46. There is no doubt that the Government's aim must be to establish an effective system of detection, prosecution and punishment which will deter the environmental offender. We have already seen that the threat of detection is, in some areas, barely a threat at all and that the current level of fines, by and large, makes for a woefully inadequate deterrent. The need for viable alternative options to ensure compliance with environmental laws and regulations is now of paramount importance.

47. We are aware that on 30 November 2004 DEFRA held a conference on Environmental Justice at which Elliot Morley, Minister of State, set out three priorities:

• to improve access to justice in environmental matters;
• to reduce the overall regulatory burden; and
• to consider more flexible options for dealing with environmental offences to make the punishment fit the crime.

Mr Morley went on to say, "data suggests that environmental crime is not punished to a degree that dissuades the callous or careless from offending. This sends out exactly the wrong signal to both industry and to the public that the law is soft on environmental crime."[50] The Clean Neighbourhoods and Environment Bill, which recently received its second reading, attempts to overcome this laxity in tackling local environmental crime. We are reassured to see that DEFRA clearly recognises that the status quo with regard to how environmental crime is dealt with cannot be allowed to continue.

48. We are particularly interested to see that DEFRA is considering using civil penalties "for offences that could lead to damage, but do not actually cause damage",[51] the idea being that this provides far greater opportunity to nip in the bud potential incidents before they become too serious and instigating action to make reparation. This would then allow the courts to deal with the more serious cases. The creation of a robust civil penalty regime as an alternative means with which to deal with environmental crime is something we considered in our earlier reports and which, subject to learning more of the detail of the proposal, we would support.

49. The creation of a civil penalty regime, as DEFRA has acknowledged, will not be easy. It is not clear, from what DEFRA has so far said about the civil penalty regime, who will be responsible for the day to day operation of the regime. It would seem likely that, unless an entirely new department is to be established, the day to day operations will fall to the Agency. If that is the case, then we have some concerns, primarily because of the resource issues currently facing the Agency, which we have already outlined earlier in this report. If a civil penalty regime is to work, and if it is to address what are recognised as the main problem areas populated by SMEs, which are currently un-regulated, significant investment is needed. Given cuts in Grant in Aid funding for the Agency in the region of £4 million, and the additional requirement to make efficiency savings of over £75 million, any suggestion that it can assume responsibility for a civil penalty regime without a significant increase in funding will doom this initiative to failure.

50. Another issue for the Agency may be its current practice of not issuing some of the more restrictive notices at its disposal because "business activity can be stopped or seriously disrupted by them".[52] As we understand it, the intention is for the Agency to have total discretion as to the level of fine applied under the civil penalty regime and, as we have already seen, getting this right is going to be absolutely essential if the penalty is to have any deterrent effect whatsoever. Whilst no one would wish to see a business fail, if the civil penalty is effectively without teeth then it is likely to fall at the first hurdle. It is important that the Agency is prepared to use a sufficient level of fine to ensure that the penalty regime works effectively both as a means of prevention as well as a cure.

51. There are other means by which compliance can be sought, some more successful than others and many more relevant to certain types of business than others. In 2003, the Agency prosecuted eleven company directors personally and it has also signalled it's intention to look at the confiscation of assets through greater use of the "lifestyle provisions" of the Proceeds of Crime Act 2002. We support the Agency in its intention to make greater use of the lifestyle provisions of the Proceeds of Crime Act 2002. We cannot consider that the survival of a business which is a serial offender in environmental terms and shows no signs of wanting to improve its lamentable environmental performance should rank higher in terms of importance than the protection of the environment which that business desecrates.

52. A further option we explored during the course of the inquiry was whether or not "naming and shaming" a company, organisation or individual was an effective deterrent or punishment. This was definitely one of those measures that would be more effective with some companies than others. The Ministry of Sound, for example, explained that as a private company with no share-holders there was little pressure on them to comply with environmental laws and regulations. The nature of their business, based on youth culture and a reputation for being anti-establishment, also meant that they were not compelled by market forces to be compliant.

53. For the water companies, for ESA members, and for SITA, for example, the threat and impact of "naming and shaming" was a source of some concern. Although the water companies, with their "captive" market, will not see their customers falling away and switching providers, they were clear that being seen as an environmental offender was bad for business. In its written evidence, Anglian Water acknowledged that domestically it did not have to compete but it pointed to the impact on its international reputation:

"The UK water industry does not directly compete in the domestic market place […]however, many companies do compete in the international market place and domestic convictions are actively used against them to prevent the winning of contracts, regardless of the severity of the event."[53]

This was echoed by Thames Water during an oral evidence session where it highlighted a particular impact on business with the United States. The US has a very robust and long-standing civil penalty regime, involving penalties which are in excess of anything we have seen in the UK. British businesses hoping to compete in the American market have a tough time if they have a poor environmental record in the UK, and Thames has described this as a huge deterrent for it. We would urge DEFRA and the Environment Agency to consider how best to harness this tactic of "naming and shaming" corporate environmental offenders in the interests of environmental protection.

54. Similarly, Mr Hjort, Managing Director of SITA-UK, was certain that a poor environmental record was a major concern for the shareholders of his parent company, Suez, and that it was one of the key indicators against which performance was measured. We find this very encouraging but we have to recognise that environmental compliance is not always going to be of paramount importance to every company board and all its shareholders. In fact, if the very act of compliance impacts on the bottom line of a company, it may be something that is positively discouraged. We touched briefly on the subject of Corporate Social Reporting (CSR) in an oral evidence session with the Agency. We do not think it is unreasonable to expect businesses which are subject to environmental laws and regulations to complete an annual check-up of how they are performing against requirements; we see this simply as a natural progression which follows, if not accompanies, the introduction of a civil penalty regime. We would urge DEFRA to consider mandating such an assessment.

51   www.defra.gov.uk Back

52   EC4-09, para3.1 Back

53   EC04-17, para 27 Back