Performance report 2020/21

Over the following page our Chief Executive, Clare Pillman, offers her perspective of our performance this year and we outline the purpose of our organisation, our main roles and responsibilities, the key risks and issues we face, as well as explaining how we have managed delivery of our objectives this year.

Chief Executive’s statement

This year has tested us like no other. While we have risen to the challenge, it is clear that the ongoing impact of the last 12 months has placed untold pressures on our staff, our partners and our wider communities.

We are pleased that these accounts are our first not to be qualified since 2015/16. The issues that led to qualification were serious and the work to bring our timber sales up to the standards expected of a public body in the third decade of the 21st century has been challenging. We are in no way complacent about this area of our work, or the wider implications around contract and performance management, and whilst we believe that we have made good progress, it will take time to be reflected in the internal audit opinion. My Executive team and I are determined to continue the improvements, so that we can be – and be seen to be - the high performing organisation across all aspects of our work that we aim to be.

Against the backdrop of the rapidly changing pandemic, we have concentrated on protecting Wales’ environment and its communities - working quickly, creatively and efficiently to maintain priority services. From the outset we also maintained an outward focus, supporting our partners and others dealing with the crisis. From helping regulated businesses navigate the implications of the new and changing restrictions and regulations, to ensuring the continued supply of timber to keep business and deliveries open; and from quickly providing much needed grants to third sector environment organisations, to providing staff volunteers to aid Welsh Government and others. We also supported the vaccination programme through advice on vaccination types and waste categorisation and classification. We are pleased and proud to have played a part in the hugely important fight against Covid.

I am immensely appreciative of all our staff, particularly those on our incident teams and on rotas, who have worked tirelessly this year in our role as a Category 1 Responder, on behalf of Welsh Government. Despite Covid restrictions, we have continued to deal with the aftermath of some of the most severe storms seen in Wales for a generation. Adverse weather affected us during the summer and winter months too, with wildfires across Wales in May destroying large areas of forests and killing wildlife. Further flooding caused devastation to homes across the south east of Wales just before Christmas, and in February, we worked with our incident management partners to support residents in Skewen, where heavy rain led to a burst mineshaft. My thoughts remain with all of those affected during what was already a deeply difficult time.

The public enjoying their local environment during lockdown has increased the number of reports of pollution incidents we have dealt with. Even when these are not individually significant, they give us a picture of the state of our environment and the pressures of development and increasing human activity. We also dealt with the worst pollution incident since the Sea-Empress disaster a quarter of a century ago. August’s freight train derailment and fire in Llangennech saw a diesel spill of around 350,000 litres into an acutely sensitive area with multiple landscape and biodiversity protections. We have worked hard with our partners to protect the local habitat, clearing the site so that the line is operational again.

Despite all the challenges, staff have undertaken outstanding work. We delivered our flood programme and capital maintenance works as planned and have also now completed the Crindau Flood Risk Management Scheme in Newport, Gwent. The scheme will not only provide protection for homes and businesses in an area with a long history of tidal flooding, but it will also be a catalyst for regeneration and provide a multitude of other benefits to the local community.

We have continued to deliver our regulatory duties to protect Wales’ land, air and water environments, considering the increasing challenges of climate change, urban and rural development, waste management and agricultural and water company discharges. During the pandemic we have worked on innovative techniques to bolster our traditional regulatory inspections, using technology to support our audits and to assess the data returns we received from permit holders. We continue to work with our partners and stakeholders to safeguard and improve our natural resources. We face difficult issues around nutrient management, in particular, phosphates in our designated rivers and how we implement new control of agricultural pollution regulations which introduce a Wales‑wide control on nitrates. 

During the deepest, darkest winter months, we focused on mental health and well-being, making sure we listened to our staff to understand what we could do to support them during this difficult time. I am so pleased that our work around organisational values has borne such strong fruit, with staff supporting colleagues through adversity. We have continued listening throughout the work to develop our Renewal from Covid programme to shape the future of our organisation, and become the best organisation we can be.

It is clear that our experiences during the lockdown restrictions have given many of us a heightened sense of the importance of the natural environment on our doorsteps. Making use of a variety of local pathways and walks was certainly key to my own wellbeing throughout lockdown. But more widely it has brought into sharp relief how valuable access to green space is to the physical and mental wellbeing of us all, reinforcing the immense health benefits that improve our resilience – whether that be through visiting Wales’ iconic mountains, areas of outstanding natural beauty, or spending time in our own gardens and neighbourhood public parks.

This brings its own problems, however. As we saw from the queues snaking Snowdon, the sheer volume of cars parking at our nature spots, and the significant littering across our countryside, there is already considerable pressure on our natural attractions and on the Welsh Government Woodland Estate. While this increased interest is very welcome, it raises questions about how we manage the need for access and monitoring of our environment going forward. Balancing the demands of recreation, timber, energy, the regenerative economy and community use will be an immense challenge going forward, with decisions to be made in how we achieve that balance in a way which protects our environment yet also meets the aspirations of Welsh Government, the requirements of industry and the expectations of the Welsh public.

We look forward to a “super year” ahead, with the momentum of the COPs on biodiversity and climate change really upping the ante for the delivery of our renewal programme, a new Programme for Government, our work around a new vision for 2050 and the next corporate plan. We must now harness these opportunities to stimulate discussions and action amongst every sector, every organisation and every community in Wales so that together we can tackle the challenges of the climate and nature emergencies head on.

Introducing NRW

We are a Welsh Government Sponsored Body. Our core purpose is to pursue the Sustainable Management of Natural Resources (SMNR) and apply the SMNR principles as set out in the Environment (Wales) Act 2016. Wales is the first country in the world to create a single organisation that brings together many of the tools needed to help manage our natural resources in an integrated way. Natural resources in Wales are fantastic - rugged mountains and woodlands, beautiful landscapes and coastlines, and amazing wildlife. They are vital for our survival and provide us with the basic things we need to live: clean air, clean water and food. They create jobs for many thousands of people including farmers, foresters, and tourist operators, creating wealth and prosperity.

Roles and responsibilities

Our roles and responsibilities include:

  • Adviser to the Welsh Government and to industry, land owners/managers, the wider public and voluntary sector
  • Regulator of industry and waste sites, marine, forests and Designated Sites to protect people and the natural environment
  • Designator for Sites of Special Scientific Interest (SSSIs), Areas of Outstanding Natural Beauty (AONBs) and National Parks as well as National Nature Reserves (NNRs)
  • Responder to over 8,000 reports of environmental incidents a year as a Category 1 emergency responder
  • Statutory consultee on around 7,000 planning consultations a year
  • Manager of 7% of Wales’ land area (influencing a further 23%), including the Welsh Government Woodland Estate, National Nature Reserves, flood defences and running recreation facilities and an analytical laboratory
  • Partner, educator and enabler, supporting and facilitating other organisations’ work and helping people learn in, about, and for the natural environment
  • Evidence gatherer monitoring the environment, commissioning and undertaking research, developing and sharing knowledge and holding public records
  • Employer of approximately 2,200 people, with a budget of over £200m

Our values

Our values are central to our culture at Natural Resources Wales - reflecting the kind of people we are - and what it means to be a part of #TeamNRW:

  • We are passionate about the natural environment of Wales
  • We care for each other and the people we work with
  • We act with integrity
  • We make a difference now and for the future
  • We are proud to serve the people of Wales

NRW in numbers

Champion the Welsh environment and the sustainable management of natural resources

  • Member of all 19 Public Services Boards in Wales

Ensure land and water in Wales is managed sustainably and in an integrated way       

Improve resilience and quality of our ecosystems

  • Responsible for the 12 nautical miles from the coastline
  • Issued 1,712 species licences
  • Manage 58 National Nature Reserves

Reduce the risk to people and communities from environmental hazards such as flooding and pollution

Help people live healthier and more fulfilled lives

Promote successful and responsible business, using natural resources without damaging them

  • Responded to 6,970 planning consultations
  • £30.6m timber income
  • 57 prosecutions for environmental offences in 2020

Develop NRW into an excellent organisation delivering first class customer service

Our Well-being Objectives and Strategic Priorities

Our Well-being Objectives are described in our Corporate Plan to 2022:

  • Champion the Welsh environment and the sustainable management of Wales’ natural resources
  • Ensure land and water in Wales is managed sustainably in an integrated way
  • Improve the resilience and quality of our ecosystems
  • Reduce the risk to people and communities from environmental hazards such as flooding and pollution
  • Help people live healthier and more fulfilled lives
  • Promote successful and responsible business, using natural resources without damaging them
  • Develop NRW into an excellent organisation, delivering first class customer service

For 2020/21, we were focussing on five strategic priorities as reflected in our annual Business Plan in working to achieve our Well-being Objectives:

  • Responding to the climate emergency
  • Responding to the nature emergency
  • Developing and using our evidence with partners to advocate for and deliver the sustainable management of natural resources
  • Developing NRW into an excellent organisation that supports the communities of Wales
  • Responding to the Covid-19 pandemic and the UK leaving the European Union, taking opportunities for a green recovery

For information on how our organisation is structured to deliver, please see our Accountability Report (or organisational structure for further detail)

Key risks summary

As an organisation with diverse roles and responsibilities, we are managing several key risks and issues to mitigate their impact on the delivery of our work. As outlined in our Accountability Report, risks to delivering our objectives are identified, assessed, managed, reviewed and recorded through risk registers at various levels of the business.

At the beginning of this financial year, we focussed our efforts on what we needed to do to manage the risk from Covid-19 – both to us internally and to our external facing services and customers. Our Incident Response and Recovery Group established and maintained a risk register relating to the pandemic. Our initial focus was to ensure continuity of our priority activities whilst protecting our staff, considering the effects on their health and wellbeing. We followed Government advice and worked with staff, customers and partners to ensure everyone’s safety. Our strategic risk register was considered for impacts of the pandemic, but the impacts were mainly on delivery of the mitigating actions rather than the risks themselves. Our strategic risk register includes the following key risks:

Failure of assets

Our assets include major infrastructure such as reservoirs and flood assets, as well as key assets on the Welsh Government woodland estate. A failure in these assets could have a major impact on the general public, so we put a lot of effort into managing our assets to required standards. Reducing the potential for asset failure through regular and robust inspection, maintenance and monitoring programmes is a priority as this will help ensure the safety of the people we are here to protect.

Wellbeing, health and safety of our staff, contractors, visitors and tenants

Some of our operational work carries significant health and safety risks, for example during the harvesting of forestry, which is recognised across the sector by the Health and Safety Executive. We provide training and support for staff which is underpinned by the policies and procedures we have in place, including a Wellbeing, Health and Safety Strategy and Risk Assessments. During 2021/22 we will continue to work towards achieving full ISO45001 accreditation in April 2022.

Finance

We depend on Welsh Government grant-in-aid for just over half of our funding, in addition to commercial income and income from regulatory charges. We have improved our budget management and forecasting, but we continue to have to prioritise the activities we can deliver and to balance the demands for our services. We liaise with Welsh Government, explaining our activities and benefits to Wales through the work that we do and articulating the level of service that can be provided for the available funding.

Incident response

We have statutory duties for incident management as a Category 1 responder under the Civil Contingencies Act with responsibilities to work with our partners to manage and mitigate the impacts on people and the environment of environmental incidents such as flooding, drought and environmental pollution. We rely on our skilled staff, systems and procedures to mount our incident response and are committed to ensuring that this service is resilient in the face of the likely impacts of climate change.

Embedding SMNR

Our statutory purpose is to sustainably manage our natural resources. We need to demonstrate, through innovative ways of place‑based working and evidence‑based decision making, the application of this purpose across the organisation. We train our staff to ensure that this is achieved and we also encourage our partners/stakeholders to include this in their training plans.

Performance summary

Our performance framework reflects statutory guidance we have received on the sustainable management of natural resources, the biodiversity duty all public authorities have, and other guidance.

All measures in our performance framework relate to our wellbeing objectives. Reporting and scrutiny of topics and measures in our annual Business Plan dashboard takes place in open public session at NRW Board meetings four times a year, with further scrutiny of this reporting via Welsh Government.

Our Business Plan dashboard reflected 35 measures this year, across 20 topics. At year end, of those measures:

  • 21 were green – achieved target or milestone
  • 12 were amber – close to target or milestone
  • 2 were red – missed target or milestone

The impact of Covid-19 meant a number of measures were changed within the year (for quarter two onwards), with approval of our Board.  In updating the measures, we aimed to ensure they reflected realistic targets, considering the known, and anticipated, impact of Covid-19 in year on individuals, organisations, and their delivery capacity, with 15 measures updated. 

Comparing performance with the previous year (2019/20), in 2020/21 there were 11 more green measures, one less red measure, with no measures continuing to be red from 2019/20 to 2020/21 (and nine more measures in total in 2020/21).

To see more on the performance position of each of the 35 measures, please see our published Business Plan dashboard, and our Board papers for the in‑year dashboards. Reports for previous years can also be viewed via our Annual report and accounts webpage.

Finance summary

Funding and how we spent our money

Our total income for the year was £78 million. In addition, the Welsh Government provided £105 million Grant in Aid and other grants towards a range of outcomes, of which £35 million was allocated to flood and coastal risk management. In the financial statements, Grant in Aid is treated as a contribution from a controlling authority and not a source of income. Our total expenditure for the year was £225 million, an increase from £207 million in 2019/20. The change is due to several reasons, including an increase in staff costs following the completion of our organisation design, undertaking of a new capital programme focused on biodiversity and water quality benefits, a bigger flood risk management capital programme and more money spent on our grants programmes. Our total funding and spend distribution:

  • Funding by type: Welsh Government grant (57% / £105m), Charges (20% / £37m), Commercial and other income (22% / £39m), European and other external (1% / £2m)
  • Expenditure by type: Staff costs (47% / £106m), Capital works expensed in year (9% / £20m), Other expenditure (44% / £99m)

Managing our money

In 2020/21, although our ‘core’ funding from Welsh Government reduced as a result of the Covid-19 pandemic restrictions and wider pressures on the Government’s budget, Welsh Government provided other funding at the beginning and during the financial year, which helped us afford our existing plans and spend £11m on a new capital programme across 70 projects achieving significant biodiversity benefits. Our timber income also increased due to the buoyant market and that income was all re-invested into forestry. We have also utilised reserves and, as a result, our cash balances have reduced accordingly. All budget allocations were scrutinised and approved by the Executive Team and Board. 

Future look

We have published our Business Plan for 2021/22 which sets out our priorities for the financial year ahead. Our current Corporate Plan runs until 2023. We have set our plans based on expected resources, including Grant in Aid, charges and commercial income allocations and estimates. Charge income tends to be relatively stable, but our commercial income is less predictable as it’s very sensitive to exchange rate changes which affect timber prices. We don’t know our Grant in Aid allocations for 2022/23 onwards but we will be working closely with Welsh Government on what we can achieve with the possible levels of available funding. Welsh Government is planning to issue indicative longer-term funding in future which will help our planning.

Non-current assets

The value of our non-current assets was £2,101 million at 31 March 2021, a 69.3% (£860 million) increase compared to last financial year. The most significant component is the value of the forest estate and biological assets which accounts for £1,773 million of the total and the strong valuation of the crops on the estate was the main reason for the large increase.

Payment of trade and other payables 

Welsh Government has a commitment to pay 95% of suppliers within 30 days and we aim to exceed this target wherever possible. Performance for the whole year fell just below (94%). In six of the twelve months, we were above the 95% threshold and fell below the target for the year because of the change in staff working arrangements during the Covid-19 pandemic restrictions.

Debtor performance

Our continued management of commercial debt has seen a slight increase in commercial debt, with the average number of days for customers to pay reduced to one day compared to three days in 2019/20. Our management of regulatory debt has seen an increase from 3.7% in 2019/20 to 5.6% at the end of 2020/21. We have not entered any legal proceedings during the Covid-19 pandemic, instead issuing reminder letters and talking to customers, making arrangements for the recovery of debt. As we come out of the pandemic, we will have to adjust our approach to improve our debt situation. The bad debt provision for regulatory debt is £0.8 million as at 31 March 2021.

Going concern

The Statement of Financial Position at 31 March 2021 shows positive taxpayers’ equity of £1,949 million. The future financing of our liabilities is to be met by the Welsh Government Grant in Aid and the application of future income. We have an approved Business Plan for 2021/22. Therefore, it is appropriate to adopt a going concern basis to prepare the financial statements.

Pensions

The pension liability is disclosed in the Financial Statements based on International Accounting Standard 19. The liability has increased for the Local Government Pension Scheme from £1.5 million to £105.8 million in the year. This is different from the basis used for funding calculations. The Environment Agency Pension Fund has estimated that it had enough assets to meet 111% of its expected future liabilities at 31 March 2021.

Auditors

Our accounts are audited by the Auditor General for Wales. The audit fee for 2020/21 was £188k.

Other reports

As an organisation, we regularly publish a number of reports including an Equality, diversity and inclusion annual report, a Corporate environment report, and Area Statements. Published research and evidence reports can also be accessed (including the State of Natural Resources Report (SoNaRR) for Wales 2020).

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