COVID-19 and the Environmental Services Sector – The blockage or the antidote?

The novelty of COVID-19 is profoundly apparent; both in terms of its virology and the sweeping economic impacts - reorienting our relationship to government, to the outside world, even to each other. Shocks to supply chains and economic growth, both here and abroad, have some experts claiming this will be a far mightier storm than the Global Financial Crisis.

However, times of crisis have often resulted in times of opportunity. We are already seeing more sophisticated and flexible use of technology and the development of new working relationships. These fast-evolving decentralised working approaches are keeping us closer to our communities and providing greater flexibility to enjoy life’s other pleasures. 

Disruption is inevitable across almost every sector of the economy, and an ability to be agile and adopt to new ways of working will allow for industries to survive. Therefore, the question needs to be asked; does the environmental planning regulatory frameworks across our country allow for sufficient flexibility to deal with the rapid nature of these changes? 

Whilst, no one knows exactly what will come, we have provided some insights into how companies faced with unprecedented challenges can navigate their evolving environmental responsibilities with necessary agility to respond to a rapidly changing market.   

 

Opportunity in adversity

Before focusing on the Australian market, there is first value in looking at China’s post-pandemic economy as it begins to recover. The Boston Consulting Group (March 2020) has tracked that while some sectors, such as transportation, continue to be depressed most sectors are already recovering to pre-crisis levels. Some, like software and healthcare equipment have already exceeded their pre-crisis levels.

Diagram
[Source: Boston Consulting Group, March 2020]

As the Asian economy begins to recover, deal activity is reportedly on the increase, presenting opportunities for financial institutions. In an era where the very concept of risk is being redefined, environmental, health and safety due diligence can play a greater role than ever in highlighting these transaction risks and mitigation. 

The importance of facilitating continued infrastructure delivery

The NSW government is “committed to continuing the existing budgeted capital program” (Dominic Perrottet) SMH, March 23

Looking at Australia, a critical driver of economic growth recently has been the infrastructure wave, with NSW alone in the midst of a $90 bn infrastructure spend. Projects such as Western Harbour Tunnel / Beaches Link, Cross River Rail and Melbourne Metro have become increasingly important in maintaining momentum in a slowing economy and providing some immunity to the damaging impacts of COVID-19. Largely, the consensus has been for work to continue ‘business as usual’ within the parameters of the government and WHO health advice. As always, this minimisation of the disruption to the work force is great news for the economy. 

Securing planning approvals for major infrastructure projects in a timely manner is going to be more important than ever; to open the door for the capital expenditure that comes from the construction of these projects. The only lingering question is whether Government will be required to divert committed budgets for these nation building projects to fund other recently announced stimulus packages.

Essential services will continue

The sanitation sector was born from the need to help communities avoid disease. While we are all in uncharted waters the waste sector will continue to provide essential services, supporting every Australian and every business to carry on.   – Garth Lamb, WMAA Chair 

The Government is in talks with the waste industry and local authorities about ensuring collection and disposal services continue to operate across the country. The impact on waste generation will vary across segments. Commercial and industrial will slow, construction waste origination and destinations may shift as borders close, while residential waste surges as potential shifts in origination of construction waste volumes as the Queensland border closes, while residential waste surges as the workforce shifts to working from home and volumes of quarantine and clinical wastes also increase. 

But is the waste sector adaptive enough to respond to these rapid changes? Operating within a policy context already under a huge amount of pressure - following the introduction of China National Sword and ever increasing focus on enhancing recycling, such as via the Victorian government’s announcement to invest more than $300m to transform the recycling sector, will the huge upswing in household waste destined for landfill be acceptable? Are throughput limits within transfer stations and landfills adequate to cater for the waste profile which has been transformed overnight? Can those proposals that provide capacity to respond to increased demand in some segments, already well progressed in the planning system be fast tracked for approval?

In a sector impacted by slow planning approval timeframes in some jurisdictions and incredibly stringent environmental regulations, how can one eye remain focused on achieving circular economy and recycling outcomes while the other deals with the anticipated glut in household waste? Recently announced NSW Government emergency measures which aim to streamline normal development approvals that protect the health of the community during the pandemic present a silver lining. 

Maintaining stability across other key sectors

Other sectors, particularly those considered essential services, are likely to weather the COVID-19 storm with less disruption. Sectors such as Defence, Health or the resources sector should focus on preventing further environmental and health impacts, which will be key to allowing the rest of the economy to divert attention to the immediate challenges COVID-19 poses. Continuing to focus and tackle key industry issues, for example the PFAS issues much of the world has been facing, will allow the prevention of compounding issues for both the community and the environment.

Emerging market opportunities

The current pressures on global supply chains may well trigger a swing back to a greater degree of Nationalism. Already the reduced access to Chinese products has resulted in seeing emerging new manufacturing capacity within Australia, an increasingly important insurance policy against global supply chain disruption. Food security is also re-entering national rhetoric on a grand scale. Our ability to identify geographic areas with the planning frameworks capable of supporting these sectors, and acting swiftly to overcome regulatory challenges, will dictate Australia’s responsiveness to these opportunities. The role the environmental service sector can play in accelerating this response should not be underestimated. 

Building long term resilience and adapting future environmental services – the COVID-19 antidote

Australia has a unique environment, which has been protected by planning regulation for decades. This system is necessarily robust; however, with robustness comes effort and time. The Australian economy is on the precipice of major disruption, and time is not a luxury that we currently have. Fortunately, much of the environmental services sector, like Arcadis, are primed to tackle this challenge head on. The best environmental services firms will be agile and diverse in their response. Opportunities such as working on overseas projects or within countries that are not so deeply impacted by the virus or are already within recovery mode, provide a cushioning effect for the rest of the Australian economy. Global firms may be well placed to leverage this opportunity through the rapidly increasing flexibility of virtual workplaces. 

Digital solutions and eradication of artificial barriers to online working play well to the environmental services strengths. Moreover, understanding the environmental and planning regulatory framework, and having the skills and existing industry relationships to swiftly navigate it, will be essential to unblocking barriers to the rapid changes needed economy wide. 

A period of pain
While there will be opportunities, there will also be adversity in what have traditionally been core markets for provision of environmental and sustainability services. Real estate, aviation, tourism, retail and some industrial sectors are likely to be materially impacted, with only business-critical development projects, that provide an antidote to the current crisis, likely to proceed.

The COVID-19 pandemic will undoubtedly cause pain and suffering on a global scale. However, it will force us to reconsider who we are and what we value. In anticipating this post-crisis world and seizing opportunity in adversity, we need to consider several shaping forces: new learnings, new attitudes, new habits and new needs. The COVID-19 outbreak underscores the need for business and society to be resilient and prepared. There will be opportunity in adversity!

Bradley Searle

Business Leader – Environment & Waste Ask me a question
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