The Environment Act: What businesses need to know
After many delays and headaches, the Environment Act was finally given Royal Assent in November 2021 and was announced during the COP26 negotiations. The Act replaces EU environmental legislation and seeks to put nature at the heart of UK policy. Much is planned, but below are the main ways it affects business.
Protecting nature is to be at the heart of UK policy (image source: John-Mark Strange on Unsplash)
What is it?
November 2021 was an important month for the environment in the UK. The country hosted the COP26 negotiations, which were highly anticipated following multiple postponements, and the Environment Act achieved Royal Assent.
The Act focuses on improving air and water quality, restoring biodiversity and reducing waste and will be backed by four legally binding targets. These targets will be defined and set by 31 October 2022 and will be established for a minimum of 15 years.
The government will publish an environmental improvement plan (EIP) that will set interim, non-binding targets for each five-year period. Annual reports will then be submitted to Parliament to review the progress of the EIP. Certain areas are exempt from the EIP, including the armed forces and the Treasury.
Potentially, one of the most critical elements of the new Act is the establishment of an Office for Environmental Protection (OEP). This body will be an independent, non-departmental body, set up to oversee the progress of the EIP. It will replace the European Commission and will enforce environmental law. Any claims of breaches of the law by public authorities will be investigated by the OEP.
There are a number of key areas the Act focuses on that are relevant to businesses. We have outlined these and their impacts below.
The Environment Act contains the first legally binding commitment to stop species decline by 2030. It requires all new developments to show a 10% increase in biodiversity. Thirty-year biodiversity net gain plans will need to be submitted alongside planning applications and will be calculated using the Defra biodiversity metric. The implementation of biodiversity net gain will be overseen by local authorities in the Responsible Body role and will use conservation covenants to enact local land change for biodiversity improvements.
Biodiversity net gain is a significant opportunity to promote and enhance biodiversity in the UK. Alongside an increase in the variety of species, it can deliver a range of other natural capital benefits, including flood prevention, carbon sequestration and increased access to the countryside.
The legal requirement for biodiversity net gain will primarily affect construction and development businesses but will also be a consideration for any business looking to build a new office or facility. The biodiversity net gain requirement is a good reminder that there are implications for the footprints our businesses have and can prompt a wider review of corporate biodiversity impacts. This regulation also establishes a new market to fund the creation of habitats, which will drive innovation and growth in the wildlife and environmental sector and will help with the delivery of quality offsets for both biodiversity and carbon.
The mitigation hierarchy values the avoidance of biodiversity loss first, followed by minimisation and offsetting (image source: Theodoros Fragkos on Unsplash)
Many products sold in the UK are based on commodities that are associated with large-scale deforestation. Known as forest-risk commodities, these include products such as beef, leather, coffee, cocoa, soy, palm oil and paper. The Environment Act will introduce a requirement for large companies to exercise due diligence regarding forest risk commodities in their supply chains. This is intended to reduce the proportion of illegal deforestation around the globe by ensuring that all products are harvested in line with local laws. Today, one third of tropical deforestation worldwide is classified as legal under local laws, so this isn’t a panacea, but it will help to drive more sustainable behaviour.
As business supply chains can often be long and complex, there will be a requirement for businesses to understand much better where their raw materials are coming from. Once the full supply chain is established, businesses can review the sources of forest commodities to confirm their legality and complete risk assessments for future procurement processes.
The Environment Act covers legislation that relates to both water abstraction and pollution. For water abstraction, the act outlines that from 2028, the Environment Agency will be able to revoke or change water abstraction licences without providing compensation. This is intended to prevent environmental harm from the over-abstraction of water during times of low water availability.
In 2020, only 14% of rivers in the UK met the definition of Good Ecological Status under the Water Framework Directive. To combat pollution issues and the declining water quality in UK rivers, water companies will be required to publish real-time information on the operation and use of storm overflows. The Environment Act makes drainage and sewerage management a statutory duty of water companies in the UK to improve their responses during adverse weather conditions. In addition, a water quality target will be announced soon, after increasing concerns about pollution from agriculture, wastewater and old metal mines.
These elements of the Environment Act will primarily impact the water sector that holds responsibility for clean water supply and the safe removal of wastewater. The legislation also links in closely with the current targets set each asset management plan (AMP) period cycle by OFWAT and the Environment Agency. In addition to water companies, there will be key industries such as agriculture that will need to enact changes in practices if the pollution targets are to be met.
The Act establishes the requirement for the government to produce two legally binding targets for air quality by the end of 2022 that will address the annual average level of PM2.5. This is any particle in the air (other than a gas) smaller than 2.5 micrometres in diameter. These particles are small enough to enter lungs and are of concern as they harm the human respiratory system and can have environmental effects by acidifying water sources. Businesses will need to be aware of their contribution to PM2.5 and start to make plans to reduce their impact.
Vehicle manufacturers and engineering companies will be specifically impacted and will need to ensure cars and other polluting machinery meet strict environmental standards over the coming years. This will be supported by the industry-wide transition to electric vehicles, but with the sale of petrol and diesel vehicles still allowed for at least eight more years, improvements to these vehicles will continue to be required. Other industries that produce particles, such as from incinerators or factories, will also need to consider their impact and how to reduce potentially harmful emissions.
The Act will introduce extended producer responsibility, which requires manufacturers to provide disposal costs for their products. This will force businesses to redesign their products to be more easily recyclable, more durable or repairable.
A deposit return scheme will be introduced for drinks containers, including plastic bottles, glass bottles and aluminium cans. Manufacturers will need to label their products to show that they are covered by the scheme.
This aim is to collect 90% of all drink containers using the deposit return scheme (image source: Lacey Williams on Unsplash)
The Act will also establish a forthcoming ban on single-use plastic items, such as polystyrene cups. This comes after the success of the single-use plastic bag charge that resulted in an 80% reduction in their usage. Businesses will need to transition to using more sustainable packaging.
What’s the next move?
Over the next few years, the government will introduce four legally binding targets for air quality, biodiversity, water and waste reduction. Each of these targets will last for a minimum of 15 years, with secondary legislation to be released in the next few years. The wide-ranging scope of the Environment Act means it will be imperative for all UK businesses to anticipate forthcoming changes and to keep up to date on new legislation.
To stay ahead of the curve, businesses should take action to perform environmental due diligence or supply chain assessments to avoid large fines or reputational damage. The new legislation also provides opportunities for new markets and consumer products to emerge.
Nature Positive specialises in understanding a business’s dependence on nature and enacting sustainable business practices. Utilising our knowledge and experience, we can support you and your business to comply with changing environmental legislation. Please visit our services page to find out more.
Earlier this month, Nature Positive Director Dr Tim Hounsome gave a 45-minute webinar about the Environment Act.
MISSED THE WEBINAR? WATCH AGAIN BELOW.
Nature Positive article authors: Luka Brown & Katherine Risk
*Banner photo by Nick Fewings on Unsplash