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 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

Infrastructure: Credit for green credentials

Green finance is an important focus for ICBC. Kevin Xu explains to Tim McCready how the bank is active in global sustainable financial governance, learning from international practical experience, and contributing financial power to serve the sustainable development of the economy, society and environment.

Herald: ICBC’s attention to environmental, social, and governance (ESG) factors is growing. How is this affecting the bank’s involvement in international infrastructure projects?

Kevin Xu: ICBC has fully integrated ESG and green financial management into its investment and financing processes. Our head office has formulated green investment and financing policies for 16 sectors and nearly 50 industries, including infrastructure construction, and has positioned key areas such as green transportation, clean energy, energy conservation and environmental protection as active or moderate entry into the industry.

Environmental, climate and social risks arising from the credit granting process have been brought under classified management. Differentiated credit policies have been implemented in domains such as economic capital occupation, authorisation, pricing, scale, and a “one-vote veto system” is used for environmental protection. Green management requirements are extended to a wide range of investment and financing businesses lines such as bonds, wealth management, leasing.

ICBC New Zealand follows head office’s approach and has been actively involved in local infrastructure projects. More than NZ$300 million in loan commitments has been provided to support NZ renewable energy, sustainable projects in the past 12 months.

Herald: What factors do you take into account when integrating ESG factors into investment decisions?

Xu: We pay close attention to hazards and related risks that financing customers and related parties may bring to the environment and society in construction, production, and business activities. This includes energy consumption, pollution, land, health, safety, resettlement, ecological protection, environmental and social issues related to climate change.

ICBC implemented the “one-vote veto for environmental protection”for the entire investment and financing business process. The customer credit risk rating has embedded ESG factors.

Environmental risk factors are included in the customer rating model, including corporate environmental credit rating and green credit classification index. For corporates that are environmentally unqualified or unfriendly, the rating model will prescribe a limit to the customer’s credit rating.

The customer rating model covers governance risk factors, and incorporates corporate governance and corporate management indicators, including corporate governance structure, shareholder control, and related party transactions.

The inclusion of negative environmental events in the rating and early warning monitoring system, including factors such as environmental violations.

Our head office also clearly requires relationship managers to prudently evaluate the environmental and social risks of customers during the due diligence process and has introduced relevant supporting policies and systems.

Herald: What else does the bank take into consideration for infrastructure projects?

Xu: We also consider credit risks, market risks, country risks and other related factors that may affect investment safety and returns.

ICBC implements a unified credit risk appetite for all types of credit risk exposures across the bank, and implements full-process management of credit risk, covering the entire process from customer investigation, credit rating, loan evaluation, loan review and approval, loan issuance to post-loan monitoring.

For cross-border investment and financing, we also need to pay attention to the country risk of the country or region where the counterparty is located. ICBC uses a series of management tools to manage and control country risk, including country risk assessment and ratings, country risk limits, country risk exposure statistics and monitoring, and stress testing, etc.

Anti-Money Laundering is also the focus of our attention in handling investment and financing business. We strictly abide by relevant Anti-Money Laundering laws and regulations and steadily promote customer identification governance and high-risk areas management.

Herald: What impact has the pandemic had on ICBC’s infrastructure projects?

Xu: The outbreak of the pandemic and its prolonged duration have had varying degrees of impact on many industries, including infrastructure, and some projects are facing a certain degree of difficulties in supply chain operation and capital turnover.

ICBC actively fulfils its responsibilities as a corporate citizen by coordinating the prevention and control of the pandemic, financial security, and operation and management, and actively carrying out special activities to ensure the sustainability of the supply chain of large enterprises and the uninterrupted capital chain of small and medium-sized enterprises.

In the global fight against the pandemic, we will fulfil our responsibility, demonstrate our care and concern, and protect our beautiful home together.

Yangjiang Nanpeng offshore wind farm

ICBC approved a loan of RMB 1.6 billion yuan for the Yangjiang Nanpeng Island offshore wind farm project.

The 401.5MW project features 73 wind turbines and is the first single large capacity offshore wind power project in China. It is also the first offshore wind power project in Guangdong Province that is more than 10 kilometres away from the coastline and more than 10 metres deep.

Completed at the end of last year, the offshore wind farm can generate 1.015 billion kWh of annual on-grid power. This is expected to save 311,500 tons of standard coal and reduce carbon dioxide emissions by 828,800 tons every year.

Dubai solar thermal power plant

ICBC is the lead arranger for the construction of one of the world’s largest and most advanced solar thermal power plants.

The 700MW concentrated solar power and 250MW solar photovoltaic power station in Dubai has been jointly invested by Dubai Electricity and Water Authority (DEWA), ACWA and Silk Road Fund.

With a total investment of US$4.3 billion, the project is the largest new energy project financing in the world and has been highly recognised by the market. As the lead bank, ICBC arranged a US$2.5b senior syndicated loan with members from China, Europe and the UAE.

Concentrated power systems generate solar power by focusing a large area of sunlight into a small area.

The light is converted to heat, which is stored in molten salt to supply electricity on demand during the day and through the night.

This method of power generation makes up for the instability of solar power generation and the impact on power grids and ensure the stability of power supply.

The power plant is an important project under Dubai’s clean energy strategy and is expected to provide clean power to more than 270,000 households in Dubai every year, with zero emissions of carbon and pollutants.

The power plant will reduce carbon dioxide emissions by 1.6 million tons and will create 4000 direct jobs and more than 10,000 indirect jobs, providing local employment and economic development.

Baodi district solid waste power generation

With the increasing volume of municipal solid waste in Baodi District, Tianjin, China, the capacity of the original landfill site was not able to meet the needs of the community. To solve this problem, Tianjin Quantai Domestic Waste Treatment launched a domestic waste incineration power generation project.

ICBC granted a loan of RMB255 million yuan to assist with construction. The project began operations in December 2020 and has changed the method of domestic waste treatment from landfill to incineration. It is preventing the pollution of domestic waste into the soil and underground water sources and reducing reliance on fossil fuel-based power and heat sources and CO2 emissions by using waste as a resource for power generation.

Kevin Xu is Team Head, Corporate & Institutional Banking at ICBC New Zealand.

ICBC is a sponsor of the Herald’s Infrastructure report.

APEC CEO Summit 2021: Highlights and insights

The full APEC CEO Summit is now available to watch, free, here.

Over two days in November, the world’s most influential political, business and thought leaders came together for the APEC CEO Summit 2021 to discuss ways the region can learn from each other and work together and to ensure it emerges from the pandemic stronger than ever.

The Summit addressed challenges and opportunities presented by the current situation, with a focus on five themes: the state of the world with, and post Covid; the digital disruption opportunity; the primacy of trust; the future of energy; and the sustainability imperative.

The state of the world with and post-COVID

The Summit was set at a complicated economic period as the world rebuilds in the wake of the pandemic. Just a year prior, the region’s economy saw a record contraction of -5 per cent, with estimates suggesting the Asia-Pacific lost over $2 trillion in potential trade over 2020.

This downturn was both faster and deeper compared to the global financial crisis – although will likely be shorter. Demonstrating this rapid turnaround, the last quarter saw record growth of 10 per cent in the region.

Keynotes from PwC global chair Bob Moritz and OECD Secretary-General Mathias Cormann, along with Dr Alan Bollard’s panel discussion on the economic state of the world helped to decipher the recovery and set the scene for the Summit. While the tone from speakers was optimistic, they cautioned the economy is still significantly impacted by the ongoing disruption of the pandemic and can be seen reflected in myriad contradictions.

The dramatic increase in trade is predominantly occurring in merchandise, with the region experiencing a chronic shortage of goods to meet demand, yet services trade is still worryingly negative.

  • Domestic investment has been increasing, but foreign direct investment is at a 20-year low.
  • Costs and wages are increasing, but productivity is stagnant.
  • Jobs are being displaced, but skills shortages are being reported widely across the region.
  • Uncertainty and significant downside risks remain, including inflationary pressures and the emergence of new Covid strains, vaccination levels and continued disruption from the pandemic – including the fourth wave beginning to sweep through Europe.

But the recovery is also providing the region tremendous opportunity – particularly for those businesses able to adapt and grow quickly and create supply chains that are robust and scalable.

Prime Minister Jacinda Ardern, this year’s APEC chair, said in her opening address:

“We have a saying in New Zealand. He rau ringa e oti ai – many hands make light work.

“The heavy load of a global pandemic that in equal measure threatens lives and livelihoods has been countered only with an extraordinary commitment to unity, partnership and progress in spite of the challenges.”

Former New Zealand Prime Minister and Administrator of United Nations Development Programme Helen Clark shared a similar sentiment, reminding delegates that they must work together and grab hold of the positives that can come from standing up to a crisis.

“We can strengthen our national systems for pandemic preparedness and response, and we can strengthen the global systems. All of that is good for business,” she said.

“If we are looking at the world we are trying to create, inclusion going forward is critical. But we must also build in resilience. Because if we don’t have resilient systems like with pandemic preparedness and response, we will repeat these lessons over and over.”

Recently elected President of Peru, José Pedro Castillo Terrones, shared a similar view, noting the APEC forum “is an important space for coordinating measures and identifying good public policy practices to face complex health and economic challenges.”

The digital disruption opportunity

While all economies across the APEC region have been impacted by the pandemic, there is clear evidence that those with digital readiness endured the pandemic and rebounded better.

Economies with both physical and digital infrastructure have been faster to deploy digital tools in the fight against Covid-19 – including contact tracing, proof of vaccine and digital trade facilitation – which has enabled them to keep their economies more open.

The pandemic acted as an accelerant and removed hurdles for innovation. Five years’ worth of technology adoption occurred within the first eight weeks of the pandemic, and the importance of its role as an enabler of trade was reiterated in almost every session at the Summit.

“The companies without digitalisation have been hit harder,” said Diane Wang, chair and CEO of DHGate. “They are at a crossroads… the choices we make today will have consequences on gender equality, digital equality and inclusive growth, for decades to come.”

In her keynote address, technology entrepreneur Amber Mac cautioned CEOs that “it may feel like there is a thick line between what you do and what big tech does, but as you embrace a tech-first strategy – an obvious path to succeed in today’s digital world – that line will soon begin to blur.”

Companies, government, and the public sector were urged to continue to seize the opportunities from digitalisation, with a heavy emphasis that the economic recovery post-Covid will continue to be digitally enabled.

Micro, small and medium enterprises (MSMEs) are particularly vulnerable to the economic impacts of the pandemic. With MSMEs making up over 97 per cent of all enterprises in the region and employing over half the workforce, digital adoption and access to innovation and will be essential for all business.

This was highlighted by Singapore Prime Minister Lee Hsien Loong, who stressed that most SMEs are not as digitally prepared as large businesses, and risk being left behind. “APEC economies must help SMEs and their workers make the digital transition,” he said.

He also acknowledged that the rapid uptake of digital innovation means that APEC economies need to do more to invest in the digital frameworks of the future, including digital identity, digital payments solutions, data exchange, data authorisation and consent.

Australian Prime Minister Scott Morrison used his address to express his concern over the rise of technology, and the ability for it to be used for bad, as well as good.

Morrison called for stronger rules for the tech sector and suggested it would be better for the sector to work in partnership with governments on regulation – saying that if not, governments will do it anyway, and “will stuff it up because they don’t understand it the same way.”

The primacy of trust

Along with digital adoption, the pandemic has also accelerated the erosion of trust around the world. There is an epidemic of misinformation and widespread mistrust of societal institutions and leaders around the world.

This extends to business, and as trust expert and public relations leader Richard Edelman told the Summit, earning trust has never been more important – or more challenging.

He described how employees have emerged as the most important stakeholder in business, with people “voting with their feet” and making major decisions – including what they buy and who they work for – based on personal beliefs.

The growing expectation of business to focus on societal engagement with the same rigor, thoughtfulness and energy used to deliver on profit was evident from delegates – the primacy of trust quickly became the most interactive session at the Summit, attracting robust discussion through the conference platform.

Edelman explained how consumers, employees and other broad stakeholders are paying more attention to what businesses say and do, and how they respond to issues including climate change, racial injustice, and other societal issues.

Intrinsically tied into trust is the need for business to apply environmental, social and governance (ESG) principles to their strategy and operations to create value for all of society.

Reiterating Edelman, the ESG panel told the Summit that there is now a much broader group of stakeholders that must be considered, including employees and the community. But beyond this, there is a growing consensus that ESG has become an extremely powerful driver for business success and financial return and is no longer seen as something that only adds costs to business.

The panel called for business leaders across the region to put ESG front and centre, integrating the principles into the purpose and values of an organisation and ensuring their commitment is actionable, verifiable, and transparent.

“The actions required are expensive, substantial, and they have to be core to an organisations strategy,” said McKinsey’s Andrew Grant. “They can’t just be window dressing or a box-ticking exercise.”

The panel said that businesses must lean in and recognise that doing good for society is also good for business.

This call for business to be a force for good in the world was repeated in the highly anticipated keynote address from international human rights lawyer Amal Clooney. She told delegates that we no longer live in a world where businesses can say ‘human rights are none of our business’.

“It is increasingly difficult for companies to say ‘we are just here to make a profit’ and bury their heads in the sand,” she said.

“Businesses, big multinational corporations, and tech companies in particular are a key part of our multilateral world of decision-makers, and each one will decide whether to be a force for good or complicit in abuses of power.”

The sustainability imperative

The Summit was unique this year, with a political leader from outside the 21 APEC economies asked to give a perspective from outside the region. The conversation between German Chancellor Angela Merkel and New Zealand Prime Minister Jacinda Ardern traversed the state of the world, Covid-19, digital innovation, sustainability and leadership.

While the discussion gave many fascinating insights, one of the key points raised was the need to take the lessons from Covid-19 and to apply them to other critical areas. The pandemic forced governments and businesses to act with urgency and in partnership with different sectors and communities who know their people best.

This same principle could be applied to manage other world problems, including climate change, scaling the uptake of renewable energy, and dealing with pressing environmental and biodiversity issues.

“Never before have we been able to realise how interconnected we are globally,” said Merkel.

“What is happening here influences what is happening in Africa, in New Zealand and in the United States of America. That sense of how small our globe actually is when it looks to the spread of such a virus should continue to guide us when we tackle issues like biodiversity and climate protection.”

This message was echoed by Canadian environmentalist Dr David Suzuki, who gave a deeply passionate keynote address. He told attendees that the planet is “at code red – and that spells trouble for humans.”

“Nature pays no attention to human laws and borders,” he said. “We are animals. If we don’t have air for three minutes we die and if it is polluted, we get sick. But we use air as a garbage can for toxic waste. We must show reciprocity and responsiveness so nature can continue to be abundant and generous.

“Success as a species is to look ahead, recognise dangers and opportunities and choose a deliberate path to avoid danger.”

Viet Nam President Nguyen Xuan Phuc affirmed the strategic importance of sustainable development and climate change response for the region.

“Our green planet is shaken by cumulative and unprecedented impacts caused by climate change, extreme natural disasters, environmental degradation, and the COVID-19 pandemic,” he said.

“Time is not on our side, for these challenges continue to worsen with every passing day. Thus, we need to work closely together to overcome such hardships.”

A similar call was echoed by President of the People’s Republic of China, Xi Jinping.

“APEC economies should make its post-pandemic recovery a green one and take the lead in making a science-based response to climate change,” he told the Summit – just hours after announcing a surprise plan with the US to work together on cutting greenhouse gas emissions in the crucial next decade.

The future of energy

The APEC region demands around 60 per cent of the world’s energy consumption, and transitioning to new forms of clean energy production and consumption will be an essential part of meeting our climate change challenges.

In her keynote address on future energy challenges, Tesla chair Robyn Denholm told APEC economies that they must act now to accelerate their transition to renewable energy to power utilities, vehicles, communities and homes.

“We all succeed or fail together in the race to zero emissions,” she said.

Denholm said the growth in electric vehicle sales was encouraging, but it would be a steep climb to eliminate combustion engines. Getting there would require a joint effort between the public and private sector, with significant capital investment and supporting policies that set standards and deadlines on emissions to accelerate the transition.

“Vehicle pollution reduction will be only as fast as our ability to ramp up battery production and EV manufacturing,” she said.

In the panel on future energy solutions, Blackrock managing director for renewable power and sustainable investing Dr Valerie Speth, told delegates that there is no topic ranking higher than climate change and decarbonisation among her colleagues and investors.

“It is the best investment opportunity for the coming decades,” she said.

A similar message was shared by President of the Republic of Korea, Moon Jae-in. His administration has closed domestic coal-fired power plants, stopped permits for new ones and cut public funding for new overseas coal power plants.

“Instead, we are expanding the use of safe and clean energy,” he said. “By 2025 we will have more than doubled solar and wind power facilities from 2020 levels.”

South Korean companies are making a $37 billion investment in and exploring partnerships on all aspects of the hydrogen economy from production to distribution to end use.

He said that as an economic forum that represents 61 per cent of world GDP, APEC “will stand at the forefront of cultivating the hydrogen economy ecosystem.”

Looking to the future

The Asia-Pacific region is home to 270 million indigenous people, making up around 70 per cent of the world’s indigenous population. Yet the full potential of the community’s contribution to the region’s economy remains largely untapped and was disproportionately impacted by the pandemic.

The panel on the indigenous economy featured speakers from Aotearoa New Zealand, Canada and Australia, and discussed indigenous leadership and the ethos of putting culture at the centre of decision making.

Rangimarie Hunia, chief executive Ngāti Whātua Ōrakei Whai Māia, told the Summit that indigenous people have values and approaches that are ancient.

“When we start to be in the game of business, we take those values and we apply them to the long-term, not the short,” she said. “When I hear things like planet over profit, that has been our way of doing since time immemorial.”

Continuing the theme of ‘looking to the future’ was a focus on young people, who make up one-third of the region’s population. The Summit had the most ever young people attend as delegates, as well as many younger voices featured in keynotes and panels throughout.

One of the most inspiring keynote addresses came from Jerome Foster II – aged just 19 and the youngest ever adviser to a US President.

Foster was appointed to President Biden’s Environmental Justice Advisory Council after spending every Friday for 58 weeks campaigning for the climate outside the White House during Donald Trump’s presidency.

He encouraged other young people attending the Summit to know that they “have so much potential… this is the perfect time for you to really step into that, and to merge your passion with what you want to do for a living.”

“As a young person it often feels like you’re inheriting an Earth that is completely backwards,” he said. “But it is now our role to figure out how we are going to make that better.”

It is the next generation, after all, that are the biggest stakeholders in the work that APEC is doing.

Watch Tim McCready and panel: Fran O’Sullivan, Brent Wilton and Hannah Pattullo discuss what was learnt at the 2021 APEC CEO Summit.


APEC CEO Summit 2021: ‘What have we learnt?’ panel (video)

APEC CEO Summit 2021: Jerome Foster II interview (video)

Newshub Nation panel discussion (video)

It was nice to be back on the Newshub Nation panel this weekend with Ella Henry and Dileepa Fonseka, talking about opening the border, climate change, and a few laughs about the Winston Churchill painting controversy!
As New Zealand starts its journey to open to the rest of the world world, it was interesting to reflect on technologies being implemented globally that could play a part in NZ’s response:
🎤 The increased use of micro-influencers, particularly in the United States, to reach out to small pockets of communities that are vaccine-hesitant and allay concerns.
📌Wristbands (Singapore, South Korea, Hong Kong) and geotagged facial recognition (Western Australia) for ensuring home quarantine.
📱 Linking the Covid tracer app to vaccine status so that entry requirements can be varied based on risk and are validated when you scan into a venue (such as in Singapore, which requires double vaccination to enter restaurants, but a lesser requirement for office spaces).