Implications of European and UK Extended Producer Responsibility Changes
Why does this matter to businesses now?
In the last year, we have seen significant developments in regulation relating to extended producer responsibility (EPR) for products, across Europe and the UK. This is triggering changes to existing schemes for packaging, batteries and waste electronics and electrical equipment (WEEE) and new products are now being caught by EPR regulation, giving rise to new compliance, registration and reporting requirements.
Producers, importers and suppliers of products, online marketplace operators, as well as online retailers and sellers of products online, need to be aware of the new obligations and may need to take action. This article summarises the changes, looks at their implications and provides guidance on next steps.
Background to Extended Producer Responsibility Schemes
EPR legislation for certain products has been in place across Europe, including the UK, for many years, imposing obligations for WEEE, batteries and packaging, as well as other product categories which vary by jurisdiction.
The 2008 EU Directive 2018/851 on waste and waste management stated:
“Extended producer responsibility scheme’ means a set of measures taken by Member States to ensure that producers of products bear financial responsibility or financial and organisational responsibility for the management of the waste stage of a product’s life cycle.”
Against this regulatory backdrop, we are now seeing the Circular Economy Action Plan in Europe and the development of the UK Green Taxonomy, expansion of the environmental social and governance agenda and the drive to net zero carbon emissions leading to EPR returning to the forefront of policy making.
Subsequent guidance has developed the stated intentions of the EU with regard to EPR to be:
- the transfer of the financial burden of waste collection and waste treatment from local authorities (and local tax payers) to the manufacturer/operator placing the product on the market in satisfaction of the polluter pays principle;
- the encouragement of Eco-conception (i.e. design with environmental and reuse concerns in mind) as a means of reducing the eco-fee demanded by EPR scheme operators; and
- the encouragement of repair, recycling and re-use of products to reduce waste production.
Current Trends in EPR Regulation
We have seen a substantial increase in consultations and subsequent legislation as EU Member States have tried to implement the above intentions. Legislative changes have focussed on expansion of the types of product caught by EPR schemes. The single biggest regulatory change is pushing the responsibility for reporting and paying the fees on to producers and away from local authorities and others collecting the various different waste streams.
Currently France is leading the way with the development of their EPR regime, with additional sectors being added yearly and major changes to the EPR framework now in effect from January 2022. Germany has also recently made some significant changes to the established schemes for WEEE, with additional provisions for packaging coming into force in July 2022.
There are also changes planned to the UK regime. Under the proposed plans, to be phased in from 2023, businesses placing products covered by specific schemes onto the UK market will be required to pay the full costs associated with the product throughout its lifecycle. There are a great number of similarities with the changes we have seen in the French and German EPR systems.
In the UK, new obligations will include the funding of collection and recycling of the products, taking over the costs from the local government tax revenues. These changes are expected to trigger an increase in producer compliance costs of anything between 6 to 20 times, with the costs to industry as a whole set to inflate from the £200-300m a year currently incurred under the PRN system, to nearly £3bn per year.
A further part of the EPR reformation in the UK will likely see the development of a deposit return scheme for plastic drinks containers and the introduction of a ban on certain single-use plastics, such as plates, cutlery and food containers and charges, similar to those currently in place for plastic bags, for others. The delivery of a consistent and frequent recycling collection service across England will also be put in place with the additional funds raised through EPR charges set to fund the entire regime.
What’s new for 2022 and how does this affect our clients?
In both France and Germany existing schemes for packaging, batteries and WEEE will continue and are overlaid with new legislation in 2022. The new legislation will extend the scope of existing EPR sectors, creating new obligations on producers and online marketplaces, whilst also, in France, introducing a considerable number of new sectors into the scope of the EPR framework.
Key changes include:
- updates to the existing legislative frameworks for Batteries, WEEE and Packaging;
- the introduction of new product categories that will be covered by EPR schemes in France, including tobacco (from 2021) and in 2022, DIY and garden materials, sports and leisure articles, toys and textiles (with building products and materials having been delayed);
- the introduction of a new definition of “producer” in France and Germany, which will trigger additional obligations for producers and draw digital marketplaces and platforms, online retailers and those selling products over the internet, into the EPR Regime and impose specific obligations for compliance. This same change is also expected in due course in the UK; and
- the introduction of further administrative sanctions for non-compliance and the requirement for removal from sale of products in the case of non-compliance with the new EPR regulations.
Focus of the New Legislation
In summary, the legislative changes across Europe and the UK are pushing far more obligations onto producers and away from the waste end of product lifecycles.
As an example, where historically in France the EPR regime applied only to manufacturers, importers and distributors, from 1 January 2022 the liability for EPR compliance has now been transferred to the producer of the product. The new definition being:
“Producer means any person who develops, manufactures, processes, treats, sells or imports any product that may become waste (or any elements or materials used for the manufacture of such product) - Article L. 541-10 of the Environmental Code.”
The definition is further expanded to include online retailers and marketplaces:
“Any person who facilitates, via the use of an electronic interface such as a marketplace, a platform, a portal or any similar device, the distant sale or the delivery (on behalf of a third party) of any products covered by an EPR scheme, must provide for or contribute to the prevention and management of related waste in accordance with EPR laws and regulations;
unless such person can prove that the third party has already fulfilled these obligations. In such case, such person must hold and maintain a Register with justications. Holding a unique identification number for the relevant products is deemed to be proof of compliance by the third party.”
This definition will catch a large number of new businesses and impose new obligations, Producers will need to register with the regulator for a registration number and then separately register with a relevant scheme operator depending on the products produced. The scheme operators will require producers to provide information regarding their products, including the composition and quantities sold. The operators will calculate the fees due on the products and charge this to the producers. Any producer found not to comply with the EPR regulations will face fines from the regulator.
We are expecting that producers could have quite some difficulty keeping up with compliance across different compliance schemes for different product categories, as even compliance schemes within one EPR category (like packaging) can have different requirements and dates for actions - like payment of membership fees. As a result, companies impacted will need to develop tools to aid compliance and avoid them missing administrative deadlines.
Online retailers and marketplaces will become liable under the new EPR legislation if they fail to verify that the producers of the products they allow to be sold on their platform, comply with the requirements. Regulators will be able to apply new administrative penalties, with sanctions ranging from substantial fines, to the confiscation of the products and restriction of access to the market. It is also possible in Germany for third parties to bring civil competition claims against a party failing to comply.
What do you need to do?
The EPR frameworks in France and Germany are progressing and the expectation is that the UK will announce more details of its own regime next year. It is likely that other EU The approach across EU Member States as well as the UK is moving in the same direction to stricter regulation, focussed on producers, even though the implementation differs.
Member States, aside from France and Germany, will not be far behind in implementing their changes to EPR frameworks. A number of Member States are already looking at the types of products covered by EPR schemes, as well as the mechanics of those schemes, so it’s essential to horizon scan for new developments and understand the expected requirements and subtle differences in each jurisdiction.
Companies selling goods into European or UK markets, acting as marketplace operators or online retailers for the sale of goods, need to first assess whether their goods fall within the existing or new EPR schemes and if they are deemed to be a “producer” placing the relevant product on the market in the relevant country. If they are, producers should consider the jurisdictions involved in the production and supply chain, and confirm if, in the circumstances, the product falls within the scope of any relevant schemes. This is particularly important as the definition of who is considered a “producer,” has been expanded.
Companies caught by the definition of producer within relevant EPR schemes will need to ensure that in relation to each product category (batteries, WEEE, packaging etc):
- they have assessed their compliance obligations for each product produced or imported and the relevant compliance deadlines;
- reporting requirements are understood and that processes are in place to collect the required data;
- any collective schemes or dual systems for products (such as WEEE) are identified, where applicable and that appropriate registrations are made in good time;
- a process is developed for assessing the costs of the schemes and consideration is give to how these can be managed or reduced within the business - for instance by restructure of the supply chain or ecodesign or pass through of costs; and
- in the case of online marketplaces and online retailers, that suppliers/ sellers providing or listing goods are aware of their EPR obligations and that there is a compliance structure within the business to track the checks carried out on suppliers/ sellers.
How can PwC help?
With the expansion of EPR regulation coming into force across Europe, our legal specialists can help our clients to:
- understand the updates to existing EPR frameworks and the new EPR schemes and their application to your product lines in countries where you are selling products;
- assess data collection and reporting requirements and the relevant timelines;
- consider and respond to any questions that may arise as a result of preparation for the expanded regulations;
- liaise with regulatory authorities and scheme operators;
- produce bespoke guidance to assist internal teams, as well as supply chain partners where relevant;
- advise on structuring and optimisation of compliance costs and potential pass through to others in the supply chain.
We can work with our clients across all sectors to help prepare them for the changes to the EPR requirements and the increased demands on online marketplaces and retailers.
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Senior Manager, UK Environmental Regulatory Legal Lead, PwC United Kingdom
Tel: +44 (0)7483 326978
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