DWF recently facilitated a discussion with a range of leading drinks manufacturers, distributors and retail businesses as part of our consumer sector in-house legal roundtable series. The event was aimed at understanding and highlighting the challenges faced by businesses in preparing for the new Deposit Return Scheme (DRS) and UK plastic packaging tax (PPTX); and providing a forum to share the experiences that different operators have had in preparing for implementation of these two new systems.
Whilst the specific challenges faced by businesses are heavily determined by the nuances of their business models, supply chains and commercial relationships, it is clear that there are a number of common themes which struck a chord with attendees.
Here are some of the concerns raised by our roundtable attendees and the key takeaways discussed:
Deposit Return Scheme (Scotland)
"We have no certainty around timescales which is making planning for the changes almost impossible"
- With implementation still in theory scheduled for July 2022, recent statements from the Scottish Government now suggest a there shall be delay to implementation. Businesses are crying out for clarity and they need this soon. Circularity Scotland, Zero Waste Scotland and SEPA have not committed to any public statements and official guidance remains in its infancy.
- Businesses do not have the luxury to take a 'wait and see' approach and need clarity as a matter of urgency.
- Logistics and practical matters remain of huge concern: labelling requirements, transition of stock, bar codes, and whether VAT will definitely apply to the deposit sum (which remains under discussion between UK and Scottish governments and HMRC).
- The overwhelming message was that businesses want to do the right thing, but cannot be expected to invest endless resources preparing for a system which feels like it could all change at the last minute.
"If the Scottish Deposit Return Scheme isn't successful then we'd be wary about replicating this elsewhere"
- There are continuing concerns that the Scottish DRS, although expected to be implemented first, may not align with any wider UK DRS system, and that businesses may end up trying to comply with two very different DRS schemes operating in the UK.
- There are also concerns around how this regulation will interact with the Internal Markets Act.
"We might be well prepared internally but we cannot guarantee that the producers and importers we work with are prepared for the changes too, let alone our customer…"
- It is not just internal organisation and preparation; larger businesses are also facing the additional burden of educating their consumers and, in some cases, their supply chain partners. People are looking to the 'big brands' to lead the way on DRS – an uncomfortable and unpalatable position to be placed in against the deafening silence of the Scottish Government, the dearth of official guidance, uncertainty around how the scheme administrator will operate and around the parameters of the regulations themselves
Plastic Packaging Tax
With the PPTX coming into force from 1 April 2022, again, businesses are thinking ahead, and road-mapping their obligations under the PPTX.
"Is the £200 per tonne fee enough to deter companies when for some the changes required to their packaging will cost more than this?"
- In regards to the costs of the PPTX, we discussed whether the £200 per tonne PPTX rate is an incentive for businesses to use more recycled plastic in their packaging or not. We heard about cost analysis exercises which concluded that the cost of updating plastic packaging to include a minimum of 30% recycled plastic content would be a more expensive option. Although businesses are overwhelmingly investing in more sustainable packaging options, there are clearly cost/benefit considerations.
"How do we manage due diligence and the burden of proof required when we simply do not know the details of the plastic content?"
- Working out the recycled plastic content in packaging is challenging and costly for business particularly those businesses who do not have or cannot afford a dedicated resource to focus on plastics.
- There are supply challenges for businesses, due to a lack of recycled plastic materials in the market. Similarly, from a practical perspective, it is clear that some plastic packaging components (e.g. bottle caps) are far more challenging to manufacture to fall within the 30% recycled content threshold. Whilst the PPTX was designed in principle to drive packaging innovation, it is clear that there are real practical 'blocks' for businesses trying to do so.
"The guidance is incredibly confusing"
- Whilst the recent UK government guidance updates were welcomed, there are some areas where the guidance is not clear, and it is unsatisfactory that the guidance is being drip-fed and subject to ongoing change. A consolidation of the guidance to avoid gaps in interpretation would be welcomed.
- As is the case with the DRS, businesses are facing external as well as internal pressures in preparing for the implementation of the PPTX. It was noted that there had to be a real 'culture change' in terms of gathering information from suppliers through the buying process and commercial contract terms to ensure that businesses can do their 'due diligence' and maintain appropriate records for the purposes of PPTX compliance.
Overwhelmingly, businesses are clearly supportive of the policy objectives of both the DRS and PPTX, and they want to ensure that they comply. However, given the heavy burden of compliance that these regimes will place on businesses - particularly those larger brands whom other businesses and, importantly, the consumer will look to 'lead the way' - it is only fair that our law-makers repay that support with clear guidance, broader engagement, and certainty of approach. Unfortunately all of those things are, at present, are somewhat lacking.
Dates for your diary
- 1 April 2022 – Plastic Packaging tax commences
- July 2022 – Scottish DRS was expected to 'go live'
- 2023 – Roll out of DRS infrastructure in England & Wales
- 2024 – DRS across rest of UK expected to become operational
