Are Businesses Ready for Climate Change?

We can’t escape it. It is the 21st century, real-life version of the impending apocalypse. Climate change.

Whether you are going to Trump this one out and state you don’t believe it, many scientists and experts have churned out their days and nights into trying to find out what is causing the potentially drastic changes in our climate.

A rise in sea level, hotter temperatures, shrinking ice sheets and warmer oceans are all signs; whisk together water pollution and the masses of plastic and waste that are superglued into the depths of our soil and reefs, and we have cooked up a very toxic concoction.

With experts stating that it is likely that the increase of violent hurricanes and parching droughts that will occur and have since occurred ‘can be attributed to human activities[1]’, it doesn’t really throw us off our seats when societies and their governments and trying to find new ways to keep climate change at bay.

After all, there is no Plan B, is there?

And if we are thinking of ways to reduce our waste, we ought to be considering what big corporations are doing to shrink their carbon footprint, because, at the end of the day, they do account towards 25% of the waste generated in England[3].

This is just the tip of the iceberg, with Europa[2] stating that each person in the EU generates 31kg plastic per year, which thus results in a sheer mass of 15.8 million tonnes of plastic packaging waste generated in a single year.

And if we are thinking of ways to reduce our waste, we ought to be considering what big corporations are doing to shrink their carbon footprint, because, at the end of the day, they do account towards 25% of the waste generated in England[3]. Morality and planetary benefits aside, corporations could also benefit financially by reducing their carbon footprint; solar panels and renewable energy costs are decreasing, thus making them a cheaper option, and, with the younger generation being more environmentally cautious, being sustainable – which sells the company well when considering marketing initiatives-, works to your favour, especially when 87% of consumers have a more positive image of a company that supports social or environmental issues[4].

What are the current laws?

Aside from the regulations, such as the expected ‘you will need a permit for exhuming excessive air pollution into the precious ozone layer’ and ‘make sure your chemicals and too corrosive and meet requirements’, there have been initiatives implemented to help push businesses to be kinder to mother earth.

Yet, ever since environmental regulations were enacted, there have been concerns on their impacts on businesses, even still to this day.

An example: if you have a turnover of more than £2 million and handle more than 50 tonnes of packaging a year, you must register with a compliance scheme or your environmental regulator and recycle and recover specific amounts of the waste[5].

Landfill tax rose with the aim to push companies to recycle more of their waste, as well as making businesses pay ‘gate fees’ when disposing waste, which is on average £6 a tonne[6]. Where this has worked to an extent, smaller businesses often struggle to gain access to residential recycling schemes run by councils and are not always big enough to gain attractive contracts for waste disposal from large commercial providers[7].

And in the past, critics, including MPs on the Commons Environmental Audit Committee, stated that the cost of compliance was too low and that they should be charged more under a “polluter pays” principle[8].

In the UK alone, changes are on the horizon.

Yet, ever since environmental regulations were enacted, there have been concerns on their impacts on businesses, even still to this day. But evidence suggests that not only do environmental regulations vastly outweigh the costs thrown onto corporations’ shoulders, but they also promote low-carbon innovations, which in turn ‘induce[s] larger economic benefits than the ‘dirty’ technologies they replace, because they generate more knowledge in the economy[9]’. This in turn makes it plausible that the switch from ‘dirty’ to ‘clean’ technologies will generate economic growth and justifies the move towards clean technology.

And since The UK’s Climate Change Act was enacted in 2008, emissions have fallen by 59% (from 2008- 2017) as the share of low-carbon generation rose from 20 to 52%, enabling the renewable energy and automotive sector to enhance investment and progress[10].

With EU laws shaping the majority of the environmental regulations, it will be up to the UK to shape how businesses and citizens to create a plan to try and save the planet.

What Will Change?
From The Green New Deal –  which in essence, is a programme of investments in clean-energy jobs and infrastructure, is hoping to transform the energy sector and the entire economy alongside it[11] – to the first-ever universal, legally binding globate climate deal, The Paris Agreement, the legislation and regulations in this area are ever changing and something businesses need to be in tune with.

In the UK alone, changes are on the horizon. I am sure you are sick of the sight of the word, but Brexit, once the UK finally finds a rational way of leaving, will present some changes in environment legislation.

With EU laws shaping the majority of the environmental regulations, it will be up to the UK to shape how businesses and citizens to create a plan to try and save the planet. The draft Environment (Principles and Governance) Bill could promise a new era for UK environmental law. With this draft bill – which is a bit to early in the making for us to delve too deep into the potential changes-, focusing on the governance, than substantive environmental law, businesses may be wondering what these changes mean for them. As experts at Burges Salmon state[12]: “It is probably true that, day to day, the work of businesses, environmental compliance teams and environmental lawyers acting for business will carry on as usual. However, let’s not underestimate the importance of strong governance on the direction of travel of environmental law. If this draft bill becomes an Act of Parliament, it sets down a powerful safeguard for environmental protection – and more radically, enhancement – that will inevitably filter through to the substantive environmental law in the UK.”

In addition to reporting on carbon emissions, business will need to report their underlying energy and transport use under Scope 1 and 2 Emissions.

More imminently, however is the new Streamlined Energy and Carbon Reporting framework (SECR). This comes into force from 1 April replacing CRC (Carbon Reduction Commitment) and will be a big disruptor to large businesses and law firms this year, according to Richard Tarboton, Director of Strategic Services at Carbon Credentials.

This framework was included in the latest Environmental Reporting Guidelines from the Department of Business Energy and Industrial Strategy (BEIS) published on 31 January 2019. Richard, who works with law firms regarding trusted carbon performance and energy management business, explains that compared to CRC which affected around 2,500 UK businesses, SECR is estimated to impact an estimated 11,900 UK companies including LLPs, quoted and large unquoted companies with more than 250 staff or an annual turnover of more than £36m and an annual balance sheet of more than £18m (so not SMEs unless they report voluntarily).

He expands: “These companies will be required to record and report within their annual reports to Companies House, their carbon emissions, energy use and energy efficiency actions taken during the reporting year with the first reports due 1st April 2020, for those businesses whose financial year ends in April 2020.

Companies need to accept that the world economy will be going through a rapid transformation over the next 30 years to one that is zero-carbon and more equitable

In addition to reporting on carbon emissions, business will need to report their underlying energy and transport use under Scope 1 and 2 Emissions. Scope 1 are greenhouse gas emissions released directly into the atmosphere – i.e.: from an organisation’s site or from their vehicles. Scope 2 is purchased electricity, heat and steam.

“These new regulations mean that a number of [law] firms will have to start collecting and reporting their emissions figures for the first time.  What’s more, these figures will be publicly reported and can be used to form league tables and compare who is performing at the best level of carbon improvement across the legal sector.  It will be an opportunity to show your leadership and differentiate your firm.”

As with anything, we can never truly know what to expect in this area.

Companies need to accept that the world economy will be going through a rapid transformation over the next 30 years to one that is zero-carbon and more equitable so SECR will be the chance to create real competitive advantage for example, by reducing energy costs, improving reputation and the wellbeing and productivity of staff.

“These businesses will also improve customer loyalty and investor confidence, opening up new opportunities for investment. Pressure to improve sustainability isn’t just coming from regulation, but more so from end clients seeking ways to cut emissions throughout their own supply chain (their Scope 3 emissions) and this means working only with likeminded, environmentally committed suppliers and partners”, concludes Richard.

As with anything, we can never truly know what to expect in this area. But with businesses accounting towards a lot of the waste and pollution our planet unfortunately is forced to embrace, it is of utmost importance we all ensure we keep our eyes peeled for any changes in environmental regulations for the betterment of our home and businesses.

 

[1]  http://nationalacademies.org/onpi/06072005.pdf

[2]  https://ec.europa.eu/eurostat/web/products-eurostat-news/-/EDN-20180422-1?inheritRedirect=true

[3] https://www.brother.co.uk/blog/sme/2017/business-waste-cost

[4] https://www.forbes.com/sites/forbesnycouncil/2018/11/21/do-customers-really-care-about-your-environmental-impact/#195bf908240d

[5] https://www.british-assessment.co.uk/environmentally-friendly-business-guide/obligations-environmental-laws.html

[6] https://www.brother.co.uk/blog/sme/2017/business-waste-cost

[7] https://www.brother.co.uk/blog/sme/2017/business-waste-cost

[8] https://www.independent.co.uk/news/business/news/uk-supermarkets-drinks-plastic-recycling-pay-cost-environment-mps-committee-audit-mary-creagh-a8124771.html

[9] http://www.lse.ac.uk/GranthamInstitute/publication/the-impacts-of-environmental-regulations-on-competitiveness/

[10] https://friendsoftheearth.uk/climate-change/what-has-the-uk-climate-law-achieved

[11] https://www.vox.com/energy-and-environment/2018/12/21/18144138/green-new-deal-alexandria-ocasio-cortez

[12] https://www.burges-salmon.com/news-and-insight/legal-updates/environmental-principles-and-governance-a-new-era-for-uk-environmental-law/

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