Squire Patton Boggs
This blog post was produced for inclusion in the Birmingham Economic Review for 2020.
The annual Birmingham Economic Review is produced by the University of Birmingham’s City-REDI and the Greater Birmingham Chambers of Commerce, with contributions from the West Midlands Growth Company. It is an in-depth exploration of the economy of England’s second city and a high-quality resource for informing research, policy and investment decisions.
This post is featured in Chapter 4 of the Birmingham Economic Review for 2020, on Connecting Communities: What Next for the Region’s Infrastructure?
Click here to read the Review.
2020 has seen unprecedented disruption from the global coronavirus disease 2019 (COVID-19) pandemic, the exit of the UK from the European Union, and an even stronger spotlight on sustainability and climate change. There are widespread calls, from businesses as well as citizens and NGOs, to build back better as we emerge from the pandemic and associated lockdowns. These calls are that the post-COVID-19 economic recovery should be a green one and promote the changes needed in order to achieve sustainability and decarbonisation goals.
2021 will be a significant year in climate policy, with the delayed COP26 talks taking place in the UK towards the end of the year. The run-up to COP26 is being framed by the UN’s Race to Zero campaign, which will encourage all stakeholders, including businesses, to increase their ambitions and climate goals in order to meet the aims of the Paris Agreement.
There has been much discussion about the significant effects that the global economic and travel restrictions have had on air pollution levels, notably nitrogen dioxide (NO2). Areas affected by the virus showed strong decreases in NO2, primarily because of reductions in transport. As we start to unlock the economy, there remain concerns about social distancing on public transport. Without wider adjustments in transport policy, this is bound to result in journeys by car that would have previously been made on public transport. So while the pandemic may lead, in the longer term, to increases in home working and less commuting overall, there are still grave concerns about the impact that increased private car use could have on air quality. The government has committed a £2 billion investment into cycling and walking routes, and businesses can build on this policy direction to incentivise staff to cycle to work, vary their commuting times or use technology to work from home more regularly.
A number of major cities that were planning to introduce clean air zones (CAZ) in 2020, including Birmingham, have delayed their CAZ due to the virus crisis and its profound economic effect on their cities. These schemes are likely to be delayed until well into 2021, if not 2022. One unintended consequence of the virus, in delaying the introduction of CAZ, may be a slower improvement in air pollution levels in our large cities, putting aside the very immediate but temporary effect that major transport restrictions have had on air quality.
The pandemic has also cast a spotlight on our interconnectedness with the planet. Global markets and supply chains have proved vulnerable to environmental and health risks, and sustainability in all its guises will need to be an essential feature of the recovery. Returning to “business as usual” will not be enough to address the challenges of the future. The forced pause and changes caused by COVID-19 have, however, presented an opportunity to reshape a better future. For example, the pandemic has led to some changes in consumer habits, particularly in relation to food shopping and consumption during the lockdown. These changes, and the impact they have had on things like food waste, can help us to reflect on the most sustainable and resource-efficient ways to use resources, and reduce waste.
Of course, the principles of resource efficiency and sustainability are much broader than food and apply across all aspects of our economy. Many policies and regulatory tools are developing to help us shift to a more circular economy in all sectors. For example, from April 2022, the UK government is proposing to introduce a new tax on plastic packaging manufactured in or imported into the UK containing less than 30% recycled plastic. Businesses that produce packaging or rely on plastic packaging for their goods need to consider the recycled content of their current plastic packaging.
Policymakers across government have been clear that they intend to leverage the recovery from this crisis to accelerate a transformation in clean energy infrastructure and technologies, and will not allow government funding support packages to fuel a greater climate crisis. The demand for sustainable solutions is only likely to increase and companies that are able to meet this demand will not only attract investment, but also benefit from growth in the long term.
Some businesses may think that sustainability is not necessarily relevant to them. However, consumer capitalism is on the rise, and social media campaigns can quickly influence and galvanise public opinion. From Extinction Rebellion and Greta Thunberg, to exposing inequalities within a supply chain and greenwashing, these are all significant reputational risks that require robust governance and transparency.
The appetite to build back better has brought issues of environmental, social and governance (ESG) firmly onto the corporate agenda. ESG-conscious companies with sound governance and solid relationships with their suppliers, employees and stakeholders have shown greater resilience and outperformed during this period of intense volatility. In a post-COVID-19 world, we are likely to see an expansion of investment in businesses that consider the long-term interests of employees, suppliers and wider society. The call for greater corporate transparency on ESG issues will only amplify as ESG factors prove themselves not just to be non-financial considerations, but also material drivers of financial performance and business resilience.
Squire Patton Boggs