Better by Design

Since the 1990s, an increasing number of countries have implemented extended producer responsibility (EPR) programs to shift the cost of collecting and recycling packaging onto the manufacturers who put it on the market. While originating in Western Europe, today more than 50 jurisdictions around the globe have EPR programs for packaging, including countries throughout Europe and parts of Asia, South America and Canada.

The Basis for Fees
Brand owners, private-label retailers and importers with packaging materials that end up in the waste stream must pay fees to one or more recovery organizations to cover the cost of the collection, transportation, sorting and recycling of the packaging sold within the jurisdictions that have implemented EPR programs. The fees are based on the amount and type of packaging materials and are reviewed annually by the recovery organizations to ensure they take into account their program costs and the present value of the material collected.

As originally established, the programs included fees for only a few broad categories of materials, such as glass, plastic, aluminum, steel, paper and wood. While relatively limited material categories remain in some jurisdictions, most recovery organizations increasingly have expanded the number of material types and some now have as many as 30. The reason? To better recover costs for harder-to-manage materials and to have a greater impact on the design process by making companies more accountable for their packaging.

More Categories, More Penalties
Under the initial EPR program designs, it didn’t matter whether a company produced plastic packaging from PET (polyethylene terephthalate) or PVC (polyvinyl chloride)—the rate was the same. Because brand owners include the EPR fees they pay in the product price, obligated companies were not incentivized to consider packaging fees as part of the design process because there was no direct impact on the cost of goods, as all materials were assigned the same rate. But now the recovery organizations have years—if not decades—of historical data to draw from. With a better understanding that some materials are much more difficult—and costly—for them to manage, the recovery organizations are transferring that burden to the brand owners by assessing higher rates for those categories.

Plastics. While EPR programs previously treated plastics as a single category despite the material composition, color or type (e.g. flexible film or rigid), that approach is changing to address the impact of these various materials on the recovery organization’s standardized streams.

The trend across countries is that easy-to-recycle, high-value materials such as rigid PET have emerged as a low-cost leader, while more difficult, less valuable plastics incur higher fees. In Denmark, for example, where packaging fees—some of the highest in the world—are a government tax, rates for PVC and EPS (expanded polystyrene) are 40 percent higher than other plastics. Plus, there’s a significant price advantage for using recycled content material. For a company putting a plastic clamshell on the market in that country, the difference in packaging fees is significant.

The chart below illustrates the differences in fees for a 25-gram plastic clamshell container.

Similarly, for plastic bottles, rates favor those the recovery organizations can better handle. For example:

• In France, Eco-Emballages charges lower fees for clear or light blue PET bottles.
• Belgium’s recovery organization, Fost Plus, which has multiple categories for plastics—PET bottles (colorless, blue and green only), HPDE (high-density polyethylene) bottles and other plastics—charges less for the former two. In fact, the organization lowered its rates for 2013 by 21 percent for these easy-to-recycle, high-value materials.
• In the Canadian province of Ontario, of all the plastic material types, Stewardship Ontario charges the least for HDPE bottles and jugs and PET bottles, with rates for 2013 of $0.1352 per kilogram and $0.147 per kilogram, respectively.

For bottle design, these fees leave an obvious winner: clear or blue PET. The fee differences for a 25-gram plastic PET bottle are illustrated below:

Glass. Color choice affects EPR packaging fees in glass as well. Since the value of recycled glass is diminishing, in general, fees for glass are rising, especially compared with other materials (e.g., fees for PET bottles are going down). But there are still better design choices. In Ontario, Stewardship Ontario charges much lower fees for clear glass ($0.0284 per kilogram) compared with its fees for colored glass ($0.0484 per kilogram). Likewise, in Japan, obligated companies are charged three times more for colored glass compared with fees for clear and amber glass.

For a 250-gram (8.75-ounce) glass bottle, the cost variance between clear and color adds up:

Paper. Paper also has witnessed a change in fee treatment as the number of categories has expanded, including newer classifications such as beverage cartons (with different fees for aseptic containers). There’s also a growing trend to more strictly determine the difference between paper and paper laminate to ensure proper categorization—and higher fees—for the latter.

For example, this year France increased the threshold of paper content required for packaging to be categorized as “paper” from 50 percent to greater than 80 percent. In Belgium, packaging must have more than 85 percent paper content to be considered paper. In Ontario, for paper to be charged paper fees ($0.0839 per kilogram) and not laminate rates ($0.1822 per kilogram), it has to be made from at least 95 percent paper by weight. But the rule doesn’t apply universally: To help address some difficult-to-recover and reuse packaging, Stewardship Ontario began categorizing coffee cups, which are very hard to recycle, as laminates, despite their high paper content.

The table below provides the cost benefits of paper compared with paper laminate for a 150-gram (5.25-ounce) paper carton.

Disrupters Face More Fees
In an effort to prevent companies from using materials that contaminate the recycling stream, some countries are taking the idea of corporate responsibility a step further by penalizing these companies for their choices.

In France, for instance, a disruptor fee of an additional 50 percent on top of the EPR packaging fee is imposed on a variety of packaging types:

• PET bottles that contain aluminum (labels, plugs, caps or inks) or use PVC sleeves or silicone; • Glass packaging with ceramic or porcelain caps;
• Liquid food packaging made from a majority of paper/cardboard, but comprising less than 50 percent fiber; and
• Packaging paper and cardboard reinforced with polyester (this type of kraft paper has a grid of polyester in it to increase its strength and is used for transport packaging that needs to be watertight).

France also imposes an additional 100 percent penalty for nonrecoverable packaging marked as recyclable but for which no recycling system exists.

Belgium’s Fost Plus has a category for materials that do not meet the recoverable European Committee for Standardization (CEN) standard (not recyclable or energy recoverable). Fees are at least 40 percent higher for these materials, including:

• Other composites when the dominant material is glass;
• Composites containing less than 50 percent aluminum or steel; and
• Any use of porcelain or ceramic in packaging.

In Ontario brand owners must now report their disruptor plastics, such as biodegradable film and rigid plastic. As of yet, companies do not have to pay higher fees for these materials; but, whether they will be required to do so in the future remains to be seen.

Materials are the Bottom Line
With the recovery organizations’ creation of additional categories to capture and charge more for—i.e. materials that are difficult to manage—while lowering rates for packaging that’s easier to handle, certain materials now have a clear price advantage. The recovery organizations’ hope is that these variations in fees send a loud, clear message to companies to make better design choices and to select materials that have less of an impact on the environment by hitting them where it hurts most: the bottom line.

Victor Bell is president of Environmental Packaging International (EPI), a global environmental packaging and product stewardship consultancy based in Jamestown, R.I. More information is available online at www.enviro-pac.com or by calling 401-423-2225.