EPR could cause an extinction event among British SMEs

Last week I met with one of the electoral candidates in our area to discuss the forthcoming extended producer responsibility (EPR) plans. I asked for clarification on the policy, as it will have an enormous impact on our business.

The implementation of EPR is seen by Defra as a solution to managing waste, particularly in industries reliant on single-use packaging. However, we as a business sell our products almost exclusively in glass bottles and are completely in the dark about the financial structure of the policy.

No financial guidance for these levies, which are due to start next January, has yet been provided. So how are we expected to budget and plan? Also, why are plastic and cans not subject to any levies until 2027, when they will be subject to the deposit return scheme (DRS) – a levy on the consumer, not the producer?

EPR places the onus of waste management entirely on the shoulders of producers, making them accountable for the entire lifecycle of their products. For soft drink manufacturers, this means taking responsibility not only for the production and distribution of their beverages but also for the cost of collection and recycling of glass bottles that are added to municipal waste streams. This shift is supposed to encourage manufacturers to adopt a more holistic view of their operations, integrating sustainability into the core of their business strategies.

However, if rumours are correct about the size of the levy, we are looking at an amount that will wipe out 100% of our profit immediately. This is both terrifying and unjustifiable in a climate when we are already embracing sustainability via investment in our business as well as working towards Scope 2 and 3 emissions in a journey towards net zero.

If the gossip about the size of these levies is correct, EPR is a potential extinction event for us and many other SME drinks manufacturers. We may well not be able to cope with this added tax when we are still facing increasing costs of raw materials, labour and energy.

Defra cites the potential to drive innovation as one of the benefits of EPR. Faced with the need to manage the lifecycle of glass bottles efficiently, manufacturers are incentivised to develop more sustainable packaging solutions and improve recycling technologies.

However, we are already innovating across the business to be more sustainable. We have invested over £400k in solar panel installation plus a new energy and CO2-efficient Calor Gas boiler, as well as more efficient manufacturing lines with variable voltage motors, and much, much more as we pursue our aim of B Corp certification and net zero by 2030.

We already are a zero waste to landfill site. And because we use 100% natural ingredients with no artificial additives, we produce our core range in glass, which allows a gentle in-bottle pasteurisation process that negates the need for preservatives. This glass is already 100% recyclable – and we use glass which is over 50% recycled. It is under-investment in bottle banks and lack of municipal recycling that stops this percentage being higher.

The timing discrepancy between EPR and DRS  – producers of drinks in glass bottles will face added costs two years before DRS introduces consumer costs for cans and plastic bottles  – will likely give a huge competitive advantage to companies that produce drinks in PET or cans. This will make glass-bottled natural drinks such as ours uncompetitive.

Is this the government’s aim – to drive all drinks into plastic? It hardly seems to fit with recycling aims, as PET is not properly recycled in the UK – much of it is exported and forgotten about.

There are producers in soft drinks, wine and beer who are sleepwalking into a legislation nightmare, which will create a massive financial burden on British SMEs in particular.

To complicate matters further, glass drinks sold to on-trade, catering and foodservice outlets that have their own waste collections will be exempt from EPR. Most companies, large and small, supply these foodservice/on-trade outlets through wholesalers. Many of those wholesalers also sell bottles to retailers, where those sales will be obligated to carry EPR costs. Will Defra obligate these wholesalers to declare exactly what percentage of sales go to foodservice/on-trade and how much to retail?

The solution would be to delay this tax to coincide with the DRS on PET and cans, which is coming in 2027. Or put glass into the DRS scheme, as it is in Europe.

I urge the new secretary of state for environment, food and rural affairs to urgently provide clarity on the costs of EPR at the earliest opportunity post-election.