7 Financing the scheme (Q17–Q21)
7.1 The consultation paper discussed how a DRS might be financed. Four main scheme costs were identified – refunding deposits, providing return points and issuing handling fees, logistics, and infrastructure and staffing associated with the scheme administrator – along with three income streams: sale of collected materials (if owned by the scheme), producer fees, and unredeemed deposits. The consultation paper set out various issues and options related to these costs and income streams, and sought views as follows:
Question 17: Do you agree that deposit return should be seen as a form of producer responsibility? [Yes / No / Don’t know]
Question 17a: If yes, how do you see deposit return interacting with other producer responsibility obligations?
Question 18: Do you think it is appropriate for the scheme administrator to maintain ownership and income from sales of the material? [Yes / No / Don’t know] Please explain your reasons.
Question 19: If the scheme administrator maintains ownership of the material, should it prioritise maximising profit from sales or should it seek to achieve additional benefits? [Maximise profit from sales / Pursue other benefits]
Question 19a: If you selected pursue additional benefits, which benefit should the administrator pursue?
Question 20: Should any excess funding or unredeemed deposits be ringfenced for the continued maintenance or improvement of the system, or do you think it would be appropriate to divert funding to other purposes? [Funding should be ringfenced / Use for other purposes]
Question 21: How would you define a producer?
Producer responsibility for deposit return (Q17)
7.2 Question 17 focused on deposit return, and asked if this should be treated as a form of producer responsibility (i.e. a means of transferring environmental costs to those who benefit from placing products on the markets).
7.3 Table 7.1 shows that a large majority of respondents (83%) thought that deposit return should be seen as a form of producer responsibility. Both organisations (91%) and individuals (82%) were strongly of the view that deposit return should be seen as a form of producer responsibility. However, more individuals (12%) than organisations (3%) were likely to say they ‘didn’t know’.
Table 7.1: Q17 – Do you agree that deposit return should be seen as a form of producer responsibility?
|Public sector organisations||21||95%||–||0%||1||5%||22||100%|
|Food and drink producers||20||83%||4||17%||–||0%||24||100%|
|Recycling / waste mgmt orgs||15||100%||–||0%||–||0%||15||100%|
|Hospitality and restaurant trade||4||80%||1||20%||–||0%||5||100%|
|Total (organisations and individuals)||1,381||83%||96||6%||190||11%||1,667||100%|
Percentages may not total 100% due to rounding.
Impact on other producer responsibility obligations
7.4 Respondents who answered ‘yes’ at Question 17 were asked whether they thought deposit return would impact on other producer responsibility obligations.
7.5 On the whole, individual respondents did not know what ‘other producer responsibility obligations’ were. Those individuals who answered offered three types of response. The first was simply to say they were ‘not sure’ or ‘didn’t know’ or ‘didn’t understand the question’. The second type of response was to reiterate how important it was for producers to (i) accept responsibility for the waste they produce (ii) move towards using recyclable materials, and (iii) stop using single use plastics and other harmful materials in their packaging. The third type of response, offered by just a few individuals, was that producers already have other responsibilities – e.g. relating to (i) hygiene (ii) health and safety more generally (iii) quality assurance across a wide range of fields including design compliance and standardisation – and that they are required by law to operate in a way that fulfils all these obligations and responsibilities.
7.6 Organisational respondents in general supported an ‘overhaul’ of producer responsibility which it was thought was currently not fit for purpose. These respondents emphasised the importance of ensuring that producer responsibility in relation to the DRS was considered in a ‘holistic way’. This meant considering the DRS in tandem with, and alongside, a range of other mechanisms (some of which were themselves under review) such as:
- The review of Packaging Recovery Notes (PRN) / Extended Producer Responsibility (EPR), a consultation on which is expected in Autumn 2018. This review covers a much wider range of items than just drinks containers. (Note that the PRN system is part of EPR; whilst some respondents talked about the review of the PRN system in their comments, others focused on the review of EPR.)
- UK Government proposals for a tax on single use plastics / EU single use plastics directive / other proposals on taxation
- Guidance and regulation on design for recyclability.
7.7 The main points made were that:
- Depending on how the (new) EPR is developed, there may be no requirement for a DRS. Thus, the review of EPR should be conducted before any decision is made regarding a DRS. It is possible that following the review of the EPR, the environmental outcomes anticipated for the DRS can be achieved at lower cost.
- The material covered by the DRS should be removed from the PRN system in order to avoid ‘double taxation’. This point was at the core of many of the responses to this question and was made by a wide range of organisational respondents including charities, food and drink producers, environmental consultancies, packaging manufacturers and retailers. It was suggested that if these materials could not be removed from the PRN, then producers should be allowed to choose whether to adhere to PRN or DRS.
- The current PRN scheme makes producers responsible for 10% of the costs of recovery. This figure should be 100%.
- The DRS and the other linked mechanisms need to be developed in such a way as to ensure that there is no incentive to avoid a DRS.
7.8 Not all organisations agreed that ‘double taxation’ was an issue which needed to be addressed. In particular, it was suggested by a public sector organisation that producers would not ‘pay twice’ if a DRS is introduced for ‘on the go’ items. Moreover, a waste and recycling organisation defined the producer obligation under the DRS as financing recyclate collection and the obligation under PRN as financing recycling infrastructure; it was argued that this was not double counting in the context of full cost recovery.
7.9 A range of other points, not directly related to the question, were made by organisational respondents including that:
- The DRS might have adverse impacts on return rates for non-DRS containers.
- If materials collected through kerbside collections are also included in the DRS then producers costs could be higher.
- The method for financing DRS in Norway is cost effective. The method in Denmark which involves a mandatory DRS also results in high return rates but is more expensive.
- The definition of producer responsibility is not consistent in the consultation document. The DRS is actually a form of ‘product stewardship’ not EPR.
Financing the scheme – income from sales of DRS materials (Q18 and Q19)
7.10 Question 18 and 19 looked at ownership of and income from collected materials.
7.11 Question 18 asked for views on whether the scheme administrator should maintain ownership of and income from sales of material collected within the scheme. Respondents were asked to complete a tick-box question and provide any additional comments.
7.12 Table 7.2 shows that 44% of respondents thought it was appropriate for the scheme administrator to maintain ownership and income from sales of the material while 16% thought it was not. However, a large proportion of respondents (40%) were unable to say whether or not it was appropriate.
7.13 Just 8% of organisations felt unable to express a view on this question, compared to almost half (43%) of individuals. Individuals who said ‘yes’ greatly outnumbered those who said ‘no’ (41% compared to 16%). This pattern was even stronger among organisations – those saying ‘yes’ outnumbered those saying ‘no’ by 84% to 8%, with all organisational types strongly of the view that this arrangement was appropriate.
Table 7.2: Q18 – Do you think it is appropriate for the scheme administrator to maintain ownership and income from sales of the material?
|Public sector organisations||15||71%||4||19%||2||10%||21||100%|
|Food and drink producers||22||100%||–||0%||–||0%||22||100%|
|Recycling / waste mgmt orgs||9||64%||2||14%||3||21%||14||100%|
|Hospitality and restaurant trade||4||80%||–||0%||1||20%||5||100%|
|Total (organisations and individuals)||679||44%||239||16%||608||40%||1,526||100%|
Percentages may not total 100% due to rounding.
7.14 Respondents’ comments at Question 18 often touched upon issues addressed elsewhere in the consultation document. Specifically, they often addressed issues related to (i) Question 32, which asked about the ownership of the scheme (ii) Question 19, which asked about the role of the scheme administrator, and (iii) Questions 20, 31 and 33, which asked how the income (and profits) from the scheme should be handled. Thus, most of the comments made at Question 18 have been considered together with the comments made at other questions. The text below (paragraphs 7.15 to 7.19) provides a brief commentary on additional insights arising from the analysis.
7.15 There were three main arguments put forward in favour of the scheme administrator maintaining ownership and income from sales of the material, namely that:
- This arrangement is essential for the financial viability of the scheme. The scheme costs money to run, and it is important that it is self-financing so that the burden on the public purse is minimised. The proposal to use income from sales of the material to finance the scheme seems entirely appropriate and is consistent with the principle that all operational arrangements (including managing any financial risk) are the responsibility of the scheme administrator.
- This arrangement would provide an incentive for the scheme administrator to run the scheme efficiently. This would mean that recycling rates were maximised and producer fees were minimised.
- A centralised process for the sale of recyclate via a single administrator would be (i) simple (and therefore cost effective) to run (ii) less likely to be open to fraud (iii) more accountable and (iv) able to achieve economies of scale and higher prices from the sale of material. These respondents sometimes contrasted this kind of arrangement with the ‘reuse and return’ scheme operated in Germany.
7.16 However, it was common for respondents to place conditions on this arrangement being acceptable. The conditions were that:
- The scheme should be run on a not-for-profit basis.
- Any profit or surplus from running the scheme needed to be invested into relevant activities.
7.17 Occasionally, some organisational respondents argued that the scheme should be privatised and that this was the way to ensure maximum efficiency and achievement of scheme objectives.
Arguments against the scheme administrator maintaining ownership and income
7.18 There were two main arguments made against the scheme administrator maintaining ownership and income as follows:
- If the scheme administrator is able to profit from the scheme, then that provides a perverse incentive for keeping the scheme running. The ultimate aim is to eliminate waste but the scheme incentivises collecting as much waste as possible.
- The private sector should not profit from running a DRS.
7.19 A range of other issues were addressed by respondents. Many of these related to (i) the arrangements for ownership of the scheme and (ii) the effects of different ownership models on the efficacy of the scheme (e.g. in relation to downgrading, market distortion, competition between recycling organisations, impacts on local authorities etc.).
Role of scheme administrator – maximise profit vs seek additional benefits (Q19)
7.20 Question 19 (a two-part question) followed on from Question 18. The first part of the question (a tick-box question) asked about the relative prioritisation of maximising profit and achieving additional benefits if the administrator retained ownership of the material collected via the scheme. The second part of the question was directed at those who thought that the scheme administrator should prioritise additional benefits and asked for views on what additional benefits should be pursued.
7.21 Table 7.3 shows that five out of six respondents (84%) thought the scheme administrator should prioritise achieving additional benefits compared to one out of six (16%) who thought they should prioritise maximising profit from sales. However, organisations were more likely than individuals to prioritise maximising profit from sales (38% compared to 14%), with some organisation types – food and drink producers (59%) and packaging manufacturers (64%) – indicating majority support for prioritising maximising profit. Other organisations – retailers, those in the hospitality trade, and environmental consultancies – were divided in their views on this question.
Table 7.3: Q19 – If the scheme administrator maintains ownership of the material, should it prioritise maximising profit from sales or should it seek to achieve additional benefits?
|Achieve additional benefits||Prioritise maximising profit||Total|
|Public sector organisations||11||61%||7||39%||18||100%|
|Food and drink producers||7||41%||10||59%||17||100%|
|Recycling / waste mgmt orgs||7||64%||4||36%||11||100%|
|Hospitality and restaurant trade||2||50%||2||50%||4||100%|
|Total (organisations and individuals)||1,025||84%||190||16%||1,215||100%|
Percentages may not total 100% due to rounding.
Note: At least three organisations selected BOTH ‘achieve additional benefits’ AND ‘prioritise maximising profit’. These responses are not included in the table.
7.22 Although the follow-up question was targeted at respondents who favoured the prioritisation of seeking additional benefits over maximisation of profits, around a tenth of those who commented thought that maximising profit should be the priority (as indicated at Question 19). The sections below cover (i) suggested additional benefits, and (ii) views on pursuing maximum profit or additional benefits.
7.23 There was a wide range of calls for the scheme to pursue additional benefits that supported the ‘common good’ or which ‘optimised the benefits’ for communities in Scotland. However, respondents interpreted this in different ways, with some focusing on DRS operational issues and others discussing issues external to the scheme itself.
7.24 Most often, those who focused on operational aspects of the DRS wished to see investment in scheme development and promotion in order to maximise recycling and the quality and value of the recyclate produced via the scheme. As well as investing in technical improvements to the scheme, respondents also called for investment in education, awareness raising and encouragement regarding recycling behaviour, plastic use etc., and in ensuring the scheme was fully accessible to all groups.
7.25 In some cases, respondents also said they wished to see the scheme prioritise ethical and sustainable business practices.
7.26 Respondents who envisaged additional benefits as being ‘external’ to the scheme made the following main suggestions as to what might be pursued:
- Support for initiatives in the environment policy area – e.g. addressing carbon emissions and climate change.
- Development of local recycling industry capacity (at Scotland or community level), with some saying that this would support employment and the local economy, and the ‘circular’ economy.
- Research and development activities relating to recycling processes, waste reduction, the development of more environmentally sound / biodegradable packaging, and alternatives to single use plastics, etc.
- Funding for public services, community groups and projects, particularly – but not restricted to – those related to recycling, waste reduction or wider environmental improvements.
7.27 While individuals offered a full range of views, organisational respondents who made suggestions for additional benefits tended to focus on DRS-related activities, or investment in local recycling capacity.
Views on pursuing maximum profit vs additional benefits
7.28 A substantial proportion of respondents who commented at Question 19a did not address the specific question of which additional benefit(s) the administrator should pursue. Instead, they discussed their reasons for favouring the prioritisation of either profit or additional benefits, as indicated at Question 19, or their wider views on the appropriate business model to be adopted by the scheme.
7.29 There were two main views presented as follows:
- Some respondents – particularly, but not exclusively, individuals – thought the scheme should prioritise environmental and wider societal benefits, or the issue of recycling and plastic waste more specifically, and felt the pursuit of maximum profit was not appropriate in this context. It was common for respondents to say that the scheme should be run on a not-for-profit basis, as a social enterprise, or by the public sector, and / or should be run in accordance with sustainable business practices. There was some concern that a profit motive might skew the focus of the scheme, or lead to unintended consequences. Nevertheless, there was also a view that the scheme should be sustainable and self-financing and that any profit that did accrue should be reinvested in the scheme or related activities. Some in this group went on to give views on the type of benefits the scheme might pursue as discussed at paragraphs 7.23 to 7.26.
- Other respondents, including most organisations, thought the scheme should aim to maximise profit, including through the sale of recyclate material, and, indeed, had to do this in order to (i) operate viably and competitively in a commercial context, and (ii) be effective in terms of meeting the scheme objectives. There was a concern that the pursuit of ‘additional benefits’ would detract from this. However, some also argued that prioritising the maximisation of profit would (in time) allow additional benefits to be pursued – these respondents largely envisaged additional benefits as being closely related to scheme development and promotion, or activities with a clear link to scheme objectives, and / or said this should be at the discretion of operators, who would ultimately act within the parameters set by government.
7.30 However, alongside these two positions, a range of respondents (organisations and individuals) argued that both profit and additional benefits could and should be pursued. They did not think these objectives were mutually exclusive, and, indeed saw profit as necessary for funding additional benefits. They thought that the relative importance of additional benefits and the pursuit of profit needed to be considered ‘in the round’ with a balance struck between the two objectives. Respondents envisaging this balance in different ways, and also suggested that it might alter over time.
Use of excess funding and unredeemed deposits (Q20)
7.31 Question 20 focused on excess funding or unredeemed deposits and asked if this should be ringfenced for the continued maintenance or improvement of the DRS, or made available for use for other appropriate purposes such as environmental projects.
7.32 Table 7.4 shows that there was a strong degree of consensus among individual and organisational respondents that these funds should be ringfenced. Just one in six respondents (17%) thought it would be appropriate to divert funding for other purposes. Public sector organisations were the only group to offer a divergent view with around four in ten (39%) of these organisations agreeing funding should be ringfenced, compared to six in ten (61%) who disagreed.
Table 7.4: Q20 – Should any excess funding or unredeemed deposits be ringfenced for the continued maintenance or improvement of the system, or do you think it would be appropriate to divert funding to other purposes?
|Funding should be ringfenced||Use for other purposes||Total|
|Public sector organisations||7||39%||11||61%||18||100%|
|Food and drink producers||23||100%||–||0%||23||100%|
|Recycling / waste mgmt orgs||13||100%||–||0%||13||100%|
|Hospitality and restaurant trade||4||80%||1||20%||5||100%|
|Total (organisations and individuals)||1,333||83%||271||17%||1,604||100%|
Percentages may not total 100% due to rounding
7.33 This question was addressed by the postcard campaign which called for excess funding or unredeemed deposits to be ringfenced for the scheme.
Definition of a producer (Q21)
7.34 The consultation paper discussed potentially new obligations which may be put onto ‘producers’ as a result of a DRS. It defined producers as ‘those companies that put deposit-bearing products onto the market’. Question 21 (an open question) asked respondents how they would define a producer.
7.35 In general, responses to this question were brief; individuals in particular provided just a phrase or a short sentence. Given this brevity it was not always clear whether the responses were addressing the question in purely abstract terms or whether they were answering specifically in the context of a DRS. Moreover, occasionally respondents said it was not possible to provide a definition in the absence of an agreed design for the DRS, since the definition of a producer would follow from the definition of the scope of the DRS.
7.36 To a large degree, respondents in general, and individuals in particular, simply ‘played back’ the definition offered in the consultation document, using their own words. Thus, responses such as ‘a business that produces food and drink’, ‘a company who produced the product which needs to be recycled’, ‘manufacturer of the bottles’, ‘someone who creates or combines ingredients to make a product’ and so on were common.
7.37 There were, however, differences in the responses offered. In particular, respondents differed in focusing their definition on entities involved with producing either (i) the product or (ii) the packaging for the product or (iii) both the product and the packaging.
7.38 Respondents described a variety of (i) types of organisation and (ii) types of activities which they associated with being a producer, although these were not expanded on in detail.
7.39 The types of organisation mentioned included: manufacturers, importers, packers / fillers, bottlers, brand owners, brand retailers, retailers, supermarkets, any organisation using plastic, and ‘anyone in the supply chain’. It was common for respondents to mention a range of types of organisation and to offer an inclusive definition of a producer. Occasionally it was suggested that certain types of organisation (e.g. small organisations with low turnover, farmers, and retailers / sellers) should be exempted from the definition.
7.40 The types of activities referred to covered: creating and / or developing, owning, manufacturing, importing, selling (or reselling / distributing), trading, profiting from a product. Again, the implication was that the definition of a producer should be wide ranging and inclusive.
7.41 Organisational responses, especially food and drink producers, packaging manufacturers, and recycling and waste management organisations, highlighted definitions already set out in legislation and / or guidance which would provide a good starting point for the definition of a producer under the DRS. Those most frequently mentioned were:
- Waste Electrical and Electronic Equipment Regulations 2013 (WEEE)
- Packaging waste producer responsibilities (2014)
- Soft Drinks Industry Levy combined with the Finance Act 2017
- Producer responsibility for packaging (2010)
- The Producer Responsibility Obligations (Packaging Waste) (Amendment 2017).
7.42 Occasionally, individual respondents also emphasised the importance of having a ‘professional definition’ or ‘legislation’. More commonly, however, respondents highlighted the importance of a clear definition which could be interpreted consistently; some organisations also specifically suggested that consistency of definition on a UK-wide basis was important.
Email: Tim Chant DRSinScotland@gov.scot
There is a problem
Thanks for your feedback