The Government will know it has a problem when the Daily Telegraph starts an environmental campaign. This time it is about raw sewage discharges into rivers to mark the launch of its Clean Rivers Campaign.

David Black – Ofwat  To: Chairs of Remuneration Committees for all regulated water and wastewater and water-only companies, copied to company board chairs 18 February 2022 Dear Committee Chair Performance related executive pay for 2021-22

You will be aware of the current high level of scrutiny and concern around water company performance amongst stakeholders and reflected widely in the media. Companies’ performance in some areas, most notably on the environment, risks eroding trust and confidence in the sector. We have seen these concerns voiced in many forums over the last twelve months, including in Parliament during the passage of the Environment Act 2021 and in the Environmental Audit Committee’s recent report, Water quality in rivers. The current focus may be largely on environmental performance in relation to wastewater but environmental performance is also important for water services.

We are close to the time when you and your remuneration committee will be determining incentive pay for executive directors for 2021-22 and setting 2022-23 targets. Our regulatory approach incentivises companies to deliver better outcomes for customers and the environment and penalises them where they fall short. We were also clear as part of the 2019 price review that performance related executive pay should demonstrate a substantial link to stretching performance delivery for customers which includes environmental commitments and obligations. We therefore expect companies to ensure that these outcomes are reflected in performance related pay for executive directors, including recognition of poor performance and any non-compliance with regulatory and statutory obligations.   Click here to read more

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