The emissions scandal: what does it mean for the transport sector?

Posted on: February 25th, 2016

In light of the recent emissions scandal, businesses, more than ever, need to be aware of not only their legal responsibilities but also the importance of their public image when it comes to environmental issues.

Businesses to lead the way

On Friday 8th January this year, London breached the pollution limits set by the European Union for the entirety of 2016 and the EU’s recent “European Aviation Environmental Report” predicts a 43% increase in NOx emissions within the next 20 years from aeroplanes. Both of these events put pressure on Westminster to tackle environmental issues; but with the Government constantly looking for cuts, (Defra recently halved its grant to English councils for tackling air pollution) it will look to shift the responsibility from the public sector budget to businesses to enact environmental change.

Quoted businesses are already expected to report their annual green house gas emissions in their directors’ report but, rather than further legal obstacles, it will be moral and social pressures that drive further change.

Fail to change, expect to fail

While both VW and Renault are facing hefty fines this is only one side of the damage caused by the emissions scandal; the larger issue is the damage to their public image. While the drop in VW’s share value and the lawsuits it’s facing from shareholders, may be seen as extreme examples, the backlash from failing to address environmental concerns can affect businesses in all sorts of ways.

Due diligence is a vital part of any corporate transaction; whether you’re selling, buying or seeking investment. It is important therefore that the answers given to enquiries are as favourable as possible. It is not uncommon to see questions about a businesses’ environmental policy beyond just the standard questions on commercial premises. Having the right answers to such inquiries could mean the difference between a deal that is successful and one that is abortive.

On the other side of the coin, it is important to take into account the bad will generated when public perception is that your business growth is jeopardising environmental policies. Awareness of sites for the construction of wind farms, nuclear power plants, solar farms and other cleaner energy initiatives is important and so is ensuring that the public approach toward them is positive. Donald Trump’s opposition to a wind farm facing his Scottish golf resort is the perfect example of a failure to deal with the impact of government environmental policies early on. Not only did a high profile court appeal fail but in the process damage was wrought on his reputation because he was going up against an important social issue.

Using the old to fund the new

With oil costs as low as they are, it is a perfect opportunity for increased profits to be fed back into R&D for the development of new technologies ready for when the prices inevitably rise again.

Getting ahead on the use of new technologies can make a business stand out and enhance its public image. Marks & Spencer’s aerodynamic lorries are now a common sight across the UK and EasyJet are trialling hydrogen hybrid planes, something that could become just as prevalent in the future.

Green policies for the transport sector, however, are about more than just environmentally friendly vehicles. New ways of storing energy, such as Tesla’s Powerpack, allow businesses to lower their energy usage within the office environment; solar technology allows for electricity production at source and can even make money for a business when excess is fed back to the National Grid; and the use of electronic archives to support paperless policies decreases office waste.

A green business can mean a stronger business

Green policies can help the bottom line – EasyJet predict that the use of hydrogen technology on their planes could save them $35million a year and a recent report on HS2 argues that capping its speeds could lead to a 23% energy saving.

More importantly, with a growing social consciousness of the need to tackle environmental issues, a green business can mean consumer and investor support even during difficult times. No where is this better evidenced than the continuing faith in Tesla: a company focused on an environmentally friendly future which recently announced $889million worth of losses and yet saw its share value spike.

At the end of it all, the transport sector is one that is going to have to adapt the most in order to deal with environmental issues. The production of emissions through transport, whether on land, in the air or at sea, is intrinsically tied to the industry, and as such, governmental and social pressures will come to bear in order to force change. New technologies will be an important part of this change but simpler changes, such as a businesses’ public-facing persona, are just as important. Getting ahead of the rest in developing new strategies going forward could mean a big difference between the success of a business and its demise.