State of nature

The SEPA chief executive on how the natural environment supports Scotland’s economy

The idea that the environment, economy and human health and wellbeing are interdependent may be nothing new. Put simply, without a well-functioning, healthy natural environment, there would be no economy.

In fact a recent report by The Economics of Ecosystems and Biodiversity – a global initiative focused on drawing attention to the economic benefits of biodiversity – says as much,  finding that although nature underpins human standards of living, it is in danger of being lost as freely given services of nature are not being valued.

Part of the job of protecting Scotland’s natural environment then, means drawing a line between the importance of environmental protection and its value to Scotland’s economy.

To James Curran, Chief Executive of the Scottish Environment Protection Agency (SEPA), the economy and the environment are intrinsically linked.

“From our perspective as an environmental regulator, the benefits of environmental regulation have never been as well identified and valued as some of the inevitable costs of regulation. Within the agency, we have been doing a lot of thinking about eco-system services, which are the free provisions from nature which every one of us, in our everyday lives and in our everyday businesses, depend on. So these are simple things like provision of water, provision of food, provision of clean air, the provision of rivers into which you can dilute and disperse waste, the provision of the atmosphere. But the other well known oft-quoted example is the importance of pollination, with bees and insects estimated to be worth about half a billion a year to the UK.”

The idea of putting a monetary value on the environment is obviously useful in making the case to protect it, even if the method for quantifying the value of a river or having clean air may not be immediately obvious.

As a way of looking at the environment, Curran says it is becoming more common: “There are recognised international methods for putting a monetary valuation on the worth of these so-called free services and globally their value is huge – they are estimated to be double the total value of global GDP. Here in Scotland we have valued our ecosystem services at being worth £23 billion per year at the very least – and even that estimate does not capture everything. 

“Now from that you can do some quite interesting calculations, because the Scottish Government budget says it is providing £130 million per year for environmental protection, which goes to us and SNH and a few others. So £130 million is being spent on protecting something with an annual value of £23 billion, which is 0.5 per cent. Imagine you rent out your own home and you have to insure it – the cost of the insurance every year relative to the income you could generate could be around five per cent. If you regard environmental protection as an insurance policy, making sure that the ecosystem provides all the things we need to live well in Scotland, then it is really cheap insurance policy – it is very, very good value.”

But beyond reframing the way we value nature, Curran also highlights how regulations can help business to perform better.

“Here in Scotland we have valued our ecosystem services at being worth £23 billion per year at the very least – and even that estimate does not capture everything”

“OECD research shows that environmental regulation actually promotes productivity, particularly in good, well managed businesses. It is often very difficult to capture the benefits of intervention from environmental regulation, from promoting productivity and innovation to the social benefits. For example, an LSE study found that the Clean Air Act, from when it was introduced in the USA, produced 100 times more benefits in terms of human health than it actually cost businesses. You have always got to work out that balance between the multiple benefits that can spin out of that type of intervention versus the often very tangible costs. But in good, well-managed businesses that are ahead of the game and ambitious, environmental regulation seems to do nothing but promote productivity.” 

And beyond the boost it can give businesses in terms of productivity, as ethics begin to play a bigger part in consumer decision-making, businesses that act in a responsible, environmentally conscious manner may also get a boost in terms of image.

“Most businesses say that the mantra of maximising shareholder value, of making it all about the bottom line, is far too simplistic and that progressive businesses need to adapt to the next generation’s views if they are to remain competitive, and the next generation is much more socially and environmentally minded than the previous one. 

“So there is lots of gathering evidence that environmental regulation causes good business to innovate, and to innovate particularly in clean, efficient and future proof technologies – all of which add to productivity, to competitiveness and therefore to profitability and long-term employment in Scotland.”

SEPA, as one might expect, has long realised the importance of the environment to the economy, and the new Regulatory Reform Act, which contains the agency’s statutory purpose, reflects that concern.

Curran says: “It is something that we always believed within SEPA, that we have contributed to sustainable, long lasting economic development in Scotland and for that reason we are really delighted that it has been recognised in the Regulatory Reform Act. I mean, protecting the environment is core business for us but the new parts, covering the sustainable management of natural resources, is clearly a reference to economic growth respecting environmental limits and in doing so – and this is a bit we have always believed we do but was not previously formally recognised – looking after the health and wellbeing of the people of Scotland.”

Curran describes two extremes from within the spectrum of the work SEPA does in protecting Scotland’s environment. On the one hand, there are businesses which are leading the way in growing through environmentally responsible strategies. 

“One example is the Scotch whisky industry, which we would regard as an environmental champion. Through its trade body, the Scotch Whisky Association, the industry has been doing brilliant work as a whole sector through its environment strategy, which is really ambitious, to encourage each other to improve their sustainability and environmental performance. They have been doing fantastically well in terms of creating a more low carbon economy and using what would traditionally have been waste and turning it into new resources. And actually, they have improved the competitiveness and profitability of their businesses in doing so, and used it as a global marketing tool. So there are genuinely environmental champions and they have been doing extremely well since launching the sustainability strategy in 2009.”

Meanwhile, as SEPA works to support businesses like those in the whisky industry, it is also tasked with trying to clamp down on criminal elements at the other end of the spectrum.

He says: “We are very concerned about serious organised crime penetrating into the waste industry. We are determined to use every means available to squeeze that criminal element out of the sector because by flouting numerous pieces of legislation, including avoidance of the Landfill Tax and also avoidance of the regulation of the way waste should be managed, transported, transferred and disposed of, they are putting communities at risk, they are damaging the environment and they are avoiding costs – which undercuts the genuine, decent, honest waste industry and waste sector. They are jeopardising their business. So we are protecting the business interests of genuine companies by hammering down on the criminal element, and obviously we are doing that in conjunction with Police Scotland.” 

Curran says that the Regulatory Reform Act will enhance SEPA’s ability to support and encourage responsible businesses in becoming ‘environmental champions’, while give also giving it powers to cut out the criminal element. In terms of supporting the good guys, part of the new regulations are aimed at making adherence to environmental regulations simpler.

“We have looked at it very much from the customer’s perspective and we have listened a lot, both in formal consultations but also through the fact we are out and about across the country every day listening to business as we speak to them about environmental issues. We have listened over many years to their feedback and the Regulatory Reform Act is allowing us to take a much more proportional approach to the way we regulate business activities. It will allow a much more straightforward approach, so that if a company is engaged in low risk activities then the responsibility is with companies. But for higher risk activities, we will have a banded approach, with customised licenses that are much more flexible.”

He adds: “The environment is always changing, technology and business is always changing and we need to flex with that so that we can intervene where there are genuine environmental risks, rather than the old-fashioned image of a bureaucratic regulator; we want to be much more responsive so we can intervene where we deliver the best possible value for Scotland”