By Reynard Loki — A new report by Sustainalytics, a sustainability research and analysis firm, suggests that Brexit could prompt British companies to slack off on green schemes, which could ultimately harm the environment. Two key areas in particular—recycling and pollution—could be subject to downgraded policy changes now that the U.K. will not be required to fulfill the obligations that come with being a member of the European Union, which it has belonged to since 1973.
The researchers examined three different issues related to environment, social and governance (ESG), three factors generally used to measure the sustainability and ethical impact of an investment in a company. “U.K. companies represent some of the world’s top ESG performers, and their strong ESG pedigree is due in no small part to the progressive policy environment in Brussels and London,” write the report’s authors, Doug Morrow and Madere Olivar.
In environment, they examined three issues: climate change, recycling and air pollution. In social, they looked at human capital, product quality standards and health and safety. Finally, in governance, they evaluated corporate governance, executive remuneration and intellectual property.
On seven of the nine issues, they concluded that probability of a post-Brexit policy change was “low or moderate over the short run, which should support the continuity of U.K. firms’ strong ESG performance.”
However, there were two key issues that raised eyebrows: recycling and air pollution. In these areas, Brexit could lead to policy changes that might reduce the pressure on companies and local governments to decrease pollution and increase recycling.
In December, the European Commission, the EU’s executive body, rolled out the “Circular Economy Package,” an ambitious new policy meant to stimulate job growth, increase market competitiveness and foster sustainable development. According to an EC press release:
The proposed actions will contribute to "closing the loop" of product lifecycles through greater recycling and reuse, and bring benefits for both the environment and the economy. The plans will extract the maximum value and use from all raw materials, products and waste, fostering energy savings and reducing greenhouse gas emissions. The proposals cover the full lifecycle: from production and consumption to waste management and the market for secondary raw materials.
More than €6 billion in funding has been set aside to aid the EU nations in the transition to the Circular Economy. However, the U.K. will likely not be seeing any of that money as it prepares to leave the EU.
In June 2015, Frans Timmermans, the first vice-president of the EC, vowed to take decisive action to establish a meaningful sustainability framework for the EU. "We will come up with a plan that bites, that has concrete measures, that really looks at the full circle of the circular economy," he said.
But on the day the Circular Economy strategy was unveiled, the World Wide Fund for Nature, a leading environmental nonprofit, slammed it, saying it fails on all of the aspects to which Timmermans had originally committed.
“We have been waiting for one year with the promise of a strong plan for a circular economy," said Geneviève Pons-Deladrière, director of WWF European Policy Office. "What we see today is disappointing. There are some good intentions, like the plans on innovation and research, but it is far too little and is not up to the challenge of reducing EU’s massive footprint. Binding targets on resource efficiency and measures on sustainable sourcing of raw materials are crucially needed to move Europe to a circular economy."
According to research obtained by EurActiv, the Circular Economy Package will create 110,000 fewer jobs in the United Kingdom, Germany, Poland and Italy than the scrapped bill it replaced.
The Sustainalytics researchers point out that when it comes to recycling, the U.K. “has expressed concern about EU policy direction,” noting that “there are indications that the Brexit could lead to a downgrade in U.K. recycling policy, targets and/or enforcement.” Specifically, Morrow and Olivar write, “The Cameron government has expressed concern over the proposed targets, which include a provision requiring 75 percent of packaging waste to be recycled by 2030, and some large recycling companies, including Suez, expect the Brexit will stall U.K. recycling policy.”
In 2014, Guardian's Eco Audit writer Karl Mathiesen noted "serious social and logistical barriers for [the U.K.'s] inner city boroughs to overcome" in order to meet the EU's new recycling target. Brexit releases the U.K. from having to achieve that goal.
“While we would not expect to see large U.K. corporates with advanced recycling programmes abandon their current initiatives,” write Morrow and Olivar, “a slowdown in the rollout of national recycling policies (and, perhaps more importantly, the enforcement of policies) could have negative knock-on effects for corporate recycling programs, particularly for smaller organizations.”
The separation from the Circular Economy plan could also lead to disincentivizing U.K. citizens from participating in community-based recycling programs that feed into EU-mandated targets. From 2000 to 2010, U.K. household recycling rates rose steadily. But over the past six years, the rates have remained flat. Today, the nation’s recycling rate lags behind half a dozen EU countries.
“Recycling rights in the U.K. trailed off in the last few years,” Morrow told the Huffington Post. “We wouldn’t be surprised if we found a relaxation of the recycling targets.”
Still, a 2014 study by the EU’s statistical agency Eurostat found that the U.K.’s efforts have remained effective, raising recycling rates to 46 percent, a few points ahead of the EU average of 42 percent. Meanwhile, several nations have simply ignored the EU targets and have continued to dump almost all of their municipal waste in landfills. The recycling rates for Greece, Croatia, Latvia, Slovakia and Malta, are all below 20 percent. Romania is the EU laggard, with a 1 percent recycling rate.
This inequity has made a few enemies of the Brussels mandates within the British Parliament. While the U.K. has been on pace to meet the EU recycling target, some politicians have expressed concern. During a U.K. Parliamentary meeting on March 7 about the EU's Action Plan for the Circular Economy, Conservative Party MP Maria Miller from Basingstoke said, “Many local authorities, such as mine in Hampshire and that of my Hon. Friend the Member for Portsmouth South, are looking for more certainty about the future of recycling.” She noted “the problems local authorities have with getting contracts to recycle Tetra [packaging] and other materials.”
Tory MP Douglas Carswell, a member of the official Vote Leave campaign, was particularly apprehensive about having to meet targets mandated by Brussels. “We, as a self-governing country, should be free to decide how much we recycle and in what way,” he said. “The figures from elsewhere in Europe are also instructive about how we deal with these things. … Every time we sign up to new regulations we create a rod for our own back because we have an army of officials to enforce them to the last comma.”
In addition to the concern over recycling, pollution is another other area where Brexit poses an environmental concern. Currently, the U.K. is subject to EU infraction proceedings covering ambient air pollution, a result of the nation's inability to comply with the Brussels' Ambient Air Quality Directive, which sets limits on the level of several airborne toxins that are a danger to environmental and public health, including sulphur dioxide, nitrogen dioxide, particulate matter and lead.
The infraction proceedings stem from the U.K.'s failure to develop a plan to reach EU-mandated nitrogen dioxide limits by 2015. Though the directive itself has been incorporated in U.K. law, Morrow and Olivar point out that “Brexit could allow the U.K. to repeal existing legislation and relax air quality standards.”
“The UK’s withdrawal from the EU could lead to a weakening of domestic standards,” they warn, “which could blunt U.K. firms’ incentives to develop programs in [recycling and pollution]." They added, “Though the U.K. has a tradition of strong corporate governance, the U.K. government’s resistance to the EU ESG Disclosure Directive could be a concern for investors as the U.K. negotiates its withdrawal from the EU.”
John O’Connell, director of Taxpayers’ Alliance, a British campaign for a low-tax society and an end to wasteful government spending, criticized the EU mandates, as well as the laggard nations not holding up their end of the deal. "Arbitrary targets become even more useless when no-one else holds up their end of the bargain," he said.
"[A]s Brexit shows, when people feel they do not control their lives or share in the fruits of globalization, they strike out," The Economist recently asserted. "The distant, baffling, overbearing EU makes an irresistible target."
In the U.K., resentment towards Brussels has been brewing, since at least the 1980s, when then-Prime Minister Margaret Thatcher insisted on—and eventually won—a rebate on the EU budget. The environmental mandates stipulated by the European Commission in recent years have served to deepen the anger in Whitehall. As Mathiesen reported in the Guardian in 2013, “Defra [Department for Environment, Food and Rural Affairs] minister Dan Rogerson wrote to waste management ‘stakeholders’ to tell them the government would ‘be stepping back in areas where businesses are better placed to act and there is no clear market failure.’ Essentially saying the imposition of targets was not part of the government's preferred approach.”
But beyond the specific and potentially harmful environmental policy or behavioral changes that may occur in the U.K. because of Brexit, there is another, possibly larger specter looming: Brexit’s potential domino effect. There is worry that the U.K.'s departure may lead to other national defections, and even a breakup of the EU altogether, which would leave EU environmental agreements and targets in shambles.
There is also another, more existentialist worry: Brexit could foster competition and suppress cooperation among nations, which could lead to several negative environmental outcomes. In the interests of individual domestic markets, for example, industrial production could intensify, overshadowing environmental stewardship and sustainability concerns. There would be little incentive, in the short term, for current environmental laggards, should they leave the EU, to establish their own meaningful sustainability targets.
Increased competition, as well as problems arising from having to negotiate numerous new trade deals and the swelling populist movement that led the Vote Leave faction, could usher the U.K. into rough financial waters, at least in the short term. "If the UK experiences financial difficulties, as well as further populist upheavals," write Morrow and Olivar, "both enforcement of regulations, particularly environmental ones, and government investment in ESG-related programmes and technologies may suffer in the longer term."
Christian Felber is the founder of The Economy for the Common Good, an Austrian organization advocating for an alternative economic model based on cooperation instead of profit and competition, and the author of Change Everything: Creating an Economy for the Common Good. He warns that Brexit is a worrisome move away from cooperation and toward competition, which will hurt the ability to control the environmental costs of economic activity. Nevertheless, he considers a more optimistic post-Brexit scenario as a real possibility as well. He told AlterNet:
In the current paradigm, it is likely that the U.K. government uses the exit of the EU to lower its domestic environmental regulations in order to gain classical competitiveness, although this is a boomerang in the longer term. Less likely, but also an option, is that a more progressive government tackles the reform of the current economic model and shifts it towards sustainability and the common good, overtaking even the EU.
On the other hand, it is likely that EU member states and sectors of the society draw this very lesson from the Brexit, and the EU changes its economic and trade policy towards deeper sustainability, social cohesion and democracy. Otherwise, the disintegration will continue.
A survey conducted in Germany found that 67 percent of its citizens would like "Gross National Happiness" to replace Gross Domestic Product (GDP) as the measure of the nation’s success. Such a "Common Good Product" would consider a wider range of well-being aspects, such as health, education, democratic participation, environmental and climate stability—or simply, "happiness." The French prime minister's “non” to TTIP, which views GDP as the highest measure of success, is a sign in this direction. The Brexit is also an opportunity for more ethical trade rules and an economy for the common good.
This article was originally published on AlterNet.
image: Rich Girard/Flickr CC