Brexit: getting down to business
The timeline for Brexit is still uncertain. At the time of writing the withdrawal date remains 31 October. What impact will Brexit have on sustainable business practises? Colleen Theron reports
Business will want to ensure that they remain compliant with environmental law and human rights laws as a bottom line, but how easy will this be?
The Government’s current position on how it will uphold environmental standards in the event of the UK leaving the EU without a deal is set out in Guidance: ‘Upholding environmental standards if there’s no Brexit deal’
Impact on environmental laws
The key legislation that will ensure that EU environmental law is transposed properly into the UK is the proposed Environment (Principles and Governance) Bill 2018. The Bill will apply to England and reserved matters and will incorporate a range of issues.
Business will continue to have to understand how to identify the laws applicable to its operations and take steps to comply with them1. The impact of Brexit is to introduce uncertainty, certainly in the short term of the application of current legislation.
In the February issue of Transform, Richard Andrews reported on how the Environment Bill can help businesses progress following Brexit.
There are a number of articles that have been written about the impact of Brexit on environmental compliance obligations and on its effect on human rights. In relation to human rights, the Charter of Fundamental Rights of the European Union will no longer apply.
The focus of this article is on the impact of the sustainability practices of business once the UK has left the EU and not to focus on the legislative impacts.
What about sustainability practices?
While complying with environmental laws is only one aspect of sustainable business practice, we should consider what is meant by ‘sustainability practices’. The terms ‘responsible business’, ‘corporate responsibility ‘or ‘corporate social responsibility’ and ‘environmental social governance’ are used by business and lawyers in various different contexts. Corporate sustainability is often framed as the triple bottom line that is based on an integrated view of environmental, social and environmental performance. All of these terms donate an approach adopted by business to ensure that its practices are responsible when considering its impacts on the environmental and human rights.
Companies that embrace sustainable business practices see sustainability as a key corporate priority2. Those businesses that have embraced sustainable business practices usually evidence this in their policies and processes. It is unlikely that companies that have embedded sustainability into their business practices will allow the uncertainty of Brexit to change this. At an Edie conference, Kellogg’s Europe’s senior director for sustainability said that Brexit has not affected the company’s internal sustainability plans. This approach is likely to be true of other companies leading this agenda. However, there may be push back by those businesses that have not embedded sustainability into the core of their operations.
The term ‘Corporate Social Responsibility (CSR) ‘ is used to denote an organisations impact on society, the environment and the economy.
Companies may refer to their policies addressing environmental and social impacts as CSR policies or as sustainability policies.
Implementing both Sustainability and CSR policies is often seen as challenge with a shortage of resources, lack of top management buy in and challenges with frequent changes in legislation. Where cost- savings have to be made sustainable practices are likely not to be prioritised. The uncertainty with Brexit may highlight these challenges.
Many reports state that Brexit will pose a real challenge for business that want to procure sustainability. However, this view does not account for those businesses that have already mapped their supply chains and have taken steps to ensure that their suppliers adhere to their ethical standards through contractual terms and by reference to codes of conduct and that they are likely to continue to source from these suppliers, subject to the impact of raised import duties.
There are many businesses currently that do not map or monitor their supply chains to ensure they are sustainable, so Brexit may have no impact on sustainability criteria. The failure to be able to resource products as a result of prohibitive import duties or finding employees from Europe due to immigration constraints are economic issues that could challenge the economic sustainability and resilience of a business and become crucial in ensuring continuity of supply, notwithstanding business sustainability criteria post Brexit.
It is, however, likely that business will be ‘re-examining their supply chains’ and move to source their products and raw materials more locally. Where imports are no longer subject to favourable EU block trading rules and companies have to revert to World Trade Organisation rules, there is also the threat of soaring costs which will threaten access to sustainable supply chains.
Threat to Green business sector
There are some key UK organisations that are moving money and low carbon production lines out of the UK. For example, Jaguar Land Rover is reducing tis production output on its Discovery Sport and Range Rover Evoque models.
There appears to be a reduction in investment in low carbon infrastructure according to E3G between 2016 and 2017 as a result of Brexit. The Government has however indicted that Brexit will not hamper its climate targets.
Extra funding will be needed to ensure that the low carbon transition post Brexit is ensured. These impacts, unless addressed will threaten sustainable practices in the low carbon infrastructure.
IEMA principles – can these help steer a course?
IEMA has published Brexit and Beyond: Environmental Principles to Guide a Sustainable Future. These principles were developed to provide a framework for the government’s approach to future policy and legislative developments. There are intended to set a policy framework that has global relevance on goals for environmental safeguarding.
The Principles set out Governance considerations on transparency, scrutiny and accountability which IEMA believes the Government should apply. It also outlines eight core environmental principles to underpin and strengthen the UK’s policy approach- including the Precautionary Principle, the Polluter Pays Principle. These principles are being incorporated into the Environment Bill. There is a lot of critique about how the principles are currently drafted in the Bill.
Martin Baxter, Chief Policy Advisor of IEMA says’ that the inclusion of the core principles in the bill have the potential to shape sustainable business practices long into the future. However, their application in policy-making by Ministers needs to be strengthened in the Bill for their full potential to be realised.”
And adopting a ‘wait and see’ approach to Brexit may leave organisations open to a number of risks. 3 ENEGIE’s Jamie Quin has highlighted that despite the risk of corporates adopting short term thinking in face of BREXIT, the demands of investors are likely to help big businesses maintain a long term approach to sustainability.
- SEE IEMA guide https://www.iema.net/sustainability-in-practice-managing-compliance/ for help with determining compliance obligations