Why EU environmental policy adds value to UK business

Posted by Nick Molho on 20th April 2016
First published in: Economist Insights

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With two months to go ahead of the UK’s referendum on membership of the EU, the environment has been a much-overlooked topic in the debates to date. But with the publication on April 19th of a report from a UK parliamentary committee on the impact of EU environmental policy on the UK, now is a good time to look at the effect that these policies have on UK businesses.

EU environmental policy covers a breadth of areas from water quality and wildlife protection to policies tackling industrial pollution and climate change. Whilst addressing or preventing negative environmental impact is the principal objective of EU environmental policy, it also has some positive impacts on businesses.

EU policy has resulted in a set of common environmental and product standards that apply across the EU’s Single Market. This is important for UK businesses that are active across the Single Market in areas as varied as the food, retail, construction and information and communications technology (ICT) sectors because it means that their competitors have to abide by the same rules. This creates a more level playing field between European businesses and also reduces the costs and complexities associated with having to comply with different regulations in different member states.

Common standards

The common environmental and product standards that are core to EU environmental policy also create market opportunities. They send a clear signal to businesses that if they can innovate and develop a project or product that complies with these standards, then this gives them access to the Single Market and its customer base of around 500m citizens. In addition, EU standards play a key role in certifying the quality of a product to consumers, such as standards on the use of chemicals in food and clothing, the energy efficiency of white goods and the organic certification of food. This in turn increases consumers’ trust in markets and suppliers, which is good for business.

EU policy has been an important driver in improving environmental sustainability in particular markets. It can at times be difficult for national governments to address environmental issues because markets in sectors such as food, electronic products and clothing tend to stretch beyond national borders. Through the EU, businesses and national governments can tackle environmental issues at a regional level, which can often have a greater impact than national action and can also help to influence market behaviour beyond the EU. The EU Timber Regulations, for example focus on preventing wood that has been illegally sourced from entering the EU’s Single Market.

Putting words into action

There are, however, many improvements that need to be made to make EU policy more environmentally and economically effective. In particular, the EU must address the unequal implementation among member states of some of its key environmental laws such as the Birds and Habitats Directive and the EU Timber Regulations. The EU’s waste policy also needs to be modernised to make it easier for businesses to reuse valuable secondary materials that are currently too quickly categorised as “waste”.  Additionally, EU policymakers must ensure that new policies do not undermine other environmental policy objectives. 

Upcoming challenges

On balance however, the UK is likely to be in a better position to push for these improvements and influence the EU’s future environmental policy priorities by remaining in the EU. Upcoming challenges for the EU include improving the resource efficiency and competitiveness of its economy through the Circular Economy Package, strengthening its climate-change policy to reflect the commitments made at the Paris climate summit, pushing for more disclosure of environmental sustainability risks on stock markets and tackling sustainability concerns in other areas, such as the sourcing of soy, palm and rare earth materials.

If the UK leaves the EU, it will be important for UK businesses to remain plugged into many of its environmental standards and policies, especially if the UK wishes to continue accessing the Single Market. But in such a scenario, UK businesses, which are often at the forefront of environmental innovation from the manufacturing of ultra-low emission cars and energy-efficient ICT equipment to the sustainable sourcing of wood, would have little say on how these future standards and rules will develop. That would be a missed opportunity for UK plc and the environment.  

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