House of Commons - Environmental Audit

Select Committee on Environmental Audit Second Report

Introduction

1. On 22 July 2004, the Sub-committee on Environmental Crime announced that it would be holding an inquiry into Corporate Environmental Crime. This was the fourth, and last, in a series of inquiries which has focused on environmental crime. It was preceded by inquiries into Environmental Crime and the Courts.[1] Fly-tipping, Fly-posting, Litter, Graffiti and Noise,[2] and Wildlife Crime[3].

2. In its press release, the Sub-committee expressed a desire to hear responses to the following questions:

Do the bodies responsible for investigating and prosecuting corporate environmental crime have sufficient powers and resources to do so? Are they able to conduct robust and effective investigations into the source of the crime and mount effective prosecutions that target those who are responsible for the crime, as well as the person actually committing it?
Are the penalties for corporate environmental offences adequate? If not, how can penalties and punishments be better targeted to ensure that the criminal justice system is effective in acting as a deterrent?
What alternatives, outside the criminal justice system, should be considered for dealing with corporate environmental offences in order to reduce environmental harm by business? Should there be greater use of alternative means of punishment, such as the use of prohibition notices, civil penalties and the confiscation of company assets?
Are there too many environmental duties and responsibilities on corporate bodies which serve only to stifle their ability to compete in the market place? Are the laws and regulations applied uniformly across the business sector?
Is the Government doing enough to educate the business sector in terms of their legal obligations to environmental issues which impact on their business? Is there sufficient dialogue and co-operation across Government and the business community to ensure that best practice, for example, can be shared?

As with previous Reports based upon the work of the Sub-committee, this Report considers only the situation in England and Wales.

3. Eighteen memoranda were received, some of which were supplementary to evidence sessions. Oral evidence was heard from seven individuals or organisations. We are grateful for all the evidence given to the Sub-committee during this inquiry. The Sub-committee would also like to extend its thanks to Mr Paul Stookes,[4] who has acted as Specialist Adviser to the Sub-committee throughout the course of the four inquiries into Environmental Crime.

4. There is no doubt that much of the evidence we received for this inquiry echoed that provided for both Environmental Crime and the Courts[5], and Fly-tipping, Fly-posting, Litter, Graffiti and Noise.[6] We make no apology for re-visiting some of the issues raised in those two inquiries. We also take the opportunity to reinforce some of the key recommendations we made as a result of those inquiries. Some of the areas touched on also have particular resonance in the wake of the Government's introduction of the Clean Neighbourhoods and Environment Bill, which we consider a timely piece of legislation. Although that Bill only deals with a few areas connected to corporate environmental crime, in some instances, for example with regard to fly-posting, it represents a very positive move in the right direction.

5. We felt that it was important that this inquiry examined in more detail than its predecessors the reasons why corporate environmental crime is committed. For the purposes of this inquiry, we were fortunate to be able to take oral evidence from the Environment Agency, the Environmental Services Association (ESA), SITA, the Federation of Small Businesses (FSB), Thames Water, Anglian Water and the Ministry of Sound. We felt that these witnesses represented the diverse nature of those who find themselves, for whatever reason and to whatever degree, contravening environmental law or regulations. They almost all also represented businesses with good and bad stories to tell about how they, and others in their areas of business, were working to meet the challenge of marrying the need to be environmentally responsible whilst running businesses for profit.

What is corporate environmental crime?

6. During the course of this inquiry, and indeed the preceding three Sub-committee inquiries into environmental crime, it has become clear that, with varying degrees of seriousness, crimes impacting on the environment are happening all the time and are being committed, not only by individuals, but by businesses, organisations and other corporate bodies. This inquiry took a broad and practical approach to the term 'corporate environmental crime', which may be defined as any environmental crime that has been committed by any corporate body. The sub-committee was concerned not to be tied to any formal or legal definition of what was a company or a legal body so this could include, among other things, a sole trader, a partnership, limited company or Plc. The importance of the inquiry was to hear from a range of corporate bodies and their representatives on the present environmental criminal justice system, while at the same time recognising that an environmental sentence for a corporate body is at present limited to a fine. Also, when we refer to corporate environmental crime we are talking about quite a varied range of actions. This can include offences as wide-ranging as, for example, fly-tipping (the illegal dumping of waste), fly-posting (plastering public spaces with advertising posters which blight the area), and pollution incidents, whether that be as a result of chemicals, farm slurry or general sewage waste, being discharged into the watercourse. During our inquiry into Wildlife Crime[7] we saw evidence of environmental crimes being committed within the building and construction industry and by local authorities. There are many more, certainly too many to list here.

7. The reasons for committing corporate environmental crimes are also varied. The crime may occur because the business concerned is ignorant of its environmental obligations. It may also occur all too often as a result of negligent behaviour, for example, where businesses are poorly managed, staff are inadequately trained or equipment and infrastructure has not been maintained to the required standard, allowing a pollution incident to occur. But perhaps the most depressing cause is when corporate environmental crime is the result of a deliberate and intentional illegal act, a decision taken in the full knowledge that the act is illegal and will result in environmental harm. During the course of this inquiry we have seen evidence of environmental crime occurring for all of these reasons.

The scale of the problem - an overview

8. The Environment Agency's (hereafter the Agency) "Spotlight Report 2003"[8], contains "good news" and "disappointing news", the latter of which is, in fact, bad news. The good news is that, in 2003, serious pollution incidents, those classified as category 1 and 2, dropped by 15% over the previous year. There were, in fact, 1,250 such serious incidents, 613 of which were caused by industry; this too represented a drop of 12%. Serious pollution incidents caused by the farming industry and waste management sector also reduced by a quarter. At the same time, the Agency reports that more sites were well-managed and waste recovery was improving. However, the "disappointing news" makes grim reading. Twenty-eight industrial sites were judged by the Agency to have "very poor" management standards in 2003 and yet there had been none in 2002. Even worse was the news that not only were some businesses harming the environment, but a number were repeat offenders. The Agency said:

"Serious pollution incidents caused by the water industry increased by 23 per cent this year and it now causes more than any other sector. Incidents from the construction and metals sector also increased. We prosecuted 266 companies this year, resulting in total fines of £2, 237, 667. Of these, 61 were fined large amounts (more than £10,000). At £676,500, the waste industry received the largest fines and five of the 10 highest fines were awarded against waste businesses."[9]

In fact, with just one exception, all of the companies on the Agency's list of top ten highest fines in 2003 were waste and water companies. Water companies were also well-represented in the group of eleven companies named as repeat offenders. In addition to this, the Agency reports that forty-two of the sixty-one businesses which incurred large fines in 2003 did so for multiple offences.

9. Of course, the "Spotlight Report" provided by the Agency can only give us a picture of those incidents the Agency itself regulates and is alerted to. But what of the sectors not regulated by, or simply not visible to, the Agency? We were particularly concerned by the evidence we took from Mr Mike Walker of the Environmental Services Association (ESA) and Mr Per-Anders Hjort, Managing Director of SITA-UK.[10] Referring to the changes which resulted from the ban on co-disposal of hazardous waste with non-hazardous waste,[11] which came into force in July of 2004, Mr Walker expressed concern about how, and where, such waste was now being disposed of. He told us,

"There are great difficulties. What we do know is that our members would have expected greater amounts of hazardous waste to go through their treatment facilities following the changes both this year and two years ago. Liquid hazardous waste was banned from landfills in July 2002. There has been no increase in liquid hazardous waste going through treatment facilities since. The question is: where has that gone? Similarly, following the ban on co-disposal this year, there are reports that hazardous waste is not going to hazardous waste landfills. Where is it going? Whilst nobody can say how much hazardous waste has been illegally dumped, it is certain that some of it is missing, has fallen out of the system, as it were."[12]

10. Nor were we reassured by Mr Hjort who told us that there were areas of the country where SITA-UK no longer bothered to bid for contracts or make investments because it could not compete on price. Whilst Mr Hjort didn't discount the fact that it may be that SITA-UK was more expensive than some of the companies against which it might be bidding, we thought it telling that he also said that, at the prices being quoted by others in the market, his "gut feeling is that the price level which is prevailing in some parts of the country is not the right price for treating waste in the correct way."[13]

11. The matter of the disappearing waste, and the possibility that what waste there was, was being disposed of in a far from safe manner, was raised with Elliot Morley, Minister of State, Department for Environment, Food and Rural Affairs, when we took evidence from him on 20 October 2004.[14] Mr Morley outlined two reasons which he said explained why some companies had not seen an increase in business following the co-disposal ban. First, there was the fact that many businesses had taken the decision to "bring forward hazardous waste disposal before the July deadline;"[15] second, because of increasing costs many companies have looked at how they can minimise and treat their own hazardous waste on site. As to the standard of waste disposal, the Minister hinted at some targeted enforcement plans which were being developed which would "send a very clear message to the whole sector that illegal activity will not be tolerated and we plan to make that a very high profile affair".[16] The Environment Agency also suggested that certain enforcement cases they were currently working on would have an impact on this area of activity. We look forward to seeing the outcome of the waste sector related enforcement cases currently being put together by the Environment Agency. We remain concerned, however, that there appears to be a discrepancy between what organisations like ESA and SITA are telling us they believe is happening with waste following the co-disposal ban, and the position described by DEFRA.

The water companies

12. The water companies represent a very interesting conundrum. We are all, without choice, their customers. We rely on them to perform the unseen and largely unrecognised tasks that ensure that when we turn on the tap we get clean, safe water and when we empty the bath or flush the toilet, that that waste water is safely disposed of. The nature of their business means that they are directly linked to the environment. Any action they take, or indeed in some instances, any inaction on their part, can have a dramatic and damaging impact on the environment. Mr Roy Pointer, Chief Executive of Anglian Water referred to water companies as "the thin green line between the effects of society and the environment."[17] But a water company is, first and foremost, a business. It has shareholders who expect to see returns on their investment.

13. The sub-committee took oral evidence from two of the UK's water companies, Anglian Water and Thames Water. They are representative of an industry which is responsible for a large workforce and a massive, and in large part aging, water and sewerage infrastructure. None of the water companies falls into the category of the ignorant polluter. It is a heavily regulated industry which is under intense scrutiny from the Agency and Ofwat, for example, and the companies are well-versed in their environmental obligations. Nor do we believe that the water companies are in general careless or negligent. They, perhaps more than any other business, are vulnerable to public perception. During oral evidence both companies were at pains to stress their commitment to the environment and we have no reason to disbelieve them. And yet, the water companies continue to cause pollution incidents. Both Thames Water and Anglian Water feature in the "Spotlight on Business" both as repeat offenders and as the recipients of some of the top ten highest fines in 2003.

14. In fact, one does not need to look far for possible reasons for the water companies' environmental record. Thames Water, for example, has 13 million customers across London and the Thames Valley for whom it provides waste water facilities. They are responsible for 349 sewerage treatment works, 42,000 miles of sewerage network and 2,246 sewage pumping stations. Anglian Water collects waste from domestic and industrial premises in an area covering 20% of England and Wales. It has 21,749 miles of sewers, 1,077 wastewater treatment works and 4,404 wastewater pumping stations. It too features in the same top ten as Thames Water and is also named as a repeat offender.

15. The water companies, in their evidence, pointed to the fact that the very nature of their business means that they have no control over what goes into their systems when it comes to waste but that they still have to treat what comes out. Thames Water also pointed to the fact that large parts of the system they manage, certainly in London, were built in the Victorian era. As Mr Sexton pointed out, this Victorian system is actually doing the job it was designed to do and part of that system provides for overflows into the Thames. It is simply not designed to cope with the demands placed upon it in the twenty first century and things can only get worse. When asked about an incident on 3 August 2004, when some 600,000 tonnes of raw sewage was discharged into the Thames, and the likelihood that such incidents would continue, Mr Sexton's reply was unequivocal,

"Yes [they] will […] The Thames Tideway suffers from over 50 overflows to the tidal river. That is how the system was designed in Victorian times, and it is how it still operates today. Those discharges are legally made and it is exactly how that system is designed to operate."[18]

Irrespective of any mitigating factors which pertain to some of the pollution incidents resulting from Thames Water's activities, and regardless of the apparent legality of the discharges into the Thames, we are compelled to express our abhorrence of this legitimised pollution and the depressing attitude with which it is accepted.

16. A water company is, first and foremost, a business: if it is allowed to operate in a particular way, which is in fact damaging to the environment but at the same time perfectly legal and profitable, then we should not be surprised when it does so. This, in effect, creates a vicious circle. Many of the sewerage systems around the UK are old and dilapidated and would be enormously expensive to upgrade. If the water company also has what is tantamount to a 'get-out' clause because the system is operating as it was designed to do, even when this means sewage entering water-courses, what results is an environmental threat sufficiently intractable that no-one will tackle it head on. This is clearly unsatisfactory.

17. We were particularly concerned to hear that the problems caused by the age of the sewerage and drainage systems are exacerbated by the weather and by the increase in the development of land which has not been properly supported by improvements in infrastructure. With this in mind, the current prospect of so much new housing in the East and South East, possibly without any improvements to those systems, rings loud warning bells. When asked about the possible impact of climate change and increasingly inclement weather, Mr Sexton told us,

"The increasing intensity of short duration storms inevitably puts a load on the sewerage system. There are other factors as well. The urbanisation of London, with much less green areas for run-offs so that the water goes into the sewers and peaks so that it arrives at the same time, and the increase in population, are putting increasing loads onto the sewerage system. It needs a lot of investment to make sure it is upgraded to what I believe is right and proper for the 21^st Century."[19]

18. A debate in Westminster Hall on 18 January 2005 provided a very graphic illustration of this problem. Dr Vincent Cable, MP for Twickenham, was highlighting the problems caused by the seventy year old sewage works at Mogden. In fact, there are three problems caused by the works at Mogden, which are: noxious odours, mosquitos, and sewage overflow into the River Thames, particularly at times of high rainfall. These are, without doubt, dire and unacceptable by-products of the works and so it was particularly welcome to hear assurances from Elliot Morley MP, during the debate, that action was being taken. We welcome the news that Thames Water, working with Ofwat, have developed a business plan to upgrade not just the sewage works at Mogden but also the other three major works identified as significant contributors to the problem of sewage overflow into the River Thames.

19. However, the problem of sewage discharges and overflows into the Thames has been around for some considerable time and we would not want this, albeit welcome, work planned by Thames Water to be seen as the end of the matter. A combined study group, funded by Ofwat and including Thames Water, DEFRA and GLA, was set up in 2000 to consider the whole issue of sewage overflows into the Thames. It concluded early in 2004 that the best solution to sewage discharges and overflows into the river would be to construct a large tunnel or pipe, to be built under London and the Thames, and which would intercept overflows and divert them via existing treatment works at Beckton and Crossness. The cost of such a project was estimated at £2 billion, a figure that even five years ago we believe would not have been realistic. Whilst this is a significant sum, it is not impossible when set in context and compared against the turn-over of the water companies. The likely timescale for delivering such a project is also daunting with perhaps four to five years to agree a detailed design, acquire the land and gain planning permissions, and a further eight to ten years to construct the tunnel itself. However, according to Thames Water, the plan appears to have stalled awaiting a decision by Ministers.

20. Until the debate in Westminster Hall on 18 January 2005 it was not clear to us whether Ministers were currently giving any consideration to agreeing the plan. Referring to the question of what to do about the Thames tideway, Elliot Morley said,

"The working group examining the Thames tideway has been considering whether there are quicker and potentially cheaper ways of dealing with combined sewage overflows in the long term. In the end, there may not be and, in the final analysis, the tideway scheme may be the best option. I do not rule that out. I am waiting for the group's report at the end of this month or the beginning of next month, and we will make an evaluation based on it."

21. Whilst we now know that there is still some work being carried out on the Thames tideway proposals we are not particularly reassured that a decision will be reached in the near future. There is no doubt that agreeing and then implementing a long-term solution to the overflow and pollution problems afflicting the River Thames is going to involve making some tough decisions and significant investment. What is also clear is that, whether the decision is for a tunnel under London, or something else, the status quo cannot be allowed to remain. The likely timeframe for action set out by Thames, which appeared to be confirmed by Elliot Morley during the debate on the 18th January, means that a decision with regard to the proposed plans for a tunnel under London to alleviate the threat of continued and increasing sewage and waste overflows into the Thames must be made as a matter of some urgency and we would expect the Government to be able to let us know the outcome of their deliberations by the time it responds to this report.

Small and Medium-sized Enterprises (SMEs)

22. Again using data from the "Spotlight Report" (this was confirmed by the Environment Agency at oral evidence session[20]), of 3.7 million-or-so businesses in the UK, 99% of them are small and medium-sized enterprises (SMEs).[21] Despite their size, SMEs appear to be able to pack quite a punch when it comes to making a negative impact on the environment. The Agency reported that, "[SMEs] are responsible for up to 80% of all pollution incidents and more than 60% of the commercial and industrial waste produced in England and Wales".[22] The Agency was also able to shed some light on a possible cause for such poor environmental records amongst SMEs, stating that their research shows that, "70% [….] or 75% of SMEs are not actually aware of their environmental obligations,"[23] and "the majority of these businesses are also not aware of environmental legislation."[24]

23. The Agency's assessment of SMEs' general lack of knowledge with regard to their environmental obligations was not disputed by Mr Holbrow, Environment Committee Chairman of the Federation of Small Businesses (FSB), who, when asked about the poor environmental record of SMEs during an oral evidence session, said that, "although we do not condone breaking the law on these matters, a lot of it results from ignorance."[25] We will return to the matter of what SMEs should be expected to know, what they know in reality, and who should be bridging that gap by informing and educating them, later in this report.

24. There might also be included here those companies who, either through failure to adequately train their workforce, or maintain their equipment or infrastructure, allow environmental crimes to occur. One only has to look at the "In Court" section of the ENDS Report[26] to see that there are all too many examples of such incidents. In the September 2004 edition,[27] for example, there is a case relating to a diesel oil pollution incident where the company concerned had failed to maintain an underground pipe, which was linked to a large storage tank, to the extent that the pipe had not been treated against corrosion and nor had there been any test made of the pipe's viability since 1990. The result of this negligence was that almost 45,000 litres of fuel had escaped and polluted the ground water. The company was fined £20,000 and is paying for what is proving to be a lengthy and slow clean-up, with costs in the region of £350,000.

25. It would be wrong to conclude from this that all environmental crime committed by SMEs is as a result of ignorance and ignorance alone. Like all those who commit environmental crime, some SMEs will act negligently, and others deliberately, in ways which will be harmful to the environment and in direct contravention of their known legal obligations. Nor, for that matter, should we assume that all SMEs are acting unlawfully and without consideration for the environment. What is clear, however, is that a significant and unacceptable number of Small and Medium-sized Enterprises are responsible for an unacceptable level of environmental crime. It is incumbent upon all businesses, whatever their size, to insure that they operate within legal parameters.

The deliberate offender

26. Clearly, there are grey areas between ignorance and negligence and without being present when an environmental incident occurs, or the decision is taken to act in a particular way, it is very difficult to establish why the act occurred, let alone whether it was deliberate or not. This is one good reason why degree or extent of culpability is not weighed in most environmental crimes which are strict liability offences. There are, however, environmental offences which are clearly carried out deliberately, in full knowledge of the offence and the benefit to be gained from it. In our earlier report, Fly-tipping, Fly-posting, Litter, Graffiti and Noise[28] we reported that fly-posting was often seen as a cheap way of advertising, even if prosecuted and fined. However, during this inquiry the Sub-committee heard evidence from the Ministry of Sound in which it was made clear that the company was aware that by fly-posting they were acting illegally but that they had made a conscious decision to act in that way, not because they could not afford more legitimate means of advertising, but because, in their view, it was the most effective way of connecting with their customers. It was, they claimed, in the best interests of their business to continue to act illegally.

27. During the oral evidence session, the sub-committee was told by the Ministry of Sound's Company Secretary and Director, Mr Richard Holman, that they had, "stopped fly-posting for record sales almost entirely some time ago, so we have been using this method of marketing essentially for events."[29] The company continues to fly-post to publicise events taking place in their London club and it does so for purely economic reasons as Mr Holman went on to explain:

"The reason that we are still using fly-posting in relation to club events is simply because of its efficiency. It reaches the market that we are trying to reach - lots of students, lots of young people. I am sure they do watch television some of the time but they probably do not take note of the adverts and probably do not read newspapers very much. They probably do not plan their lives very far ahead, so fly-posting that they see two or three days before an event is going to be more effective. It has just been the way that club events have been marketed, certainly in our case, for nearly 15 years."[30]

28. Leaving aside the rather depressing picture painted by the Ministry of Sound of its typical customer, the idea that young people do not watch television and are not influenced by advertising will come as something of a shock to all those brand names which do use television, and cinema, advertising to target their young adult customers. In this respect, the idea that the Ministry of Sound, and companies like it, are somehow compelled to fly-post in order to reach its customer base is nonsense. We are pleased to see the stronger tools proposed to be given to local authorities in the Clean Neighbourhoods and Environment Bill, especially those which allow local authorities to recover the costs of removing fly-posting (and graffiti—increasingly being used for commercial advertising) and which extend the graffiti removal scheme currently in place to fly-posting. We also applaud the increase in the size of the fixed penalty notice for fly-posting offences, although the level of fine could be raised higher still.

1 Environmental Audit Committee, Sixth Report of Session 2003-04, Environmental Crime and the Courts, HC126 Back

2 Environmental Audit Committee, Ninth Report of Session 2003-04, Environmental Crime: Fly-tipping, Fly-posting, Litter, Graffiti and Noise, HC445 Back

3 Environmental Audit Committee, Twelfth Report of Session 2003-04, Wildlife Crime, HC605 Back

4 Mr Paul Stookes, LLB, MSc, CEnv, Solicitor and Chief Executive of the Environmental Law Foundation Back

5 Environmental Audit Committee, Sixth Report of Session 2003-04, Environmental Crime and the Courts, HC126 Back

6 Environmental Audit Committee, Ninth Report of Session 2003-04, Environmental Crime: Fly-tipping, Fly-posting, Litter, Graffiti and Noise, HC445 Back

7 Environmental Audit Committee, Twelfth Report of Session 2003-04, Wildlife Crime, HC605 Back

8 "Greener business is good business, Spotlight on business, Environmental performance in 2003", Environment Agency Back

9 "Greener business is good business, Spotlight on business, Environmental performance in 2003", Environment Agency Back

10 Ev22 Back

11 See Council Directive 99/31/EC Back

12 Ev22 Back