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Comment: Water companies count cost of fines

Recently amended sentencing guidelines are leading to much larger fines for environmental pollution, giving utilities pause for thought

by Tamsin Wray, Associate Director, Environment, AECOM

Recent changes to both the Sentencing Council’s Definitive Guideline on Environmental Offences (announced in July last year) and the new draft Environmental Permitting Regulations 2015 have had an impact on the way water utilities respond to environmental pollution in England and Wales.

The Sentencing Council’s guidelines cover offences where an organisation causes pollution or harm or the risk thereof to the receiving environment. For water companies, this could include allowing untreated sewage to end up in a river or bathing water, having an impact on amenity, or failing to comply with conditions of a site permit.

The guidelines were introduced to encourage courts in England and Wales to take a more consistent approach when dealing with environmental offences, and to give a clear message to polluters that environmental impact would be taken seriously. The Sentencing Council found that magistrates in particular were unfamiliar with sentencing offences relating to the disposal and treatment of waste, and inconsistency in judgements was apparent across the country.

The guidelines are divided up into two parts, dealing with organisations and individuals. Each set of guidelines involves an assessment of culpability and an assessment of harm. Culpability is categorised in four bands: deliberate, reckless, negligent, and low or no culpability. Harm ranges from category 1 to 4, with category 1 harm being the most severe. Whilst the risk of harm is regarded as less serious than actual harm, the potential to pollute is also a material consideration in any case.

Businesses are being categorised by size and are divided up into financial bands dependent on the turnover of the company; a large company is defined as having a turnover of over £50M. Under the changes, fines are now substantially harsher and proportional to the polluter’s ability to pay. Prior to the guidelines changing, the average fine for one utility company was between £7,000 and £10,000. Under the new changes, an event that is categorised as ‘reckless and given a category 2 for harm’ can incur a fine starting at £250,000, per charge cited, for a large company.

One thing is clear, large companies are concerned over the substantial fines for environmental offending. Such large fines that were previously very rare in the sector are now becoming commonplace. The impact has not been so keenly felt by smaller organisations, because although fines have increased, the sentencing court also considers the offenders’ ability to pay when handing down financial penalties.

Another thing that is certain is that the higher penalties are helping to raise awareness and even greater focus on the requirement for environmental compliance. At the same time, however, there has been an increase in long, drawn-out legal cases as the penalty for those found guilty is far more significant than before. Looking forward, the new Environmental Permitting Regulations (EPR) 2015 will also have an impact on prosecutions and enable the Environment Agency to accept enforcement undertakings from companies that have committed environmental offences. Enforcement undertakings are voluntary and are offered by the polluter to the regulator. This offer can be made at any time before the commencement of legal proceedings and allows the offender to provide direct restitution to the area of failure and the environment most affected by the pollution event. If deemed to be in the public interest by the regulator and the enforcement undertakings accepted, it means that the offender can no longer be prosecuted for the failings if the agreed undertakings are completed. Understanding the impact and what has gone wrong has never been so vital to managing environmental businesses.

It is, perhaps, too early to tell whether the Sentencing Council’s changes and the EPR will lead to a substantial reduction in environmental breaches. However, in the long term, it is anticipated that they will create an improved understanding among businesses about the impact of environmental offences and their responsibilities.

Topic: Policy & Regulation
Tags: fines , water companies , pollution

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