The novelty of COVID-19 is profoundly apparent, both in terms of its virology and the sweeping economic impacts. The virus has already reoriented our relationship to government, to the outside world and 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 created opportunity. We are already seeing more sophisticated and flexible use of technology and the development of new working relationships. Now is a good time for businesses in the environmental services sector to consider the long-term impact of the COVID-19 crisis and the role they can play in the recovery of the economy.
Opportunity in adversity
Before focusing on the Australian market, we should look 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.
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 mitigating these transaction risks.
The importance of facilitating continued infrastructure delivery
Looking at Australia, a critical driver of economic growth recently has been the infrastructure wave, with NSW alone in the midst of a $90 billion 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.
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 government is in talks with the industry and local authorities about ensuring collection and disposal services continue to operate across the country. The impact on generation will vary across segments. Commercial and industrial disposal will slow and construction waste volumes may shift location as the Queensland border closes. At the same time residential waste will surge 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. There is already a great deal of policy pressure in the waste sector following the introduction of China’s ban on waste imports and the ever increasing focus on enhancing recycling, such as 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 one avenue.
At the more radical end of the spectrum the US Environmental Protection Authority recently announced a sweeping relaxation of environmental rules in response to the coronavirus pandemic. Some would argue that this is perhaps a step too far with some experts viewing it as an open license to pollute.
Emerging market opportunities
The current pressures on global supply chains may well trigger a swell of nationalism. The Commonwealth Government’s recent introduction of tough new foreign investment rules to protect Australian businesses whose assets have been devalued by the COVID-19 crisis is a case in point. Already the reduced access to Chinese products has seen new manufacturing capacity emerge in Australia – an increasingly important insurance policy against global supply chain disruption. Food security is also re-entering the national conversation.
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 in response to COVID-19
Australia has a unique environment, which has been protected by planning regulation for decades. This system is necessarily robust but this means it takes effort and time to navigate. The Australian economy has already been subject to major disruption with some pundits predicting it will take a decade to recover from the fall out, and time is not a luxury that we currently have.
Fortunately, the environmental services sector is 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 do 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.
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 ameliorate the current crisis likely to proceed.
The COVID-19 pandemic will undoubtably cause pain and suffering on a global scale but it will also 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.