Public authorities for transformative change: integration principle in public funding

Although rarely brought into a direct dialogue, both literature on regulation and transformative change relate to the question of governance in complex times, composed of multiple interactions and typically transcending sectors and jurisdictions. It has been suggested that transition literature conceptualises government in a way that is at odds with the traditional tasks of the government and public administration (Braams et al. 2021). But in fact, the expectations of the governments’ tasks in the context of sustainability challenges fit well with the account of the government’s role in a post-modern, polycentric, dynamic, complex environment—the context that has been at the focus of the regulation literature since 1990s. Here, the governments’ competences and assignments are understood as an ongoing, adaptive process, constantly changing and expanding for new tasks, designing moves and counter-moves through regulation (Ayres and Braithwaite 1992; Gunningham and Grabosky 1998). Regulation is understood in a great variety of ways (Baldwin, Scott, and Hood 1998; Morgan and Yeung 2007; Koop and Lodge 2015), broadly relating to a set of direct and intentional interventions, encompassing binding standard-setting, monitoring, and sanctioning, and exercised by public-sector actors on the economic activities of private-sector actors (Koop and Lodge 2015). We extend it to spanning over not only the level of legislators but also public administration (Croley 1998; Kingsbury et al. 2004). In the transnational landscape, regulation by states (but also by international organizations) is likened to orchestration or steering actors in desirable directions, both through binding rules and facilitative actions that encourage rather than mandate (Abbott and Snidal 2009).

According to the literature on transformations, the government’s role in transformation ranges from softer to harder methods. The state provides a platform for constituting, defining and redefining democracy, power and culture, from which norms, expectations, and beliefs emerge (Hausknost and Hammond 2020). It is capable of proposing and deliberating transformation (O’Brien 2012), through introducing, monitoring and adjusting policies and laws related to the management of the environment and societal–environmental interactions (Duit et al. 2016; Eckersley 2021). The government is also able to scale up and accelerate the changes introduced by individuals and communities (van Bruggen et al. 2019), and set up collaboration and co-creation arenas for various stakeholders and steer them in a broadly similar direction (Johansson 2018). The government’s role in introducing change is particularly strong through channelling public spending and conditioning it, especially in a post-crisis period (Mazzucato 2015; Spratt 2015).

The regulation and sustainability literature both agree that contemporary regulation requires action not only in response to challenges, but also in their anticipation. Regulation should not just be reactive, including deploying reflexivity and adaptive learning processes (Dryzek 2014; Galaz et al. 2012; Driessen et al. 2012; Berkes 2017), but increasingly also anticipatory, pre-emptive, forward-looking and acting in advance of risks (Chapin et al. 2010; Park et al. 2012; Boyd et al. 2015; Vervoort and Gupta 2018). Decision-making is required to be based on scenarios or models, and ideally occurring at the intersection of challenges, requiring a cohesive or ‘nexus’ approach (J Gupta et al. 2013).

While the government’s roles and their broad approaches to introducing transformative change are justified, it is more difficult to determine the more specific methods or regulatory instruments to that end. Traditionally, in dealing with the socio-environmental domain, governments’ options range across direct regulation (so-called command-and-control), market-based incentives and information-based tools (incl. awareness-raising and behaviour nudges) (Jordan et al. 2011; Penca 2020). In the context of transformations, there is a prior and broader question to just picking the right tool in the regulatory toolbox. The regulatory goal here is new, wide-ranging, profound and only partially (pre)defined, in contrast with more narrowly defined goals, such as waste reduction, minimizing pollution, or habitat protection.

Rather than in terms of regulatory instruments, transformative change has thus been discussed foremost in the context of systemic socio-political changes. At the heart of these is the question of addressing power asymmetries and inequalities (Avelino 2017; IPCC 2022). This spans over the need to re-establish normative hierarchies in such a way as to re-embed economic policies and activities into social and environmental norms (Hujo, Braumann, and UNRISD 2016, 226) as well as over the need for more participatory decision-making approaches (Glass and Newig 2019; Cattino and Reckien 2021). Collective action among all actors is needed to foster fundamental change, both in making decisions and creating opportunities (Monkelbaan 2019). Transformative governance needs to be integrative, inclusive, informed and adaptive at the same time (Razzaque et al. 2019), while highly sensitive to the local context (Bennett et al. 2016; Andrachuk et al. 2018).

Due to uncertainty, governance for transformative change has been strongly linked to experimentalism and innovation (Moberg et al. 2021). Innovation in policy can be conceived in terms of introducing new regulatory elements, expanding their use into new areas or experiencing new effects (Jordan and Huitema 2014). Using a variety of approaches or policy mixes has been promoted (Rogge and Reichardt 2016; Edmondson, Kern, and Rogge 2019; Kern, Rogge, and Howlett 2019). But innovation in policy-making can also be conceived in terms of selecting different and better leverage points for overcoming the lock-ins that contribute to existing inertias (Abson et al. 2017; Kanger, Sovacool, and Noorkõiv 2020). Improvements can thus be of infrastructural and technological, institutional or socio-economic, behavioural and relational types, and all tightly intertwined among themselves (Seto et al. 2016). They can also be thought of in terms of restructuring institutions, reconnecting people to nature and Earth, and rethinking how knowledge in pursuit of sustainability is produced and used (Abson et al. 2017; Delanty and Mota 2017). Concepts of growth, efficiency, state, commons and justice were demonstrated the key to the transformation (McPhearson et al. 2021). Thus, transformative policy tools seem to start with the task of reframing policy goals.

Empirical evidence confirms that governments have a powerful role in transformations by devising the right public policies and in channelling public financing, but have to work in close collaboration with the private sector (Moberg et al. 2021). They have the ability to act quickly and decisively if they decide so (Willi et al. 2020). However, it is suggested that the governments should not approach transformative change as a managerial issue and in a problem-solving manner, but rather maintain a strategic and responsive focus on it (Bornemann and Christen 2020).

A key concept with regards to operationalisation of transformation towards sustainability, is integration. Integration or the idea of linking various goals and pursuing multiple targets concurrently and not prioritising one over another, is central to Sustainable Development Goals (UN GA 2015), where the Preamble of the 2030 Agenda speaks of the 17 SDGs and 169 targets being ‘integrated and indivisible’ and where a separate target (17.14) aims to ‘enhance policy coherence for sustainable development’. The purpose of integration or policy coherence efforts is that rather than policies resulting in tensions and trade-offs among economic, social, environmental and governance dimensions, policies should result in coherence and multiple benefits at all stages of domestic and international policy making (OECD 2015; Kanie and Biermann 2017; Stafford-Smith et al. 2017). Indeed, the SDGs are designed in this interrelated way as numerous targets can contribute to several goals (ICSU and ISSC 2015). A close integration between social and environmental goals has indeed become well established in the holistic concept of socio-ecological systems (Díaz et al. 2015; Biggs, Schlüter, and Schoon 2015).

Recently, science has been drawing attention to the utmost need for synergies among different environmental goals and specifically to the paramount role of the biodiversity. Biodiversity loss, reflecting complex interactions between ecosystems and societal vulnerabilities, has been recognised as typifying the existence of a gap between existing and sustainable pathways (Palomo et al. 2021; Pörtner et al. 2021; Turnhout et al. 2021; Rusch et al. 2022). The efforts in biodiversity conservation are seen as the driver of profound shifts in society and sustainability transformations (Pascual et al. 2022), particularly when they are related to embracing other global challenges and increasing conservation and restoration ambitions (Leclère et al. 2020; Fastré et al. 2021; Jung et al. 2021; Leadley et al. 2022). The interconnected nature among biodiversity, climate and people has been acknowledged in the recent international policy processes and agreements, such as the 2015 Paris Agreement, the 2015 Sendai Framework for Disaster Risk Reduction; the post-2020 Global Biodiversity Framework and 2021 Glasgow Climate Pact.

Enacting transformative governance is thus closely related to the challenge of integration of biodiversity considerations into policy decisions at all scales and sectors. The requirement of environmental policies being an integral part of development is long established (Principle 4 of the Rio Declaration 1992), but also a concept capable of being implemented in various ways and to various degrees (Persson 2004). At the basic level, the principle of integration can act as a requirement at the procedural or outcome level (Barral and Dupuy 2015). This would suggest a difference between biodiversity considerations being simply taken into account in the process of decision-making, or representing a certain expectation of result. In practice however, successful cases of environmental integration are about both these dimensions (Lenschow 2002). Any discussion of integration principle in public policy is far from a discussion between prescription vs. inclusiveness. Public participation and engagement is an inherent element of both the integration principle (Lenschow 2002) and successful transformative governance led by the public authorities (Cattino and Reckien 2021).

Policy options have been discussed in the context of decision-making for the benefit of biodiversity conservation and sustainable use. Biodiversity can be addressed through a number of measures and as part of policy mixes in sector-specific ways, relating to food, energy and urban planning, to name just a few sectors (Razzaque et al. 2019). Literature has recognized the value of biodiversity being integrated into other policy actions and embraced by other global challenges, particularly climate change adaptation and mitigation (Morita and Matsumoto 2018; Leclère et al. 2020; Jung et al. 2021; Hu, Chen, and Wu 2021; Fastré et al. 2021; Leadley and et al. 2022). Independently of the need for creating synergies between policies for the benefit of biodiversity, convincing arguments have been made for increasing conservation and restoration ambitions (Díaz et al. 2020; Leclère et al. 2020; Leadley and et al. 2022) and requiring increasing resources dedicated to conservation (Deutz and et al. 2020; Grumbine and Xu 2021). The idea of increased investments into biodiversity can translate into either direct funding for biodiversity, elimination of subsidies with adverse impacts on biodiversity and into setting-up public works programmes with socio-environmental objectives (Hujo, Braumann, and UNRISD 2016). A fundamental reorientation of economies away from continuous growth and a reduction of overall resource consumption has been identified as a necessary means to reducing the overall pressure on biodiversity (Otero et al. 2020).

Various policy options emerge from considering the integration principle at the intersection of regulatory theory and sustainability literature. The knowledge can be structured into a set of possible regulatory interventions for public authorities. The starting point for the list is a recognition that the principle of integration can be applied in various degrees, rather than in a yes/no manner. It allows and requires not only avoiding conflicts and trade-offs that originate from other policy domains or sectors, but also proactive planning and implementation of policies. Procedural and substantive approaches play a complementary role as they can influence policy-making through different methods (actions) and in different ways (outputs). Different substantive obligations are matched by different procedural approaches, and vice versa. Figure 1 summarises the model. The purpose of the figure is not to detail policy actions, but to present the key interventions at disposal of the public authorities in integrating or mainstreaming biodiversity policies.

In the EU the principle of integration, as a means to sustainable development, is enshrined in its constitutional treaty (Treaty on the European Union, Art 11): “Environmental protection requirements must be integrated into the definition and implementation of the Union’s policies and activities, in particular with a view to promoting sustainable development.” The principle has guided the design of specific policy instruments, such as Strategic Environmental Assessment to guide the plans and programmes that are likely to have significant effects on the environment (Directive 2001/42/EC), as well as the design of policies, for example an integrated maritime policy (e.g. Commission of the European Communities 2007). However, the operationalization of integration is not without barriers. The integration of environmental considerations into all sectors is hampered by the fragmented institutional design at various governance levels, from global to the EU and national (Doelle 2009; Russel et al. 2018). The EU is struggling particularly with renegotiating economic interests and beliefs, and overcoming institutional competition and sectoral policy boundaries (Winkel and Sotirov 2016).

In 2019, following the formation of a new Commission (proponent of legislation and the guardian of the EU’s legal order), a new European strategy was adopted, European Green Deal or EGD (European Commission 2019). In comparison to the previous Commission and its agenda, this one was considerably more environment-oriented (Čavoški 2020). This has laid promising ground for reforms in the direction of sustainability pathways, such that these would correspond to the expectations by the public across the EU, as expressed in the polls (European Commission 2020a). The EGD promised to design “a set of deeply transformative policies” across all the sectors, listing the economy, industry, production and consumption, large-scale infrastructure, transport, food and agriculture, construction, taxation and social benefits. Apart from planning a carbon–neutral economy by 2050, it represented a strong commitment to creating a non-polluting and non-toxic circular economy and to biodiversity goals and targets. The latter included recognizing the value of protecting and restoring natural ecosystems, and sustainable use of resources as well as their strong link to improving human health. It acknowledged issues as closely interlinked and mutually reinforcing, thus having a strong case for integration.

To consolidate the commitments from the strategic document of the EGD, the Commission embarked on a process of adopting action plans, laws and policy guidance. While slowed due to the Covid-19 pandemic, this resulted in a variety of policy measures, including an EU-wide climate law, making the EU’s climate neutrality by 2050 legally binding, an action plan for circular economy, a strategy for the transformation of the food system, development of a sustainable blue economy and a biodiversity strategy.

The EU Biodiversity Strategy for 2030 (adopted in May 2020) committed to legally binding restoration of degraded habitats, ecosystem services and the biodiversity, and to providing financial support for restoring ecosystems (European Commission 2020d). Considering that legal targets on biodiversity have long gone unnoticed, the early signs of a legislative action in this domain were applauded, particularly from the point of view of integrating biodiversity conservation effectively into other sectoral policies and scaling up the funding (Hermoso et al. 2022).

With the outbreak of the Covid-19 pandemic, and the decision that the EU will help tackle the economic consequences by large injections of money, the significance of the EGD was elevated. From a strategic document outlining legislation, EGD became the signpost for a post-pandemic transition, centred around the priorities of a green and digital Europe (European Commission 2020e). The EU availed unprecedented 672,5 billion Eur (312,5 billion Eur in non-repayable funds and 360 billion Eur in loans until 2027) to member states (Regulation 2021/241). Most of this funding was to be channelled to member states as either grants or loans. The payment of the funds to member states were conditioned on a plan (National Recovery and Resilience Plan, NRRP) outlining the public investments, and their compliance with the agreed rules. One of the agreed rules was compliance, in the adopted NRRPs, with the do no harm principle, which aimed at integration of environmental policies across the investments from this fund.

The role of the integration principle in the transformation was explored through the operation and impact of the do no harm principle. This principle was introduced in the EU as a means for verifying environmentally sustainable economic activities, including the spending of public money. In the present study, we first explore the setup of the principle, its intervention logics or theory of change, as explained in the publicly available working documents by the European Commission (the Commission). Second, we analyse the operation of the principle through a revision of Commission’s assessments of 24 NRRPs (out of 27 EU member states, 2 NRRPs were not approved by the time of writing and 1 had not been submitted). The application of the principle is observed through a combination of a qualitative analysis of documents regarding how biodiversity is mainstreamed into the NRRPs and quantitative analysis of the share of resources dedicated to biodiversity as a share of total resources, including conservation and restoration ambitions (at land or sea). The NRRPs did not specifically classify values for investments into biodiversity, neither was this done by two large-scale external reviews of the NRRPs.¹ Information was extracted through the present original empirical analysis.

All reviewed documents (regulations, technical documents, Commission’s assessments of NRRPs) are publicly accessible. The Commission’s assessments of NRRPs were reviewed rather than NRRPs so as to mainstream the object of study from the linguistic and statistical point of view (not all NRRPs are available in English; they do not use a common approach to tagging and tracking investments).

The do no harm principle builds on an existing terminology but represents an innovation from the point of view of the context and way in which it was used. A do no harm principle (or rule) is a widely recognized principle of customary international law, which bestows a responsibility on every State to prevent, reduce and control the risk of environmental harm to other states (Crawford 2019). The principle has been incorporated in international treaties, such as UN Convention on Law of the Sea, Convention on Biological Diversity and UN Framework Convention on Climate Change.² However, from the obligation to not cause transboundary harm, the principle gained a different meaning in the context of the EU, where it is mandated with not causing harm to other policy areas, and thus aligned more closely with the principle of integration and coherency.

Do no harm also builds on a previous policy experience in the EU with insufficient integration of biodiversity and sustainability, particularly in the planning of energy policy. Concerns have been raised over the implications of the large-scale diffusion of renewable energy on ecosystems and biodiversity, as this becomes the backbone of transitioning to green economy (Gasparatos et al. 2017). Additionally, there is a history of the EU efforts having led to highly controversial measures, such as curbing greenhouse gas emissions in the transport sector by promoting crop-based biofuels with severe negative impacts on ecosystems and food production (Directive 2003/30/EC—Biofuels directive) or including forest biomass in the EU’s renewable energy directive (Directive 2018/2001; see Catanoso 2021). Member states indeed had a “strong sense of ownership of the energy and climate transition objectives”, but less for their interaction with other environmental goals (European Commission 2020f).

The EC first introduced the do no harm principle, in an undetailed way, in 2020 as part of the plan setting out an increased climate ambition of the EU, advocating that do no harm avoids “wasted money and stranded assets” (European Commission 2020b). The principle was further elaborated in documents relating to the post-Covid-19 Recovery and Resilience Facility Regulation. It is referred to in two versions—as do no harm (European Commission 2020b) and do no significant harm (Regulation (EU) No 2020/852, European Commission 2021a), without implying a difference in that distinction. The principle was presented as a new rule, based on the logics of life-cycle assessment. It applied to any economic activity that is to qualify as environmentally sustainable, including those that wished to benefit from the funds from the Recovery and Resilience Facility. Any economic activity (reform or investment) must “do no harm” to any of the six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Although the details on the implementation of the principle came only two months before the deadline for the submission of NRRPs (European Commission 2021a), the do no harm became a mandatory part of every NRRP. For every investment or reform, proposed to receive funds from the EU recovery fund, the national authorities had to evaluate the impact of that measure on the six indicated areas by writing, on the provided template, a yes/no indication of the impact and a brief justification. The national proposal could only be approved if no measure within the entire document was found to lead to significant harm to any of the six environmental objectives.

The do no harm principle was designed as the sole and crucial measure of the recovery process to support reforms and investments in “green transition, including biodiversity” and for mainstreaming biodiversity action in EU policies (Regulation (EU) 2021/241). In design, it was limited to being a plain procedural requirement with no participatory measures and no obligation of outcome. This occurred through a mal-devised legislative manoeuvre. While all investments had to contribute to one of the six pillars, among which was also ‘green transition’, which included biodiversity, biodiversity was not supported by a numerical target, unlike climate action (Regulation 2021/241). Contrary to the objective of climate neutrality and digital transition, which were supported by the numerical targets (of having to benefit from at least 37% and 20% respectively of the all the financial allocation, in each national plan), biodiversity had no comparable obligation of outcome. Furthermore, biodiversity-positive measures were not specifically encouraged. Biodiversity was not framed as one of seven ‘flagship areas’, which were strongly encouraged by the Commission, based on the fact that they are common to all member states, need significant investments, create jobs and growth and are needed for the transition (European Commission 2021b). The underlying logics of the do no harm principle was purely that a requirement for a self-revision of decisions would improve compatibility between the proposed investments and their impact across environmental areas.

Several observations can be made regarding the impact of NRRPs on biodiversity. Firstly, most reforms and investments provide very little to no justification over how the conclusion that they have no significant impact on the biodiversity or any other environmental area was arrived at. System-wide implications along various sustainability dimensions, including biodiversity, were not deliberated or fully explored. An example is the non-problematic presentation of the German investment in the electrification of private vehicles, despite the concerns related to the extraction of components for batteries and batteries recycling (Dirnaichner et al. 2022). On several occasions, benefits for biodiversity were mentioned as a positive ‘side-effect’ stemming from other actions. This was typically the case with the rise of renewables in national policy mixes. Sometimes the link between actions and benefits was elusive and not justified, as in the case of the Cypriot diversification of the economy, which is expected to have a contribution to protecting biodiversity through developing touristic routes or through improving waste collection and recycling.

Secondly, some investments have biodiversity as their primary target, but their share is low. Both at the individual country levels and at the cumulative EU level, they are significantly lower than investments towards decarbonisation and do not reach the targets indicated in the EU Biodiversity Strategy. The Strategy spoke of biodiversity and nature-based solutions benefitting from “a significant proportion of the 25% of the EU budget dedicated to climate action” and recognised as “among the five most important fiscal recovery policies, which offer high economic multipliers and positive climate impact.” (European Commission 2020d) Table 1 details investments into biodiversity across the NRRPs. At the EU level, these have reached merely 0,00,000,088% of the value of NRRP.³ At a country level, they range between 10 and 0% of all funds, in comparison to a minimum of 37% funds dedicated for decarbonisation. About half of the countries have earmarked only 0–1% of the funds for measures with significant or primary objective of biodiversity protection. The share of funds seems to correlate positively with the clarity of visions on how these funds will be used and of the total benefits of biodiversity, i.e. the lower the percentage of funds earmarked for biodiversity, the less detail is given on their spending.

Thirdly, not all the measures targeting climate mitigation or adaptation have considered benefits for biodiversity. Synergies between climate and biodiversity goals have inconsistently been identified and sometimes missed. For example, measures for flood prevention are sometimes not specified (Czech Republic, Latvia) and give reasons for concern over harming, instead of benefitting biodiversity. Synergies between climate and biodiversity policy, Nature-Based Solutions or Natural Climate Solutions as opportunities for maximizing social and ecological benefits and meet global development goals and cost-effective long-term solutions for sustainability have a significant potential in enhancing resilience and sustainability (Griscom et al. 2017; Keesstra et al. 2018; Palomo et al. 2021). The inability to encourage or even mandate such science-based solutions and targets is certainly the procedure’s weakness.

Lastly, major negative impact on biodiversity sensitive areas, which would result in manifest errors, have been avoided in the adopted NRRPs. Most controversial measures have been removed in the course of the adoption of plans (CEE Bankwatch Network 2021). However, civil society within countries remains concerned about the investments disregarding biodiversity goals, once they have received the green light for funding (CEE Bankwatch Network 2022). The confidence that harm will actually be avoided remains contingent on the scrutiny of implementation of NRRPs (Fig. 2).