Brexit: Now What?

Mike Hegarty

Britain has voted to leave the EU. The can’s open, and there are worms everywhere. There’s no precedent for this, and you’d be hard pressed to say that the Leave campaign helped to illuminate what happens next. At the time of writing, we don’t even know who the Prime Minister will be when we break ties with the EU, much less guess at what route they might take. But before it was a legal and political superpower, the European Union was an economic union. Therefore, we do know that the implications for business are significant indeed. What, then, are the implications of Brexit for the work that we do at Corporate Citizenship?

A new regulatory environment for British business is on its way. European law shapes the way our businesses behave; how they source materials, how they pay their workers, how they combat discrimination in their workplace, how they deal with harmful waste…the list goes on. But though there are a number of options for how Britain could proceed, it’s unlikely that any would lead to a regulatory bonfire.

The most straightforward post-Brexit model would be something resembling the status of Norway, which is outside the EU but within the European Economic Area (EEA). In this scenario, UK businesses would still have access to the single market, and would therefore still be bound by the vast majority of its environmental and labour laws. However, it would also pay into the budget and accept the free movement of people. Should this prove too unpalatable to the 52% of voters that voted to leave, it may be that we leave the EEA entirely and negotiate a Free Trade Agreement (FTA) similar to Canada’s. Even in this case, most businesses wouldn’t be able to wave goodbye to EU regulation anyway – any business wishing to sell goods in the EU would still be bound by the minimum EU product standards around health and safety, animal welfare, environment and so on – and that’s assuming the FTA didn’t include formal stipulations on these anyway.

So that’s the legal stuff. But whatever happens, it’s increasingly the case that leading companies go beyond compliance in environmental, social and governance matters. Many that we work with are seeking to establish themselves (or are already established as) leaders in these areas, and fully recognise the advantages it gives them. Stakeholder expectations aren’t really marked by borders, and neither are the ever-growing number of investors who regard sustainability as material to where they put their money. In short; the wider movement towards sustainable business isn’t going to be turned back by this.

However, economic uncertainty is certainly not good for CSR budgets, which unfortunately can be one of the first things to be cut in a downturn. Our sector shrank in the wake of the 2008 financial crash and, should predictions prove true, it could do so again. Although sustainability reaps benefits in the mid- to long-term, it requires effort and a strong will up front. In a difficult economic climate, these may be less forthcoming.

And although stakeholder expectation can drive a lot of good behaviour, strong laws are essential when high-profile, consumer-facing corporates are the exception and not the norm in a diverse economy such as Britain’s. If you are worried that a future UK government might not pursue environmental requirements, labour laws and human rights with the same zeal as the EU, then you are certainly not alone. It is estimated that we owe 80-90% of our environmental laws to the EU, and although it’s unlikely these laws will disappear entirely, they could reappear in a watered-down format.

Gloomy as this appears, we now need to dust ourselves off and focus on the opportunities. Should the UK repeal the laws that have shaped good business practice, companies and consumers alike have much to gain from pushing back, remaining ambitious and retaining high standards. The EU’s laws are not altruistic – they are about maintaining a level playing field for business and society. They are intended to promote healthy competition, just as they are intended to avoid the worst abuses of business. One would hope that an independent British parliament would continue to see the fundamental value of this. I am quietly confident that the British companies we work with – many of them globally recognised leaders in sustainability – will do too.

Comment (1)

  1. Cristina Thomas says:

    Mike, thank you for the above article, these are uncertain times for us all on our island, so many of us are feeling shipwrecked but, as you say, we must strive to remain ‘quietly confident’ that our leaders move this situation forward in a way that is beneficial and sustainable to us all.

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