Extended Producer Responsibility and Its Impact on Companies in the EU
11 August 2022
In the European Union, annual waste generation is still high. Approximately 2.5 billion tons were registered by the EU in 2018.
In order to make progress in waste prevention and improve recycling, the current EU waste legislation and the corresponding state laws are therefore further expanding the principle of Extended Producer Responsibility (EPR): By 2024, every EU member state must introduce an EPR system for packaging for both the private and commercial sectors. Herein, we will provide a comprehensive overview so you can:
- Learn about the legal foundations and objectives of the EPR
- Understand what is required of companies in the process
- See how you can respond to these challenges and
- Know what solutions are available to help you implement Extended Producer Responsibility in your business.
Product Responsibility: First Take-Back Systems
Since the so-called Dual System with the Green Dot for packaging was introduced in Germany in the 1990’s, the principle of product/producer responsibility has been embedded in waste legislation. The aim was to achieve environmentally sound disposal of packaging or the take-back thereof.
Inspired by this model, EU legislation has since published several guidelines. Above all, the EU Waste Framework Directive, which was amended in 2018, placed an emphasis on waste prevention, as well as shining a spotlight on the concepts of reusing material and recycling for the first time. This elevated Extended Producer Responsibility into becoming an even more significant component of waste strategy in the EU — including all the corresponding consequences for companies operating within its borders.
What Does Extended Producer Responsibility Mean?
With numerous revised EU directives — e.g., the directives concerning packaging and packaging waste or waste electrical and electronic equipment (WEEE) — as well as the corresponding laws and regulations within the individual EU member states, the Polluter Pays Principle has been strengthened in recent years. This means that manufacturers and distributors are responsible for the respective environmental impacts throughout the entire life cycle of their products — from design and production, to financing separated collection, and to proper disposal. This is intended to achieve the waste collection rates targeted by the EU.
The focus is primarily on plastics, electronics, information and communication technology and textiles. Additionally, intermediate products with a high environmental impact such as furniture, steel, cement or chemicals are also targeted.
The EU directives have been implemented in various ways by the individual EU countries in recent years. In Luxembourg, for example, the Circular Economy Strategy Luxembourg was published in 2021. Therewithin, according to Luxinnovation, the strategy demonstrates Luxembourg’s appreciation for the fact that “moving towards a circular economy is a strategic priority” and, by implementing this approach, it demonstrates an awareness and recognition of “the country’s limited resources”.
In order to establish specific requirements for individual sectors of the economy, the EU member states have also enacted numerous laws over the past ten years resulting from the amended EU Packaging Directive, the WEEE Directive or the EU Battery Directive.
Equally ambitious targets were set in the EU's 2020 Circular Economy Action Plan.
What Are the Objectives of the EPR?
The prevention of waste, a stricter compulsory collection and separation of unavoidable waste, and comprehensive recycling: this is how resources are to be used more sustainably and the environmental impact of products to be minimised — the ultimate goal is the advancement of the circular economy. After all, according to estimates by the European Commission, recyclable materials that currently end up in landfills have a value of over 5 billion euros.
All these measures have been enacted against the backdrop of the world's dwindling resources and the negative environmental impact resulting from the steadily growing amount of waste. Thus, the EPR is intended to provide incentives to avoid waste as far as possible as early as the manufacturing stage of products. Additionally, products should be at least partially reusable after use and enable for simple, environmentally friendly recycling.
Recycling Targets for Packaging Waste
The overall goal is to sharply reduce the total volume of waste in the EU despite economic growth and thus, for example, to halve the amount of non-recycled municipal waste by 2030. The manufacturing industry accounts for around ten percent of waste generation in the EU. There is also an enormous potential to save valuable raw materials and, in the process, costs through less waste, reusing material at an increased rate and through better recycling practices.
Specifically, 65 percent of all packaging waste is to be recycled throughout the EU by 2025; by 2030, it should be as much as 70 percent. For plastics, the quota is to rise from 50 to 55 percent, and, for wood, the rate should increase from 25 to 30 percent.
Example: Producer Responsibility for Packaging
When it comes to packaging, the following applies when in accordance with the EU Packaging and Packaging Waste Directive and the Single-Use Plastics Directive: All EU member states must introduce a system for Extended Producer Responsibility for packaging for both the private and industrial sectors by the end of 2024. Under this system, manufacturers must bear the costs of waste management and clean-up campaigns in public areas, the corresponding data collection and educational measures for the use of the following products: food and beverage packaging, bottles, cups, bags, film packaging, lightweight carrier bags and tobacco products with filters.
One example of an EU member state following suit in accordance with the EU directives is Sweden - more specifically, Sweden’s implementation of the Swedish Producer Responsibility Scheme for Packaging. According to the Swedish Environmental Protection Agency, producers of packaging “must be affiliated to a suitable collection system”. Furthermore, this scheme exists as a means of reducing “the amount of packaging waste” all while ascribing to the concept that, through the undertaking of responsibility, producers “also contribute to a sustainable development and a circular economy”.
Since 2019, measures of Extended Producer Responsibility, such as compulsory registration, system participation requirements and reporting obligations, also applied to online marketplaces and fulfilment service providers. This meant that the international mail-order business had to make financial contributions to the costs of collecting and recycling packaging.
Starting July 1st, 2022, the responsibility will now lie entirely with the producers and retailers. Fulfilment providers will only have to check whether the product and shipping packaging has been licensed by them. In dropshipping, on the other hand, retailers check whether producers and intermediaries fulfil their obligations.
The overall target: by the end of 2025, 50% of all plastic packaging used in an EU member state must be reused or recycled. By 2040, the number will rise to 100%.
How Companies Are Affected by the EPR
When a company manufactures or launches a product in the EU, it is responsible for take backs, suitable sorting and recycling and, if necessary, the proper disposal of the product within the scope of Extended Producer Responsibility — i.e., also after the end of its use. This applies, for example, to electrical and electronic equipment, batteries, textiles and clothing, but also to packaging. Manufacturers must therefore pay for the costs of recycling the product and its packaging.
As a result, here are some examples of implications for businesses in various EU states when it comes to the inherent EPR:
- According to the Interreg Danube Transnational Programme’s report from December 2017, Austria has a “dual model for packaging and packaging waste, where industry has full operational and financial responsibility over collection, sorting and recycling”. While there is a collection system appointed to local authorities, the influence generated from this sector is minimal. Additionally, according to the Austrian Chamber of Commerce (WKO), every business must keep records of the waste it generates. Furthermore, if a company has more than 100 employees, a waste management concept must be drawn up and it must be determined if there is also a need for a waste management officer.
- As described in the book Recycling and Extended Producer Responsibility: The European Experience, Portugal’s industries are “financing approximately 77% of net financial costs of packaging waste management”. Additionally, taking a closer look at Portugal, the Decree Law No 366-A/9732 defined the implementation of EPR. As a result, the “Green Dot Society is the Producer Responsibility Organisation (PRO) responsible for financing the selective collection of packaging” according to this factsheet created by the European Commission.
- In Germany, there is an Extended registration obligation. This means that all packaging must be registered with the Central Packaging Register (ZSVR). This includes cardboard packaging, shipping packaging, pallets and other packaging materials, such as labels, adhesive tape or bubble wrap, but also service packaging, such as to-go cups or pizza boxes. Since January 1, 2022, manufacturers have also been subject to an obligation to provide evidence of compliance with the take-back or recycling obligations and an extended mandatory deposit on disposable packaging.
At the same time, the EPR offers companies incentives to produce less packaging from the outset. After all, as the amount of packaging increases, so do the costs of disposing of it.
Producer Responsibility: Requirements for Companies
For companies, Extended Producer Responsibility results in a wide range of reporting obligations, since all processes must be documented properly. These include all financial contributions and all costs for the waste management of products put on the market, the compliance with the legally required collection rate of used appliances, recovery rates and much more. In addition, all EPR waste streams must be identified and EPR registration numbers must be obtained for each of the countries in which a company is active.
Another challenge is that of respective national legislation. Although this is intended to fulfil the EU guidelines, there can be exceptionally different requirements within the individual member states. Companies that manufacture goods and packaging in the EU or market them in several EU countries — which can be expected to be the norm in times of online trade — are therefore faced with a very complex set of regulations. Meeting the legal obligations in all target markets therefore means additional effort.
Take country-specific packaging laws for instance or the individual registration obligation for manufacturers of packaging. In Germany, for example, companies are required by the Packaging Act to participate in a dual system. In France, more categories will be covered by the EPR from 2022 on, such as textile decorative elements, toys or sporting goods. Moreover, there are often language barriers. For this reason, several service providers are now working in the market to support companies in complying with the respective EPR regulations in the various EU member states.
Digital Waste Management: Better Recycling, Less Effort
One important first step in adapting to these new challenges as a company is to evaluate your own waste management. This may mean focusing on the following objectives:
- More efficient processes
- Optimised collection and higher quality of residual materials
- Increased use of residual materials in production
- Transparency of waste streams
- Increasing recycling rates
- Cost reduction
The way to get to this point is through the digitisation of waste management. After all, automated, digital processes not only simplify legally compliant waste management, but rather companies gain detailed insights into their waste management with extensive reporting options and data at the same time. This can help improve recycling and uncover further potential for optimisation. The administrative burden is reduced, freeing up resources to find innovative solutions to the challenges of extended producer responsibility.
Further potential lies, for example, in digitising product information or digital product passports which increases transparency into which materials are used in products and what options there are for reuse or recycling.
Here's How Companies Can Responds to the EPR
As a result of the amended EU Waste Framework Directive, legislation in member states can promote products that have a lower environmental impact during manufacturing and use and help reduce waste generation. Specifically, such measures can promote the "development, production, marketing and use of products and components of products that
- are suitable for multiple use,
- contain recycled materials,
- are technically durable and
- easily repairable and that are, after having become waste, suitable for preparing for re-use and recycling.”
This therefore also supports innovation in companies. After all, the EU Commission estimates that 80% of a product's environmental impact is determined in the design phase: If companies are able to gain advantages here with reusability, recyclability and reparability of products or packaging, they increase their competitiveness.
Further Opportunities for Companies
The various mechanisms of Extended Producer Responsibility led to increased obligations and initially to more effort at the company level. At the same time, however, the new requirements also offer new opportunities and incentives to reposition themselves as sustainable companies and make them more competitive for the future—and thus enable for a circular economy.
With a shift in consumer behaviour, the circular economy is being increasingly seen as a new opportunity for companies. Those who adapt early have a competitive advantage over companies that stick to conventional, linear business models for too long.
The laws and regulations on Extended Producer Responsibility also ensure that producers and distributors bear the costs of collecting, sorting and recycling waste. This forces them to look for optimised, efficient solutions—not only for waste management, but also in manufacturing. After all, if attention is paid to reusability, repairability or recyclability as early as the production stage, companies can ultimately reduce their costs for waste disposal. This approach is therefore not only environmentally sound, but it is also a good economic decision.
According to the EU Commission, manufacturing companies in the EU spend on average around 40% of their expenditure on materials and raw materials. Closed-loop business models can therefore increase the profitability of these companies while at the same time make them less dependent on the strong fluctuations in commodity prices.
Extended Producer Responsibility - Our Conclusion
The regulatory framework for waste policy in Europe is diverse and complex. From the European Green Deal and the Circular Economy Action Plan to amendments to the European Packaging Directive at EU level and amendments being made to the packaging laws in the member states: they all require a great deal of flexibility and a steep learning curve from companies.
The laws and regulations relating to Extended Producer Responsibility initially mean additional effort for companies. However, requirements for the development of durable products, the use of secondary raw materials in production or take-back obligations for manufacturers and environmentally sound disposal can also lead to innovation and new production methods or strategies for reducing waste. Companies should face these new challenges head on and take advantage of the new opportunities.
After all, the goal of a climate-neutral, resource-efficient and recycling-oriented economy can also lead to lower costs for companies in the long term in terms of manufacturing and waste disposal. Increasing recycling rates will play a major role. A key foundation for all these processes and for implementing Extended Producer Responsibility is the digitalisation of waste management in order to always have real-time data on all waste processes in the company.