Four sustainability regulations to watch for 2020

Sancroft Team
By Sancroft Team

By Michael Bateson, former Senior Analyst at Sancroft.

One of the principal challenges for any business which wants to improve their sustainability performance is the sheer volume of consultations, proposed policy change and regulation in the pipeline at any given time. This year is no different and will see an important number of changes at UK and EU level which will have an important impact on the planning and operation of many businesses. Here is our round up of what expect in the course of 2020.

1          New rules for dealing with plastics and packaging waste

While new rules banning certain single-use plastic items like plastic straws, cotton buds and drinks stirrers are bound to grab the headlines in April when they come into force, the bigger issue for business to watch for this year are the consultations on changing how the UK deals with plastic and packaging waste.

Since last summer, Defra and HM Treasury have been synthesising responses to four consultations on reforming Packaging Producer Responsibility regulations, a Plastics Tax, a potential Deposit Return Scheme, and consistency in collection of waste materials across UK authorities.

Two key things to look out for are:

  • How the plastics tax will be structured – will a 30% threshold for recycled content be set across the board, or will the government adopt a tiered system that rewards good behaviour and punishes the bad?
  • What governance model will be adopted under Extended Producer Responsibility (EPR) – a huge amount of our work and industry discussion has focused on how the new system will be managed. How will fees be set? Who has ultimate oversight of the system? And who is obligated to pay into it?

The answers to both of these questions will have a significant impact on the operations and profitability of any organisation which produces or uses plastic.

2        Waste Electronics and Electrical Equipment

The waste debate is not only contained to plastics and packaging. Another area under scrutiny is waste electronics and electrical equipment (WEEE). This is partly down to the sheer volume of it: over half a million tonnes of waste electronics is collected in the UK alone each year, and that doesn’t include the equipment hoarded in drawers and cupboards.  It is also due to the nature of the waste, which contains rare-earth metals and materials.

The amount of precious materials like lithium and cobalt in an individual device may be small, but together it all adds up to a massive total. With worries over virgin source of rare-Earth metals running out – never mind it being expensive and complicated to mine these anyway – there is pressure to rectify the situation.

In 2018, amendments were made to the UK’s Waste Electrical and Electronic Regulations regarding Producer Compliance Schemes (PCS) and reporting on quantities of WEEE sent for reuse was introduced. This was followed in 2019 by refinements to the way such waste is classified (the ‘open scope principle’) and Defra’s consultation on reforming the PCS Balancing System.

What we can expect to see in 2020 is further work on redesigning the WEEE waste system. The government will continue to seek views from industry on compliance, and will publish further consultations on both WEEE and batteries that focus on increased collections, sustainable design and alignment between the two regimes.

3          The European Green Deal and Climate Law

The European Green Deal announced at the recent UN Climate Change Conference laid out an ambitious package of measures to help steer the EU to being climate-neutral by 2050.  It will focus on cutting emissions, investing in technology and protecting the environment.

In March, the European Commission will write this into law, establishing measures and targets to guide EU member states towards delivering net-zero emissions within that timescale.

EC President Ursula von der Leyen has outlined her ambition for Europe to be the first carbon neutral continent while delivering on the goals set out in the Paris Agreement – “Europe’s man on the moon moment”.

Some countries, including the Czech Republic and Poland, have outlined their opposition to the target, saying they need further assistance in evolving their energy systems in order to deliver on targets. As a result, the EC is looking to create a “just transition fund” to enable these countries to change.

Despite the UK’s departure from the European Union, the Government has previously committed to at least matching the EU in terms of environmental policy and action, so we must assume that the UK will follow the same course as member states and the subsequent laws that are passed.

4          Climate stress tests for banks and insurers

The Bank of England has put forward proposals to introduce a mandatory, uniform climate risk test for major banks and insurers. The move comes as part of BoE Governor Mark Carney’s efforts to transform the financial services industry in the UK into one that takes climate change and sustainability seriously, and uses its influence to catalyse positive change.

The tests, which Carney has said should be carried out over 2020 and early 2021, would evaluate – against three different environmental scenarios – how effectively members of the industry are managing ‘transition’ and ‘physical’ risks associated with climate change, as future events such as drought, flooding and fires will test the resilience of global assets.

Results would be published in the second half of 2021 alongside the BoE’s standard annual stress tests. The UK’s green finance sector has welcomed the move, saying that it will improve investor knowledge and enable comparability in investment decision making.

Carney is also one of the driving forces behind the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) reporting framework, which encourages such institutions to undertake and report their own analysis. He has also been selected by PM Boris Johnson as his finance advisor for COP26, which is being held in Glasgow in November 2020, so we can expect to see the role of the financial sector as a key discussion point in these talks.