The battle for the soul of extended producer responsibility

But the process of getting it off the ground has been anything but, lurching from one crisis to the next under a succession of Defra ministers.

Now, with a year to go before the first invoices land, Defra is starting to address concerns over the “eye-watering” fees, with increasingly precise illustrative estimates. But the existential battle for the soul of EPR in the UK is still uncertain.

Backed by a new report from a cross-party thinktank, the Food & Drink Federation (FDF) claims unless producers are given the reins to run the scheme, EPR will result in retailers and manufacturers simply pumping money into a bottomless money pit – with no guarantee of an improvement in the quality or quantity of recycled materials at the end of it.

So how can the scheme be modified for a better outcome?

Seat at the table

A number of changes have already been made. Arguably the biggest breakthrough came in July last year, when the then environment secretary Thérèse Coffey agreed to give key industry figures more say in the design of the scheme.

Thus, in January this year, ex-OPRL MD Margaret Bates was appointed on a secondment to become head of a government-run administrator – a not-for-profit company that will oversee the EPR scheme.

Alongside her, a new steering group was formed, headed by Sebastian Munden, former Unilever UK&I boss and current chair of environmental NGO Wrap. Also on its board from the industry side is Aldi buying director Luke Emery, former M&S packaging boss Karen Graley, and Nestlé packaging supremo Sokhna Gueye, as well as leading trade associations. And on the waste collection side there are representatives from local authorities, the waste management industry and the devolved governments.

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The steering group’s role is to prepare the ground for the creation of the EPR scheme. And the government has said this body, now comprised of more than 50% producers, could be a prelude for some of the administrator’s functions switching to private-sector control in the future.

But with so much at stake and crucial details of precisely how the scheme will operate still to be thrashed out, tensions are running high.

In the past few months, a number of small to medium-sized brands have called for EPR to be scrapped altogether as they woke up to the costs involved. Tthe publication of Defra’s first estimated base fees for producers in August further fanned the flames, and resulted in some unedifying scenes between different packaging material camps, with glass producers furious over the high estimates for glass, and aluminium producers livid at their attempts to shift the cost to other materials.

“Over time it’s possible there would be elements of competition. But we want a fully accountable system to minimise confusion”

Jim Bligh,  FDF

Meanwhile, the report by leading think tank Policy Exchange called for an “urgent” review of EPR, asking ministers to design alternative proposals to ensure a producer-led system. The report, which cites the FDF as a sponsor, claims the government’s strategy has become a retrograde “plastic tax”, without any levers for the industry to deliver environmental or operational outcomes. While the aims were “laudable”, it warned EPR “may well have deleterious unintended consequences” – unless producers were given financial and legal responsibility and autonomy to design and manage operations, under the oversight of a strong independent regulator.

The challenge now is to strike the right balance, says Munden. “It’s a balance between the needs of local authorities and the obligations of producers to pay on the one hand – and the costs and procurement and supply chain innovation producers want on the other.

“It’s only right that producers are given more accountability for the strategy to deliver outputs. But the changes must not be at the expense of the overall objective, which is to increase the quality and quantity of recycled materials on the UK market and to increase investment in the necessary infrastructure. So it’s not just about the lowest cost – it must be low-cost and high-quality output.”

It’s a valid concern. A waste source, who asked not to be named, claims a producer-led system does not guarantee better recycling at local authority level and worries that it would be more about slashing costs.

“There is serious concern that a producer-led system will ‘lowball’ the overall costs and not lead to any better collection services or greater recycling rates.

“I think there does need to be more say from producers in the system, but this should be a small, elected governing group that sits alongside government to oversee the system, rather than a much bigger organisation that commands and controls the whole UK waste management system for packaging.”

Funding the status quo

Jim Bligh, director of corporate affairs and packaging at the FDF, insists lowballing is not the intention. “Producers want and need an EPR system that builds a truly circular economy. So you can use a crisp packet, you can use your yoghurt carton and then get them back as food-grade material. We agree EPR is the vehicle for that, and that comes with a cost, and we’re prepared for that cost, but what we’re not prepared to do is simply fund the status quo. We’re saying to the government that we’re going to spend £2bn from next October on EPR so, for us, there is a time imperative to agree a system with producer leadership at its heart.”

If the UK is to establish a “world-beating”, producer-led EPR system, it must learn from the success of EPR in countries such as Belgium, Canada, France and many states in the US, which are all producer-led, says Bligh.

“Currently, no two EPR systems look the same, but we do know that in Russia and Hungary, where they have pure government-led systems, recycling rates are substantially worse.”

Giving producers the lead over EPR would enable the industry to incentivise local authorities through the distribution of funds based on performance, as well as empowering industry to attract investment to give local councils access to modern recycling facilities and other infrastructure that can help them push up recycling rates, he adds. “Local authorities would maintain contracts and the democratic accountability for collections, but we want a system that sees them partnering with us to attract that investment and increase accountability,” he adds.

The lack of soft plastic recycling infrastructure is one example of where a producer-led model could turbo-boost EPR’s effectiveness, claims the FDF.

“Currently, virtually nowhere has flexible plastic collection,” says Bligh, “Yet by 2027 the government is legislating that it must be collected. That’s a great example of where, [with the right framework] we can invest to make sure all local authorities have access to the latest technology, so flexible plastic can be collected and a market for it is created.”

Even the creation of such a flexible packaging market is not without controversy, however: the government would need to heed industry calls to allow chemical recycling for food-grade recycled material.

“What we’re not prepared to do is simply fund the status quo”

Jim Bligh, FDF

But the FDF’s vision has led to fears over the control producers could wield on already under-the-cosh local authorities. Steve Gough, CEO at Valpak, whose ‘PackFlow’ data calculations have been widely regarded as the most reliable source of evidence in the run-up to the EPR launch, says local authorities need government support and long-term security.

“Faced with the challenges of disparate housing stock, a wide range of circumstances and limited funds, local authorities work hard to provide value for money,” he says. “Without enforcement powers and with little funding for communications, they have limited power over the participation of householders in recycling.

“Many local authority waste management contracts are outsourced, so any scrutiny over efficiency should also include waste management contractors, while collection contracts tend to run for at least five years, so change will not be immediate. To improve efficiency, local authorities might therefore benefit from support around contracts or funding towards communications.”

Instead of a producer monopoly, Valpak suggests ministers consider the example of EPR in Germany as a potential model, where it has opened the strategy up to competition among different providers.

“Germany also started under a monopoly system, but by introducing competition it was able to drive more competitive costs and a better range of services for producers,” says Gough.

When it launched in 1990, the Duales System Deutschland (DSD) was Germany’s only EPR scheme, and remained so until 2003 when the government brought in regulations resulting in the market entry of nine competitors.

Valpak says opening up the scheme to competition resulted in a massive reduction in disposal costs, while the costs for collecting packaging from households fell from around €2bn to less than €1bn. He urges the government to learn the lessons so it is optimised from the start.

The FDF would not oppose such a system in principle, says Bligh, but it’s not a solution for the short term, he insists.

“All successful EPRs start out with one organisation,” he points out. “Over time it’s possible there would be elements of competition. But we want a fully accountable system to minimise confusion. Our suggested solution is all about testing and rolling out best practice.”

However, like Valpak, Robbie Staniforth, innovation and policy director at Ecosurety, who also sits on the government’s EPR steering group, warns against a system in which producers have all the power.

“It looks like the government is amenable to producers playing a larger role in some elements of the EPR system,” he says. “However, it will need to be balanced against the needs of all stakeholders, including local authorities and waste management companies.

“Examples across the world have demonstrated that if any one group holds too much power, the system becomes inequitable. Clearly, as financiers of the system, producers should have a say in how their money is deployed. However, local authorities and waste management companies have done most of the work to deliver the high recycling rates we see in the UK today when compared to many other nations.

“They need adequate incentives and autonomy to deliver the next jump in recycling volumes that the new system was intended to deliver.”

As producers digest news of Defra’s new set of estimated fees, the power struggle looks set to rumble on. Munden urges patience. “We are trying to do something really hard and complex. So the road is going to be bumpy, but the rewards at the end will be worth it for businesses and customers. Without packaging EPR we are not going to get a circular economy for packaging. When we get these phased moves right – and no successful EPR scheme I am aware of was born perfect – it will open up the opportunity for a big step forward for Circular Living, our mission at Wrap, enabling solutions for a range of products and sectors.”