State of the Environment Report 2021: key findings and takeaways for Australian businesses

The State of the Environment Report 2021 has finally been released and, as expected, it contains a dire prognosis of the Australian environment. In this Insight, we outline the key findings of the report and discuss some important takeaways. We also outline the Federal Government’s response to the report, including its ambition to undertake ‘once in a generation’ environmental law reform and potential implications for businesses.

The State of the Environment Report 2021 (the Report) was released on 19 July 2022 by the Federal Minister for the Environment and Water, Tanya Plibersek (the Minister), at her State of the Environment address at the National Press Club (Environment Address) in Canberra, ACT.  

The Report was prepared in response to the requirement in the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) for a report on the state of the Australian environment to be prepared every five years. Written by independent and expert authors, these reports outline the condition of the Australian environment, taking into account the pressures on it and the effectiveness of its management.  

The Report differs from previous reports in that for the first time it:

• considers and uses the United Nations’ Sustainable Development Goals (SDGs) as a framework for the assessment of human links with the environment in relation to wellbeing; and
  
  
• includes Indigenous authors and voices, an entire Indigenous-led theme and Indigenous-specific case studies, recognising the invaluable role that Indigenous Australians play in protecting Country and supporting a greater emphasis on engagement with the knowledge and cultural principles of Indigenous Australians to enhance environmental management and restoration.

Key findings

As expected, the Report presents a confronting picture of the overall outlook for the Australian environment and the potential impacts on the wellbeing of Australians.  

The key finding of the Report is that the overall state of Australia’s environment is poor and continues to deteriorate. This deterioration is due to a number of increasing pressures and changing environmental conditions including climate change, habitat loss (including through land clearing and urban expansion), invasive species, pollution and resource extraction. While these pressures are not new, their impacts are becoming more intense, amplifying the threats faced by the Australian environment.

Some other particularly sombre findings from the Report include: 

• more mammal species have become extinct in Australia than any other continent and Australia continues to have one of the highest rates of species decline among countries in the Organisation for Economic Co‑operation and Development;
  
  
• there are now more foreign terrestrial plant species in Australia than native species;
  
  
• at least 19 Australian ecosystems have been reported as showing signs of collapse or near collapse;
  
  
• 7.7 million hectares of habitat for terrestrial threatened species was cleared or substantially degraded between 2000 and 2017;
  
  
• Australia has the third highest amount of soil organic carbon loss in the world, behind China and the United States; and
  
  
• the first‑ever consecutive years of mass coral bleaching in the Great Barrier Reef occurred in 2016 and 2017, followed by a further bleaching event in 2020. This has resulted in widespread coral losses, both within and beyond the Great Barrier Reef.

The Report specifically assesses the changing condition of the natural environment across 12 areas: Air Quality, Antarctica, Biodiversity, Climate, Coasts, Extreme Events, Heritage, Indigenous, Inland Water, Land, Marine and Urban. Summaries of the assessments and key findings for each of these areas is easily accessible on the Report’s dedicated website.

Takeaways from the Report

While the Report is large and covers a wide range of topics, there are a number of important issues which businesses and government should be aware of and consider.   

These include: 

Increasing biodiversity loss	Some of the most confronting findings in the Report relate to the extent and speed of Australia’s biodiversity loss. As highlighted in our previous Insight, Top 5 reasons Australian corporations should act on biodiversity loss and management, this biodiversity loss should be a major concern for business for the reasons set out in that article. Accordingly, boards should actively start considering the risks increasing biodiversity loss poses to their business, and start looking for opportunities to demonstrate innovation and leadership in this space and proactively take action to minimise biodiversity loss. One way to do this is for business to become familiar with the Task Force on Nature-Related Financial Disclosures and start preparing for biodiversity loss risk disclosures (see our Insight Over the climate change horizon: corporations must prepare now for biodiversity loss risk disclosures for further information).
Reliance on natural capital	The Report recognises the environment as ‘natural capital’ and highlights the dependence our current and future economies have on ecosystem services. The Report’s findings are in line with the World Economic Forum’s 2020 Nature Risk Rising Report which found that US$ 44 trillion of economic value generation – over half the world’s total gross domestic product – is moderately or highly dependent on nature and its services.  Accordingly, the Report is a further reminder to actively consider the extent to which a business’ activities rely on natural capital and the importance of supporting and restoring such natural capital in order to minimise disturbance and risk to a business’s activities.
Opportunities for the private sector	While the Report is sombre reading, it also identifies opportunities for the private sector to assist with environmental protection and restoration.   One of the opportunities discussed in the Report is environmental markets. In this regard, there are a number of existing and emerging markets, including in relation to biodiversity, carbon, water and other natural capital. While there are some practical and integrity issues associated with these markets, well-designed and data informed environmental markets could offer opportunities for business and better environmental outcomes.  Another opportunity discussed in the Report for the private sector to be involved in environmental protection and restoration is through environmental, social and governance (ESG) investment. One particularly informative statistic highlighted by the Report was that 90% of millennials are looking to ESG investment instead of traditional investments. Accordingly, the Report supports the need for companies to take ESG issues seriously in order to remain competitive in the future. For further information on this, please refer to our guides on ESG for Directors and ESG for General Counsel. The Report also highlights how opportunities also exist for the private sector to develop innovative products and technologies to assist with conservation practice and environmental management. For example, Google’s AI technology has recently been combined with hundreds of sensor cameras to automatically identify species in areas impacted by bushfires.
Changes to environmental assessments and approvals under the EPBC Act	The Report highlights many of the issues which have been previously raised in Professor Graeme Samuel’s Final Report of the Independent Review of the EPBC Act, released in October 2020 (Samuel Report) in respect of environmental assessments and approvals under the EPBC Act. The Report similarly concludes that a major transformation in environmental planning, assessment and reporting in Australia is required. The Report identifies the main issues with the current EPBC Act process as follows:  each proposal is assessed individually and is not required to include an assessment of cumulative impacts. Accordingly, an EPBC Act assessment does not adequately consider or address broader and/or long-term impacts arising from a proposal; and there is a lack of consistency and transparency, and therefore a lack of confidence that the EPBC Act process is effective in protecting the environment according to the appropriate environmental standards. During her Environment Address, the Minister commented on some of these issues, including that the failure of the EPBC Act to adequately account for and assess cumulative impacts is one of the reasons for the current scale and rate of environmental decline.    The Minister also announced a full response to the Samuel Report will be provided by the end of 2022, along with ‘once in a generation’ environmental law reform. See further on this under the section below titled ‘What’s Next? Implications of Report and Policy Announcements’.
Climate change	Unsurprisingly, the Report makes clear that climate change increases the impacts of other pressures on the environment and immediate global action to reduce carbon emissions would result in reduced pressures and improved trajectories for most aspects of Australia’s environment. The Report will continue to motivate various parties (including governments, investors, employees, consumers and non-government organisations) to scrutinise corporations and their stances and responses on climate change. Accordingly, the legal, financial and reputational risks associated with failing to robustly engage with climate change are more significant than ever before.

The Report suggests that the current state of Australia’s environment is generally due to insufficient investment, inadequate strategies and lack of coordination to adequately address environmental pressures and match the scale of the challenge.  

The Report emphasises that much more needs to be done to stabilise and improve the state of the environment, including by making more resources and funding available for environmental management; improving the quantity, quality and consistency of environmental data; and also improving accountability, coordination between agencies and levels of government, Indigenous involvement and environmental skills.

While the Report’s prognosis is confronting, the Report also makes clear that this dire state of affairs can be turned around with appropriate management measures. In this regard, the Minister’s initial response to the Report is outlined below. 

What’s next? Implications of the Report and policy announcements

In response to the release of the Report, the Minister announced a number of commitments for “once in a generation” environmental law reform at the Environment Address, including:

• a full response by the end of 2022 to the Samuel Report. In this regard, the Minister implied that reforms to Australia’s environment laws would likely take the form of the recommendations made in the Samuel Report;
  
  
• a ‘30-30-30’ target to protect Australia’s national estate. That is, the target is for 30% of Australia’s land and 30% of Australia’s waters to be protected by 2030. The Minister also emphasised that this target is not solely concerned with expanding protected areas but also increasing the standard of protection;
  
  
• ensuring that the $40 million promised by the last Federal Government to help Indigenous communities in the Murray-Darling Basin, to invest in water for cultural and economic activities, is delivered; and
  
  
• specific stand-alone Indigenous cultural heritage legislation co-designed with First Nations Australians.  

In relation to the Murray-Darling Basin Plan, the Minister conceded that it would be “next to impossible” for the Commonwealth to deliver 450 gigalitres of water promised by the 2024 target, noting that only two gigalitres of water had been recovered toward the target. However, she emphasised that this was a serious area of reform and that the states would need to take further action to meet the commitments under the Murray-Darling Basin Plan.

The Minister also commented on project assessments and approvals under the EPBC Act, including the delays faced by proponents and duplication of assessment processes. She highlighted the need for these processes to be efficient, clear and timely, recognising that better environmental outcomes and faster, clearer decisions for project approvals were not mutually exclusive goals. 

The Minister also re-iterated some of the ALP’s pre-election commitments in relation to the environment in her Environment Address, including: 

• the establishment an independent environmental protection agency;
  
  
• an additional $224.5 million to establish a ‘Saving Native Species Program’ and to fund specific threatened species projects;
  
  
• the investment in reef preservation and restoration to almost $1.2 billion by 2030; and
  
  
• the doubling of the number of Indigenous Rangers and additional support for the management of Indigenous Protected Areas.

Conclusion

The Report makes clear that the state of Australia’s environment is dire. The main response from the Government is the proposal to enact ‘once in a generation’ environmental law reform, reflective of the changes recommended by the Samuel Report. More detail of the extent and nature of this reform is likely to emerge in the coming months. 

It is critical that businesses are preparing now for the implications of the Report, both in terms of the practical issues that nature dependent businesses will be confronted with in the coming years, as a consequence of the state of the environment, but also transitional risk as a consequence of significant impending reform.   

This reform will present opportunities for businesses investing in a sustainable future, but lead to more serious enforcement and operational constraints to those businesses not looking at their environmental footprint holistically and in a future focused manner, having regard to cumulative impacts over time.