Water Company Environmental Performance Report

England and Wales

The environmental performance report assessing the environmental compliance of all water companies has been published with, according to the Environment Agency, the worst results last year that have been seen for years. As a result the EA intends to increase the number of prosecutions and urges courts to impose higher fines. Action will not only be taken against the water companies but directors are also a focus for future enforcement, according to the report where the EA says that the Courts’  powers to impose prison sentences and disqualify directors must be exercised.

The foreword to the report criticises the level of fines being ordered against water companies despite water companies receiving some of the largest fines in history over the past few years. The report itself identifies that fines of £138 million have been imposed since 2015, and in 2021, 7 prosecutions against 5 different water companies resulted in the imposition of a total of £102 million in fines. Emma Howard Boyce, EA chair, has suggested however that the lack of downward trend of pollution incidents evidences that such action is not enough to prevent offending. They are increasing inspections of sewage treatment works; insisting that companies put monitors on all their storm overflows, including both on the network and at sewage treatment works and requiring the data to be made public. The country’s largest ever investigation into environmental crime, involving all the companies, has also been commenced by the EA.

This year, the EA is reporting on revised Environmental Performance Assessment for the first time which consists of metric thresholds regarding pollution incidents and the relevant assets that they relate to, seriousness of pollution caused and how they were reported, as well as a supply demand balance index. The full criteria can be found here: Water and sewerage companies in England: EPA metric guide for 2021 - GOV.UK (www.gov.uk)

The report allows for the performance of different water companies to be compared, with performance indicators against the criteria. The report highlights that when compared to the previous year in 2020, there was a large increase in the number of the most serious Category 1 incidents, despite a slight decrease in the total number of pollution incidents on water and sewerage infrastructure. There were positive stories also with nearly 100%  of water and sewage treatment works complying with permit conditions for discharging treated wastewater, and the same for the completion of planned environmental improvement schemes within deadlines.

The EA’s response to the report findings identifies the need for water companies to brace for a change in oversight and enforcement, with an increase in the following:

  • increased scrutiny and inspections;

  • increased prosecutions for a wider range of incidents of varying seriousness;

  • increased fines for those found guilty of offences;

  • increased prosecutions of directors; and

  • increased use of court powers to imprison and strike off directors found guilty of environmental offences.

Within their 2020-2025 business plans, the majority of water companies have translated the EA Performance Expectations into performance commitments. However, the EA has made it clear that despite these commitments further changes to are to be put into action.

Some practical actions which may assist in ensuring compliance and evidencing commitment to reducing incidents are:

  • Revising how often systems and procedures are reviewed.

  • Ensuring that operational systems are sufficient to act as the first line of defence meaning incidents are detected before they result in damage.

  • Reviewing the processes in place for reporting incidents. A rigorous reporting approach enables companies to comply with notification obligations mandated by statutory bodies and reduction in exposure to potential liability.

  • Providing training to directors on their environmental obligations and the risk of prosecution should they fail to meet such requirements.

     

The inspection and enforcement approach by the EA is set to change and the water industry could see a spike in prosecutions for incidents previously dealt with by way of enforcement notices, warnings or civil sanctions. It is clear that the EA intends to hold company directors to account for company failings. Directors need to be aware of their responsibilities and the increased level of regulation the EA is posing in this report.

Please do not hesitate to get in contact with the authors of this article if you have any further questions on the potential impact of the report or environmental compliance training for companies or directors.