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Trialling regulating entire companies and offsets - BR0110

The Coalition Government aims to reduce unnecessarily burdensome and detailed regulation and to be the
greenest government in history.
Smart regulatory reform can help deliver these aims by ensuring that the effort and resources devoted to:
�� process is reduced, and
�� outcomes is increased.
This project will help DEFRA to explore two newer ways of doing just this.
1: Regulating Entire Companies
One factor that creates red tape, especially for large companies, is being subject to the requirements of multiple
regulations administered by multiple regulators.
Businesses in this situation are typically subject to multiple control instruments and processes (eg. licences,
notices, reporting etc). This has made sense as it has enabled different regulatory agencies to ensure that
companies meet specific obligations. Is it now possible to streamline a company’s various regulatory obligations
into fewer processes? Can this save costs for both government and business and give the community increased
confidence? Can it support business innovation to drive greener outcomes, giving the economy a competitive
Trials will be conducted with two companies to see if all their regulatory obligations can be combined into a single
‘regulatory compact’ which has full legal force. It would streamline paperwork dramatically and allow for
regulatory priorities and timelines to be set more clearly through negotiation involving senior representatives of the
regulatory agencies, the companies and civil society.
The trials will generate new data on the opportunities and barriers to this type of reform. Findings will range from
more simple issues such as consolidation of data reporting requirements through to more challenging reforms
such as consolidation of obligations and priority setting that supports business innovation.
Reform 2: Offsets
An ‘offset’ is an action through which a regulated entity meets its obligations by reducing environmental impact in
a different way to the measures specified in the regulations.
For example, a company could re-vegetate and stabilise the banks of a river to prevent erosion and pollution
runoff in preference to reducing its own pollution discharges. This may be cheaper for the company and do more
to improve river quality.
Offsets have already been used in various forms in different jurisdictions, however their potential is largely
untapped. Taking offsets a step further, ‘overarching offsets laws’ could cover all regulations and allow a
regulated entity to suggest an alternative offset to that specified by an individual regulatory requirement. Whereas
most offset schemes relate to ‘like-for-like’ only (e.g. investing in one nitrogen reducing activity in preference to
another), this reform opens up the possibility of a regulated company negotiating a wide range of compliance
requirements and offsets with its regulatory agencies.
More ambitious, albeit prudent, use of offsets has the potential to generate major outcomes for the community at
much lower cost to business.
This project will generate case studies of how more expansive offset schemes could be established, the type of
environmental gains they can create and the red tape reduction costs they can deliver. It will highlight the
opportunities and barriers to using offsets in the current UK context.
As stated in Defra’s project specification, Project 3 proposals should “investigate high-potential ideas”.
Accordingly, the broad aim of this proposal is to investigate how a ‘negotiated partnership’ approach between
regulators, regulated businesses and civil society can drive significant reductions in red tape, spark genuine
business innovation for green growth and increase public transparency and accountability. This aim will be
pursued by exploring two specific regulatory reforms (Entity Regulation and Offsets) to see how they might be
deployed in more ambitious ways than they previously have in the UK and jurisdictions around the world.
In delivering upon this general aim, the project team will not be conducting detailed surveys. Instead, two
regulated companies will be involved in facilitated workshops to explore the potential of a different negotiated
way of approaching regulatory outcomes, using the two instruments (from Entity Regulation and Offsets) to
generate powerful case study-based evidence and insights.
In using this approach, the project will deliver upon the following specific evidence objectives:
Specific Evidence Objective Interdependencies
i. Establish and agree target companies, regulatory
agencies, issues and any exclusions.
ii. Establish world’s best practice in Entity
Regulation and Offsets.
This research base will provide an
evidence baseline to inform the other
two objectives.
iii. Engage with two businesses to identify some
potential uses of Entity Regulation and Offsets,
especially in (a) reducing administrative and
compliance burdens and (b) sparking business
Research objective (ii) will inform the
work on this objective.
iv. Provide (a) specific findings about the potential of
using Entity Regulation and Offsets and (b)
specific recommendations about how reform
opportunities could be pursued.
Research objective (ii) will inform the
work on this objective. It will also
depend on the successful completion
of research objective (iii).
Time-Scale and Cost
From: 2011

To: 2012

Cost: £29,600
Contractor / Funded Organisations
W S P Ltd (WSP)
Better Regulation              
Regulatory policy