In the United Kingdom, the protection of biodiversity is embedded in a range of legal instruments, including the recently enacted Environment Act 2021 (the Act). The provisions of the applicable legislation are likely to have a significant impact on businesses across the economy, including the construction and development industries.
The following provisions in the Act are expected to have an impact on businesses:
Forest Risk Commodities
The Act gives the Secretary of State authority to define "forest risk commodities," which will be introduced through secondary legislation. Businesses with a certain turnover threshold (yet to be defined) must not use forest risk commodities in their UK commercial activities unless they comply with relevant local laws. Even if usage is permitted, businesses must set up a due diligence system in relation to their supply chains and the specific commodity on which they will be required to report. The reporting duty is to ensure transparency, but this may have ramifications for businesses in balancing the company's best interests in maintaining profitable investments while ensuring Act compliance.
The Department for Environment, Food and Rural Affairs (DEFRA), the government department responsible for implementing the Act, has recently completed consultations on how businesses can comply with the legislation. The Government’s response is awaited.
The Act requires planning applications in England to demonstrate a 10% net increase in biodiversity. Making this a prerequisite for planning permission demonstrates the government’s emphasised importance on this criterion, and developers will now need to consider how to meet their biodiversity criteria without compromising on profitability on potential development projects. There has been consultation on defining the biodiversity metric and on biodiversity net gain regulations, nonetheless the government guidance is awaited.
Construction and Waste
The Act provides a framework for national authorities to impose responsibilities on businesses on how they manage waste from any products or material they use or produce. This framework necessitates secondary legislation as well as guidance on how authorities can put the Act's new powers into action. As legislative action on waste is in its early stages, self-regulation is important for businesses to assess profitability. Businesses should assess how to maintain profitability and ESG desirability while ensuring effective waste management systems. Similarly, in considering effective waste management systems, it is important to consider current environment trends; for example the recent introduction of the Plastic Packaging Tax, and how this may be incorporated into further secondary legislation regarding the Act.
In comparison to countries such as Bhutan, which has enshrined tangible biodiversity requirements in its constitution, the UK government is doing this via comprehensive legislation. The Act provides a good foundation for businesses to understand how environmental regulation can affect their business operations; however, until further legislative action is provided by the government, either through secondary legislation or regulation, businesses must be aware of and consider current commercial factors of importance, such as sustainability and plastic reduction, and incorporate these into their environmental policies to ensure compliance and maintain ESG desirability.
This article is part of Clyde & Co’s 3-month blog series ‘Biodiversity and Business Risk’. In this 3-month blog series, Clyde & Co explores the relationship between biodiversity and business risks. In the run up to the delayed UN Biodiversity Conference (COP15) in December 2022, these weekly blog posts dig deeper into themes highlighted in Clyde & Co’s Biodiversity liability and value chain risk report, published in March 2022. The importance of biodiversity on corporate liability and risk planning cannot be understated.
If you have any questions about the content of this article or any articles in the series, please contact Sarah Hill-Smith, Catriona Campbell, Vincent Fraser, or the authors of this post.