Biodiversity in the water sector: From compliance to capability

This opinion piece first appeared in the February 2026 edition of The Water Report.

For much of the past decade, biodiversity within the water sector has been framed as a desirable co-benefit: a positive outcome delivered as a side effect of good catchment management, land stewardship or partnership working, but rarely an issue subject to the same level of regulatory scrutiny as water quality, resilience or customer outcomes. Levels of fines for missing biodiversity targets in previous AMP cycles did not necessarily drive good practice.

A step change in BNG expectations

That has now changed. In AMP8 (2025–2030), biodiversity becomes a measured and incentivised board-level issue. Ofwat’s introduction of a common biodiversity performance commitment, the statutory roll-out of biodiversity net gain (BNG) under the Environment Act 2021 and the scale of environmentally driven investment through the Water Industry National Environment Programme (WINEP) together mark a step change in expectations.

For water companies, the question is no longer whether biodiversity matters, but how it is governed, delivered and assured. Those that treat biodiversity as a series of disconnected compliance tasks may face higher costs, delivery risk and regulatory exposure. Those that approach it strategically can unlock efficiencies, reduce planning risk and strengthen long-term environmental performance.

The biodiversity drivers

Water companies are currently responding to three distinct but overlapping biodiversity drivers.

• AMP8/PR24 biodiversity performance commitment (Ofwat)
  This requirement measures biodiversity units gained on nominated land. Performance is reported annually and linked to outcome delivery incentives (ODI). Companies must demonstrate measurable gains in habitat quality and area across their operational land, with targets set for the full AMP8 period.
• Biodiversity net gain (BNG)
  A statutory requirement for most development projects in England to deliver a minimum 10% net gain, assessed on a project-by-project basis using Defra’s Biodiversity Metric 4.0. Credits must be secured for at least 30 years, creating long-term obligations for land management and monitoring.
• Water Industry National Environment Programme (WINEP)
  A statutory programme of environmental interventions agreed with the Environment Agency and Natural England. WINEP delivers water quality improvements, habitat restoration and species protection. Many interventions also create biodiversity units, but they are funded and designed primarily to meet statutory environmental outcomes.

Integrating AMP8, BNG and WINEP

Individually, these drivers are not new territory. The challenge lies in learning how to treat them together, not as separate compliance tasks, but as components of a strategic biodiversity delivery plan. Failure to integrate AMP8, BNG and WINEP risks duplication, inefficiency and under delivery.
Early AMP8 preparations across the sector reveal a recurring pattern:

• AMP8 biodiversity performance commitments (PC) are often owned by regulatory or environment teams
• BNG is handled within capital delivery and planning teams
• WINEP is delivered as a statutory compliance programme
• Land and property teams operate separately, with limited integration
• Multiple ecological consultants and contractors produce different assumptions, baselines and metrics.

Board level measurement

The result is fragmentation, duplication and inefficiency: repeated surveys, inconsistent metrics, lost opportunities to ‘stack’ benefits and increased risk to ODIs. More importantly, fragmented delivery makes biodiversity harder to assure at board level, precisely when regulatory scrutiny is increasing. Boards are now being asked to approve plans and budgets linked to measurable biodiversity outcomes, yet often have limited insight into the delivery mechanisms, risks and metrics underpinning those outcomes.

BNG, WINEP and the AMP8 biodiversity performance commitments are not separate silos, but overlap in several ways:

• They can target the same operational land.
• They can enhance the same habitats, such as wetlands, grasslands and riparian zones.
• They use the same ecological metrics, particularly Defra Biodiversity Metric 4.0.
• They generate long-term management obligations spanning 30 years or more.
• The strategic opportunity lies in designing habitats and delivery programmes that count towards all three drivers simultaneously – a “design once, deliver many times” approach.

The accountability question

One of the most important questions boards should ask is deceptively simple: “Who is accountable for biodiversity delivery across the business?” In many companies, not just in the water sector, the honest answer is “no one, fully”. Biodiversity often sits too far into environmental compliance to influence capital design, too far from asset planning to shape investment decisions and too far from land management to ensure long-term success. Good practice in AMP8 will require a single accountable biodiversity lead with cross-business authority and clear governance linking capital delivery, land strategy, environmental performance and regulatory reporting. Without this, biodiversity enhancement risks becoming an outcome everyone supports but no one truly controls.

Key principles for success: Prioritise land with long-term control and allocate long-term budget

BNG and AMP8 PCs both rely on 30-year management commitments, going beyond the programme and budget of a single AMP cycle, so seeking ways to hand over management and monitoring responsibility to competent contractors may help to secure a long-term future outside of AMP8 and beyond. Sites with uncertain tenure introduce risk: habitat gains may be lost and ODIs could be underdelivered.

Follow the principles of Bigger, Better and More Connected

The Lawton Principles, from Professor Sir John Lawton’s 2010 “Making Space for Nature” review, advocate for More, Bigger, Better and Joined-up habitats to benefit biodiversity by improving existing sites, enlarging them, enhancing connections with corridors, creating new ones and reducing external pressures. These principles form the foundation of nature recovery and aim for resilient, functional landscapes rather than isolated reserves. Projects that align with local nature recovery strategies, or with environmental delivery plans arising from the Planning and Infrastructure Act 2025, may also be supported by local stakeholders.

Create biodiversity units early

Early habitat creation de-risks AMP8 PC delivery, provides flexibility for future BNG needs and reduces pressure on individual development schemes. By creating units strategically and ahead of schedule, companies can allocate them to projects opportunistically, smoothing delivery risk and maximising regulatory confidence. This approach should come naturally to water companies, mirroring asset resilience thinking by building capacity before it is needed. Furthermore, the emerging biodiversity credit market may allow companies to trade surplus units, adding a financial incentive to early habitat creation.

Deliver multiple benefits

Land is a limiting resource and operating sustainably means delivering the optimum range of benefits from any site. This doesn’t necessarily mean ‘sweating the asset’ and trying to cram small pockets of biodiversity onto operational sites where they can become isolated and fail to deliver the anticipated biodiversity value. It can mean considering other environmental benefits rather than just, for example, BNG units. That could include delivering water quality and flood attenuation or climate resilience benefits alongside BNG units, or delivering access to nature for local populations. The key to this is early integration of multiple uses, stakeholder needs and the different regulatory requirements into the design. Retrofitting biodiversity into late-stage designs almost always increases cost and risk.

Get to grips with the metric

The Defra Biodiversity Metric 4.0 is a powerful tool when used correctly, but it introduces new risks. Firstly, as it is a new system, consultants are just getting used to the metric and can make errors such as incorrect classification of habitats or over-optimistic assumptions about condition uplift and the time it will take to achieve a target condition. These errors can translate directly into ODI underperformance, making early diligence critical.

It is important to make sure the metric is used by appropriately qualified staff or advisers. Although it is deceptively simple, to apply it effectively requires detailed knowledge of habitats, so independent assurance of metric calculations is valuable. It is advisable to be conservative in all delivery assumptions; nature is a complex system and even with close habitat management we cannot always control the outcomes to a fine degree of detail.

Work with the grain of nature

It can be tempting to limit aspirations when delivering biodiversity net gain to habitats with shorter delivery trajectories, those where it will be easier to achieve a ‘good’ condition, have simpler management requirements or those where more BNG units can be delivered per hectare. However, that approach wouldn’t deliver a diverse and vibrant countryside supporting healthy populations of animals and plants; in fact, most projects would deliver fairly dull grassland and scrub. Instead, BNG delivery should seek to create the right habitat in the right place. If a site is on limestone and would historically have been chalk grassland, then it is better to produce four units of ‘calcareous’ grassland than eight of ‘other’ grassland. That might seem counter-intuitive when companies have BNG unit targets to meet, but there is increasing scrutiny of green claims, and delivering poorly designed biodiversity enhancement may lead to regulator or public criticism.

Long-term management

While habitat creation is capital expenditure, delivering biodiversity enhancement is an ongoing long-term revenue commitment. Too often, management costs are underestimated, poorly secured and detached from operational budgets. Unmanaged sites can quickly revert, turning a proposed gain into an unfunded liability. It is vital to have a clear long-term management plan setting out responsibility for all activities, appropriate ring-fenced funding and a responsive approach to monitoring so that if habitats underperform, further management can be put in place.

Data, assurance and regulatory confidence

Ofwat’s biodiversity PC will be subject to increasing scrutiny as AMP8 progresses. Strong performance against it will require an effective geographic information system (GIS)-based data platform for all biodiversity data and clear audit trails from survey and management plans, through site activity to monitored outcomes.

By 2030, leading water companies will be able to demonstrate that biodiversity is:

• fully embedded into their asset planning and capital delivery
• supported by strategic land management across their estate
• delivered efficiently across AMP8, BNG and WINEP, demonstrating genuine win–wins
• backed by robust survey data and assurance
• subject to robust governance.

Those outcomes will not be achieved through last-minute mitigation or isolated projects. They will come from early decisions, integrated strategic thinking and clear accountability. In AMP8, biodiversity is no longer peripheral. It is a test of how well the sector can turn regulatory ambition into operational reality and ultimately, environmental improvement that endures.