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Scotland's Deposit Return Scheme remains ambiguous

24 November 2022

As the go-live date of 16 August 2023 edges ever closer, producers and retailers continue to face uncertainty on the implementation of Deposit Return Scheme (DRS). 

Peril for producers

The geographical definition of in-scope containers ("scheme articles") is simple: they must be intended for marketing or sale in Scotland. However, the definition of "producer" muddies the waters. Producers that manufacture and sell beverages in Scotland and producers that manufacture beverages in England, and sell directly into Scotland, are in scope.

However, consumers will be unable to buy an English-manufactured beverage in England and redeem scheme articles in Scotland, leaving future England, Wales and Northern Ireland DRS schemes to pick up the slack. It also remains unclear whether producers that manufacture beverages in England and sell to wholesalers/retailers in England, who then sell to consumers in Scotland, would be in scope and are required to register and meet producer obligations. 

To reduce the risk of non-compliance, producers will need to create infrastructure that allows supply chain tracing and unprecedented levels of seamless collaboration with wholesalers. This will not come cheaply and will take time to develop the process for. Whilst this uncertainty persists, it is time and money that many producers can't afford.  

Whilst new Scottish DRS labelling is not mandatory, it is likely to be the most practicable route to allow everyone in the supply chain to easily identify products intended for sale in Scotland.

The financial impact does not end there: participation in the DRS will see a rise in producer costs and obligations such as labelling, logistics, and other administrative burdens. Many Scottish producers have announced that if the scheme goes ahead as planned, they would have to reduce or event stop selling the number of brands they produce and sell in their home market altogether. In turn, consumers would see reduced choice and significantly rising prices. 

In a welcome statement at the beginning of November, Circularity Scotland announced that it will be revising the scheme's cash flow model, including day one charges, and its forecasted producer fees to better reflect actual operating costs and resale value of each in-scope material (PET, glass and metal). Further details have not yet been released but it is safe to say that many producers will be keeping their ears to the ground for developments in this area, which will be key to the affordability and success of the scheme.

Too hot to handle

In early November, a Scottish convenience store owner launched a judicial review challenging the legality of Circularity Scotland’s imposition of return point handling fees. The move, which was supported by the Scottish Grocers’ Federation, presented a further blow to the handling fees which have already faced significant criticism for not being high enough for retailers to act as return points without making a loss. It is alleged that the resulting financial burden may be enough to put many. particularly small, retailers out of business.  

The limited (and somewhat opaque) return point exemptions have also been a source of controversy. In early November, the Scottish Government reacted by releasing updated guidance and support, including a new "Return Point Mapping & Exemption Support" service, confirmation that the size of premises will be considered in determining environmental health exemptions, and streamlined evidence and assessment processes that better take into account the challenges facing specialist, food service, and hospitality retailers. 

Whilst there are still no automatic proximity or small store exemptions, the additional guidance will hopefully go some way to reduce operational burden for smaller retailers. 

In addition, the Scottish Government has announced that it hopes to share additional guidance in relation to the vexed and burdensome issue of online takeback in the coming weeks. 

What's next?

At a time where businesses are recovering from the impacts of the Covid-19 pandemic, Brexit and tackling significant economic headwinds, the proposed approach to implementing the DRS in Scotland is proving to be unpopular. 

On 7 November, over 500 food and drink industry leaders signed an open letter to Lorna Slater, the MSP spearheading the DRS, calling for it to be paused and rethought. The Scottish Government replied by restating its commitment to the go live date.

Despite the go-live date edging ever closer, one positive is that the Scottish Government still appears to be receptive to feedback and change. Although this may prove helpful, all players in this game of spin the bottle remain unsure of where the bottle will land or what the obligations will look like by 16 August 2023. 

For advice on the implications of the introduction of the Deposit Return Scheme in Scotland for your business please contact Caroline Colliston, Dominic Watkins or your usual DWF contact.

Further Reading