The risk of complying with environmental legislation
This blog post has been produced for the Greater Birmingham Chambers of Commerce as part of the 2023 Sustainable Business Series. The Sustainable Business Series seeks to help local firms understand the role that they play in progressing to net zero, as well as the opportunities and challenges that may arise from the net-zero transition. Through an expansive range of blogs, webinars, events and Q&A’s, the Sustainable Business Series offers useful information to businesses interested in adopting a sustainable business approach. Click here to register for Sustainable Business Series events and webinars.
Businesses are routinely told to comply with Government environmental regulation to protect employees, consumers and the planet. Not doing so could result in fines or damage to brand and reputation. However, complying with regulations can also impact a business’s profit margins and long-term viability.
Freeths ESG and Sustainability teams regularly advise businesses not only on ways to be more sustainable but what specific measures will benefit their commercial goals and strategy, such as keeping stakeholders (customers, employees, investors, banks and insurers etc) happy and saving money. Not all sustainability measures cost money; many will reduce business costs. One common example is encouraging employees to reduce their paper usage, which also saves trees! Over the past 5+ years, Freeths' has significantly reduced paper usage, saving all of those paper costs and reduced the number of printer/photo copiers by two thirds creating additional savings.
However, there are instances when being an early mover to comply with incoming legislation (that promotes the environment and “doing the right thing” by your business and by the planet) can lead to wasted costs. Here are two recent examples.
Scotland Deposit Return Scheme
Any retailer selling drinks in a single-use container in Scotland has been preparing for this scheme for years as it was intended to go live across Scotland on 16 August 2023. In a deposit return scheme (DRS) consumers who buy a drink in a single-use container, pay a deposit (in the Scotland scheme case 20 pence), which they get back when they return the empty bottle or can. Various businesses in the supply chain have been affected by the Scotland DRS and those with stores had to offer “return points” for consumers to return their drinks container and recoup their deposit. Then in early June, Scotland’s Minister for Green Skills, Circular Economy and Biodiversity announced that Scotland’s DRS would be delayed until at least October 2025 in order to “align with schemes in the rest of the UK” and that “as a result, it is likely elements of Scotland's scheme will need to be redesigned to be fully interoperable with the UK.”
The fall out for those retailers who’d quite rightly prepared for the 16 August 2023 go-live date is wasted costs that in some cases reach into the millions. Not only have they signed up to the Scheme Administrator and paid it contributions, many have entered into contracts for the purchase and maintenance of reverse vending machines which are now not needed for years. By the time the new go-live date comes into operation those particular reverse vending machines may not be fit for purpose if glass single-use containers are removed from the Scotland DRS. There is no compensation available and little that affected businesses can do.
Nutrient Credits
In late August, the Government surprised property developers and environmental lawyers (including Freeths Natural Capital team!) by announcing that “Over 100,000 homes held up due to defective EU laws will be unblocked between now and 2030” by removing “legacy EU laws on nutrient neutrality”. The Government would achieve this by inserting further amendments into the Levelling Up and Regeneration Bill (“LURB”) to amend the Conservation of Habitats and Species Regulations 2017 and other duties on sewage treatment undertakers regarding water quality standards. This has meant that property developers who had contracted to purchase nutrient credits (in order to offset the nutrient impacts on protected sites associated with the homes they propose to build) are now trying to work out whether despite the Government announcement, they actually still need those credits and, if they don’t, whether they can claim back from relevant landowners (who are creating the nutrient credits) deposits already paid which run into tens of thousands of pounds.
Where does this leave businesses?
If an environmental law is due to go-live or is already on the statute books, you obviously can’t ignore it - although, in relation to the change on nutrient credit law, the steer from the Government is to carry on as normal until the proposed amendments to LURB have been debated and passed into law.
Given that the multiple laws and guidance that surrounds businesses’ environment and sustainability linked obligations is complex and fast-moving, please contact Freeths if you need clarification on what your next steps should be. In particular, if you are affected by the changes on nutrient neutrality, contact Freeths Natural Capital Team.
Kirstin Roberts
Director, Freeths