Impact of ‘GreenLib’ Wave on European business interests

Impact of ‘GreenLib’ Wave on European business interests

The May elections resulted in a significant change to the make-up of the European Parliament. They reflect a fundamental shift in power politics throughout the European Union member states.  

The substantial gains of the Green and Liberal Democratic parties will open the door to new climate change legislation at the EU and national levels. It will foster clean and green tech innovation and likely lead to more EU institutional support to start-ups and small and medium enterprises. However, the election results present a real political risk to firms that may have to adjust quickly to rapid changes in the EU business environment from this ‘GreenLib’ wave.

The election results reflect the recent shift in voter priorities – in most countries, most notably Germany, many are saying that climate change is the most important election issue. The Greens’ vow to be dedicated to improving European energy policies and voter impatience with a lack of progress on combating climate change boosted their election results. The Greens jumped up 25 seats to 75 and the Liberals Democrats are up almost 40 to 139 seats in the European Parliament. At the same time, major centre left and right parties suffered substantial loses that underscore voter interest in a change to the status quo.  Even voter turnout (over 50% for the first time in 20 years, and especially high among younger voters) reflect a desire for a new direction in the political process, with both the GreenLib wave and the populist push pulling votes away from the established parties.

How the GreenLib wave may impact business interests

Neither the Green Party nor the Liberal Democratic faction can be considered ‘business unfriendly’. Yet, the changes that they will promote represent a political risk to foreign companies that are unprepared to compete in a changing playing field. This may lead to accusations of increasing non-tariff trade barriers that will exacerbate the U.S.-EU trade dispute simmering since the beginning of President Trump’s administration.

Although the European Parliament does not initiate new laws, they most certainly have a strong role in crafting new directives and regulations. The GreenLib wave in Europe will impact what laws are raised for consideration. Additionally, they are in the position of kingmakers when it comes to the selection of the next set of EU Commissioners.  Both parties are likely to have leading candidates to take influential positions on the Commission. ALDE member Margrethe Vestager, the former competition Commissioner, has even been mentioned as a compromise candidate for outgoing Commission President, Jean Claude Juncker.

This political shift will impact companies that operate in the EU or send goods into the common market.  New laws at the EU level (as well as a member state) will alter the business environment in potentially profound ways as the concern over the environment takes centre stage.

Environmental rules impact on Non-EU countries

The U.S. was criticized by European leaders for pulling out of the Paris Climate Agreement. Yet the U.S. has actually outperformed the EU in reducing greenhouse gas emissions over the last few years. Voters’ frustration with the EU’s lack of real action in this area means that a Green-driven trade agenda will likely ramp up environmental concerns and regulations in the European market. Some of it will be a challenge to all competitors in a given product. Example, such as a requirement for substantially better auto emissions, which will require improved technology from all automobile manufacturers. For the United States, which under the Trump administration seemed keen to protect the sales of U.S automobile manufacturers over the likes of BMW and Mercedes, this shift will likely further damage exports into the EU and exacerbate the swift decline of global car sales.

However, much of the anticipated forthcoming environmental regulations will preference European producers. These include the growingly stringent regulations for biological food products (GMO) and differing product safety and marking requirements. These were already a point of dispute between the U.S. and the EU. While the GreenLib wave does not give them enough to dictate terms on trade, it is likely that they will use their new influence to push some agendas. This includes ensuring that issues such as labour fairness, phytosanitary restrictions and more stringent environmental standards are part of future negotiations.

Energy policy is priority number one

At the EU level, the Greens have set the year 2050 as their goal for entirely eliminating the production of greenhouse gases in Europe. At the national level, even more ambitious goals are being set, as Finland committed to being carbon neutral by 2035.  The Greens’ popularity in the recent elections has dragged other parties, including ALDE and traditional centrist parties such as Manfred Weber’s European People’s Party (EPP) to commit to substantially stronger commitments towards this goal.  This key plank will drive European legislation at the EU and national levels.

This is especially true in countries such as Germany. Here the Green party (Die Grünen) stunned many by not only becoming the second largest vote-getter in the European elections in Germany but are now actually polling as the most popular party in the country, ahead of Angela Merkel / Annegret Kramp-Karrenbauer’s Christian Democratic Union (CDU).

The increasing scrutiny of everything from cruise ship emissions to global warming from IT server farms will dramatically impact business practices in Europe.  The political risk that this rather abrupt acceleration in climate change policy brings will be most felt by the energy sector as sources such as coal will likely be entirely eliminated on a much faster time frame than projected earlier.  Renewables have shot up in Germany, but so has their reliance on oil imports to replace coal energy.  Electric cars will likely receive a boost in government support, and sales in cars such as Tesla, the Nissan Leaf and Renault’s Zoe, that were already surging in 2018, should dominate the market entirely in a few years.

Support for innovative companies should surge

Government support to startups is a key economic goal of ALDE, the European Alliance of Liberals and Democrats. With enthusiastic backing for things such as EU-wide crowdfunding initiatives and facilitating innovation in the EU, ALDE is a natural partner in supporting Cleantech and Greentech efforts. Paired with previous calls to create European Champions to compete in high-tech with the U.S. and China, this should open the door for programs that will encourage, if not outright fund, the development of companies tackling everything from plastics clean-up to environmentally-sustainable packaging.  As with the recent Single-Use Plastics Directive,  it is highly likely that forthcoming laws will force importers and producers to improve packaging and narrow their environmental footprint as they sell into the EU. This may close the door for certain companies that rely on Styrofoam and narrow margins to sell in Europe but will provide new opportunities for firms that can remain agile through more environmentally-friendly (and locally sourced) products.

Out with the old, in with the new

Observers who were concerned that voter apathy and Euroscepticism, especially in Central and Eastern Europe, would lead to populist gains in the EU parliamentary elections were not entirely wrong. Eurosceptic parties did raise their profile and will have a greater influence on the political process. However, the GreenLib wave captured large swaths of younger voters. They remain committed to the ideals of the EU and were clearly unimpressed with the environmental track record of the centrist parties. In the years to come, their interests will create a new political and business landscape as they will also vote with their wallets in support of more eco-friendly products. Agile companies will flourish through innovation, smart CSR programs, and quick adaptation to new regulatory scrutiny, but carbon-heavy business models, especially those that rely on outsourced manufacturing with long supply chains, may suffer in this new era.

Categories: Europe, Politics

About Author

Kirk Samson

Kirk Samson JD, MBA is a former international law advisor for the U.S. military and served as a diplomat in Prague, Oslo, and Tunis. He has over 20 years experience in international political analysis and is currently the owner of Samson Atlantic LLC, a Chicago-based business consulting company which offers market research, site selection assistance, political risk assessment, and international negotiations coaching.