Becoming a World Class Regulator

Final Report of the World Class Regulator Working Group

June 2012

Table of Contents

Acknowledgement
Executive Summary
World Class Regulator Action Plan
1. Introduction
2. Context
3. World Class Regulator Process
4. Short-Term Action Plan
5. Continual Improvement Strategy
6. Conclusion
Annex 1 - World Class Regulator Project Milestones
Annex 2 - World Class Regulator Criteria
Annex 3 - World Class Regulator Criteria and Regulatory Cycle
Annex 4 - Regulatory Categories
Annex 5 - Summary of Cross-Cutting Assessment Results

Acknowledgement

At each phase of the world class regulator (WCR) project, numerous Environment Canada (EC) officials offered their support and contributed their expertise. The WCR working group would like to thank everyone involved in the project to date and as we move through its implementation. We would especially like to thank those who have taken the time during the past year to provide us with insights, thoughts, ideas and opinions. Your participation has been instrumental in our endeavour to become a world class regulator.

Executive Summary

As one of the federal government’s most active regulators, Environment Canada (EC) has wide-ranging regulatory powers. EC must manage its regulatory agenda within a complex and rapidly evolving context. To meet these challenges, EC has embarked on a continual improvement initiative to strengthen the processes by which the Department selects, develops and implements regulatory instruments, with the objective of operating as a world class regulator (WCR).

Following a literature review and Department-wide consultations on the WCR concept, it was determined that, in general, a WCR consistently applies five criteria in its work:

• Evidence-based decision-making: Decisions are supported by science and precaution is used where evidence is incomplete.
• Effectiveness: Clear environmental objectives are defined and the regulatory instrument achieves the desired environmental outcome.
• Efficiency: Regulatory instruments achieve the desired environmental objectives at the lowest possible cost.
• Transparency: Affected parties are engaged throughout the process to give stakeholders a voice, enable market certainty, reinforce credibility, and engender public trust.
• Adaptability: Processes are reviewed and performance is measured to determine whether regulatory instruments are achieving the intended policy objectives.

We subsequently initiated an internal evaluation of our regulatory activities using these five WCR criteria. Teams of experts representing the full range of regulatory functions within EC analyzed a cross-section of the Department’s regulatory activities and identified best practices and opportunities for improvement. The analysis identified strengths in all aspects of the Department’s regulatory process and confirmed EC’s solid foundation and capacity to embark on our WCR journey.

This report identifies short-term actions (see World Class Regulator Action Plan) related to:

• data collection and information gathering;
• instrument selection;
• performance measurement activities;
• streamlining of regulatory amendments; and
• the transparent communication of decisions.

The Department will begin to implement these actions immediately. The WCR working group will monitor progress in implementing these actions and will report back to the EC community in one year.

The WCR initiative reflects Environment Canada’s commitment to regulatory excellence. While the short-term actions in the WCR Action Plan will bring the Department closer to its objective of being a WCR, it is recognized that the goal of operating as a WCR is an ongoing initiative. To this end, the following longer-term continual improvement actions are proposed in order to ensure that the goal remains a priority in the years to come:

• internal communication of best practices and integration of the WCR criteria into training and guidance material;
• promoting the project externally by implementing the WCR Communications Strategy;
• assessing other key regulatory programs against the WCR criteria and priority areas for improvement;
• committing to develop and report on progress in completing future WCR actions; and
• validating the WCR initiative at the international level.

World Class Regulator Action Plan

All actions are to be completed by the end of fiscal year 2012-2013.

1. Introduction

Over the past year, the world class regulator (WCR) working group led a self assessment of Environment Canada (EC)’s regulatory system with the goal of strengthening the Department’s regulatory processes and becoming a world class regulator.

Given the wide-ranging regulatory powers of the Minister of the Environment, the Department’s regulatory work has the potential to significantly impact Canadian society and the Canadian economy. Inefficient regulation can be an impediment to innovation, add unnecessary burden and inhibit competitiveness, productivity, investment, and economic growth. Understanding what it takes to be a WCR and institutionalizing these principles in the Department’s day-to-day regulatory work is essential to advancing a regulatory agenda that achieves the Government’s environmental objectives while minimizing economic costs.

This report of the WCR working group presents a framework for continual improvement towards becoming a WCR and charts a course for strengthening EC’s already robust regulatory processes. It begins with an overview of the WCR process, including a definition of what it means to be a WCR as defined through the establishment of five criteria. Summaries of the first two phases of our internal assessment process follow. The report then outlines an action plan that identifies short-term priorities for improvement and a strategy for institutionalizing the goal of being a WCR at EC. 

2. Context

Environment Canada is one of the federal government’s most active regulators. The Department administers more than a dozen statutes and 80 regulations respecting matters as diverse as controlling the level of toxic substances in commercial products, emissions of pollutants and greenhouse gases, the licensing of dams on international rivers, the protection of migratory birds and species at risk, and international trade in hazardous waste and endangered species. EC has the mandate to regulate institutional, commercial, and industrial activities and individual product choices. It can prohibit, restrict or permit various activities or require reporting, studies, or the sharing of information.  

EC is managing its regulatory agenda within a rapidly evolving context. Regulation-making is becoming more complex and dynamic¹.

In 2010, Environment Canada’s Deputy Minister challenged the Department to become a world class regulator. Such an endeavour will position us to meet these challenges and thrive in this rapidly evolving context.

3. World Class Regulator Process

The following summarizes the major steps to date in achieving the goal of becoming a WCR. Detailed project milestones are listed in Annex 1.

What does it mean to be a World Class Regulator?

The literature and internal consultations suggest that the following criteria are key attributes of a WCR:

• Evidence-based decision-making: Decisions are supported by science and precaution is used where evidence is incomplete.
• Effectiveness: Clear environmental objectives are defined and the regulatory instrument achieves the desired environmental outcome.
• Efficiency: Regulatory instruments achieve the desired environmental objectives at the lowest possible cost.
• Transparency: Affected parties are engaged throughout the process to give stakeholders a voice, enable market certainty, reinforce credibility, and engender public trust.
• Adaptability: Processes are reviewed and performance is measured to determine whether regulatory instruments are achieving the intended policy objectives.

These criteria are further defined in Annex 2.

Self assessment exercise

In 2011, the Department initiated the WCR project. The purpose of this project was to engage the EC community in the identification of concrete actions to:

• strengthen EC’s regulatory processes and outcomes;
• institutionalize the goal of being a world class regulator; and
• improve the Department’s reputation and credibility as a regulator.

The WCR working group led a self assessment of the Department’s regulatory system. This self assessment was undertaken in three phases:

1. Taking stock of EC’s regulatory activities and processes
2. Assessing EC’s regulatory processes and activities against the WCR criteria
3. Identifying priorities for improvement and developing an action plan

Phase 1 - Taking stock of EC’s regulatory activities and processes

The self assessment addressed four categories of regulatory activity (see Annex 4):

• Chemicals Management Plan Risk Management Measures
• Vehicle Emissions Regulations under the Canadian Environmental Protection Act
• Regulations under the Migratory Birds Convention Act
• Environmental Emergency Regulations

For each category of regulatory activity, teams of program experts and key enabling groups (e.g., enforcement, compliance promotion, economic analysis) mapped the typical regulatory process followed at each stage of the regulatory cycle (see regulatory cycle in Annex 3). The teams then documented detailed information such as the scientific evidence used to make decisions, which stakeholders were consulted and how they were engaged, and the support and guidance provided to develop and implement regulations.

Phase 2 – Assessment against the WCR criteria

In Phase 2, the WCR working group coordinated a qualitative assessment of each category of regulatory activity against the five WCR criteria.

This assessment led to the following conclusions:

• Evidence-based decision-making and transparency are particular strengths for EC.
• EC is an effective and efficient regulator. However, the Department could strengthen and better measure these criteria.
• Adaptabilityshould be strengthened within EC. Although EC is a leader within the federal government in preparing and implementing Performance Measurement and Evaluation Plans (PMEP) for high impact regulations, it should continue to emphasize the importance of providing ongoing feedback on the impacts of its regulations. This is consistent with findings from the Organisation for Economic Co-Operation and Development (OECD), which has concluded that ex post regulatory review and evaluation is generally under-emphasized by OECD governments².

The assessment phase identified numerous best practices, including:

• early and continued engagement with stakeholders;
• applying a consistent and systematic approach to selecting the most appropriate instruments to achieve public policy objectives;
• consideration for compliance flexibility that allows the regulatee to choose how they will meet the stated objectives;
• a consistent, predictable and transparent process for developing regulations; and
• the development and implementation of Performance Measurement and Evaluation Plans for high impact regulations.

Phase 3 – Priority areas for improvement

The working group also identified the following six priority areas for improvement:

• Enhancing data collection and information gathering;
• Improving instrument selection;
• Increasing transparency and strengthening communication of decisions;
• Enhancing performance measurement activities;
• Streamlining and minimizing regulatory amendments; and
• Support government-wide actions.

The following section describes a short-term action plan to address these priority areas for improvement.

4. Short-Term Action Plan

Implementing the following short-term action items within the next fiscal year will improve EC’s performance as a regulator. These actions are also summarized in the World Class Regulator Action Plan.

1. Enhancing data collection and information gathering

The WCR working group recommends that the Department improves the quality of data and information it gathers in order to analyze the potential environmental, economic and social impacts of a proposed regulation.

Action #1: Continue research to assess the economic benefit to Canadians of reducing environmental emissions of hazardous chemical substances through the design of a survey instrument.

Action #2: Capitalize on opportunities to incorporate, enable, and expand the use of economic analysis to inform conservation decisions by including cost benefit analysis for the protection of critical habitat for two species at risk (Sage Grouse and Bobolink).

2. Improving instrument selection

There is a need to improve understanding, consideration for, and use of the broad suite of regulatory and non-regulatory instruments available to achieve public policy objectives. The working group therefore recommends the following action to improve the Department’s ability to select the most effective and efficient instruments.

Action #3: Provide enhanced guidance materials and incorporate into EC's regulatory training to increase understanding and awareness of instruments available to achieve public policy objectives, including lessons learned with various instruments to date.

3. Increasing transparency and strengthening communication of decisions

 The working group recommends that EC implement measures to increase transparency in regulatory processes where possible. This includes actions such as:

• providing further clarity regarding the scrutiny of confidential business information / sensitive information claims;
• improving public access to information upon which risk assessment determinations and regulatory decisions are made; and
• strengthening communication and understanding by stakeholders and the Canadian public of risk assessment conclusions and regulatory decisions.

Action #4: Develop a high level statement to publicly communicate the Department’s intention to promote greater transparency in its regulatory processes to external stakeholders. The statement will be published on the Department’s website, announced at relevant stakeholder meetings, and serve as a platform to announce and link to other relevant departmental initiatives aimed at increasing transparency. To support this public statement, the Department will:

• Develop operational approaches to ensure consistency regarding the transparency of information and management of confidential business information on new and existing substances under the Canadian Environmental Protection Act, 1999 (CEPA 1999).
• Consider relevant opportunities to more readily release non-confidential information received by the Department. For example, summaries of the information received on chemical substances as part of the Chemicals Management Plan Inventory Update will be posted publicly online.
• Increase communication and transparency of regulatory decisions, where possible, by publishing:
  • the substances on the Domestic Substances List that have been assessed/managed under CEPA 1999;  
  • the substances subject to the Significant New Activity provisions under CEPA 1999; and  
  • summaries of select new substances assessments under the New Substances Notification Regulations.
• Establish departmental guidelines to promote a consistent approach in receiving, sharing and providing feedback to stakeholders regarding comments received during all public risk management consultation periods, beginning with those under CEPA 1999.

4. Enhancing performance measurement activities

In terms of measuring performance, the long-term objective is for EC to have a clear sense of the overall effectiveness and efficiency of its regulatory instruments – and to more clearly communicate their performance to Canadians. 

Work is underway to strengthen performance measurement of Chemicals Management Plan (CMP) substances by conducting substance-based performance measurement activities. The WCR working group recommends building on these efforts to promote the inclusion of performance measurement activities during the development and implementation of a wider range of the Department’s risk management instruments.

There is a need to further increase the transparency of performance measurement activities. Moreover, EC needs to obtain information about the costs and benefits of regulations post-implementation. For example, economic indicators have not been considered in all Performance Measurement and Evaluation Plans (PMEP) to date. This information would support decisions about whether changes are needed to a specific regulation and inform the design of other regulations.

Action #5: Further integrate performance measurement concepts into training and support materials so that risk managers consider how to measure the effectiveness of risk management instruments during instrument development.

Action #6: Commit to reporting on the impact of select EC instruments in the CEPA 1999 Annual Report (i.e., environmental outcomes).

Action #7: Improve PMEPs by:

• Investigating the feasibility of including economic indicators within the performance measurement and evaluation plan (PMEP) using the Heavy Duty Vehicle Regulations as a case study
• Incorporating findings within departmental PMEP guidance and training materials, as appropriate

5. Streamlining and minimizing regulatory amendments

The working group proposes several actions to streamline the amendment process in order to make it more efficient.

Action #8: Using documented lessons learned, identify opportunities to make minor amendments to multiple regulations (e.g. withdrawn or outdated standards, Standing Joint Committee for the Scrutiny of Regulations (SJCSR) issues, enforcement gaps) through Omnibus regulations.

Action #9: Develop a process to ensure that, when amending a regulation, program leads consider addressing: outstanding issues identified by the SJCSR, enforcement issues, and outdated/time-dated standards associated with the regulation in question.

Action #10: Promote the use of ambulatory incorporation by reference of externally generated documents as a regulatory drafting technique through the development of an internal guidance document and through EC’s regulatory training.

Action #11: Update the Department’s Guidance Manual for Risk Managers (for managing CEPA-toxic substances) to emphasize the need  to involve the Enforcement Branch and the Science and Technology Branch in the design of regulatory instruments at the earliest possible stage

6. Support government-wide actions

During the next fiscal year, the Department will:

• minimize regulatory costs and burden;
• improve service delivery;
• reduce administrative burden of departmental regulations on business;
• provide clarity on EC’s regulatory agenda; and
• enhance stakeholder understanding of EC regulations.

Action #12: Provide targeted training to regulators so that new regulations and amendments to existing regulations minimize costs to business.

Action #13: Develop and publish service standards for key authorization or approval processes and corresponding departmental process for receiving feedback.

Action #14: Identify opportunities to repeal or amend existing regulations which could be repealed or amended to reduce administrative burden.

Action #15: Develop an approach to improve public awareness of EC regulatory activities.

Action #16: Develop guidance for responding to requests for further clarity regarding EC regulations.

5. Continual Improvement Strategy

The goal of becoming a WCR is a long-term one which requires a continual improvement strategy that will ensure that the objective of operating as a world class regulator remains a priority in the years to come.

Internal communication

Ensuring that key best practices identified through the assessment exercise are shared throughout the Department will strengthen organizational regulatory capacity. This will be achieved by:

• making this report available to all EC employees;
• incorporating best practices into EC’s training initiatives (e.g. EC’s Regulatory Training Curriculum) and in departmental guidance material;
• implementing an EC Regulatory Training Framework, in which the above- mentioned recommendations align with its core competencies; and
• integrating the five WCR criteria into new and updated training and guidance material, as necessary.

External validation of the WCR approach

Third party validation of the WCR initiative will confirm the direction of the initiative to date, and will help reaffirm EC’s commitment to become a WCR.

Short-term

EC has contracted Professor Cary Coglianese, Director of the Penn Program on Regulation at the University of Pennsylvania, to assess the WCR initiative as a framework for organizational regulatory improvement. Professor Coglianese is recognized as a world leader in the study of regulation and regulatory processes. His report provides a critical assessment of the criteria, the process followed, and the results of the WCR project. The report was completed in May of 2012 and is available on the Environment Canada site.

Medium-long term

The WCR initiative was presented to the Organisation for Economic Cooperation and Development (OECD)’s Regulatory Policy Committee in April 2012.   The objective of the presentation was to provide the Committee with an example of how to implement the OECD’s draft framework for measuring regulatory performance.  The WCR working group will pursue opportunities with the OECD on incorporating the WCR initiative in future work relating to measuring regulatory performance.

Establishing a WCR process for planning and performance measurement

A process will be established whereby regulatory programs assess their regulatory activities against the priority areas for improvement. Specific actions will be identified to bridge the gaps along with timelines for completion.

A reporting strategy will be implemented to track progress towards becoming a WCR. 

6. Conclusion

Effective environmental regulation is a complex, multi-faceted, and constantly evolving endeavour. Along with strong performance in many areas, the WCR project has demonstrated that several opportunities exist to improve EC’s role as a regulator. By aligning the scope and objectives of the WCR project with the broader regulatory reform initiatives in Canada, the WCR working group is confident that EC is well positioned to achieve world class regulatory performance.

The WCR working group remains committed to ensuring that progress resulting from the WCR project is reported on and shared with the EC community. Accordingly, the WCR working group will monitor progress made and produce a progress report within the next year.

¹ Streiner, S. 2008. The Evolution of Regulatory Function and Implications for Public Service Renewal. 

² Malyshev, Nick A. 2006.  “Regulatory Policy: OECD Experience and Evidence,” Oxford Review of Economic Policy22(2):274-299.