'Green-tape': the next challenge for business

By Carolyn Jackson, Editor
Monday, 22 October, 2007

Legislation and regulation surrounding environmental issues has been increasing at a steady rate for years. Now with the emergence of climate change issues it is set to escalate further and impact all businesses. According to a study recently released by the NSW Business Chamber, the rise of the so-called green tape will be one of the major challenges facing Australian businesses over the next decade.

The study, 'Environmental law and small to medium enterprises in Australia', highlighted the following trends: environmental law in Australia is one of the fastest growing areas of law both in terms of scope and complexity; regulatory penalties are becoming more severe, and regulatory bodies and local councils are gaining greater power to monitor and prosecute businesses; the traditional regulatory focus on large businesses and industry is shifting to also cover smaller to medium-sized enterprises (SMEs).

SMEs in resource, energy and waste intensive industries will be at the greatest risk of increased costs of compliance in a tighter regulatory environment; NSW is the most prolific regulator with 68 Acts relating to environment passed since 1986, almost equal to the other states combined (84 Acts) and surpassing new Commonwealth legislation (19 Acts); the debate over climate change is a clear driver of such growth (taken on by COAG in 2006); local governments (across Australia) continue to impose stricter environmental conditions in their planning controls, which will impact SMEs; an emerging trend of 'vicarious liability' where the corporation is deemed to have breached an act through the actions of one of its directors or managers, and 'strict liability' where an offence can be imposed without proof of fault or intent is tightening the burdens on business.

Some examples of increasing green tape highlighted by the study included: environmental planning instruments (EPIs) like LEPs that can create a complex and confusing development process of overlapping requirements; and the beginning of extended producer responsibility where producers take greater responsibility for managing the environmental impact of their products throughout their life.

The disparate nature of environmental law across its many jurisdictions makes it difficult for small business to be aware of the environmental regulations impacting their business. The study recommended that SMEs should prepare for increased regulation in the use of energy so they are in a position to be competitive when an emissions trading scheme is introduced.

Kevin MacDonald, CEO of the NSW Business Chamber, said regulators and business need to be aware of the tectonic shifts occurring in the administration of regulation in Australia.

Australian businesses are dealing with five levels of intervention in environment regulation &mdash international law, national law, state law, local councils and various arms of the judiciary. It is no surprise that we are seeing the emergence of green tape as a real business issue.

Mr MacDonald said the record of governments in relation to green tape was very much at odds with recent work by all governments to streamline traditional areas of 'red tape'.

"Governments of all political backgrounds have made real progress in recent years in streamlining the traditional areas of 'red tape' without compromising the underlying purposes for which the regulation was developed."

"Reports like the Banks and IPART reports highlighted the importance of creating regulatory environments that had clarity of intent, consistency in objectives and could withstand a reasonable social and economic cost/benefit analysis. However, I question if the same rigour is being applied to areas of green tape."

"One of the great competitive advantages of Australia is its natural, clean environment &mdash and I am not saying we should take short cuts in any area of environmental conservation, protection and resource allocation. At the same time we cannot let our approach to green tape be ad hoc, inconsistent, costly and complex."

"The question up for debate is whether we are applying the same rigour to decisions relating to environmental issues. We have seen in the area of climate change government rushing to introduce changes often under the guise of being seen to 'do something' with those decisions impacting on everything from the establishment of new coal mines to the types of light bulbs used in family homes."

"The danger is that this uncoordinated and ill-considered approach across all levels of regulation will create major costs from Australian businesses and consumers with little real idea of the benefits provided by such regulation. I expect that in five to 10 years' time, governments will be setting up other inquiries trying to unravel costly and complex green tape systems."

Mr Macdonald said the green tape trends were very clear before the start of the climate change debate.

"The concern of business is that the climate change debate will result in double regulation &mdash with an emissions trading scheme seeking to produce a market-based solution in effect replicated by regulation on the day-to-day activities of business."

Mr MacDonald said the study represented an important debate starter about green tape.

"This study should not be seen as an attempt by business to unwind regulation, rather it should be seen for what it is -&mdash a warning to learn from the 'red tape' lessons of the past and ensure that the administration of green tape is done in the most efficient and streamlined way possible."

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