Fast track, high costs: How short-term thinking could cost us everything

Opinion: It’s hard to overstate how much New Zealand’s economy depends on the environment. Our two largest sectors – agriculture and tourism – are directly dependent on factors like healthy ecosystems, biodiversity and clean water. In fact, the Sustainable Business Council notes that 13 of our top 20 export commodities, constituting more than 70 percent of the country’s entire export earnings, are dependent on natural capital.

Yet despite this reality, we keep reverting to a narrowly-focused short-termism as we navigate our current (and recurring) economic challenges – a short-termism which may give us an immediate sugar rush, but which jeopardises one of our core competitive advantages for this temporary high. The natural environment is declining, and our continued dependence on it is at risk.

Prioritising short-lived profits over long-term nature-focused opportunities

After decades establishing New Zealand’s ‘clean green’ branding we’ve seen this rhetoric being increasingly challenged by reality. We’ve let ourselves slide to the middle of the pack as other nations have surpassed us on climate action and environmental protection. We have one of the highest per capita rates of greenhouse gas emissions in the world and the declining state of our land, air and water has been well documented. None of this is helped by our sometime reliance on, and celebration of, a ‘number eight wire’ mentality – which can often translate to finding a cheap ‘workaround’ rather than addressing the root cause of a problem.

This environmental decline is however not just an issue for government, communities and non-governmental organisations to address. Every business in the country is making decisions that impact the natural world somewhere in its value chain, from sourcing materials to refuelling the company car. Every business needs to understand its dependence on the natural world, the impacts that its activities can have on these natural resources, and the actions it must take to ensure it can continue to rely on them into the future.

However, the best intentions can be overridden by a short-term cost-management focus, by immediate financial pressures and a desire to reduce expenditure. It is in these situations that businesses need to pause and consider the implications of these actions on a company’s long-term viability. Whether this is the inadvertent, and sometimes irreversible, deterioration of a critical natural resource dependency, the erosion of trust and/or social licence, or the opportunity cost of establishing new value chains, partners and customers.

Fast, good or cheap: pick two. That’s a well-established way to underline a business truism – that you can’t achieve great results, on a short timeline, at a low cost. While a fast track may seem to be the low-cost option, it can be the opposite in the long run as we miss the critical cues necessary for long-term operational resilience in our fast-changing and increasingly challenging world. This is particularly true for sustainability issues, where short-termism often leads to a compliance-led, single-issue focus, rather than a strategic view on integrated opportunities across multiple domains.

Weaving sustainability into all decision making  

Given the tough operating conditions for Kiwi businesses in 2024, taking a long-term view and addressing sustainability issues might seem impractically optimistic. But embedding responsible practices into a business isn’t just a nice idea – it’s an enduring business reality. The pressure is building from all sides: from your customers, local regulations, international markets, and the financial sector.

Mandatory climate-related disclosures are already in place for around 200 local companies that participate in our financial markets, including our large banks, insurers and fund managers. This will impact on financial flows and is placing a focus on climate implications and exposures throughout organisational value chains, from suppliers through to customers. Internationally, huge brands like Tesco are demanding supplier data that demonstrates a product’s sustainability credentials. Expectations are coming to bear on exporters to the EU, North America, Australia and other important global markets. A recent study from the Aotearoa Circle noted that 80 percent of New Zealand’s exports by value are going to markets that have mandatory reporting on environmental, social and governance issues either in force or proposed.

Whether you’re a one-person services business or a multi-site manufacturer, you can no longer ignore the complexity and pervasiveness of our sustainability and climate change challenges. And treating them as a compliance box-ticking exercise will leave your business vulnerable to higher future costs, less resilient, and potentially prone to reputational headaches.

Instead, the opportunity is to see these pressures as a signal to move from impact reduction to sustainable value creation. If you can get ahead of this, your business can shape its own transformation, instead of having it forced on you by regulators, investors or customers. This means recognising risks and identifying nature-focused opportunities within your individual business. Long-term thinking must be bedded into every decision-making process in your company.

You can be the person who inspires change

None of this change is easy. If it were, we would have done it already; but we know that passionate individuals can drive massive change within their businesses. You can be the individual that initiates or speeds up positive change by encouraging open and honest reflection and challenging some long-held beliefs on ‘how things are done around here’. It’s critical that we all challenge our mental models: our current ways of doing business are not sustainable. The world that shaped our current thinking no longer exists. Ask questions; be humble; expect pushback and fatalism; embrace tension and uncertainty.

We’re standing at a tipping point. Businesses will operate differently in future. You get to choose whether your business navigates a successful path to that future. Or you can wait to get pushed, unprepared and unwilling, into a new operational model. One of those options sets your company up to be adaptable, resilient and profitable. The other option might save you money right now, but in the long run it could cost you everything.