Global shockwaves mean NZ must reduce its reliance on imported goods and foster regional growth and jobs, argues Dane Ambler
Opinion: Something Climate change minister James Shaw said in the lead-up to COP27 this week stuck with me: “We need to move at the speed and scale of the crisis.”
Shaw was expressing his frustration at the lack of climate action that comes out of the conference.
“In the one opportunity we have to try and make progress as a planet on reducing emissions there are loads of countries and companies who use it as an opportunity to clothe themselves in a veneer of concern while not actually doing anything about it.”
As evidence of the harms done to the planet become more widespread, the responsibility on businesses – large and small – increases. If, as predicted, we see no real progress at COP this year, we may see change driven by an awareness of climate-related and supply chain risks. In other words, now more than ever, profitability is welded to the idea of sustainability.
There’s no denying, however, our businesses face extreme uncertainty; recession fears, new environmental regulations, geopolitical tensions, surging shipping costs and ongoing challenges associated with the pandemic, to name a few.
But no challenge is more pressing than the threat of climate change. If businesses aren’t already on their sustainability journey, its likely they will be left behind.
Our model of consumption has taught us to buy, use briefly and dispose of our products. Rinse and repeat. The goal of limitless growth has led to mass imports and exports across long distances, ceaselessly burning carbon from point A to point B.
"Economic pendulums always shift, and ours is shifting right now from unfettered globalisation to more regionalisation and localisation.” – Rana Foroohar, Financial Times
Achieving record profits and reducing emissions is the great balancing act large businesses face today.
Financial Times columnist Rana Foroohar argues global supply chains are being rearranged, slowly but surely, as companies reevaluate their sourcing practices and aim for more resiliency.
Foroohar says globalisation has been fuelled by three things; cheap capital, cheap energy and cheap labour, three things that are coming to an end.
“Interest rates are going up, the invasion of Ukraine has made energy more expensive, and wages in Asia are rising. Economic pendulums always shift, and ours is shifting right now from unfettered globalisation to more regionalisation and localisation.”
It’s become clear, as the UN’s trade and development body has noted, the only true winners from our current model are the large multinationals and the Chinese state.
Foroohar is just one in a growing school of thought that see a switch back to localisation as the only answer.
“When you have more localised systems, you just don’t have those sorts of problems of hauling things halfway around the world and running into all kinds of roadblocks.”
With global wealth growing rapidly, no country has been unable to avoid rising inequality.
Businesses need to make some serious decisions about where they manufacture, not only for the planet, but because of the impending risks.
Supply chains in crisis
Maritime transport, responsible for a massive 3 percent of global emissions is in for a shake-up.
From next year, new International Maritime Organisation rules will require ships to measure and report a carbon intensity index in the form of an annual efficiency ratio (AER). Compliance will be a major hurdle for the dirty shipping companies.
The European Union is also planning to bring shipping into its Emissions Trading Scheme in 2023. That means shipping lines will have to purchase allowances for 50% of emissions for some voyages.
“We would lose our soul if we moved overseas,” – Oscar Rodwell, BONZ
While this is a step in the right direction for the climate, it also means significant cost increases will likely be passed onto businesses and consumers.
Researchers recently discovered supply chains are bitterly unprepared for climate change-related disruptions. Overall, just 11% of all sites examined were fully prepared for climate-related disruptions.
“Eighty percent of all sites in the United States and 48% of all sites in China and Taiwan have either no business continuity plans or no alternative sites lined up that could be put into operation quickly; in other words, they are unprepared for disruptions to their operations.”
Resurgence of locally made
There is no one answer to the plethora of environmental challenges the world faces, but procuring and manufacturing locally is a significant step in the right direction and one way to reduce the risks associated with global supply chains.
While almost every product is outsourced from China at low cost and enormously high waste, Kiwi businesses that focus on local procurement are emerging in droves.
“We would lose our soul if we moved overseas,” BONZ managing director Oscar Rodwell says.
The iconic Queenstown-based clothing business contracts some of its manufacturing to 50 knitters throughout the country.
“Being in New Zealand we can control the quality, the environmental inputs and outputs and the social inputs and outputs – how we manage our people. That’s very hard to find internationally.” – Peri Drysdale, Untouched World
When it lost 90 percent of its revenue overnight in early 2020, the business switched to making products more suited to the domestic market, diversifying into furniture and homeware with great success.
“We want to show the world we can compete in the luxury space. New Zealand is revered as a country that produces premium products. We just want to continue supporting Kiwi jobs and suppliers.”
Untouched World founder Peri Drysdale says manufacturing locally gives greater control over waste. It’s estimated between 100-200,000 tonnes of textile waste is either burnt or sent to landfill each year in New Zealand.
“We haven’t burnt or buried a single garment in 40-years, but offshore there’s millions of dollars of garments being burnt or buried.
“Being in New Zealand we can control the quality, the environmental inputs and outputs and the social inputs and outputs – how we manage our people. That’s very hard to find internationally.”
Drysdale and Rodwell say New Zealand’s perceived purity and premium global recognition relies on living by their sustainable values.
These businesses focus on the local market first, realising that mass exports and imports across long distances is not sustainable.
Both of these businesses use transparency in production to counter the cognitive dissonance between sustainable thought and action, and prove that manufacturing and purchasing decisions do make a difference.
There’s no better example of how New Zealand businesses can scale up their production locally than face masks and PPE. Thirty NZ Made manufacturers adapted to massive demand and quickly and saw their business thrive, meaning the country was not reliant on unsustainable disposable imports for protection.
Change is nigh
Consumers are also demanding more from manufacturers.
This year, Kantar discovered New Zealand made had overtaken price for the first time, as 64 percent of New Zealand consumers sought locally produced and grown products over imported ones.
People want to know what is in their products, where it was made, who made it and what happens to it once it is disposed of.
As the pendulum swings, we have to ask if there is greater risk in moving manufacturing to China, or doing the opposite and bringing it home.
Understanding the challenges and opportunities of manufacturing offshore is important, but with the uncertainty of war, rising costs, human rights violations and climate change, there has never been a better time to make things here.
The private sector’s decisions now will shape the future, and those in charge have the means to do immense good in the world.
If ethical reasons aren’t enough to encourage progress at COP this year, my hope is that financial or risk-related concerns might drive real change.
