Germany’s environmental regulations are hurting some of its most ecological companies. Recent interviews showed that zero-waste shops have been negatively affected by Germany’s recycling rules, which require businesses to report and pay a fee on all packaging sold to customers. 1 However, for businesses producing the least waste, these regulations are a burden.

For these businesses, which try their best to reuse their packaging, this is a bureaucratic nightmare as the system targets recycling rather than preventing waste, and shop owners have no means of proving that they are actually reusing packaging. The one-size-fits-all approach of many governments and the will to regulate our way out of the climate crisis continue to end in situations just like this. It is important to rethink the regulatory approach to the green transition.

Regulations can often have unintended consequences. The EU’s regulations to reuse packaging could further strain water and power resources.2The same Packaging and Packaging Waste Regulation could lead to “an uptake of plastic packaging and consequently of plastic waste and pollution,” according to Eleni Despotou, Director General of the European Federation of Corrugated Board Manufacturers (FEFCO).

This is because the targets favour plastics by default at the cost of more eco-friendly materials like cardboard. Attempts to provide sweeping, ambitious regulatory frameworks often overlook alternative and more sustainable options or even hurt them, leaving little room for those trying to take the initiative to be as sustainable as possible.

The problem with seeing regulation as the go-to solution for complex issues like the green transition is that regulators often take a central planning approach which fails to take into consideration the multiplicity of possibilities, actors, and actions which occur in a market.

Austrian economist Friedrich Hayek wrote about this in his treatise, “The use of knowledge in the society”. Hayek explains why it is impossible to centrally plan an economy in this way. He makes a very important observation that can be applied to regulations and all attempts at top-bottom planning: the knowledge problem.

Hayek points out that it is impossible for anyone to gather all the information required for central planning (as there are many individuals engaged in many activities and the status quo is ever changing) or even to comprehend it in its entirety to make the best decisions for all the various aspects and parties involved. In the same way, while regulators may think of specific environmental policies, they cannot know what every business is doing now or will do in the future to be more sustainable and how their policies can affect them. A centrally planned green transition is doomed to fail.

Does that mean that there should be no regulations to promote better sustainability practices? No. But it means that we cannot see regulation as the primary solution. The urge to create a strict regulatory framework for every aspect of a business is in itself an obstacle to finding innovative solutions to these problems, as well as promoting ownership and investment in these solutions.

If we want companies to take more responsibility for the impact their activities have on the environment, it has to move beyond checking a regulatory checkbox after fulfilling the bare minimum requirements. Putting the green transition in a regulatory box means companies spend more time and resources on compliance, understanding, and implementing specific regulatory guidelines rather than investing in making their companies more sustainable for the long term.

We are living in a time where consumer awareness and action have more impact than ever on how businesses operate. The proof can be found in initiatives taken by local businesses to be as sustainable as possible, as well as the rise of eco-friendly businesses in various industries, from fashion4 to tourism.5

From reducing waste, to sourcing sustainably, reinventing supply chains and new business models (including innovations specifically designed to tackle climate change) and partnerships,6 there are multiple actors working towards protecting the environment in their own way. This is something that cannot come from having even the smartest regulators in Brussels, and overregulation could kill it, which would leave us all worse off.

This article was written by Ogechukwu Egwuatu. Ogechukwu is a writer and campaigner based in Paris. She is a policy fellow with Young Voices Europe.


1 Dwnews.
2 Unpacking EU packaging regulations.
3 Plastic economy: the unintended consequence of reuse targets.
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