Global Insights – September 2021

CHINA

Carbon neutrality pledge

Ever since President Xi announced ‘3060’ as a goal for carbon emission in China at the seventy-fifth General Assembly debate last year, the Chinese government considers ‘Carbon peak in 2030 and carbon neutralization in 2060’ as one of its key tasks. Last month, the National Development and Reform Commission issued the ‘14th five-year plan for the development of a circular economy’ to explore a sustainable development path in line with China’s national conditions. At the China International Trade in services Fair held early this month, sustainable development was discussed in several different seminars. In the field of sustainable investment in the future, achieving the goal of ‘carbon neutrality’ requires a total investment of RMB 139 trillion (about USD $30.48 trillion), accounting for more than 2% of China’s annual GDP. 

China has also expressed its desire to join the global economic circulation for a long-term development. On 16^th September, Commerce Minister Wang Wentao submitted China’s application to join the free trade agreement in a letter to New Zealand’s trade minister, Damien O’Connor.

What is clear is that energy and power generation will be the single sector most directly impacted by China’s carbon neutrality pledge. In China, this sector is responsible for 52 percent of carbon emissions, higher than the global average of 41 percent. This means that there’s an opportunity for New Zealand tech developers,  manufacturers and service providers in Carbon Capture Storage (CCS), reduction of industrial wastes (eg. Kea Connect business Zincovery) or the renewable and clean energy industry (eg. Solar power, wind power, advanced batteries and electric vehicles -eg. Kea Connect business Switch Motorcycles) to seek investment and business opportunities in China for the next few years.  

Plastic waste control

At the beginning of 2021, the toughest ‘plastic restriction’ in Chinese history officially came into force. Companies manufacturing or consuming plastic products were all required to strictly implement the latest standards. For example all the major bubble tea brands (such as Heytea) and restaurants have changed their straws and takeaway boxes to degradable products. Demand for biodegradable plastics is skyrocketing due to these new restrictions, but the industry itself remains small and fragmented. Demand outweighs supply, and there remain significant barriers to mass production like capacity limitations on raw materials.

This is an opportunity for New Zealand companies that offer degradable products or advanced technology and manufacturing techniques in the degradable materials industry to export or expand to the Chinese market. 

Water Shortage Crisis

Water shortage has been an ongoing issue for China. Home to 20% of the global population, China has only 6% of the world’s total freshwater resources. 2014 statistics from the World Bank indicate that the total renewable water resources per inhabitant is only 2018 cubic meters each year- 75% less than the global average. 

According to the ‘National Water Saving Action Plan’ issued by the national development and Reform Commission and the Ministry of Water Resources, by 2035, the total water consumption in China will be controlled within 700 billion cubic meters, and the conservation and recycling of water resources will be the most advanced in the world. 

New Zealand has many companies that are experienced in water recycling and waste water treatment. If they have competitive technology and solutions, they should explore opportunities in the Chinese market.

Ciara Liu, Kea China Regional Director

UK & EUROPE

Across UK & Europe we are consistently seeing retailers and suppliers focus on sustainability as a key driving force in their business. Companies are looking to innovate, shift and change their production, supply chain, new product development and distribution lines to help implement these changes.  

This includes continually working towards reducing plastic usage, introducing refillable/reusable packaging and/or removing plastic and introducing paper packaging.  It is also extending to reducing overall waste, improving recycling and reuse and remove schemes.  Creating incentives for this development and investing in plant and equipment for ongoing improvements. 

New Zealand owned Epicurean Dairy – The Collective, is a good example of how Kiwi export businesses can continue to push and drive change in the marketplace.  The Collective boast a carbon neutral range of yoghurts which are available in 100% recyclable tubs and made from 100% recycled material.  A game changer in shaking up the UK marketplace.  

UK Packaging reforms

The UK Government is undertaking reforms to the packaging sector with four core initiatives, currently under a public consultation until June 4th. This reform will see producers becoming financially responsible for funding the net costs associated with dealing with packaging waste UK wide and will impact and affect all producers (not just UK producers). 

This will have an impact on New Zealand businesses in the UK market and they will need to keep a close eye on developments as the reforms go through the consultation and decision making process. Businesses will need to work closely with their teams and partners in the market to ensure that they are ready for this change well ahead of time.  This will also have implications in terms of labelling and data reporting. 

For those looking to engage or enter the UK market, it will mean looking at how these initiatives interplay with their own current production processes, product development, long term COGS planning and sustainability focus. Likewise with businesses already operating in the market, they will need to ensure they understand these changes, are able to analyse market suitability and have the lead-time to make changes so that they can continue to have a strong premium distribution footprint, shelf presence and market penetration.

Sara Fogarty, Kea UK/Europe Regional Director

North America

On the ground here in New York, I see many food businesses promoting the fact that they use organic produce. Farm to the table seems to be promoted more than it did even two years ago. Being stuck inside for a year or more during the pandemic has given people a lot of time to reflect on their eating habits and focus on a healthier diet. In the bigger cities eating out is easy and it’s easy to find healthy options. When the city shut down, and people were home, they turned to food delivery services which provided healthy organic produce.

Farmers markets with local produce have been popular in the city for some time now. Most parts of the city have one day a week where you can buy fresh organic produce, there just seems to be a lot more of them these days, and the variety of offerings is greater. Wines, spirits, toys, clothes are among the traditional offerings, including meats, artisan cheeses, and vegetables.

New Zealand brands definitely have something to offer when it comes to tapping into these organic, healthy, whole food trends. Kiwi Apple growers Bostock have been selling 100% organic apples into the US market for some years now and have recently released a new variety of organic apple specifically grown for the US market. Meanwhile Kiwi wine brand Villa Maria have been actively promoting the launch of  ‘Earth Garden’ their first fully organic and vegan friendly range of wines. They’re using their first ever double-decker bus wraps, and digital signs with a rotating ad promoting the brand and it’s sustainability claims.

It can be a challenge for New Zealand brands when it comes to labelling their products as they are unable to use the word organic, due to regulations here in the US. The USDA’s definition of organic is different from the New Zealand equivalent Bio Grow qualification. There is a bill in parliament that is addressing this at the moment and for now descriptions on New Zealand products are carefully crafted.

Gary Fortune, Kea North America Regional Director