Defra environmental targets consultation: Environment Agency response

A strategic steer to water companies on the environment, resilience, and flood risk for business planning purposes.

How to use this document

The water industry strategic environmental requirements (WISER) sets out:

  • issues and opportunities water companies should consider in meeting their environmental obligations
  • how water companies should step up their level of ambition

WISER describes the statutory and non-statutory expectations of water companies for price review 2024 (PR24) and expected practice. These are organised around the 3 objectives the Environment Agency and Natural England expect water companies to achieve:

  • a thriving natural environment
  • resilience for the environment and customers
  • expected performance and compliance

WISER, which should be read in conjunction with the WISER technical document, sets out the expected approaches water companies should follow during PR24 and beyond.

The WISER technical document gives more detail on:

  • best practice, providing an overview of emerging good practice water companies should consider in their business plans
  • the expectations set out in the WISER
  • the relevant legislation and duties

Section 1: WISER

Understanding WISER

The UK government’s strategic policy statement states that the Environment Agency and Natural England will set out the expectations of water companies’ overall environmental performance through the WISER.

WISER is written by the Environment Agency and Natural England. It provides the strategic steer to water companies on:

  • improving the environment
  • resilience for the environment and customers
  • flood risk
  • relevant legal requirements

It is designed to help water companies understand their environmental obligations and the regulators’ expectations of them.

Water management within the water sector is governed by 4 statutory planning frameworks. These are the:

  • river basin management plans
  • water resource management plans
  • drainage and wastewater management plans
  • flood risk management plans

WISER requires water companies to take all these planning frameworks into consideration as well as considering the water industry national environment programme (WINEP).

The WINEP gives information to water companies on the actions they need to take to meet their environmental legislative requirements and related government priorities (as set out in WISER).

WISER explains the statutory obligations on water companies and the regulators expectations of water companies. Water companies should embed the statutory obligations and regulator’s expectations in the outcomes, performance commitments and investment decisions which underpin their business plans.

However, these are the minimum requirements. Water companies are expected to go beyond the minimum where there is environmental benefit in doing so, and where water companies have good customer support.

Audience

WISER has been produced for water only undertakers, water and sewerage undertakers, and new appointments and variations to use. They are referred to collectively throughout this document as water companies.

WISER applies only to English water companies operating wholly or mainly in England.

WISER should be read alongside:

Regulators, water retailers, customer groups and other parties interested in the design, funding, and delivery of environmental outcomes in WINEP can also use WISER.

The challenge

Over the past 12 years there has been no significant improvement in the overall ecological status of England’s waters. Only 16% of English water bodies are at good ecological status. Water companies have an important role to play in contributing to achieving the Government’s 25 Year Environment Plan ambition for ‘clean and plentiful water’ and to improve at least three quarters of waters to be close to their natural state as soon as is practicable.

The challenges our planet faces because of climate change and biodiversity loss mean we must transform the way we treat the environment. Protecting and restoring the water environment can help address many of the challenges we face including climate change. The climate is now more extreme, resulting in an increase of unpredictable and intense rainfall and more frequent periods of prolonged drought. The UK population is expected to grow by another 6 million by 2043, putting further pressure on the environment and water.

People want more from the environment, including the opportunity to swim outdoors and spend more time near their local river. Therefore, going beyond damage limitation and creating a water environment that benefits people as well as nature is important.

Water companies have a crucial role to help realise this ambition. In the past 30 years water companies have made good progress in enhancing bathing and river water quality, but pressures are increasing, and more action is needed. Without change, rivers could have up to 80% less water in summer by 2050, and it will not be possible to meet the growing demands of people, industry, and agriculture.

Government priorities for PR24

Protecting and enhancing our nation’s water environment is a priority for the government. The strategic policy statement sets out the government’s environmental priorities for Ofwat’s regulation of the water sector in England.

The water industry needs to prioritise appropriate action to enhance water quality and deliver a resilient and sustainable water supply.

The government’s key priorities for water companies are:

  • significantly reduce the frequency and volume of sewage discharges from storm overflows, so they operate infrequently, and only in cases of unusually heavy rainfall
  • achieve zero serious pollution incidents, and significantly reduce all pollution incidents
  • reduce nutrient pollution from wastewater treatment works
  • maintain, restore, and enhance protected sites and priority habitats such as chalk streams

Environmental ambitions and targets

The 25 Year Environment Plan sets out the government’s ambition to improve the environment and people’s connection to it within a generation. Water companies have a leading role to achieve the 25 Year Environment Plan goals. This includes helping to improve at least three quarters of our waters to be close to their natural state as soon as is practicable.

The Environment Act 2021 will help ensure the environmental protections are maintained and improved now the UK has left the European Union. The Act sets out environmental principles and introduces measures to:

  • improve air and water quality,
  • tackle plastic pollution
  • restore habitats so plants and wildlife can thrive.

The Environment Act 2021 requires legally binding long-term environmental targets in 4 priority areas:

  • air quality
  • water
  • biodiversity
  • resource efficiency and waste reduction

Water companies must take action to meet the targets under the Act.

The Environment Act introduces:

  • a new place-based spatial planning framework
  • Local Nature Recovery Strategies
  • new biodiversity duties for water companies

It also makes the requirement for drainage and sewerage management plans statutory.

Supporting the government’s vision for water and biodiversity and the need for more resilient infrastructure alongside economic growth are:

How water companies approach delivering enhancements is important. Water companies need to:

  • consider a longer-term approach and vision
  • demonstrate that they have chosen the best value options, taking natural capital into account
  • make data and evidence open and available to all, where appropriate, to demonstrate the integrity of water and sewerage company operations
  • be accountable for the design and development of their programmes of work and the resulting outcomes
  • support customers to make decisions and change behaviours to reduce unnecessary water use and sewerage abuse
  • plan over the longer term (to 25 years) to address complex environmental issues and account for a range of future climate change scenarios and other pressures
  • work with others whose activities impact on the water environment to support them with improving water quality and water resource availability

WISER expectations

Water companies must meet statutory and non-statutory expectations. These expectations are best achieved by focussing on long-term outcomes and service improvements benefiting customers and the environment.

The WISER expectations are organised around the Environment Agency’s and Natural England’s vision for the water industry:

  • a thriving natural environment – increased environmental value, healthy rivers, lakes, wetlands, coastal waters, and a sustainably functioning eco-system
  • performance and compliance – day to day service excellence for customers and acts in the long-term interests of society and the environment
  • resilience for the environment and customers – resilient, safe, and affordable water and waste water services today and for future generations

The expectations are grouped by the main legislative drivers and current regulatory priorities. The WISER technical document explains the expectations in more detail.

Many of the expectations set out in this document extend beyond the water industry; other sectors also need to play their part by working with water companies.

Water companies will need to consider these expectations in the context of climate change, by understanding its impact and planning for the longer term across all parts of their business for a range of future climate change scenarios. Actions should preferably be carried out in a low carbon way taking opportunities to maximise carbon sequestration and storage, for instance through supporting recovery of key habitats and tree planting. Opportunities should be taken to restore natural form and function of natural assets to ensure resilience to future climate impacts.

Definition of expectations

PR24 expectations of water companies include statutory and non-statutory requirements. Expectations are categorised as either statutory (S), statutory plus (S+) or non-statutory (NS) in line with the following definitions.

Statutory obligations (S)

Statutory obligations arise from legislative requirements and the need to comply with obligations imposed directly by statute or by permits, licences and authorisations granted by the Secretary of State, the Environment Agency or other body of competent jurisdiction. Other statutory obligations include ministerial directions and meeting specific planning requirements. While it is important to understand the costs and benefits of measures needed, these statutory obligations must still be achieved.

Statutory plus obligations (S+)

Statutory plus obligations are categorised as legal requirements where economic evidence forms part of the decision-making process, that is the balance of costs and benefits, and affordability considerations. In cases where action is considered disproportionately expensive to meet statutory plus obligations, alternative objectives, or timescales to meet them may be set.

Non-statutory requirements (NS)

Some expectations are not driven by statutory requirements. There may be a public need which may not be underpinned by a specific Act or piece of legislation. Water companies should demonstrate that there is an environmental requirement and customer support and that such investments provide best value for customers over the long term. Effective customer engagement should reveal whether customers (and which types of customers) want to see further environmental improvements, and over what timescale.

These expectations apply to the land that water companies own, the catchments in which they operate and the areas in which they exercise their functions. Whether an expectation is S, S+ or NS water companies should show that there is an environmental requirement and that they have customer support. They must also show that such investments provide the best value for customers over the long term.

In line with the strategic policy statement water companies will need to clearly demonstrate in their business plans how they will meet the expectation and ambition set out in WISER.

Some expectations are not currently statutory but will become statutory in the future through Ministerial directions for example storm overflow targets and drainage and wastewater management plans.

Water companies must address any damage arising from their activities, and are expected to protect, restore, and enhance the environment.

Each water company is required to set out the services and improvements it intends to provide to meet these legal obligations in their 5-yearly business plans. These will relate to:

  • reducing their impact on the environment
  • ensuring environmental compliance
  • improving resilience of their assets to climate change
  • securing the reliability of water supplies to their customers

Water companies should establish internal assurance to identify legal requirements and how to meet them.

Water companies should be aware that further changes to the policy landscape are expected, as well as future changes to environmental targets. They should also be clear that this document does not reference all water company related legal obligations, government targets and statutory requirements. Even when not specifically referenced in this document, water companies are legally bound to abide by them.

Objective: a thriving natural environment

The expectations are set out under each heading and are given a category or categories in brackets.

Bathing waters

  • action to improve waters with a current planning class of poor (S)
  • action to improve waters at risk of deterioration to a planning class of poor (more than 20% risk of failing sufficient) (S)
  • action to improve waters to good or excellent where there is evidence of customer support (NS)
  • action to improve waters failing their baseline class (S)
  • action to improve non-designated waters where there is evidence of customer support (NS)
  • action to communicate to the public the location and quality of designated bathing waters and actions they can take to support bathing water quality (NS)

Chemicals

  • action to prevent deterioration (includes standstill measures) (S)
  • action to achieve compliance with environmental quality standards (S+)
  • develop and implement operating targets for chemical removal for existing and upgraded wastewater treatment works as part of assessing performance in reducing chemical loads to the environment (NS)
  • review and strengthen management of trade effluent, tankered waste and sludge transfers to improve effluent and sludge quality (S)
  • investigate existing and emerging substances occurring in sewerage systems, inform and work with consumers, businesses and other stakeholders to develop innovative approaches to reduce loads entering sewerage systems or treatment techniques to improve the environment (NS)

Drinking Water Protected Areas

  • catchment actions to prevent deterioration in water quality and to reduce the need for additional treatment (S)
  • catchment actions to improve water quality to reduce the level of existing treatment (S+)

Environment Act 2021 targets

  • reduce phosphorus loadings from treated waste water in line with the Environment Act’s long-term environmental targets (S)
  • reduce the use of public water supply in England per head of population in line with the Environment Act’s long-term environmental targets (S)

Healthy and resilient fish stocks

  • screen abstractions and outfalls to prevent the entrainment of eels, salmon, sea trout and to resolve Water Framework Directive fish failures (S, S+)
  • address barriers to the passage of fish (S+)
  • action that supports recovery of Natural Environment and Rural Communities Act (NERC) Act S.41 priority fish species (which includes salmon, brown sea trout, eels, smelt, river and sea lamprey and shad) or at sites where fish form part of the conservation designation (S+)

Invasive non-native species (INNS)

  • prevent deterioration by reducing the risk of spreading INNS and reducing the impact of INNS (S)
  • reduce the impact of INNS, where INNS is a reason for not achieving conservation objectives or good status (S, S+)
  • reduce pathways for the introduction and spread of INNS (S)

Natural environment

  • action that contributes to meeting and or maintaining conservation objectives of Habitats sites, for example, addressing the potential impact of development and growth (S)
  • action that contributes to meeting or maintaining favourable condition targets for Sites of Special Scientific Interest (S+)
  • action that contributes to the restoration and recovery of habitats and species under the NERC Act including supporting delivery of the Nature Recovery Network (S+)
  • action that contributes to the achievement of conservation objectives of Marine Conservation Zones and (when designated) the desired state of the environment within Highly Protected Marine Areas (S, S+)
  • actions for biodiversity should deliver the outcomes of the relevant Local Nature Recovery Strategy, Protected Site Strategies, and Species Conservation Strategies introduced by the Environment Act (S+)
  • contribute to actions under non-statutory initiatives including the England Peat Action Plan, England Tree Action Plan and the National Pollinator Strategy (NS)
  • action that contributes to the conservation and enhancement of landscape character and sense of place, so that landscapes are alive for nature and beauty, and provide opportunities that benefit people’s health and wellbeing (where this goes beyond statutory obligations) (NS)
  • action that delivers inclusive public access to water company land and water of natural beauty, amenity or recreational value and allow public access for the widest possible range of activities (S+)

Shellfish waters

  • action to prevent deterioration of shellfish water protected areas (S)
  • action to achieve shellfish water protected area objectives (S)

Urban wastewater

  • reduce the frequency and volume of sewage discharges from storm overflows in line with the Storm Overflow Discharge Reduction Plan (S)
  • action to protect newly identified Sensitive Areas (S)
  • action to improve wastewater treatment where population thresholds are exceeded and, in line with Defra policy, provide secondary treatment where water company owned septic tanks discharge to surface water (S)
  • maintain sewers to minimise sewer leakage especially in source protection zones (S)
  • provision of first-time sewerage schemes (S)
  • action to increase flow to full treatment and storm tank capacity at wastewater treatment works where the Urban Waste Water Treatment Regulations requirements are not being met (S)

Water body status (river basin management plan objectives)

  • action to prevent deterioration in current water body status (S)
  • action to improve water body status (S+)
  • action to ensure no river, lake or estuary is in poor or bad ecological status due to the water industry (S+)
  • work with stakeholders and catchment partnerships to explore integrated solutions, including nature-based solutions, and delivery of multi-functional benefits at a catchment scale (NS)

Objective: expected performance and compliance

The expectations are set out under each heading and are given a category or categories in brackets.

Regulatory compliance (all regimes)

  • achieve 4-star status on the Environmental Performance Assessment (NS)
  • 100% compliance for all licences and permits (NS)
  • 100% compliance at wastewater treatment works and water treatment works with numeric limits and for storm overflows (S)
  • 100% compliance with environmental impact and operational performance permit conditions at wastewater treatment works and water treatment works with descriptive not numeric limits (S)
  • 100% compliance with abstraction and impoundment licences (S)
  • all the correct authorisations (permits and exemptions) are held and 100% compliance with installation permits, waste operation permits and waste exemptions (S)
  • 100% compliance with flow conditions, including dry weather flow, flow to full treatment, maximum daily volume and flow rates, MCERTS certification, at wastewater treatment works and water treatment works (S)
  • 100% compliance with ultra-violet dose conditions (S)
  • zero serious pollution incidents (category 1 and 2) (S)
  • at least a 30% reduction of all pollution incidents (category 1 to 3) by 2030 on current 2025 targets. There may be some variation on our expectation depending on company performance during the current asset management plan period (2020 to 2025) (S)
  • high levels of self-reporting of pollution incidents with at least 90% of incidents self-reported by 2030. More than 95% of incidents self-reported for wastewater treatment works and pumping stations (NS)
  • business plans include all actions identified within the WINEP and these are planned well and completed to agreed timescales and specification (S)
  • either good or excellent rating of self-monitoring provisions under Operator Monitoring Assessment. Compliance with self-monitoring conditions, including data quality and providing data on time for Operator Self-Monitoring, Urban Waste Water Treatment Regulations and flow monitoring, event duration monitoring and ultra-violet disinfection (S)
  • sustainable management of sludge treatment and onward sludge use so as not to cause regulatory breaches or pollution to land, surface water or groundwater by implementation. Including modernisation of the regulatory controls through delivery of the Environment Agency’s sludge strategy, which moves sludge from Sludge (Use in Agriculture) Regulations to Environmental Permitting Regulations (S)
  • 100% compliance with satisfactory use of sludge on agricultural land (S)

Objective: resilience for the environment and customers

The expectations are set out under each heading and are given a category or categories in brackets.

Climate change

  • report on understanding of risks from climate change and how they are being addressed through Adaptation Reporting Power reports (S)
  • contribute to the sector’s ambition to achieve net zero carbon by 2030 as set out in Water UK’s ‘Net Zero 2030 Routemap’; to meet the government’s 2050 net zero target, the sector will need to go beyond the stated net zero ambition as currently scoped 1 and 2 greenhouse gas protocol to account for, and reduce, existing indirect emissions greenhouse gas protocol Corporate Value Chain (Scope 3) Standard, that result from: future asset management plan delivery; new national requirements; and measures taken in adapting to and addressing climate change impacts (NS)
  • apply adaptive planning for a range of future climate change scenarios (NS)
  • safeguard services and ensure risks are proactively identified and actions implemented using an adaptive planning approach (NS)
  • deliver actions to restore form and function of the natural environment to improve resilience of ecosystems to warmer water temperatures, more frequent flooding and drought, and rising sea level (where this goes beyond statutory obligations) (NS)
  • deliver actions that help to mitigate rising water temperatures (NS)
  • deliver actions that mitigate the impact of low flows and rising temperatures on water quality (where this goes beyond statutory obligations) (NS)

Ecosystem and natural function

  • action that contributes to restoring natural function to allow capacity for growth and development and to allow nature recovery (NS)
  • action which supports Nature Recovery Networks through enhancing ecosystem resilience and ecosystem function on which nature recovery is reliant (where this goes beyond statutory obligations) (NS)
  • restore and reconnect priority habitats (such as wetlands and peatlands) to strengthen freshwater and marine resilience to challenges such as climate change (S+)

Flood risk management

  • act in a manner consistent with the National Flood and Coastal Erosion Risk Management Strategy for England and have regard to Local Flood Risk Management Strategies (S)
  • co-operate with other risk management authorities and Regional Flood and Coastal Committees in improving flood resilience and exercising water company flood risk management functions (S, NS)
  • co-ordinate and share data and information with risk management authorities to deliver flood resilience, and with category 1 and 2 responders to manage incidents (S)
  • comply with statutory reservoir safety requirements (S)
  • engaging with stakeholders to understand service and system risks and implement solutions to improve flood resilience (NS)
  • reduce sewer flooding of homes and businesses trending towards zero (NS)
  • contribute to reducing the number of properties at risk of all sources of flooding through co-funded or co-delivered schemes with other risk management authorities and other parties, including by using nature-based solutions (NS)
  • deliver sustainable drainage systems and nature-based solutions, for example by promoting these solutions through the drainage and wastewater management plan process and business plans (NS)

Future drainage

  • PR24 business plans should reflect the requirements including the extent and pace of these reductions as set out in the Secretary of State’s “Storm Overflow Discharge Reduction Plan” to be published by 1st September 2022 (S)
  • water and sewerage companies drainage and wastewater management plans should provide the evidence base for reducing spills from current and future baselines to meet the requirements of the Storm Overflow Discharge Reduction Plan (NS)
  • improve and monitor networks and wastewater treatment works to reduce the number of failures (NS)
  • ensure compliance with permitted flow to full treatment settings (S)
  • PR24 business plans should address the Environment Act duties on water and sewerage companies to:

    • continuously monitor the receiving water quality potentially affected by storm overflows (S)
    • publish data on storm overflow operation on an annual basis and make spill information available in near real time (S)

Water resources – security of supply

  • demonstrate that the government expectations for water companies’ water resources planning have been met (NS)
  • ensure water resource management plans reflect the relevant regional water resource plans and show how strategic scale solutions are implemented to meet long term water supply needs and environmental destination (NS)
  • abstractions and operations meet current regulatory requirements to support the achievement of environmental objectives (S, S+)
  • incorporate sustainability changes into supply forecasts (NS)
  • deliver solutions to meet the need identified in final water resource management plans for 2030 and the long term (NS)
  • commitment to reduce demand and per capita consumption in line with the Environment Act target and set out in the Meeting our future water needs: a national framework for water resources (NS)
  • set challenging targets for leakage informed by water company customers’ views and the potential for innovation (NS)
  • water companies in seriously water stressed areas may implement wider water metering programmes where it is shown within their water resource management plans that there is customer support and it is cost effective to do so. Using the latest evidence provided by the Environment Agency, additional areas in the South, East and the Midlands were designated as in serious water stress by the Secretary of State in July 2021. Smart meters should become the standard meter installed, given the wider benefits or there should be justification for using older technology (S+)
  • implement solutions to meet the needs identified in the final water resource management plan aiming for resilience to a 1-in-500 year drought by 2039 (or by 2050 where costs are exceptionally high locally in comparison to benefits) (NS)
  • ensure agreed and up to date plans are in place to manage a drought and minimise environmental impacts (S)

Section 2: Expected approach and practice

This section sets out the approaches the regulators expect water companies to take.

The Environment Agency and Natural England recognise that many of the approaches require other sectors to play their part. However, it is essential water companies demonstrate leadership by:

  • valuing the environment by considering the social and economic value of the water environment, using it to inform decision making, and secure wider benefits for communities and society
  • embracing innovation by seeking opportunities to improve the environment through better industry practices, better urban design, and better land management
  • building stronger and more collaborative catchment and flood partnerships to maximise and integrate benefits and evolve solutions work with others to allow catchments to function more naturally, wildlife to thrive and to build resilience to future climate impacts

Water companies should use new and innovative approaches wherever possible to achieve wider environmental outcomes and provide best value to customers. Exploring solutions which achieve multiple benefits for the environment are encouraged even where the risks are uncertain. However, water companies must understand and control the risks and the risks must be proportionate to the potential benefits. Water companies should share their learning from these approaches across the sector.

Water management needs to be both nationally strategic, operating within the legal and government’s policy framework, and locally owned through place-based partnerships. Planning at a catchment scale to identify improvements that restore the natural ecosystem ensures resilient biodiversity and wider ecosystem benefits.

Water companies should seek partnership opportunities to:

  • achieve their business plan outcomes
  • improve efficiency
  • enable more sustainable, resilient options

Water companies should work with other local plan makers and authorities to align ambition, programmes, funding, and action in a catchment. This is to make sure there is adequate water for growth, development, and the environment in a changing climate. Working with other place-based partnerships (for example, local nature partnerships, local enterprise partnerships, and coastal partnerships) and engaging with local nature recovery strategies will support a nature recovery network as highlighted in the government’s 25 Year Environment Plan.

Developing a shared vision and understanding with catchment partners will help water companies optimise their investments and gain support from local communities and businesses who benefit from a healthy water environment and enhanced landscapes.

Good examples of partnerships include the Norfolk Water Fund project, Natural Course, the Eden Integrated Catchment project in Cumbria, Wyre natural flood management partnership in Lancashire, and the catchment markets in Somerset.

Further information can be found on the Catchment Based Approach website as well as information on local catchment partnerships.

Green finance

Government is driving the greening of the finance sector. The government’s Green Finance Strategy sets out a comprehensive approach to:

  • greening financial systems
  • mobilising finance for clean and resilient growth
  • capturing the resulting opportunities for UK firms

A UK green finance taxonomy will define which economic activities count as environmentally sustainable. Making Climate Risk Financial Disclosure mandatory will drive companies to further de-risk their business and make them more attractive to future investors. These changes present a new financial environment.

Water companies should adopt, promote, and encourage green finance use to help grow the UK market, green their supply chains and set a green framework for the network of stakeholders that help achieve and support water company outcomes.

There are already a number of trial financial innovation schemes in place, for example, catchment trading, payments for nature-based solutions and resilience financing. The aim in this price review period is to move these from stand-alone projects to mainstream and national scale programmes. The expectation is that these will become mainstream and wide-scale practices ahead of PR29.

Helping people connect with the water environment

Water companies have an opportunity to engage with the public and help them develop a closer bond with nature. Helping people connect with where their water comes from will be a crucial part of nature’s recovery. Enabling the public to become an active part of the solution lies in positive, and empowering communication, engagement, and access.

A growing weight of evidence shows that freshwater, coastal and marine places (flowing and standing waters) are particularly beneficial for well-being. Around half of people in England visit blue spaces at least once a month and say they gain psychological benefits and report feeling happier near them.

Our blue spaces are highly valued and visited by the public. The proportion of adults in England taking visits to rivers, lakes or canals between April 2020 and January 2021 was 26%, peaking in September 2020 with 32% of adults reporting visits (People and nature survey for England). It was a similar picture with visits to the coast. At the same time, it is clear there are huge inequalities in terms of access to land and blue spaces across the country and across different groups in the population.

Water companies can help achieve a significant change in improving access to the outdoors for all to improve public health, support children and young people and contribute to nature recovery and net zero. Water companies are ideally placed to provide people with access to their land and blue spaces.

Natural capital and environmental valuation

A natural capital approach is about thinking of nature as an asset, or set of assets, that benefit people. Water companies should adopt a natural capital approach to inform their planning and long-term investment decisions.

Defra has produced guidance on enabling a natural capital approach which covers natural capital accounting, economic valuation of the environment, and applying natural capital accounting at the local level.

Natural England has produced a Natural Capital Evidence Handbook setting out how natural capital evidence can be used in place-based strategic planning. This may provide helpful evidence for developing water company business plans.

A natural capital asset and ecosystem service register will enable water companies to value the environment benefits assets provide through a natural capital account. This information can be presented together in an extended natural capital account, for example Natural England’s Natural Capital Account for National Nature Reserves.

The Environment Agency has produced a Natural Capital Register and Account Tool (NCRAT) which water companies could use to create a natural capital register and account using open-source data. Water companies can request the latest version of the NCRAT and supporting information (user guide, technical report and natural capital scorecard) from the Environment Agency’s natural capital team:

email naturalcapital@environment-agency.gov.uk

Natural capital indicators identify key components of the environment essential for the long-term provision of benefits on which society relies. Using indicators will make sure water companies report on key attributes of the environment important for ecosystem function and ultimately providing benefits to people. The indicators are designed to enable reporting on aspects which can be changed by management in future, providing a baseline upon which to measure progress.

The environmental valuation techniques used should be clear, proportionate, and based on multiple evidence sources. They should include qualitative and quantitative information and monetary assessment, where possible. For example, in their natural capital account companies could use quantitative evidence of customer valuations, supported by qualitative evidence on customer priorities, needs, requirements and behaviours. They could also assess the impacts of business plans on social values.

The economic values of environmental impacts are usually partial estimates as only some economic aspects can be valued. Valuing biodiversity is recognised as a particularly difficult area; consider taking an ecosystem approach as described under the Convention on Biological Diversity, and integrating the concept of natural capital within water company planning and decision making.

Using valuation techniques to measure the costs and benefits to society of the environment informs better decision making and supports actions that increase the resilience of our natural assets for the benefit of people and wildlife, now and in the future.

Water companies can carry out surveys to draw out people’s preferences for changes in the environment. These can be used in benefit valuation work if appropriate. Questions directly linked to well-described environmental changes will help to estimate people’s preferences and the economic value they place on changes to the environment.

Using sustainable drainage systems

Well-designed multifunctional sustainable drainage systems deliver a wide range of water quantity, water quality, flood risk, amenity, and biodiversity benefits. Run-off attenuation, storage and infiltration can help relieve pressure on water company assets. Other opportunities include using planting and wetland areas to avoid the embedded carbon of a traditional ‘piped’ system. Overall, there is huge potential for sustainable drainage systems to contribute to achieving the biodiversity net gain mandate brought forward in the Environment Act 2021.

Water companies should take account of the developing knowledge and approach to sustainable drainage systems including the consultation on the Government’s Storm Overflow Discharge Reduction Plan. The consultation includes a review of the case for the implementation of Schedule 3 to the Flood and Water Management Act 2010 which, if implemented, will introduce standards for new sustainable drainage systems.

Technology and smart networks

Embracing technology and developing smart networks is essential to drive process efficiency and to achieve carbon reductions. Employing smart technology to inform drainage and wastewater planning and water resource planning will enable companies to develop targeted solutions. These will achieve more effective environmental outcomes, better customer service and long-term efficiencies. It will also help achieve carbon reductions.

Water companies are already using machine learning and artificial intelligence concepts to drive process improvements which:

  • helps reduce the number of pollution incidents
  • enables targeted nature-based solutions
  • provides early leak detection
  • enhances energy efficiency
  • optimises processes and efficient integrated water management

The Environment Agency and Natural England encourage all companies to follow suit.

Working with nature-based solutions and catchment scale thinking

Catchment and nature-based solutions can help restore biodiversity and provide benefits to water companies and their customers through:

  • improved water retention
  • flood regulation
  • water quality
  • helping catchments adapt to climate change

They can offer more cost-effective and sustainable solutions over more traditional engineered options.

The Environment Agency and Natural England expect water companies to consider using catchment and nature-based solutions more broadly, wherever they can achieve whole or part of the environmental outcome. Proposed solutions should have a plausible mechanism for achieving the required solution, biodiversity gains and improvements to ecosystem integrity. The longer planning timeframe of 25 years enables the delivery of options which require a longer lead-time such as catchment and nature-based solutions.

Nature-based solutions are defined by the International Union for Conservation of Nature as “actions to protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human wellbeing and biodiversity benefits”.

Catchment and nature-based solutions can cover a wide range of different approaches and techniques including:

  • peatland restoration
  • tree planting
  • river restoration
  • floodplain reconnection
  • wetland creation

Underpinning many catchment and nature-based solutions is an understanding of natural processes and the physical pressures across a catchment. A greater understanding of the operation of natural processes can be a first step in planning and informing the optimal locations and type of approaches to work with nature. To help manage landscape change it is important to consider the right feature in the right place within the landscape. Different nature-based approaches will be appropriate in different situations, but those that restore natural processes, rivers and their floodplains can often offer the most sustainable solutions and widest benefits.

Not all water companies will be able to use all types of catchment and nature-based solutions as qualifying criteria apply for some of them, for example in relation to catchment nutrient balancing. Advice to support development of well-designed catchment and nature-based solutions is provided in the WINEP options development guidance.

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