The Government’s landmark Environment Bill and its latest net zero commitments will bring in a new era of environmental regulations that could revolutionise the way businesses manage their products and services.

In November 2020, Prime Minister, Boris Johnson, announced a £12 billion plan for a “green industrial revolution” that would set the path to achieving net zero by 2050 and create over 250,000 new jobs in the process.

The ten-point plan covers energy efficiency, greener transport, more renewables, and new innovative technologies, combined with further commitments to protect nature and strengthen biodiversity across the country. Environmental groups described the plan as a “notable step forward” in tackling the climate emergency, while businesses cautiously welcomed the plan, the investment it would bring and the new jobs, but questioned how it would work in practice and what new rules might be applied.

The ten-point plan is underpinned by two pieces of legislation: the amended Climate Change Act, which commits the UK to net zero, and the forthcoming Environment Bill which the Government says will stimulate new investments in green technology and innovative practices in waste and resource management, air and water quality, green transport and the natural environment. This article considers some of these ambitions, the rules that underpin them and how these are likely to impact on all business sectors.

Net zero

The UK’s first official recognition of an emerging climate crisis came with the introduction of the 2008 Climate Change Act that placed a duty on the Government for an 80% reduction in net UK greenhouse gas (GHG) emissions by 2050, based on 1990 emission levels. In 2019, the 80% target was increased to 100%, through an amendment order (2019 Order) making the UK the first major economy in the world to set out legally-binding ambitions for a net zero economy by 2050.

To back up those commitments, the 2008 Act also established a progressive carbon budget system, managed through the Committee on Climate Change (CCC), to ensure Parliament and the wider public can track progress and hold the Government of the day to account.

Businesses will have to comply with various climate-related obligations and legal requirements for the UK to achieve net zero. Installations in energy-intensive industries are already subject to the new UK Emissions Trading System which imposes limits on carbon dioxide and other GHGs. Other measures include the new Streamlined Energy and Carbon Reporting obligations, requiring most businesses across all sectors to report on their emissions and to draw up plans for emission reduction.

The UK’s track record so far has been impressive. The first two carbon budgets have been met with CO2 emissions cut by approximately 28% from 2008–2018. The third budget from 2018–22 is also likely to be met, largely because of a two-thirds fall in emissions from the power sector brought about by reducing fossil fuel use and increasing renewables over the last 20 years or so.

But on current trajectories, the CCC calculates the fourth and fifth budgets are likely to be missed, unless urgent action is taken. Achieving net zero is an enormous challenge, affecting how we do things across all industry sectors, all public services, all government department and wider society.

According to CCC’s 2020 report, the path to net-zero requires a full policy package covering every part of the economy by 2025.

Key government actions that are likely to affect all businesses

Transport

Road transport, which accounted for 24% of UK emissions in 2019, making it the highest emitting sector. Businesses will need to plan for the forthcoming ban on new petrol and diesel cars from 2030, accelerating the shift to zero emissions vehicles. A combination of electric and hydrogen-powered HGVs and related infrastructure will also replace diesel lorries in the near future and around 4000 new zero-emission buses will be introduced in the coming years. Also, as with European emissions trading scheme, aircraft operators will now need to comply with the UK ETS. The Government is also considering whether to include shipping in its UK ETS to further reduce transport pollution by 2050.

Industry

The CCC describes action on industrial emissions as “piecemeal and slow”. Options to reduce 21% of UK emissions include technologies that will enable heavy industry to switch from fossil fuels to electric or hydrogen power. Emissions from industrial installations and mobile plants under the Industrial Emissions Directive 2010, which replaced the former Integrated Pollution Prevention and Control regime, have now been implemented into UK law via the Environmental Permitting Regulations. Under the new Clean Air Strategy, the Government has also adopted legally binding international targets to reduce emissions of five of the most damaging air pollutants (fine particulate matter, ammonia, nitrogen oxides, sulphur dioxide, non-methane volatile organic compounds), with further proposals to cut public exposure to particulate matter pollution, as recommended by the World Health Organization.

Buildings

Buildings in both the commercial and domestic sectors should play a key role in the UK’s green recovery plan according to the CCC. The report stresses the importance of low-carbon, climate-resilient newbuilds, the benefits of heat pumps and heat networks, and green building “passports”, which provide detailed guidance on actions required to improve buildings efficiency. The Energy Efficiency (Private Rented Property) (England and Wales) Regulations set a minimum EPC rating of ‘E’ for private rented properties, making it unlawful for landlords to grant a new tenancy of commercial property with an EPC rating below this. This will be extended to include existing leases from 2023 and from 2027 all commercial rented buildings must have improved the building to an EPC ≥ C, From April 2030, all commercial rented buildings must have improved the building to an EPC ≥ B, or register a valid exemption.

Protecting the wider environment

While net zero emissions targets are the main headliner attracting most of the media attention, other aspects of government environment policy will also have an impact on businesses.

The Environment Bill returned to Parliament on 26 May for its Third Reading, following long delays because of the pandemic. This is the first significant Environment Bill in over 20 years and sets out a comprehensive legal framework for environmental improvement, which the government claims will; “leave the environment in a better state than that in which we inherited it”.

The Bill enshrines previous EU Environment Directives into UK law and sets out plans to improve air and water quality, increase recycling, reduce waste, updated laws on chemicals and improve resources efficiency.

There is greater protection for wildlife and the natural environment with more trees and enhanced green spaces. There will also be a new Office for Environment Protection (OEP), to ensure those responsible for meeting legal and regulatory requirements can be held to account. An interim OEP will be set up in July to provide independent oversight of the Government’s environmental progress and to accelerate the foundation of the full body.

Key principles in the Environment Bill

The continuation of the polluter pays principle.

Environmental protection should be integrated into policy-making principle.

Preventative action to avert environmental damage principle.

The precautionary principle: to avert risks of serious or irreversible harm to the environment.

Environmental damage should as a priority be rectified at source principle.

These principles have underpinned domestic law for many years and are a key part of international treaties and agreements that other nations have agreed to. Commenting on the principles, Environment Agency Chair, James Bevan added that rather than being a burden on industry, they can lead to innovation and the implementation of new technologies in industry sectors, such as hydrogen trials in the cement sector and heat exchangers in the intensive farming sector, hence more growth, and new jobs.

Key areas affecting businesses.

Air quality

The Bill introduces a duty to set a legally-binding target for fine particulate matter, which continues to be a major concern for human health. The Government will have new powers to enforce environmental standards for vehicles. There will also be a new framework for local action and collaboration on air pollution, and a simpler mechanism for local authorities to tackle smoke emissions.

Waste and resources

Local authorities will be required to deliver consistent recycling collections across England and operate weekly separate food waste collections, preventing food waste from going to landfill or being incinerated. Following the successful introduction of the plastic bag charge, the Government will introduce a deposit return scheme (DRS) on drinks containers and expand the use of charges on single-use plastics. A new tax will be applied to plastic packaging produced in, or imported into, the UK that does not contain at least 30% recycled plastic, which is likely to impact businesses across the supply chain.

Water

Safeguards will be put in place to ensure water resources are better managed in a changing climate and regions become more susceptible to prolonged periods of drought and storm surges. New measures to reduce sewage discharges from storm overflows will be put into law, placing a duty on water companies to publish data on storm overflow operation on an annual basis. For businesses, discharge to water or sewers is likely to include conditions such as monitoring the discharges that occur, as part of its environmental permitting regime

Consumer protection

Clearer Labelling will be introduced on certain products so consumers can easily identify whether products are recyclable or not. New consumer protection law guidance will be issued for all businesses making environmental claims about their products. Businesses making misleading claims or omissions about how environmentally friendly their products or services are could in future be subject to enforcement action.

Biodiversity Net Gain

The Bill includes a general duty to “enhance” biodiversity. Planners and developers in England will be required to demonstrate a 10% increase in biodiversity on or near future development sites. The Biodiversity Net Gain proposals also include the option for off-site compensation as a last resort or purchasing of biodiversity credits if biodiversity losses are unavoidable. This will be decided in accordance with Defra’s mitigation hierarchy, under which the minimum objective should be “no net loss” of biodiversity. Local nature recovery strategies (LNRS) will also be introduced, bringing together local businesses, farmers, and local communities to devise strategies to help restore and link up habitats so that species can thrive over wider areas.

Summary

The UK’s commitment to set a legally binding net zero target by 2050, combined with the principles and pledges set out on the draft Environment Bill will set a new benchmark for the way businesses operate and manage their products and services going forward.

Some of these changes are happening already. The UK is already halfway to meeting its legally binding targets. Others such as the Extended Producer Responsibility regulations which requires producers to pay the full cost of managing packaging once it becomes waste, are still out for consultation but could be introduced later this year. More ambitious plans, such as the phase out of diesel and petrol vehicles, tighter rules on energy efficient buildings and improvements to air and water quality will happen over time.

There will be more legislation to come. Change is inevitable. The challenge for businesses across all industry sectors is how quickly they can adapt to new working practices and capitalise on the emerging opportunities that the “green industrial revolution” offers.