Extended Producer Responsibility (EPR): what will it mean for the food and drink sector?

Extended Producer Responsibility (EPR), set to come into force later this year, essentially shifts the financial responsibility for packaging waste from taxpayers to producers. As food and beverage manufacturers are set to be one of the most affected by this new legislation, The Manufacturer caught up with Jim Bligh, Director of Corporate Affairs, Communications and Packaging at The Food and Drink Federation (FDF), who discussed the potential impact of the EPR scheme on manufacturers.

Under the EPR scheme, businesses must collect and report detailed data on their packaging usage, which is then used to calculate household waste management fees. These fees will be modulated based on recyclability – meaning more sustainable packaging will result in lower costs.

Key takeaways

• The UK has one of the worst recycling rates in Europe and lags behind many of its neighbours
• Many businesses remain uncertain about how to navigate EPR effectively
• Rather than replicating best practice from overseas the EPR in the UK has been developed from scratch
• The EPR will cost producers £1.4bn a year but the FDF has stressed that this needs to be ring-fenced for recycling
• It is important that the government focus on SMEs as many could be unsure the EPR even exists

Any packaging producers (mainly food and drink manufacturers) need to pay for each tonne of material they put onto the market. Coming into force in October it is estimated by government to be over £1bn annual cost for the industry.

EPR is designed to encourage businesses to rethink packaging design, ensuring materials are both environmentally friendly and cost-efficient. As the financial responsibility for packaging waste now shifts to producers, businesses must factor these additional costs into their budgets. However, many businesses remain uncertain about how to navigate EPR effectively.

Why has the EPR been introduced?

Fundamentally, the UK has a problem. As a nation we use too much packaging, and in particular, virgin plastic. This is hard to recycle, and as such, Britain’s recycling rate has flatlined to around 40% for a decade or more, thanks to very little public and private investment in the system.

Just under a decade ago the government at the time took action and decided to follow international best practice and introduce EPR for packaging. “This ultimately means that companies that manufacture consumer goods are now responsible for paying for the full lifecycle of their packaging”, said Jim.

This lifecycle includes collection, sorting, processing, treatment and reprocessing (turning that packaging back into other recycled materials). In other countries, this has proven to be effective in building a circular economy for packaging recycling and to push up recycling rates.

Under the scheme, companies will pay fees per tonne of packaging material sold to consumers that will end up in the household waste stream. This will cover cardboard, paper, glass, flexible plastic, rigid plastic and aluminium. Indeed, almost everything that’s used as packaging will end up attracting an EPR Levy. And, the harder a material is to recycle then the higher the fees.

The levy paid by producers would then fund recycling infrastructure and create a circular economy for packaging recycling. “The problem, as it stands, is that government has built the part of the EPR that will invoice businesses, and that will cost producers £1.4bn a year from October”, Jim continued. “However, they haven’t set out any plans for how that money will be ring-fenced and dedicated to recycling infrastructure.

“Our concern is that the £1.4bn will be used for plugging council and funding gaps. But we are absolutely clear – this money is for recycling yoghurt pots, it’s not for fixing potholes, and that’s our message to government right now.”

UK is lagging behind

Jim explained that by comparison, the UK’s near neighbours – Belgium, the Netherlands and France – can boast significantly higher recycling rates. A key reason for this is that EPR schemes have been established and run successfully by the private sector in those locations for nearly 20 years.

He added: “Here in the UK, however, there’s been very little focus on investment in the system, so EPR should help. As producers, EPR gives us a legal responsibility to push up recycling rates. But the challenge in the way that Defra has designed the system is that we don’t have any levers of control to improve those rates.”

This will require improved recycling infrastructure and as such, the FDF is currently pushing for the government to hand over control to producers, similar to the structure of other successful EPR schemes elsewhere in the world. “That will help us attract investment, consolidate and improve infrastructure and create a flow of materials to turn crisp packets, yoghurt pots and bread bags etc, back into food grade packaging”, Jim added.

Not helping the situation is the fact that the UK’s scheme has been developed by the UK government and the devolved nations, meaning slightly different approaches to the problem.

Copycats

As EPR has been run so successfully in other countries, one would think it would have been prudent to follow another’s example. In Canada, for example, there are several different EPR schemes that have been running for 25 years or more. One is the Recyclability Assessment Methodology (RAM) which means that every product put on the market has to be assessed and fees paid based on its recyclability.

This methodology is complicated, and takes a lot of time, discussion and tradeoffs between different material sectors and producer types. This took around two years to get up and running in Canada. However, as Jim continued: “Defra, for their own reasons, have decided to do that in the space of three months, without really consulting businesses on the implications and what it means for them. They’ve created a scheme that is actually quite different from other countries, when they could have simply replicated the ones that work well.”

He added that this bespoke UK approach will probably lead to a more expensive system, and certainly one that’s more complicated for producers to deal with. In the UK’s version of the RAM, producers will have to assess 700 different data points on each piece of packaging placed on the market, and all this by October. “That’s just not possible”, Jim continued. “If you’re a big business with 8,000 different SKUs, and are required to capture 700 different pieces of data on each of those products, that’s not going to happen by October.

“Defra would say that they’ve been working with businesses in the UK, including our members, on the scheme. But that’s all been based around starting our EPR from scratch, rather than importing best practice from overseas.

“Another key differentiator in the UK is that the scheme administrator, PackUK, is a public sector organisation. In every other country except Russia and Hungary, the scheme administrator is run by producers. As such, it is the producers who are genuinely taking responsibility for increasing recycling rates.

“Here, for reasons known only to Defra and the Treasury, this has been placed within the public sector. They’ve created a quango, and that limits the ability of the scheme to really attract private investment and get the system change that’s required if we’re going to make this successful.”

The impact

The aim of the scheme of course, is to create a circular economy, so the packaging that is put into the recycling system comes out as food grade packaging at the other end. This will require investment, infrastructure and new rules on issues such as chemical recycling.

It will also require attracting overseas investors to come in to the UK and create the new systems and processes to make it work. Being able to use waste as a resource is the ultimate prize for manufacturers.

However, because of the lack of infrastructure planning, and the fact the Treasury has slowed down the decision making process, Jim is worried that currently, all companies have been left with is a £1.4bn bill that’s payable this year and every year thereafter.

He added: “Let’s hurry up the process of ring-fencing those fees, investing them in infrastructure and creating that circular flow of materials where producers own the content that comes out of the recycling system to use it again.

“Without this in place, the only impact of the £1.4bn is food prices will go up – which will subsequently be passed on to consumers – and recycling rates will stay the same.”

Should F&B manufacturers be worried?

The first concern is cost, and making sure those can be passed on – Defra estimate that 80% of the EPR costs will be passed straight on to consumers. However, it is Jim’s view that this figure will ultimately be closer to 90% or even 100%. Food and beverage is a sector with small margins so those costs will have to go somewhere.

Another issue, as Jim sees it, is bureaucracy and admin. Businesses will have to register and submit data on all the packaging that they put on the market. A big company will probably do this in other countries already, and so probably have systems in place.

However, the sector is full of SMEs and it’s possible that a small business will not have heard of EPR until this year. “If you’re an SME you could suddenly be in a position where you’ll have a large bill landing on your desk which could well outweigh your profits. We want government to support small businesses to help them make that transition, both in terms of minimising the admin burden, but also the associated costs, particularly if they’re not aware of the new obligations.”

How could EPR lessen its impact on industry?

The number one priority is to ringfence the EPR fees – making sure that the £1.4bn that is being invested in the system is spent on recycling. Jim also stressed that government also need to hand over control of the scheme administrator to the private sector as quickly as possible.

He added: “To their credit, they have indicated their willingness to do so, and the FDF is setting up a producer organisation to cover all the different obligated producer sectors to make sure that they are in the driving seat and able to make the changes required.”

He added that there also needs to be a focus on attracting investment into the recycling system and a plan for how to improve, modernise and consolidate the UK’s fragmented and rather inefficient recycling system. This will involve difficult decisions about long-term local authority contracts and choices around different materials and how they’re recycled. “We need to get on with that now if the investment we’re making is to bear fruit.”

Finally, Jim added that government needs to give a thought to small businesses. He suggested that for an SME manufacturer of pasta sauce, peanut butter or alcoholic or non-alcoholic drinks, for example, using glass for their bottles and jars could very well cost more in EPR fees than the company is making in profit. “It’s vital that the government listens to those businesses and creates ways to provide financial support to help them get through the first few years of the scheme.”

Be prepared

The most important factor for businesses right now is to register and submit their data, which is in everyone’s interests. The total amount of money to pay is not going to change, but the more companies are signed up, the more individual bills will come down.

It is also advisable for businesses to talk to their trade associations. In the FDF’s case, it is providing assistance to businesses to help them comply, understand the requirements of the scheme and to make sure they are submitting their data.

Packaging design is also a key consideration. EPR provides a financial disincentive to use certain types of packaging. But this will take time and investment for manufacturers to change their material type. It could also require some investment but it is certainly worth manufacturers considering alternative forms of packaging that reduce their environmental footprint and also ERP fees.

“This will create some significant opportunities for businesses over the next few years, as we innovate, create lighter weight plastic and use less. The problem at the moment is two-thirds of flexible plastics end up being incinerated overseas. That’s a terrible outcome, so if we can use less and recycle more, that’s a win for everyone.”

Although the FDF have reservations about the structure of the EPR, it is still a scheme the federation supports. Jim added: “Food and drink manufacturers are alone at the moment in supporting EPR, but the reason we do is because we’ve got goals to meet. The UK sector wants to reach net zero by 2040 and many of our global businesses have ambitions to eradicate virgin plastic from the food chain entirely by 2040, or even earlier.

“EPR is a proven way of building a circular economy, but the policy needs to be right. That’s where the challenge now lies between business and government around how to implement this in a way that leads to the change that we all want and need.”