to say that I can ask for something and they’ll say, ‘of course Phil, we will give it to you,’ but at least I can pick the phone up and talk to them.”

When Goff campaigned in 2016 to get rid of plastic bags, he couldn’t make it work with the supermarkets and didn’t have the power to force them. But he was able to speak with the government, and they brought in enforceable legislation which he says has been a huge benefit environmentally.

“That doesn’t mean there hasn’t been areas where I’ve had strong disagreements with government — Three Waters is one of them,” he says, noting that he understands why the government wants to reform water services but doesn’t support the form that reform has taken.

“I’ve argued consistently and strongly — and although I haven’t won the battle, I have been able to talk on a personal level with an understanding and a mutual respect with ministers that I’ve known for a long period of time.”

The job’s not done yet

With six months left on the clock in his current role, Goff says he is not done yet.

In the wake of the latest Intergovernmental Panel of Climate report, he says it is clear that the time to act for the climate is now.

“We are seeing more frequent and severe weather events, we had our hottest year on record last year, and I wouldn’t be surprised if this year exceeds even that.”

Goff’s council has put money into electric buses, is converting its ferry fleet from diesel to electric, is putting money into cycling and walking, and is planting trees to provide shade and increase Auckland’s canopy cover.

But he says this is the start of the solution, and more needs to be done.

“What worse time to try to find funding to deal with the impact of climate change than when you’re dealing with Covid?

“You’ve lost revenue, and your costs have gone up,” he says. “It is easy to say Covid is the big problem at the moment, and we’ll do climate tomorrow.

“But tomorrow is when our kids grow up. If we don’t act, it’ll be harder and more expensive and economically and environmentally more disastrous.”

Goff has proposed a climate action targeted rate of $1.12 a week for a median-value residential property. This is expected to raise $574m over 10 years and unlock a further $471m through central government co-funding and other sources, ringfenced for direct climate action to cut Auckland’s emissions and respond to extreme heat.

“The council we are handing over will hopefully have funding to tackle the problem of climate change, one of the predominant problems that is confronting our city, our country and the whole planet,” he says.

Councillors will vote on the decision as part of the annual budget in late June.

Goff is, of course, just one vote out of 21.

But he says the council has consulted with people, taken submissions and done polling. “I believe there is public support to make this happen,” he says.

“This is something we are doing for the long term.

“Too often people say the trouble with parliamentarians and councillors only think in three-year terms — and too often we do. This has the chance to act with a longer timeframe in mind.”

Taking Sir John’s advice

It was just after Goff’s first month as mayor that Sir John Key resigned as Prime Minister.

Goff laughs that the way Key departed might have inspired his decision to go.

“He had been in my office a week earlier and I thought, ‘he’s looking remarkably relaxed, what can be causing that?’…

“Maybe he was the role model for me — make sure you stand down while you might still be wanted, rather than waiting to the point where you’re not!”

Reflecting on his time as mayor, Goff says he has been lucky to have had people around the council table that have worked with him on things he has wanted to achieve, and he is grateful for that.

“Because in the end, success is a collective endeavour.

“The mayor might be the person at the top of the heap, but he or she is not the only person there, and it relies on that team.”

To pass his final budget, he will need them on his side.

“It might be the last six months of my mayoralty, but it won’t be the easiest six months of it,” he says.

“I’ll be working out right up to the last moment.”

Project Auckland: Gary Blick on creating foundations for the future (NZ Herald)

Project Auckland: Gary Blick on creating foundations for the future (NZ Herald)

Tim McCready talks to Gary Blick, Auckland Council’s new chief economist about Auckland’s long-term performance and the pandemic’s impact on the city centre.

As Auckland Council’s chief economist, Gary Blick assists Council staff and elected officials to evaluate the economic implications of policy and infrastructure proposals. This means assessing the likely impacts on society’s resources and wellbeing over time – including the financial, social, environmental and cultural aspects.

Originally from Southland, Blick has been in the role since late last year and has lived in Auckland for the past decade. He is particularly interested in the long-term performance and trends of the region and thinks a lot about the wellbeing of Aucklanders now and in the future, and the legacy we will leave them. He says this includes not only those that migrate to the city, but the children and future generations that do not have a voice here yet.

“I often think about the generation I am – what did we inherit? A lot of great things, but then you think about missed opportunities,” he says.

“It is very easy to get caught up with where we are now in terms of the economic cycle and what is happening with housing this month or this quarter, but I am particularly interested in where we have come from, and where we are heading over the long run.”

Getting the foundations right

Blick says for Auckland to be successful in enhancing living standards for residents, including future generations, cities need to get a couple of foundations right.

“For me it is about using our land efficiently and improving accessibility in terms of how we get around,” he says. This means enabling more people to live in locations with good proximity to job opportunities, transport links and amenities. “Many other things matter too, but getting those things right matters a lot because they are the foundations for everything else.”

The Unitary Plan, implemented in 2016, has helped Auckland to take important steps forward with its land use and transport links, including enabling more opportunities to build multi-unit dwellings such as townhouses and apartments.

“All else being equal, having more development opportunities enabled and a more responsive supply of dwellings is supportive of improved affordability over time,” Blick says.

He points to econometric research into construction activity trends that shows, relative to plausible counterfactuals, there was a material boost to supply following the Unitary Plan. He says this likely contributed to the stabilisation of Auckland house prices from 2017 to 2019.

But he acknowledges that events over the past couple of years have complicated the situation, and says it feels like housing affordability took several steps forward with the Unitary Plan, but a step or two back recently with house prices increasing approximately 40 per cent over the past two years.

“The pandemic crisis caused central banks everywhere to head off a drop off in demand and introduce low interest rates to try and stimulate activity and maintain employment. That enabled people to bid a bit more for houses,” says Blick.

“Then with rising case numbers and public health restrictions, we have seen disruptions to supply chains globally, as well as the closing of the borders and a reduction in cross-border labour flows.”

This is problematic because since before the pandemic, Auckland has been losing more residents to elsewhere in New Zealand than it has gained. There were net losses in internal migration in 2019 (11,400 people), 2020 (11,100) and 2021 (13,500), showing that plenty of people judged they would be better off living in other regions and raising a question about Auckland’s overall liveability.

Blick expects the border reopening will see population growth resume as migrants and New Zealanders with needed skills arrive or return to the city, but he cautions that if Auckland isn’t doing as well as it could be then the city may miss out as those with needed skills compare Auckland to other places.

“Liveability and productivity depend on many factors, but it is reasonable to ask whether Auckland can do better on the fundamentals of land use and transport networks,” he says.

Covid-19 hangover in the city centre

The impact of the pandemic has been uneven across businesses.

“The city centre is home to many large professional services and financial services firms that have big office-based workforces with perhaps more flexibility to adapt and adopt remote working,” says Blick.

“Often their customer base is not foot traffic on the street, it is with other businesses and may involve exporting services to elsewhere in New Zealand.”

Even so, GDP – as the measure of the economic output of all businesses in the city centre – decreased by 4.6 per cent for the year to March 2021 – more than the decrease of 2.8 per cent for Auckland as a whole.

But it is the hospitality, retail and events-focused businesses that have borne the brunt of the loss in visitors to the city centre. Heart of the City data last month showed that city centre spending was down more than 40 per cent on the same time last year, and pedestrian counts were almost 50 per cent down.

“Household spending has held up well, but the city centre has lost out as spending has been reoriented to other locations, whether that is online or other centres of Auckland,” says Blick.

While employers and workers have become more comfortable with remote working, he doesn’t expect this to have a permanent devastating impact on the city centre.

“Having that choice may suit some workers and it may mean there are fewer visits on a daily basis from people in the near term relative to before,” he says. “But not all jobs lend themselves to being done remotely on a permanent basis, and people joining the workforce and those starting in new roles may seek in-person collaboration and opportunities to build up their connections.”

The city centre is comparatively very accessible, Blick says, and the concentration of people and businesses in proximity can deliver productivity gains known as agglomeration benefits.

Proximity promotes ease of access, lower transport costs, and knowledge sharing, and a higher population density enhances proximity benefits by supporting deeper labour pools and specialisation among suppliers. As a result, cities can offer higher-paying jobs, as well as more choices in consumption and leisure.

It is this that Blick says will stand Auckland in good stead for the economic recovery post-Covid.

“There’s a good case that the reduction in visits to the city centre will be made back over time, because of its long-run trend growth in density, economic activity and jobs.”

 

Dynamic Business: Trends that matter in 2022 - NZ Herald

The business climate has been anything but predictable over the past two years.

The Covid-19 pandemic has caused upheaval and seen companies scramble to adapt to a rapidly changing environment — the most visible changes have been the rapid uptake of digital technologies and the rise of remote and hybrid working.

That unpredictability looks set to continue, but there are several underlying trends for businesses to keep in mind as they navigate the year ahead.

A new era of geopolitics

In response to Russia’s invasion of Ukraine, the US and EU have cut selected banks from Swift and closed airspace to Russian planes. Further sanctions have been imposed on Russia’s central bank, aimed at preventing it from accessing reserves.

While the crisis might be on the other side of the world, the economic impact will ripple through the global economy and reach NZ shores.

Russia is the world’s second-largest exporter of crude oil and refined petrol, and the world’s largest exporter of natural gas. Global crude oil prices have already reached their highest levels since 2014, and it is expected that prices will go even higher as the conflict persists. This will impact fuel, supply chains, and the cost of goods in general.

Businesses should also brace for cyberattacks, which many predict Russia will use in response to sanctions. NZ’s National Cyber Security Centre (part of the GCSB) recently released an advisory encouraging nationally significant organisations to consider their security, exercise readiness, and monitor for relevant cyber security developments.

Closer to home, the South China Sea and China’s increasing influence in the Pacific continues to cause fractures in the relationship between China and the United States.

Just prior to the Beijing Winter Olympics in a joint statement, President Xi Jinping and Russian President Vladimir Putin denounced interference from the United States in their affairs and opposed further enlargement of Nato.

While New Zealand has so far managed to carefully navigate its relationship with China, we will face increased pressure as Australia, the United States and the UK make stronger statements about China’s behaviour. At last year’s Apec CEO Summit, President Xi warned Asia-Pacific nations to not “relapse into the confrontation and division of the Cold War-era”.

Prime Minister Jacinda Ardern noted at last year’s China Business Summit that differences between NZ and China were “becoming harder to reconcile” as Beijing’s role in the world grows and changes, and that “managing the relationship is not always going to be easy and there can be no guarantees”.

With geopolitics entering a new era, businesses must walk a geopolitical tightrope and be ready to respond as events occurring elsewhere in the world impact their own operations, relationships, and people.

Increased employee turnover becoming harder to prevent

Since the start of the pandemic, the “Great Resignation” has gained momentum. The pandemic has shifted the mindset of employees, and seen them leave their jobs in search for a better work-life balance, remote work opportunities, increased flexibility or higher pay. In some cases they are moving to organisations that provide a better sense of purpose and meaning, with values that align with their own.

In order to remain competitive and attract and retain workers, companies have to rethink the benefits they offer and clearly articulate their purpose.

This is particularly true for knowledge sectors — those industries significantly reliant on the use of technology and human capital. The tight labour market around the world has seen those workplaces that don’t offer the flexibility and purpose demanded by their employees hindered by increased turnover in a market where good talent is hard to find.

But remote and hybrid has introduced new challenges for business.

The removal of a commute dramatically increases the pool of potential companies for employees. Someone living in Taranaki can now apply for remote working roles in Wellington or Auckland that might have previously been unobtainable to them.

It also limits the social ties that employees make with colleagues.

We have all been to staff farewells where we are told by the departing employee “it is the people here that makes it so hard to leave this job”. These connections that might have once encouraged employees to remain in their job have become weaker and will see the great resignation becoming a sustained challenge for business to grapple with.

Four-day work week gaining momentum

As an alternative to negotiating remuneration with employees and becoming drawn into a bidding war with other workplaces, there has been a rise in companies offering a shorter work week as a bargaining chip.

One example of reduced hours is the four-day work week, which is gaining momentum around the world.

NZ’s Perpetual Guardian trialled a four-day week in 2018 — a world-first for a privately held company.

The eight-week experiment measured productivity, motivation and output, with staff paid the same amount for working fewer hours. It discovered productivity improved 20 per cent, and employees were more creative, committed and less stressed. It has since made the move permanent.

Perpetual Guardian founder Andrew Barnes says the four-day working week is “not just having a day off a week — it’s about delivering productivity, and meeting customer service standards, meeting personal and team business goals and objectives”.

More companies are now beginning to trial shorter work weeks.

A four-day week pilot in the United Kingdom begins in June, with 30 companies signed up so far. The pilot is run by 4 Day Week Global, an organisation that advocates for the shorter week. It says similar programmes are set to start in the US and Ireland, with more planned for Canada, Australia and New Zealand.

Wellness on the way up

Covid-19 has put significant strain on the workforce. Uncertainty around job security, lockdowns, social isolation and limited social contact all contributed to the mental health crisis and exacerbated stress, anxiety and depression for both employers and employees.

The challenge of retaining good employees has seen businesses and business leaders prioritise health and build a culture of wellbeing in the workplace that openly supports mental health.

Many organisations have introduced wellbeing programmes, which include partnerships with mental health providers, subscriptions to mental health apps, fitness classes and additional days off. Last year, Westpac New Zealand introduced five days a year of wellbeing leave, and NZX-listed Vista Group introduced half-day Fridays for all its staff.

Research conducted by the New Zealand Institute of Economic Research last year on behalf of Xero showed investing in employee wellbeing can help to make a business more profitable.

It estimated that for every dollar a small business invests in company-wide wellbeing initiatives for staff, it can expect to see a return of up to 12 times within a year.

The impact of Omicron (and future variants)

Overlaying all these trends, Covid-19 remains present. While the world welcomed the news that the highly transmissible Omicron variant is associated with less severe disease than earlier variants, a pattern of new variants around every six months has emerged.

Since there is a risk of the virus mutating each time it reproduces, the greater transmissibility from Omicron brings with it an even greater chance of new variants emerging.

It was hoped by many that the vaccine rollout would bring an end to the pandemic, but it looks increasingly likely that Covid-19 — in one form or another — is here to stay.

New tools like antivirals, antibody treatments and new vaccines are coming on board this year, which will help us navigate Covid-19 as it becomes an endemic disease.

These will be important as 2022 (hopefully) becomes the year that businesses, employers, employees and government finally reach post-pandemic normality. In a year fraught with challenges of all kinds to navigate, that is something that should bring hope to us all.

Deloitte Top 200: Sustainable Business Leadership - Kathmandu - 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.”

Deloitte Top 200: Chairperson of the Year: Patrick Strange — Chorus, Auckland Airport

Patrick Strange’s positive and inclusive style, together with his proactive leadership role in the business community, saw him crowned as this year’s Chairperson of the Year at the Deloitte Top 200 awards.

During 2021, Strange led a group of senior business leaders that called on Government to be more transparent about its plans to get New Zealand to a “Covid normal”. He says he was motivated to speak up because he was concerned Government was failing to build a long-term strategy.

“We were complimentary about the Government on things they had done, but we did criticise them,” he says. “That is the role of business, that is the role of all New Zealanders — open debate.”
The Deloitte Top 200 judges say Strange is very effective in building relationships with Government for the organisations he chairs — Chorus and Auckland International Airport — which is vital given their importance in New Zealand’s infrastructure landscape.

Chorus has played a critical role over the past year with its fibre network, which has been under significant load with so many New Zealanders working from home during the lockdown.

“We were still connecting 800-900 customers a day, with Covid and all its restrictions,” Strange says. “We don’t hear about it, but they have done a great job not missing a beat under those constraints and added layers of difficulty.”

Strange pushed back on the Commerce Commission over its proposed price control settings for the provider’s ultrafast broadband network, and the returns it should be allowed to make on its regulated asset base. In a letter to the commission, he warned of “regulatory failure” if Chorus was prevented from earning a fair return on its investment.

“We are there to represent New Zealanders — and particularly our shareholders — and I call that out,” says Strange. “I have a constructive relationship with the Commerce Commission and get on well with them — but they know if I disagree with them, I will say it publicly.”

Judge Cathy Quinn, an independent director herself, says this has no doubt been agonising to deal with and required Strange to be heavily involved. But it is clear he did a good job that will allow Chorus to continue to invest in innovation and deliver a fair return to shareholders.

For Auckland International Airport, Strange says the biggest challenge in 2020 was its huge loss of income and the need to rapidly raise capital to redress the balance sheet. But the past year has been much more about people — particularly those that have had to continue operating remotely, which has put a lot of strain on them.

“We are spending a lot of time worrying about how to support people,” he says. “The uncertainty — the way they are having to work — they are working long hours in difficult circumstances.”

His biggest challenge for both companies he chairs has been the loss of exchange that comes from meeting face-to-face. This was also noted as a big challenge by other finalists in this category.
“We can operate well on Zoom, but nothing beats getting together and the things you learn by walking around and talking to staff,” he says.

The judges highlight this emphasis on people as another of Strange’s core strengths. “Patrick is highly regarded by his peers, the management teams he works with and broader stakeholders as an inclusive chair who brings out the best in his fellow directors and management teams,” says Quinn.

“He encourages others to contribute and offers his perspective in a constructive way.”
Strange says this isn’t hard to achieve, because he enjoys working with talented and motivated people — from fellow directors to the impressive young people involved in the companies he chairs.

“We are there to have fun, and I am just part of that,” he says. “I am just lucky enough to oversee a couple of great companies where we have that culture.”

Finalist: Barbara Chapman

Barbara Chapman’s governance career has been shaped by her interest in transformation and improving the experience of customers.

She is chair of Genesis Energy and NZME, and is a director of Fletcher Building and BNZ. Chapman is also deputy chair of public-policy think tank The New Zealand Initiative and was chair of the Apec 2021 CEO Summit. In 2019 she was awarded a Companion of the New Zealand Order of Merit (CNZM) for services to business.

When Chapman joined the NZME board in 2018, it had an enormous amount of debt. “That was really shackling the company from being able to do what it needed to do to grow,” she says.

NZME is now debt-free, succeeding in a three-year plan to eradicate $100m in debt. Its share price reached a high of $1.46 on December 15, up dramatically from its depths of $0.18 at the start of the pandemic.

“Along the way, we were balancing dropping debt with investing in things like premium, and the technology you need to drive that,” says Chapman — recognising that having cash now gives NZME far more scope to invest, such as its recent acquisition of BusinessDesk.

Judge Cathy Quinn says Chapman has shown remarkable skill while working with the board and management team of NZME throughout its transformation.

“Since joining the NZME board in 2018, Barbara has played a key role in the company’s turnaround after financial challenges and helped set foundations for future success.”

The judges also acknowledge Chapman’s leadership in astutely navigating Genesis Energy through the August power outages, as power distributors responded to Transpower’s demand to reduce the burden on the national grid. A ministerial inquiry has since shown that Genesis was wrongly blamed at the time. “As it came out, we didn’t cause any of the problem and we couldn’t have done anything different,” says Chapman. “But given we are 51 per cent owned by the government, quite rightly they were asking us some pretty strong questions.

As for her highlight over the past year, Chapman points to the success of the Apec CEO Summit, held at the end of 2021.

Soon after taking on the role at the request of the Prime Minister, a fire broke out at the International Convention Centre — the intended venue for the summit. Then  Covid-19  struck, thwarting plans to host thousands of delegates in-person.

“To deliver an online event that had the reach it did, as well as the response it had, has been amazing,” she says. “I am really proud that we focused hard on gender balance and diversity with our speakers, and people tell us we ended up with what was the best CEO Summit ever. Over 3000 people watched it — amazing for something online!”

Finalist: Mark Tume

Mark Tume says boards are decision-making engines, and that there is a ‘secret sauce’ in the boards he chairs that makes the whole greater than the sum of its parts.

“To get the most out of a board, it is not about me being a leader, it is about arranging a meeting so you can get the most out of everyone and a contribution from everyone.”

Tume is chair of infrastructure investor Infratil and commercial arm of Taranaki’s largest iwi, Te Atiawa Holdings. He is also a director of Retire Australia, Precinct Properties and was chair of Ngāi Tahu Holdings Corporation until December 2021.

The Top 200 judges say Tume’s performance at Infratil has been excellent, as has been his significant contribution to the Māori economy.

“Tume was pivotal in establishing Te Atiawa Holdings, a new entity being built from the ground up,” says Quinn. “He has been on the Ngāi Tahu Holdings board in three separate instances, stepping down as chair at the end of last year.”

Tume says Māori organisations have a clear view that assets, investments and returns should be seen as multigenerational. He says there’s a real alignment between that thinking and Infratil, due to the nature of the assets needing to last a hundred years or more.

In December 2020, AustralianSuper, Australia’s largest pension fund, put in a takeover bid for Infratil worth nearly $5.4 billion — representing a 22 per cent premium on its closing share price at the time. The takeover bid resulted in a 20 per cent jump in Infratil’s share price, and was ultimately rejected. Tume says the offer materially undervalued Infratil’s high-quality and unique portfolio of assets.

“It wasn’t a hard decision, AustralianSuper’s offer wasn’t a huge premium,” he says, noting Infratil has returned an average annualised shareholder return after tax and fees in excess of 18 per cent since its inception.

“Tume’s ability to navigate challenging issues such as a hostile takeover bid from Australia and remain steadfast in his belief that the offer materially undervalued Infratil’s portfolio, is a clear demonstration of his focus to do what is best for shareholders,” says Quinn.

Infratil also dealt with another significant transaction in the past year — the sale of wind farm operator Tilt Renewables. “We had a tremendous number of board meetings, because we were dealing with a $5b takeover offer at the same time as a $3b sale process of Tilt Renewables,” Tume says. Ongoing restrictions of Covid and the border closure added to the pressure since both deals were run out of Australia.

While this period was a huge challenge due to the need to deal with so many things at the same time, including a change in CEO, completing the Tilt deal was also one of Tume’s highlights of the past year.

“You don’t get many years like this one where so much pressure and stress and bad things are happening — and yet everything lines up so nicely.”

Dynamic Business: Movement in the Top 10 - NZ Herald

The high-level view of the 2021 Deloitte Top 200 Index shows an increase in total revenue from $190,618m in 2020 to $191,527m in 2021 — an increase of 0.5 per cent. This compares to a 1.6 per cent increase in 2020.

Underlying earnings (ebitda) increased from $24,803m in 2020 to $26,374m in 2021. This is an increase of 6.3 per cent, compared to a 7.3 per cent decrease in 2020.

The ebitda margin, an assessment of operating profitability as a percentage of total revenue (total ebitda/total revenue), increased slightly between 2020 (13.0 per cent) and 2021 (13.8 per cent).

Total profits after tax have increased from $6505m in 2020 to $7910m in 2021. This is a 21.6 per cent increase year on year, compared to a 37.3 per cent decrease in 2020.

Net profit margin (profit after tax/total revenue) increased between 2020 (3.4 per cent) and 2021 (4.1 per cent).
Total assets have increased from $253,333m in 2020 to $264,759m in 2021, which is a 4.5 per cent increase, compared to a 9.6 per cent increase in 2020.

The number one spot on the Top 200 Index has been held by Fonterra since its formation in the early 1990s. Fonterra’s revenue increased by 1.4 per cent during the year to reach $20,565m. This increase is mainly due to increased sales volumes.

EBOS Group has maintained its number two ranking, increasing its revenue by 7.0 per cent from $9,241m in 2020 to $9,886m in 2021.
EBOS Group’s increase in revenue is attributed to growth in its community pharmacy, institutional healthcare, contract logistics and animal care businesses. The revenue gap between the top two companies has remained fairly constant, slightly decreasing by 3.3 per cent, as Fonterra (ranked first) had a revenue increase of 1.4 per cent.

Fletcher Building’s (ranked 3rd) revenue has increased by 11.1 per cent from $7,309m in 2020 to $8,120m in 2021, which is a recovery on a drop in revenue of 12.0 per cent in 2020 compared to 2019, which caused it to slip from second in 2019 to third in 2020.
The top 10 has seen some movement in 2021, with Meridian Energy re-entering in sixth place (previously 10th place in 2019 and 11th place in 2020).

Zespri has moved up to seventh place from 12th place in 2020, and Mainfreight now occupies 10th place compared to 15th place in 2020.
These movements in the top 10 see Z Energy moving down from fifth place in 2020 to 11th place in 2021, Air New Zealand moving down from sixth place in 2020 to 17th place in 2021, and BP moving down from eight place in 2020 to 15th place in 2021.

The 200th ranked entity on the Top 200 Index in 2021 is Aurecon, a newcomer to the index, with revenue of $189m.
Last year’s 200th ranked company, Airwork, had revenue of $200m. This is a 5.4 per cent decrease in revenue between 200th ranked companies year on year.

Top profits

  • Fonterra (ranked first in the Top 200 Index) reported the top profit for 2021 at $532m. Last year’s top profit was also held by Fonterra, reporting a net profit of $803m in 2020. This top profit amount has decreased by 33.7 per cent year-on-year.
  • The decrease in Fonterra’s 2021 profit is attributed to non-recurring gain on sale of investments which boosted the 2020 profit by $467m. This has been offset by lower net interest-bearing debt and an increase in sales revenue for Fonterra in the current year.
    In contrast, average profit after tax across all 200 companies has increased from $32.5m in FY20 to $39.5m in FY21, a 21.5 per cent increase.
  • Respiratory products maker F&P Healthcare (22nd) has moved up to second place in 2021, from sixth in 2020, with profit after tax increasing by 82.6 per cent from $287m in 2020 to $524m in 2021.
  • Auckland Airport (139th) has moved up to third place in 2021, from 14th in 2020, with profit after tax increasing by 139.2 per cent from $194m in 2020 to $464m in 2021.
  • Meridian Energy (6th) has moved up to fourth place in 2021, from 15th in 2020, with profit after tax increasing by 143.2 per cent from $176m in 2020 to $428m in 2021.
  • Ryman Healthcare (97th) has moved up to fifth place in 2021, from 7th in 2020, with profit after tax increasing by 59.6 per cent from $265m in 2020 to $423m in 2021.
  • Infrastructure investor Infratil (38th) has moved out of the top profits, from being placed second in 2020, reporting a profit after tax of $509m in 2020, to reporting a loss of $88m in 2021.

Biggest losses

  • The biggest loss for 2021 was reported by hydrocarbon producer OMV (ranked 83rd in the Top 200 Index), with a loss of $567m.
    OMV’s loss is a $614m drop from its 2020 profit after tax of $47m.
  • Pacific Aluminium (58th) and Air New Zealand (17th) respectively hold the second and third biggest losses in 2021.
  • This is reasonably consistent with the loss positions they occupied last year.
  • Pacific Aluminium was third and Air New Zealand was first in the biggest losses for 2020.
  • Air New Zealand’s continued losses are reflective of the decline in profits of the air travel industry caused by the impact the Covid-19 pandemic has had on border restrictions limiting international travel.
  • Tasman Steel (54th) and Lion (71st) respectively hold the fourth and fifth biggest losses in 2021.
  • Kiwirail (64th) has moved out of the top biggest losses, from being placed second in 2020, reporting a loss of $325m, to having a profit in 2021 of $43m.

Most improved profit

  • Agricultural co-operative company Ravensdown (ranked 63rd in the Top 200 Index) recorded the most improved profit out of all the entities on the Top 200 Index.
  • It delivered a 10,213.8 per cent increase in profit from a $0.2m loss in 2020 to a $15.4m profit in 2021. Haier (30th) has the second most improved profit, recording a profit of $29.3m in 2021 compared to a $0.6m profit in 2020.
  • This is an increase of 4,834.3 per cent.
  • NZPM Group (144th) holds third place for most improved profit, with an increase of 2,404.8 per cent. In the current year, NZPM Group recorded a profit of $6.8m, compared to a 2020 profit of $0.3m.
  • There is no overlap in the most improved profit list in 2021 relative to 2020.

Most improved revenue

  • Meat company Hellers (ranked 141st in the Top 200 Index) has reported the most improved revenue, increasing revenue to $269m in 2021 compared to $101m in 2020.
  • This increase has seen Hellers enter the Top 200 Index for the first time.
  • Newcomer to the Index, Wilmar Gavilon (143rd), is ranked second for most improved revenue. Wilmar Gavilon had reported revenue of $172m in 2020 which has now increased to $267m in 2021, representing a 55.1 per cent increase in revenue.
  • Fisher & Paykel Healthcare (22nd) has seen a similar increase in revenue, reporting an increase of 53.0 per cent from $1,273m in 2020 to $1,948m in 2021 which places it third for most improved revenue. Fisher & Paykel Healthcare occupied 16th position for most improved revenue in 2020.
  • Microsoft (72nd) is the only other company to be included in the most improved revenue index for two years in a row.
    A2 Milk and Xero had been included in the most improved revenue index for the last four years, however they are not included in 2021.
  • Pushpay (142nd), My Food Bag (196th), Synnex (190th) and Tasman Liquor (152nd) are new entrants to the Deloitte Top 200 Index in 2021, and also feature in the most improved revenue index.
  • Hellers, Microsoft, Precinct Properties, Synnex and Tasman Liquor are included in both the most improved profit and most improved revenue index in 2021.

Top return on assets

  • Return on assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against total assets reported.
  • Lotto NZ (ranked 26th in the Top 200 Index) holds the top spot for ROA for the third year in a row after newly entering the Top 200 Index in 2019. It has maintained a strong ROA of 194.7 per cent in 2021 compared to 214.0 per cent in 2020. The high ROA is driven by a 25.5 per cent increase in profit after tax from $333m in 2020 to $378m in 2021, with total assets of $199m in 2021.
  • Holding the second spot for ROA for the second year in a row is TAB (121st) – despite a decrease in its ROA to 94.5 per cent from 102.6 per cent. This is driven by an increase in total assets from $136m in 2020 to $208m in 2021, and an increase in profit after tax from $137m in 2020 to $163m in 2021.
  • Third place is held by newcomer Aurecon (200th) with a ROA of 35.3 per cent.
  • Fisher & Paykel Healthcare (22nd) placed fourth in terms of ROA, rising from fifth place in 2020. Its ROA has increased from 21.8 per cent in 2020 to 29.9 per cent in 2021, which is consistent with its increase in profit.
  • The general trend of increasing return on assets falls in line with the 21.6 per cent increase in average profits, with third to 20th places for 2021 increasing year-on-year against third to 20th places in 2020. Only Lotto NZ and TAB, ranked first and second respectively, saw a reduction in ROA year-on-year.

Top return on equity

  • Return on equity measures how effectively a company can generate income relative to the amount of money shareholders have invested in the firm.
  • It is a useful tool for investors, particularly when comparing firms within the same industry and is calculated by measuring the revenue earned against the average equity held over the past two years – to prevent changes in shareholder contributions skewing the results.
  • Lotto NZ (ranked 26th in the Top 200 Index) has taken the top spot for return on equity, moving from second place in 2020, with a return on equity percentage of 661.8 per cent.
  • TAB (121st), has moved up from third place to second place for its return on equity of 416.5 per cent.
  • Bunnings (31st) has dropped from top spot to third place with a return on equity of 264.7 per cent for 2021.
  • Kiwifruit marketer Zespri (7th) has risen to fourth place from sixth, with a return on equity of 105.0 per cent.
  • Nestle (90th) has maintained its fifth-place spot with a return on equity of 101.9 per cent.

The newcomers

  • This year, 22 companies were added to the Deloitte Top 200 Index. This compares to last year when 13 companies debuted on the Index.
  • Heinz entered the Index at the highest rank (ranked 56th in the Top 200 Index) with revenue of $768m.
  • Also entering the Top 200 Index within the top 100 companies were metals distributor and processor Vulcan Steel (59th) with revenue of $732m, and New Zealand Health Group (70th) with revenue of $639m.

Just missed the cut

  • The 200th place in the 2020 Deloitte Top 200 is Aurecon, which recorded $189m in revenue. In last year’s Top 200 Index, Airwork was ranked 200th with revenue of $200m in 2020.
  • Abano Healthcare (ranked 201st in the Top 200 Index), Whakatane Mill (202nd) and Wilson Parking (203rd) just missed the cut by $1m. Scott Technology (204th), Suzuki (205th) and China Merchant Properties (206th) were close to breaching into the Top 200 Index in the current year, all achieving revenue around the $186m mark. Of these companies, Abano Healthcare and Scott Technology have fallen out of the Top 200 in 2021, previously holding 168th and 182nd place in 2020 respectively.

In last year, not now

  • After its entrance in the Top 200 Index in 2019, Scentre wasn’t in this year’s index (in 2020 it ranked 90th). Until last year, the owner and operator of Westfield retail destinations was in the most improved performance index for two years in a row.
    Shell has also dropped out of the index this year after ranking 149th in 2020. In 2019 it appeared in the top profit index, recording a figure of $1,397m.
  • Kordia didn’t feature in the Top 200 index this year. In 2020 it reappeared on the index ranked 183rd, after falling from the index again in 2019.
  • Horizon Energy (2020: 163rd) and Scott Technology (2020: 182nd) also did not make the list this year after entering last year’s index.

Deloitte Top 200 awards: Top business leaders crowned - NZ Herald

Deloitte Top 200 awards: Top business leaders crowned – NZ Herald

Infratil has been crowned Company of the Year and Skellerup’s David Mair named Chief Executive of the Year at the prestigious Deloitte Top 200 Awards.

Rocket Lab founder, CEO and chief engineer Peter Beck took out the coveted Visionary Leader award.

In its 32nd year, the Deloitte Top 200 Awards are a showcase of the very best of New Zealand business and business leaders. They celebrate the depth and range of our business community, featuring the industries and sectors that underpin our country’s success.

This year, the awards recognise outstanding results despite the ongoing challenges resulting from Covid-19, including companies and leaders from the manufacturing, retail, media, and energy sectors, all showcasing their commercial strength and agility during challenging times.

Infratil had an outstanding year in 2021, further enhancing its reputation as a savvy infrastructure and utilities investor. The company was active with its portfolio, divesting Tilt Renewables and investing in diagnostic imaging firm Pacific Radiology.

The panel of high-profile judges — convened by NZME editorial director of business Fran O’Sullivan — said Infratil’s combination of strong performances with its investment companies, especially data centres, along with its divestments and new acquisitions have added significant shareholder value over 2021.

“In addition, the company went through a fairly seamless transition of CEO from Marko Bogoievski to Jason Boyes and won the takeover battle with Aussie Super,” say the judges.

Infrastructure: Auckland's light rail project poised to take a major step (NZ Herald)

Infrastructure: Auckland’s light rail project poised to take a major step (NZ Herald)

Before the end of this year, the Government will decide on the route, mode, and delivery for the project for the light rail project, which will run between Auckland’s city centre and Māngere, connecting major employment hubs in the city and the airport at each end.

Transport Minister Michael Wood acknowledges the decision has been a long time coming. He first launched the promise of light rail during his campaign for the Mount Roskill by-election in 2016 which brought him into Parliament. Labour campaigned on light rail at the 2017 election, but the move was stymied by Labour’s coalition partner New Zealand First in the last term of Government.

“It is no secret that it was in a fairly challenging stage at the end of the last term, and it had the political knockback between parties,” Wood says. “We had to have a reset which is effectively what happened this year. But it’s put us in a good position to take it to the next stage.”

The three options under consideration are:

• Light rail, a modern tram on city streets;
• Light metro, underground in a tunnel under the isthmus, and underground in Māngere and Onehunga, and at street level in other areas; and
• Tunnelled light rail, underground from Wynyard Quarter to Mt Roskill, and then up at street level to Auckland airport.

They were chosen after an assessment by the Auckland Light Rail team from over 50 different options for modes and routes against the project’s three objectives: improving accessibility, reducing Auckland’s carbon footprint, and unlocking urban development in the corridor.

Not a simple decision