By Ben Falkenmire

In 2019 Charlie Chen CA was offered the job of his dreams. Air New Zealand asked him to establish a new portfolio management function from the ground up. Having held similar corporate strategy positions with Foodstuffs North Island, one of New Zealand’s largest grocery cooperatives, and local government entity, Auckland Council, Chen latched onto the opportunity.

Eleven months in, however, COVID-19 struck a devastating blow to the business which employed 12,000 staff. Chen’s position, along with 4000 others, was made redundant.

He was soon snapped up by ASB Bank, part of the Commonwealth Bank of Australia Group and one of the leading commercial banks in New Zealand, for a portfolio management role where he supported climate change response teams with SME and corporate clients.

Partnering with a climate change response team, Chen was exposed to climate risk issues for the first time in his professional career. He realised it was a bigger challenge than he had originally thought.

“Sustainability was not a core topic in my CA or university studies. Back then studies mainly focused on driving shareholder wealth – not stakeholder wealth,” he says.

“I expected to be learning about communicating better and corporate responsibility, PR skills. I quickly realised it is so much bigger than just maintaining a good image.

“It’s about managing a major strategic risk that a lot of the companies are facing and many are not currently aware of,” Chen says, showing passion for this line of work when he adds that banks lend to SMEs and businesses exposed to severe physical risks including floods, drought and heat stress that could destroy livelihoods.

“If we don’t look at that over a longer time horizon, we are not mitigating a major strategic risk adequately,” he says.

A world first for New Zealand institutions

Another thing that attracted Chen to the field was New Zealand’s passing of a law to make climate-related disclosures mandatory for more than 200 large financial market participants from 1 January 2023. The world-first standards are based on the principles of the Task Force on Climate-related Financial Disclosures (TCFD).

Fascinated by what was ahead, Chen moved into ASB’s corporate responsibility team as a senior manager.

“I’ve always been interested in sustainability, but I never thought I would work in it,” he says. “It never occurred to me that accounting professionals could play such an important role in the world’s transition to net-zero. It’s a huge opportunity for us.

“There is a big gap in the market right now where people in the environmental space are trying to explain scientific facts in layman terms. Accountants can help bridge the gap by learning more about the environment and translating scientific research into actionable business insights.”

Chen says for accountants to truly understand the impact they can have in this sector, they need to adapt their thinking. “It means evolving from strictly looking at things from a dollar perspective to understanding the drivers of climate-related risks and opportunities across the company’s value chain,” he says. “And looking at how choices are impacting the environment and biodiversity and ultimately the profit a company is making.”

CA studies reap returns

Climate change reporting is riddled with ambiguity. Chen credits the skills he acquired in his CA modules, particularly management accounting and corporate finance, with helping him develop critical thinking and analysis skills vital for confronting the unknown.

“Being able to look behind the numbers at the drivers of business performance has been really helpful, because in climate change a lot of detail is highly qualitative and sometimes contradictory.

Charlie Chen CA. Image credit: Adam Firth

“Being able to look behind the numbers at the drivers of business performance has been really helpful, because in climate change a lot of detail is highly qualitative and sometimes contradictory.”

“Critical thinking helps me identify multiple data sources and triangulate them to identify what is closest to the truth, because you’ll never get the exact truth,” he says.

“The other skill I employ from my Capstone module is how to convey messages to stakeholders in a way that makes sense to them. You have stakeholders and business managers who are not experts in climate change, but you need to be able to articulate to them the climate change risks and what needs to be done to mitigate them.”

In June Chen accepted a new role at ASB Bank, senior manager – climate and sustainability reporting, which will see him working with New Zealand’s External Reporting Board, which anticipates issuing its world-first standards for financial market participants in December 2022.

“There is little awareness of how big of an impact the standards are going to have for New Zealand SMEs and New Zealand businesses,” Chen says. “No single person or profession has all the answers. It’s about working with people from different backgrounds on the puzzle and trying to piece things together collectively.”

Certainly, another skill useful for this line of work is collaboration and keeping an open mind. “People look at me as a subject matter expert, but it’s OK to admit if you don’t know something,” says Chen.

“Having a growth mindset and being willing to learn is the number one success factor. I’m going to focus on what I can learn now, and I am confident that it will lead me to an opportunity no one has ever thought of in 10 years’ time.”

Take action

By reducing, reusing and recycling, SMEs can decrease plastic pollution and stop it going into landfill, oceans and waterways.

• Reduce use of plastic made with fossil fuels
• Reuse or repurpose as much as you can
• Recycle as much as possible and buy sustainably.

Use of the world’s resources has tripled in the last half century and is predicted to double again by 2050.

The world’s oceans have turned into a giant waste dump of plastic, most of it made with fossil fuels.

As an SME, the first steps are to:

• Wherever possible use less plastic in your own business, such as packaging. Initially look to reduce unnecessary product packaging and then consider alternative materials or how the packaging can be reused or recycled
• Work with suppliers to help them reduce their plastic products by asking for recycled alternatives.

Oceanic Global, production partner to United Nations World Oceans Day, provides downloadable guides for businesses in: hospitality, sports, music and general offices about how each industry can introduce measures to reduce the use of plastic and ways to recycle waste.

Recycle and buy sustainably

Some of the biggest contributors to waste are from food and construction industries. You can do your bit to ensure your waste doesn’t end up in landfill, the ocean, creeks or river systems by implementing collection and recycling programs including:

• Have designated bins to separate your waste
• Educate employees about why you’re recycling
• Task an employee to ensure recycling is done properly
• Investigate the supply chain
• Switch to suppliers that have sustainably certified products.

Source: How SMEs can create a more sustainable world.

Resources

SMEs and accounting firms have a critical role to play in the world’s transition to a sustainable future. CA ANZ has released a playbook for accountants in practice and finance teams in small and medium-sized organisations seeking to take action.

New Zealand’s Resilient Organisations has created a step-by-step checklist applicable to any organisation so that they can tackle, survive and thrive through any disaster thrown up by climate change and stay resilient – be it a flood, earthquake, bushfire or another pandemic.

The SME Climate Hub in the UK has an extensive range of tools for SMEs to reduce emissions and raise their ambition for sustainability. SMEs can make a climate pledge by signing the SME Climate Commitment.

The Science-Based Targets initiative (SBTi) provides a credible pathway for businesses, including a pathway for SMEs, to reduce greenhouse gas emissions with a view to meeting the Paris Agreement goals.

Climate Active is an Australian Government initiative to drive voluntary climate action by businesses. It provides a framework for organisations of all sizes to measure, reduce and offset emissions.

How SMEs can create a more sustainable world can be downloaded here.

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