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EXTENDED PRODUCER RESPONSIBILITY
9 May 2000
Traditionally, producers of consumer products have had to carry very little responsibility for their products after sale, excepting possible liability for accidents. Extended producer responsibility means that the product producers must carry the burden of the waste that is created when their products are thrown away.
Legislation in many European countries means that manufacturers have to take responsibility for the waste costs incurred by product packaging; in the near future manufacturers of electronic equipment such as televisions may have to take back their products after ten years of use and recycle them.
General Beverages Ltd - A Fictional Case Study
General Beverages Ltd, a milk company, has always relied on refillable glass bottles for milk packaging. The cost of a 600mL bottle of milk has always included 10 cents for the collection, washing and refilling of the bottles. However, recent developments with plastics mean that plastic milk bottles can now be obtained for only 7 cents. Despite the general belief that glass bottles are better for the environment, the opportunity for a three cent saving on each bottle of milk sold can't be passed up, and General Beverages changes to a plastic bottle. Competitors in the same industry also change to the cheaper plastic option, and eventually part of the cost saving is passed on to consumers.
Unfortunately for the consumers, responsibility for milk bottles ends up on the shoulders of the city and regional councils. Increased volumes of waste mean that landfills, already filling up fast, fill up even faster, even as councils run into increasing difficulty in finding new sites for when space in the existing landfills run out. Eventually new sites are found, but at a price that means ratepayers are hit with a $10 rate hike to last indefinitely, far more than the savings they make from the cheaper milk.
The best option for consumers may well have been the glass bottles in the first place. While prices of milk went down, at the same time consumers have to pay for the increase in landfilled waste, whether through rates, taxes, or a charge on each bag of rubbish. Consumers are highly likely to buy the cheaper plastic bottles of milk, even given that glass is more environmentally friendly, especially as the cost of plastic bottle disposal will be paid by all ratepayers equally, whether they buy the plastic bottles or not. The end result, however, is not just worse for the environment, it also means that it costs more money to get the same milk.
A Solution
The concept of EPR, developed in Europe, has lead to a variety of schemes, all aiming at reducing waste, and recognising that the stakeholder that most controls packaging is the producer, not the consumer.
Take Back Laws
Pioneered in the 1991 German Packaging Ordinance, take back laws mean that companies become responsible for their wastes.
While implementations vary, the general trend is for business to take financial (and sometimes physical) responsibility for the management of waste. Initially the packaging industry has been targeted for extended producer responsibility, due to packaging waste comprising about a third of the household waste collection.
Advantages
Lowered use of raw materials, cutting costs. (A typical example in Germany has been the elimination of secondary packaging, for example the boxes that contain toothpaste tubes. In countries that do not have EPR regulation, boxes are a necessary branding and marketing tool, but EPR legislation eliminated the boxes (which have very little, if any consumer value,) without creating a bias in the market.)
Consistency of product design with corporate environmetal policies.
Green marketing advantage, especially in environmentally conscious offshore markets
Drives innovation - concerns about collection stimulate re evaluation of critical assumptions (e.g. Does the customer want telephone directories, or information about telephone numbers?)
Asset retention (e.g. The glass refillable bottles are worth significantly more when they can be refilled than as waste; Xerox copiers can be remanufactured at a much lower cost than that of a new copier.)
Reduced production time: Design for recycling, reuse or remanufacturing drives simple designs that can be manufactured and dismantled quickly and easily.
Increased attention to consumer wants and desires; reevaluation of what constitutes value in a product. (E.g. What is the driving value of bottled water? Can bottled water be sold with refillable bottles? Can the water be sold without the bottles? Can the bottles be sold without the water? Can a "filling right" be sold, and customers supply their own water?).
Disadvantages
Cost. Germany's Green Dot system has resulted in a non profit making collection system grossing DM 3.9 billion annually (although in reality, the total cost to the consumer is DM 0.69 for every DM 100 spent on shopping.) It is still unsure whether the net effect of the legislation in Germany has been positive or negative.
Compliance costs. EPR schemes initiated by government have often been extremely prescriptive, and tend to consume resources and time. Partnerships between industry and governments, such as the many conventions signed in the Netherlands are often far preferable to government regulation.
Pricing Anomalies EPR schemes inevitably set a monentary value to the recyclability of products. Incorrect pricing schemes will stimulate false innovation and will not move business towards sustainability.
Current Implementations - Germany's Green Dot
In 1991 the German Packaging Ordinance was passed, which shifted the burden of waste management from the municipal authorities to manufacturers, distributors and retailers.
The Ordinance detailed specific requirements for recovery and recycling of sales packaging, either through a state-run scheme, or an industry-run scheme (Duales System Deutschland).
The aim of the ordinance was to influence industry at the product design stage, as well as to manage the rising costs of waste management.
Packaging may either be returned to the retail outlet where it is bought, or collected by the industry run DSD scheme, which includes paper collection, bottle banks, and other packaging collected in special yellow bins from houses.
The German scheme was implemented in under two years, and as a result is one of the most expensive packaging reduction schemes in Europe.
Nevertheless, total packaging recycling rates in Germany were at 84% in 1996, and under the Green Dot packaging scheme waste volumes dropped 14% over the first four years. (According to EPA data, US packaging waste increased 13% over the same period.)
The total cost of the Green Dot System has amounted to US $28 per person per year in 1996, although changes due to an amendment to the Act probably mean that costs will come down slightly. Comparisons with traditional waste management systems are difficult, as they did not incorporate such high levels of recycling, nor is it easy to estimate what it would have cost to landfill the 5.5 million tonnes per year of waste that DSD manages.
The European Directive on Packaging and Packaging Waste
The European Union's Directive on Packaging and Packaging Waste means that by July 2001, all countries must recover at least 50% of used packaging for uses other than landfilling or incineration. (E.g. waste to energy, composting, recycling.) The overall material recycling rate must be over 25%, and no material may be recycled less than 15%.
Countries recovering more than 65% of waste, or recycling more than 45% must demonstrate they have enough capacity to handle all the material, because of fears of stringent regulation leading to an oversupply of plastic and other materials for recycling.
While the packaging directive does not stipulate extended producer responsibility, many European governments have gravitated towards EPR as a waste management strategy that sets up the right incentives for real environmental and economic improvements. Legislation passed to meet the requirements of the European Packaging Directive has incorporated some elements of EPR in Austria, Belgium, France, Germany (the 1998 Amendment) the Netherlands and Sweden.
Future Developments
Proposed EC directives related to EPR include:
A directive requiring separate labelling and collection of hazardous household waste, with fees to be paid for by producers. The items listed in the Directive, including paints, resins, solvents, photo chemicals, medicines, aerosols and pesticides, can cost up to $2 300 per metric ton for safe disposal. Eight countries already regulate hazardous household waste in some way.
A directive to require take back of electrical and electronic items, including appliances, toys, medical equipment and computers. Disposal of electrical and electronic products such as obsolete or broken computers and televisions is an increasing burden on state-run waste management authorities, who are likely to support a producer responsibility scheme.
A first draft circulated in April 1998 entailed collection of 80 to 90 percent of large household appliances and personal computers to be collected, with a 70 to 90 percent recycling rate, and was very controversial.
Take back schemes are proposed to cost nothing to households, with the costs of the scheme built into the prices of new products. As with the Green Dot scheme and the European Packaging Directive, many states (Switzerland, the Netherlands, Sweden, Norway, Italy) have already introduced take back schemes in some form.
The EC directive on end of live vehicles (ELVs) has been under development for some time. While the iron and steel in cars has always been recycled in industrialised countries, the remaining 25% of the vehicles weight (often known as auto shredder residue) is comprised of a mix of often environmentally toxic materials.
The current draft on end of life vehicles stipulates an 80% recycling rate and 100% take-back rate of cars by 2005. France, Germany and Sweden already have agreements with industry or legislation. Japan has also proposed legislation requiring a 95% recovery rate by 2015.
Further Reading
Duales System Deutschland AG, the non profit company set up by industry to administer the "Green Dot" programme in Europe.
Product Take-Back is a New Marketing Tool an article provided by J. Ottman Consulting (for ) detailing business strategies used to profit from product take-back.
Green Planning in the Netherlands is an easy to read explanation of how the government in the Netherlands have achieved much in a short time by using a collaborative approach.
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