Comply with me...
According to recent statistics published by the Government, nearly 8,900 businesses are currently covered by the Producer Obligations (Packaging Waste) Regulations, and this number will rise significantly in 2000 when the turnover threshold test falls. Simon Thresh, strategic consultant at AEA Technology Environment, unwraps the packaging options: go it alone or register with one of a number of compliance schemes.
Obligated companies are those that:
- are involved with one of the following activities:
- the manufacture of raw mate ials used for packaging;
- the conversion of raw materials into packging;
- packing/filling packaging;
- the selling of packaging to a final user;
- have a turnover of £5 million (falling to £2 million from 7 April 2000); and
- handle over 50 tonnes of packaging a year.
There are two ways in which companies can register: on an individual basis directly with the EA or SEPA or, alternatively, they can join a registered compliance scheme and discharge their liability.
The 'individual route'
At present about 800 companies have followed the individual route, generally larger businesses with simple unchanging packaging flows. A company choosing to take this approach must first register with the EA or SEPA and pay a £900 registration fee. They then have to complete and return a self assessment form and obtain PRNs for their obligated tonnage.
These companies are able to 'play the market' and pick up PRNs as and when they want. Although recent developments have made this easier with the establishment of an internet-based trading floor, the producer carries the risk and does not have the technical or political support that a compliance scheme may offer.
The majority of obligated companies have joined one of the 13 registered compliance schemes (see table, p16). After payment of an annual fee the producer supplies packaging data to the compliance scheme, which in turn purchases PRNs on the producer's behalf.
Each compliance scheme has a different focus and a different operational approach. Some are open to all, such as Valpak which was set up by the packaging industry and is the largest scheme by far with nearly 2,500 members. Others are restricted to certain industries or materials, such as Difpak, established by the Dairy Industries Federation and Paperpak, set up by the paper industry. Several schemes have been established by waste management companies including Biffpak (Biffa Waste Services), Wastepack (Onyx) and Recycle UK (UK Waste). Finally, there are those that operate on a regional basis e.g. Pennine-Pack, set up by Green Business Network for companies in the Calderdale and Kirklees area, and SWS Compak established by SWS for companies based in the north of England.
Whilst there are certain advantages to be gained from membership of a compliance scheme, these tend to vary from one to another. In all cases membership eases the burden of compliance. A scheme can provide technical support in the actual calculation of the obligated tonnages, some schemes going as far as to offer members one-to-one consultation. They may provide members a voice in the marketplace that a single company cannot achieve. Their specialist knowledge of the PRN market, waste management scene, and access to unobligated material means that compliance schemes should be able to achieve compliance at good value, and any mistakes are their responsibility.
Individual companies have to decide what scheme offers them best value. This will depend on the volume and type of waste they handle, their location, the sector in which they operate and their annual turnover. Inevitably companies will tend to opt for the scheme that offers compliance at least cost.
As a result of the review process the Government delayed its announcement regarding changes to the Regulations until late last month.
The delay, at least in part, was due to lobbying from the converting sector regarding the fair distribution of the recycling obligation across what Meacher described as the "fractious" packaging industry.
In December 1995, industry agreed a distribution of the packaging targets of 6%, 11%, 36% and 47% for manufacturers, converters, packer/fillers and sellers respectively. Last month, Meacher reported that several converters were unhappy with the current spread and wanted alterations made.
As a result of the Review, some interim changes to the percentage activity obligations have been put forward for further consultation. They are that the converter obligation be reduced from 11% to 9%; the packer/filler obligation be increased from 36% to 37%; and retailer obligation go up 1% from 47% to 48%.
The Government has also increased interim recovery and recycling targets as follows:
- 1999 recovery target increased from 38% to 43% and the recycling target from 7% to 10%;
- 2000 recovery target increased from 43% to 45% and the recycling target from 11% to 13%.
By comparing the number of companies registered with the Agencies and the number of companies thought to be 'obligated', it appears that there are about 5,000 companies yet to register.
High profile enforcement
The Advisory Committee on Packaging, led by INCPEN chairman Sir Peter Parker, came out in favour of more rigorous enforcement of the Regulations, stating: "High profile enforcement is essential to business confidence." At present no company has been taken to court but the EA has started taking proceedings against a number of companies which failed to register in 1998. If found guilty, they may be fined up to £5,000 in a Magistrates Court or an unlimited amount in the Crown Court.
This call for stricter enforcement has been repeated by a number of organisations including the Packaging and Industrial Films Association (PIFA). In delivering its response to the Government's review, PIFA stated that "free riders" could not be tolerated. It reported a reduction in profitability and, while supporting an increase in targets, stressed that if the free rider issue was not addressed, higher targets would result in an unfair increased burden on compliant companies.
In his Review annoucement, Meacher indicated he had taken this advice on board. "A rigorous monitoring and enforcement policy on the part of the Agencies is essential if the mandatory Directive targets are to be met in 2001."
In order to pay for the Agency monitoring and reporting of businesses checked for registration and compliance, the Government has raised the Agency registration fee to £900 (from £750).
Packaging Recovery Notes, the subject of much confusion since the introduction of the Regulations, will also be the subject of a separate Government announcement due shortly (at the time of going to press).
Packaging Recovery Notes
At first, many thought that reprocessors were to give PRNs to companies delivering materials for recycling, at no extra cost. Obligated companies could then purchase others to make up the difference between the tonnage they recycled and the tonnage for which they were obligated.
This is clearly not the way the system operates and it is essential to increase transparency within the system and remove the notion that the Regulations have provided reprocessors with a licence to print money. If the recycling and recovery targets are to be met it is necessary to feed a reasonable proportion of PRN revenues back into the system. This will encourage the development of the waste management infrastructure and an overall increase in reprocessing capacity. There has to be evidence from reprocessors, therefore, that this does, in fact, take place.
The market supply of PRNs has vastly outstripped market demand. To date, this is thought to be largely due to a number of companies who have not registered and an under-declaration of obligated tonnage. The lack of robust data also 'muddies the waters'. These factors have contributed to a surplus of PRNs and a consequent slump in price - good for obligated companies but not for reprocessors, the recycling infrastructure, or the 'larger picture'.
RECOUP, the Plastics Packaging Recycling Association, is keen to see an increase in the target for plastics recycling. Its view is that without an increased demand for PRNs, reprocessors will find it difficult to support the price of recycled material and this could result in an overall decrease in plastic recycling by as much as 35%.
The Review also considered the development of separate targets for household and commercial waste. In August, Michael Meacher suggested that at least 25% of a company's obligated tonnage should be recovered from the domestic waste stream. He is eager to prevent the preferential reprocessing of commercial waste over the generally harder to recycle domestic waste stream, although some argue that this may not result in the most economically advantageous result.
Feelings are divided regarding this topic. Some groups, such as LARAC (Local Authority Recycling Advisory Committee), supported the idea, suggesting the establishment of interim targets. However, the Environment Agency warned that unless this proposal was dropped and the Regulations simplified, it would be unable to cope with enforcement. The Agency, in common with most of the compliance schemes, felt that household waste targets would make implementation too complex and it would rather targets were increased across the board.
In the event, Meacher resisted setting separate targets for household waste this year, but has promised to give further consideration to ways of increasing recovery of packaging waste from the household waste stream.
It was clear that some alterations had to be made to the system in order for it to work effectively, and the Review recommendations have addressed the major concerns of enforcement, increased targets, obligation distribution and household waste obligation. At the time of going to press, news on improving PRN transparency was "due shortly".
Once all obligated businesses are registered, some of the other problems will be more easily addressed.
Fewer free riders will mean that targets can be fairly increased across the board and together this will create a greater demand for PRNs. Consequent higher prices will support the cost of reprocessed material and allow development of additional reprocessing capacity. It is then essential to have markets in place for recycled materials in order to complete the loop.