Eco => Economy. Economic implications of environmental protection measures

For a long time of human industrial progression environmental quality issue could be described as “tragedy of the commons”. This is the problem occurring when individuals tend to overconsume a particular resource to the extent that demand overwhelms supply and the resource becomes unavailable to some or all.

Until an issue of environmental conditions was not pivotal for life quality, public movements and relevant engineering decisions remained in the range of “crying ecology” and were not taken seriously at a large scale.

Gradually, public demand for environmental quality as a conditioned product is transforming into state and international policies, framing new reality for all.

Therefore, for business and citizens environmental protection is not the matter of compassion for birds and butterflies anymore. This is about money and economic development. And the more Ukraine is going to integrate into the global community, the clearer these incentives must be.

“Environmental problems, whether uncontrolled pollution or the unsustainable use of natural resources, result when resources are left outside of the market institutions of property rights, voluntary exchange, and the rule of law”.

The Washington Post, 2017

Benefits for business

By these days all pushes and pulls around “environmental protection” and “sustainable development” appealed to conscience, responsibility and only caused troubles and needles spendings. But since recently there are lots of talks about the profitability of this sphere. Which actual financial advantages my business can get from environmental protection measures?

Prevented financial losses

Less energy and resource consumption prevent money loss. This makes your business resilient to shifts in commodity prices and energy tariffs.
Maintaining legally allowable indicators of environmental pressure at your production facilities saves you from relevant state penalties.

Think ahead: resources tend to be more expensive.

“Shifting the burden of taxes away from employment and towards resource use and pollution will help to increase the efficiency of resource consumption and deal with unemployment”.

European Environment Agency, 2017

Economic gains

Due to the spread of “ethical consumption” on the markets of developed countries, selling goods produced with the application of environmentally sound practices gives the possibility to earn more on their price premiums.

“The volume of global organic market in 2015 reached 81.6 billion US dollars with the greatest sales in North America and Europe”.

Organic Monitor, 2017

Minimized financial risks

“Everything is connected to everything else” – Commoner’s environmental law says. Good conditions of environmental components and sound manufacturing practices are also crucial for the high quality of commercial products. This is sufficient for:

  • avoiding fines, confiscations, and withdrawals of the commercial product from the market;
  • preventing penalties from product supply disruptions.

With good environmental reputation, you will benefit from lasting and trustworthy relations with your partners, customers, local population and controlling bodies.

“Millions of eggs removed from European shelves over toxicity fears”.

The Guardian, 03.08.2017

Boost for investment attractiveness

Environmental protection practices will allow your company to enter stock market and attract foreign investors. This is because a growing number of stock exchanges make public commitments to advancing sustainability in their market.

 

“Market expectations are shifting quickly and we see more and more stock exchanges viewing sustainability reporting as necessary and inevitable”.

UNCTAD, 2016

Resilience to future policy developments

As part of international climate obligations, an in-country emission trade system (ETS) by greenhouse gases has to be introduced in Ukraine.

While implementing environmentally sound technical and managerial approaches, your enterprise will be prepared for the upcoming regulatory shifts and earn money on selling leftovers of emission quotas.

New business opportunities

Environmental protection is also about consumer preferences. Therefore, environmental criteria are progressively included in technical specification of public and corporate procurements.

By using advanced environmental practices and relevant environmental labeling, you will be able to stick with the requirements of “green procurement” and therefore enhance your possibilities on the market.

“IKEA sets a goal of 100% of its wood, paper and cardboard from more sustainable sources (FSC certified or recycled) by 2020.”

IKEA 2015 Sustainability Report

This makes sustainable production practices for its suppliers not voluntary, but mandatory.

Advantage for business development

International financial institutions – IFC, EBRD, EIB – require their borrowers to be compliant with environmental legislation and their internal environmental standards.

While following this requirement, you have greater access to funding, which is one of the major problems for Ukrainian business.

“The sustainability of our investments is a prerequisite as much as their bankability. This is why the 10 environmental and social standards apply to all EIB’s investment projects”

European Investment Bank

Benefits for the government

A state is a social contract, according to which people refuse part of their freedoms in exchange for protecting their rights. Article 50 of the Ukrainian Constitution says:

“Everyone has the right to an environment that is safe for life and health, and to compensation for damages inflicted through the violation of this right”.

State of an environment isn’t something given for granted, but also “a product” requiring appropriate maintenance. Therefore, it is a prerogative of state servants to adopt relevant strategies and policies to enable the implementation of citizens’ constitutional rights.

Instead of being a break for economic activities, proper environmental policies in place can become the basis for “green growth”: economic development, which ensures that natural assets continue to provide the resources and environmental services, on which the well-being relies. How can this be beneficial?

Moving towards a balanced budget

Reaching strategic goals in economic and social development

“Export strategy of Ukraine. Strategic trade development roadmap 2017-2021”, indicates tourism as one of the most prospective sectors having the potential to invigorate SME development and stimulate entrepreneurship. Without proper environmental quality, this claim will not go further.

Transition to a sustainable economy

Previous decades of inappropriate resource exploitation lead to their exhaustion globally. It is expected that subsequently their price will grow. Enhanced resource and energy efficiency rises resilience to potential future supply shortages and price volatility.Associated incentives for innovation and entrepreneurship will be favorable for transition to more efficient – innovation-driven – economy.

Strengthened national security

More efficient resource use, local renewable energy production prevents country’s dependence on import supplies and possible associated socio-political pressure and manipulation.

Strengthened economic cohesion

Emerging business opportunities in “green economy” will support the economic development of lagging Ukrainian regions and better social inclusion. This perfectly aligns with decentralization reform in Ukraine.

Improved trade balance → better macroeconomic indicators

  • import reduction through an enhanced material use and waste recycling, energy saving and local renewable energy production;
  • boosting exports (especially of eco-industries: the technique for renewable energy production, means for air and water treatment, waste recycling lines, organic agricultural products, etc.).

 Improved reputation and perception of public services

Environmental problems have no borders and are not an issue for a single separate country. Proper environmental policy in place will prevent possible international environmental disputes and give better prospects in international cooperation. This is especially relevant in the light of European integration of Ukraine.

Benefits for the population

Aren’t you worried about the fact, that businesses make profit at your expense? They take natural resources, belonging to you according to the Constitution, pollute air, water and generate waste. So that you have to pay with your comfort, health, and life longevity. In this regard, environmental protection measures can limit some of those losses.

Increased length and quality of life, avoided illnesses

Ukraine performs the worst in terms of human deaths because of air pollution: 120 out of 100,000 deaths were because of unsatisfactory quality of ambient air.

WHO global rating, 2016

Enhanced employment opportunities in the “green” sector

Adopted and upcoming environmental policies transform employment patterns: some professions disappear, while others just emerge.

“The transformation to a greener economy could generate 15 to 60 million additional jobs globally over the next two decades and lift tens of millions of workers out of poverty if the right policy mix is put in place”.

International Labor Organization (ILO), 2012

Greater protection from disasters

Since natural disasters cause life, health, and financial losses, proper environmental management will decrease those risks.

Poor people in developing countries are more dependent on agricultural and ecosystem-related income, more vulnerable to natural hazards and spikes in food prices, which climate change is likely to magnify.

World bank, 2016

Free access to high-quality local recreational resources

While facing unsatisfactory conditions of local recreational places, you have to spend additional costs to travel to those distant ones.

With the proper environmental policies and measures in place, you will exploit your constitutional right for natural resources and avoid those additional “travel costs”.

Author: Zoia Pavlenko, Ukrainian Environment Expert at CUTIS project