Environment Matters – Regulatory & Governance: balancing economic growth with environmental protection – S3E1

Sarah Sackville Hamilton, Director, Burges Salmon (00:40)

Thank you, Mike. It’s lovely to be back.

Simon Tilling, Partner, Burges Salmon (00:42)

Yeah, thanks Mike. It’s great to be back at Burges Salmon. As you say, four years out, one year at a US firm on the EU side of the practice and then the last three for a water company. So lots of really important environmental issues there.

Michael Barlow (01:01)

Yeah, absolutely.

So in this podcast, we’re going to be, as I mentioned earlier, focusing on sort of regulation and governance issues. As I mentioned, there’s an awful lot happening in this space at the moment. And we thought it’d be worth kicking off our podcast series by looking at this really as a way of trying to set the scene for more focused discussions as we go on through our podcast series and we can drill down into more specific areas of environmental law in those future podcasts.

So what I thought I’d do just at the outset is give a little bit of background and our thinking on this to set the scene. And I think really, it’s worth saying that there’s been a huge amount of change in environmental law since Brexit.

I mean, what we know is that there are about 3000 pieces of legislation that DEFRA (the Department for Environment, Food and Rural Affairs) are responsible for across the piece. And that inevitably leads to a great deal of complexity for its regulators and also for the regulated businesses that are regulated by DEFRA. And a huge proportion of that legislation is EU derived. And I think post Brexit, a lot of that needs to be unpicked and rationalised. And I think that really is part of the whole challenge and what we’re going to be talking about today.

And then I suppose just coming on from Brexit, we’ve got the Environment Act 2021, which obviously had a governance feature to it because it set up the OEP (the Office for Environmental Protection) as a UK layer of governance to effectively replace the European Commission. And I think that sets challenges as well in this whole space. We’ve got the OEP who is reporting on government progress and so on. And the Environment Act as well also set out a number of environmental targets that we’re trying to achieve as UK PLC.

And on top of those targets, we’ve got the environmental improvement plans that DEFRA published in 2023 and 2025. And in the sort of latest reports on those, we know that 3 out of the 10 goals in the environmental improvement plans, it’s only 3 out of 10 that have largely been seen to be improving. And those include cleaner air and reduced exposure to chemicals.

So there’s a lot there that still needs to be done. And we know that 9 out of the 43 of the government’s other environmental targets and commitments are the only ones that it is thought are going to be achieved in the current trajectory. So there’s an awful lot to do here. I think that we can all accept that.

And then in 2025, so last year, there were 3 major reviews about DEFRA’s approach to regulation and I think it’s worth saying that there haven’t been any reviews previously so 3 in a year is a lot. We obviously had the Cunliffe review looking into the water sector. We’ve had Heather Hancock doing an internal review at DEFRA and then the review by Dan Corry as well into environmental regulation and we’ll probably focus on that for the majority of this podcast. But coming out of those, there were 149 recommendations for DEFRA to take forward. So you can see the scale of the challenge there. And on top of that, there was an NAO (the National Audit Office) report which just came out in January on the 9th of January on the value for money of environmental regulation. And I think that’s an interesting read. And it does show partly how DEFRA are looking to address some of these challenges with 300 million pounds planned investment between 2026 and 2029 just on digital infrastructure, for example.

But just as my sort of last piece of scene setting here, I said we’d focus on the Corry review, which came out in April last year. And I think that was really, in effect, wrestling with the perennial dilemma about how you balance economic growth with protection of the environment. And I just thought there’s an interesting quote here from the forward, which I’ll read, which says, the current system of environmental regulation was set up in good faith, but time and factors like resource constraints, legal findings, case law, EU exit, climate change, and ministerial merry-go-rounds under the last government mean it is not now working as anyone would want. The system is also now inefficient and difficult for customers to navigate. It needs to work in a fundamentally different way to become a system focused on delivering positive outcomes for nature and the environment and to be an aid, not an impediment to sustainable growth.

And I think that really sums it all up in that one paragraph and what we’re going to be talking about today. And the Corry really came out with five themes as well as 29 recommendations. The five themes, just to touch on and we’ll unpack this a bit as we go on, was firstly a focus on outcome scale and proportionality with constrained discretion, to untangle and tidy green tape to ensure process light and adaptive regulation.

Third one, to deploy a fair and consistent thin green line on regulatory compliance with trusted partners earning autonomy. Fourth one, unlock the flow of private sector green finance to support nature restoration whilst better targeting the public sector finance. And the last one, to shift regulators to be more digital, more real time and more innovative with partners. So I think those themes are helpful to just have in mind.

And then just really by way of illustration that this is continuing apace, on the 6th of February, Government published the Green Book, which said that the environmental principles policy statement must be explicitly reflected in appraisals of new policies, which was something the OEP had called for last year.

And the added complication, of course, is that environment is a devolved function. And so all of this is developing separately in the different UK jurisdictions.

So for example, one of the recommendations from Cunliffe was to merge Ofwat (the Water Services Regulation Authority), the water functions of the Environment Agency and the DWI (the Drinking Water Inspectorate), whereas Wales said it’s not going to go down that route. And on the 9th of February, NRW (Natural Resources Wales), obviously the Welsh environmental regulator, published its draft growth strategy about how it plans to grow its income and improve efficiency.

We all have to bear in mind the different jurisdictions as well as the complexities just within the English regulation.

Simon, turning to you first, obviously, set the scene there, but I’d be really interested in your thoughts on some of those themes which have developed through those reviews which I touched on. I mean, from your perspective, what would you like DEFRA to focus on as part of that they’re taking forward these recommendations.

Simon Tilling (08:09)

Yeah, thanks Mike. I mean, there’s loads here to go for. So it’s really hard to pick out the top ones, but I really do think that Dan Corry is absolutely right when he talks about ⁓ data and data access and the digital revolution. I think he calls it a turbocharged approach to modernisation of DEFRA on the digital front. And I think that’s really key. And it picks up.

I think a fundamental point we’ve had in environmental law and policy for a very long time, which is that more than many, maybe most other areas of law, environmental law is really about the science. It’s about the science of the environment. And you can’t do the science without good information and good data. And there’s two parts of that. There’s the collection of data, good, robust data that’s actually useful for the regulators, but for industry, for society to really decide its priorities and how to regulate for the outcomes that we all want to see and that the Corry is so focused on.

So it’s about collecting it in the first place. It’s about having good access to it, which is a real theme within the Corry review. It’s hidden across lots of different platforms. You’ve got to know where you’re looking if you’re going to find any of this data and enabling both regulators and industry and across different regulators and across different industry to have that through really good digital tools to give real time decision useful data, that’s absolutely critical to getting good outcomes on the environment. So I think that really is something that DEFRA is intending to and absolutely needs to turn its attention to.

Michael Barlow (09:55)

Yeah, and I think that’s a really good topic to pick up on. And obviously, Simon, you’ve been out of private practice law for a few years and really at the sharp end, advising in-house a highly regulated client in a sector that is under huge pressure on these regulatory issues. Are there any sort of examples that you can point to where that data issue it has become an issue?

Simon Tilling (10:20)

Yeah, absolutely. I mean, it’s it is regularly an issue. ⁓ We’re all trying to get to the same outcomes, the same environmental improvements. But if you’re not if you’re not actually looking for the same data source and you’re not agreeing on what the data is, you’re impeded on getting anywhere before you even started. And the case that springs to mind is a

It’s a prosecution and I can’t go into any of the details, but a big component of the prosecution is about whether or not a wastewater treatment works is operating as it should, but more importantly, what harm is the way it is operating causing the environment? And the case is about the operation from a period of time, 2015 to 2020. And the allegation is that that’s caused harm to a body of water, which is a water framework, directive water body it’s also a protected site. And these allegations have been made about harm and impact. And so we had to get an expert to go actually exploring and digging into this.

And the first point to make, which really resonates here, is how hard it is and how much of a specialist expert you have to get to find the data on which these assessments can be made. But when we had really investigated it, the remarkable thing is that the assessment that there had been harm from this incident or this operation that had run from 2015 to 2020 was actually based on sampling that had stopped in 2014. So there had been no actual sampling. Regulators in different parts of DEFRA had made a decision based on the absence of evidence that there was a likely decline, but without any data. And then that had been the basis of an allegation that this incident must have caused harm because another regulator hadn’t recorded this water body as improving on certain metrics for which it hadn’t tested. I mean, that’s clearly not a way to run regulation. We clearly need the data. Everyone needs to have access to good data. And then we can all have sensible discussions and decisions about what needs to be done to improve things based on evidence.

Michael Barlow (12:34)

Yeah, and I think that’s a really good example. And we know that the Environment Agency are looking and has recruited many more data scientists. So you’d hope in the future this would improve. But I think it also links to one of the other themes coming out of Corry which is the need for radical improvements in IT infrastructure across the DEFRA regulators.

Simon Tilling (12:56)

Yeah, absolutely. mean, those two things go hand in hand. There’s no good having good robust data hidden away. And unless you have good IT systems for analysing that data, but also for information exchanges for processes, just making things run smoothly is critical if we want to have both improvements in natural capital and growth that of course is the fundamental theme of the Corry report. So we need to have systems on a good IT basis. mean, a great example of that is the current permitting system within the Environment Agency’s National Permitting Service. It’s clearly outdated, but on the operator side, things just seem to go into a black hole. And then there’s actually human time required for keeping to update where people are. And one of Corry’s points is that you could have all of that on an automated system if you had frankly a 21st century digital system. So the opportunity here for better outcomes, better delivery and faster delivery are huge and it really has to be a focus.

Sarah Sackville Hamilton (13:59)

And you can see that DEFRA is starting to try to get a grip of the whole agenda around data and IT. I think a good example of that is in the waste space, the waste regime, where DEFRA is looking to introduce digital waste tracking. That has been due to be rolled out for a while, has been pushed back a couple of times, currently due to be rolled out later this year. It does remain to be seen whether a workable, practicable solution can be delivered within that time scale. And I know there are doubts about that, but I think a fundamental point is that the intent is there, the ambition is there, remains to be seen when exactly when it will be achieved, but it is a drive towards data, sensible use of IT and transparency, which has to be good.

Michael Barlow (14:45)

Yeah, no, I think that’s good point. And you can see them grappling with it. I remain to be, you know, I’ll be pleasantly surprised when I see that it’s all out and working. But I know also from talking to clients that they’re concerned about the risks of going too far and too fast on this digital route, because whilst the points that Simon made about data and the importance of data are key, I think there are risks with huge amounts of data being on systems that aren’t that robust or that the systems that are developed are not good enough to cope with technical, you know, businesses that are really technical, that’ve got a lot of IP and other information in there and having the ability to upload their data in a way that is both accurate and effective. And so the systems need to be developed with that in mind.

Sarah, so turning to you then, is there a theme coming out of all of this that you’d like to develop your thinking on?

Sarah Sackville Hamilton (15:49)

Yeah, the one that most piqued my interest, because it is really pertinent to an area where I’m doing a lot of work at the moment, is the fourth of the strategic themes that you mentioned at the start, Mike, that came out of the Corry review, which is to unlock the flow of private sector green finance to support nature restoration whilst better targeting public sector finance. Of the 29 recommendations that came out of the Corry review, five of them fall within that overarching strategic theme. But I wanted today just to pick out one of them, which is recommendation 21. And the issue that that recommendation is grappling with is that in order for us to be meeting the nature recovery targets that have been set in the Environment Act and in the environmental improvement plan that you mentioned at the start, Mike, really significant amounts of private finance are going to need to be mobilised.

Corry in his review identified various barriers to the mobilisation of that private investment. And those include concerns about complexity of the various nature markets, about market oversight, about governance, and also about integrity. And each of those concerns really chimes with what I and the rest of our team have been seeing through our discussions with the various stakeholders in carbon and nature markets, particularly in the voluntary markets where participation isn’t driven by a compliance obligation. Those voluntary markets really do face a challenge that they’ve developed ahead of regulation and without regulatory oversight or governance, there can be challenges to invest or trust in the environmental projects or products that they’re being asked to invest in.

Businesses fundamentally need clarity and confidence to invest. So increasing trust in voluntary carbon and nature markets is really key. And that’s the issue that Corry has identified. The recommendation that he made was that DEFRA should explore launching a, what he calls a nature market accelerator, which would be a small focused and industry funded body to provide independent assurance on governance and on standardised processes that are needed to guide and to protect the interests of various stakeholders in nature market transactions. So looking both at suppliers of nature-based projects, investors in biodiversity and ecosystem services, and then also other intermediaries and the third parties that are involved in trading transactions.

What Corry noted was that clear market rules and governance are going to be essential for delivering public goods and services. And that also potentially that nature market accelerator could have further functions to drive the market. For example, more hands-on intervention, for example, identifying projects and also matching projects to investors. So some interesting ideas.

Michael Barlow (18:52)

Yeah, and I know that’s something that you and I have talked about over the last few years, we’ve been developing that bit of the practice. So I think the recommendation is interesting. Is there any progress?

Sarah Sackville Hamilton (19:06)

Yeah, I think what I would say is that at the time of the publication of the Corry review, so April 2025, there was already a UK Nature Accelerator programme, which is managed by Finance Earth and helps projects prepare for institutional investment via the UK Nature Impact Fund. That fund had seed investment from DEFRA.

So there is already a sort of a market accelerator in this space. I think we have to assume that that’s not exactly what Corry meant because his recommendation was for new action to be taken. Around the same time as publication of the Corry review, the government launched a consultation which was called Voluntary Carbon and Nature Markets: Raising Integrity. And that consultation looks at many facets of those markets, but included within it, one of the express questions that consultees are asked to respond on was their views on the requirements for effective governance and the appropriate degree of regulatory oversight that’s appropriate to support voluntary carbon and nature markets.

The consultation put forward a range of different governance and regulation models, different types of additional regulatory oversight that might be valuable. For example, a market ombudsman function, a market infrastructure body, mechanisms for joint regulatory working by existing regulatory bodies or potentially a dedicated regulatory body for carbon and nature markets. And then the sort of the last example that was given in the consultation was a Corry-esque nature market accelerator. So that consultation closed in July last year and the public information currently available is that feedback is being considered and the government response is still awaited.

We did get a bit more when the environmental improvement plan was published in December, which confirmed that DEFRA is intending to set out next steps later this year on its plans to streamline and strengthen nature market governance following that consultation and also expressly referencing the Corry review. So I think in summary, progress is that it is clearly on the table being considered. There’s a lot of work going on to work out exactly what governance and regulation needs to look like for these nascent carbon and nature markets, whether that is going to be through a nature market accelerator remains to be seen. And yeah, that’s something we’re going to be keeping a really close eye on this year as we get more information coming out.

Michael Barlow (21:53)

Thank you, Sarah. That’s really informative. And I think that is a key issue to take forward if we’re going to develop or protect the environment as part of the growth strategy. I think we have to get all of that right. There are a few other themes in Corry, which you can probably put into a sort of box around culture, and they’re sort of slightly softer issues. And Simon, do you want to pick up on any of those?

Simon Tilling (22:19)

Yeah, there are, there’s a couple I think that are worth digging into here. One is that Corry does pick up on consistency. And to a certain extent, there’s thousands of officers working on complex regulatory decisions. You’re always going to have a degree of variation, but you do need to have consistency and fairness. And I think some of the themes we see that clients are frustrated by is we can see sometimes quite significant regional variation. So that’s really about the corporate approach, the culture in those particular areas rather than individuals. And we do also see that clearly there is a skills gap. Another point that the Dan Corry review picked up, there’s a lot of juniors coming through, quite a lot of expertise has left the regulated bodies.

And I think, of course, that also makes it challenging in terms of achieving consistency. And let’s be fair, some of these decisions, they do need the exercise of judgment. They’re not binary, yes, no decisions. But if you’re going to allow the system to have that flexibility, you do need systems built in place to make sure that there is that fairness and consistency between regions, between sectors, and to really give the whole of regulated industry that confidence.

But there’s sort of interesting, slightly opposite thought also coming through from Dan Corry which is the need to challenge the risk-averse culture. Now, that’s absolutely right. It is easier for regulators to say no rather than yes. And maybe the legal profession may be slightly responsible for some of that in that there’s lots of litigation around regulatory decisions and the regulators clearly feel that they have to make their decisions in accordance with all of the boxes they need to tick. But as the Dan Corry review picks out, we’re not going to regulate our way into the future. We need to have innovation. We need to have an innovation in regulation and that does need a cultural change. As has already been mentioned, we’ve got this concept of constrained discretion.

If the regulators can see this is a good outcome, but the system I’ve got doesn’t quite allow us to get there, then we should flex the system to get to the good outcome. We shouldn’t automatically say, okay, the system says no, so our hands are tied on this. So this constrained discretion, I think, is a really good idea. A regulatory sandbox is something else that’s been talked about, which is some safe space outside of the strict regulation to experiment with different ways of doing things so that we can all learn. My question, I think, is how are you going to reconcile that more innovative constrained discretion with also consistency and making sure you seem to be fair and consistent? That is a tension. It’s not insurmountable. We just need to acknowledge that that’s there with the regulators, know when the constraint discretion is being used and why, and know why decisions are being made, which will then help us have the consistency and above all else fairness, which is what we really want to see and what industry really wants to see.

Michael Barlow (25:29)

Yeah, and I think it sort of leads me on to one of my bug bears, which is around guidance, you know, Corry picks up on that as well. And, you know, when we’re training junior lawyers, you know, we say, start with the legislation, but there is always guidance. And I think the difficulty is when the guidance doesn’t reflect the legal position, which creates complexity, which creates difficulty for the regulated business, which doesn’t drive the consistent thing you’re talking about, Simon, it just creates real challenges. And part of that is leads back to that sort of maybe lack of skills. And I think the whole system needs to be tightened up, which would maybe solve some of those problems that you’re talking about there. Sarah, I don’t know if you’ve got any thoughts on other things that would tackle these sort of wider issues.

Sarah Sackville Hamilton (26:26)

Yeah, think that the sort of reflecting on the discussion we’ve just been having, I think what shines through for me is that in recent years, a lot of the regulatory change that we’ve seen has been probably best characterised as a reactive approach to short term, high profile issues, which means that you have got potentially not that longer term view, that more outcomes focused view on what environmental regulation and governance need to look like in order for us to not just react to the political hot topic of the day, but to achieve the sort of, I don’t really want to use the word mission, but achieve the mission, which I think the Corry review is very useful for framing things in that way and saying sort of well it’s not calling for a major institutional change or a bonfire of regulation it is recommending what it calls a radical repositioning and repurposing of environmental regulation. It’s calling for a system level impact to transform the landscape and the culture of those that are operating within it. Aiming to, I think the fundamental aim is to create a system that’s becoming a partner and a promoter for achievement of sustainable economic growth rather than an obstacle and at the same time while delivering the fundamental and necessary improvements to our natural world. So I think the scene setting done by that review is spot on in terms of where we need to be moving and the focus on outcomes rather than the short term reactive issues.

And for me, really remains to be seen how in parallel with doing the firefighting of those short term issues, this more strategic longer term view on what our regulatory and governance framework needs to look like is in practice. And I think that the 29 recommendations coming out of the Corry review are a great starting point and it’s going to be fascinating to see how those are engaged with over this year and beyond.

Michael Barlow (28:35)

Yeah, well, I think you’ve summed it up brilliantly there. So we could probably talk about this for the next couple of hours. But I think that’s probably a really good place to draw this to an end. I think probably if I was going to summarise it, not as well as you did, Sarah, but maybe more briefly, know, there’s clearly there’s big challenges there. Clearly now is the right time to be trying to address them. There are some good thinking about what the potential ways forward to deal with those issues is. And I think it really, we wait and see how that goes forward. it’s something that we’re going to all have to keep an eye on. And it’s going to be challenging times for not just environmental lawyers, but those that are in regulated businesses.

So just leaves it to me to say thank you very much to both Simon and Sarah for your contributions.

Simon Tilling (29:35)

Thank you, Mike. Great to be here. Really enjoyed it.

Sarah Sackville Hamilton (29:37)

Yeah, thanks Mike.

Michael Barlow (29:43)

So we also thank you for listening to this episode of Environment Matters. We hope you enjoyed it. This and all of our other podcasts are available on Apple, Spotify, or wherever you listen to your podcasts. And please do look out for our future episodes, which we’re looking to produce every couple of months over the next year or so. If you’d like to know any more about our environmental energy teams or how our experts can work with you, please do contact me or any of the rest of the team via our website.