Based on the ‘polluter pays’ principle, the Extended Producer Responsibility (EPR) legislation, which came into effect at the start of the month, requires business to pay for the collection and management of packaging waste that ends up in households.
Growers, retailers, manufacturers and suppliers that meet the criteria are hence forth responsible for paying the full net cost for managing their packaging waste when disposed, and be required to report on packaging data. ERP is levied on any company which produces packaging bought and disposed of by households. The fees are based on the materials and amounts used.
A survey by the British Retail Consortium (BRC) of leading retailers, highlights the significant financial burden that EPR fees will place on UK retailers and households. Following last year’s Budget, which resulted in £5 billion extra employment costs for businesses on account of higher employer National Insurance and rising National Living Wages, the industry has been left with little room to absorb additional costs.
With EPR set to cost industry billions, the new tax will be yet another inflationary pressure, at a time when food prices are already rising fast, with The Bank of England estimating that the policy alone will add 0.5% to food inflation.
In addition to the financial impact, 85% of retailers said the administrative and compliance burden they face has increased significantly as a result of EPR. Obligated businesses will no longer be able to rely on the ‘allocation method’ which allowed for estimates of packaging amounts handled based on turnover. Clear recording of precise weights of different packaging products are required, be it primary, secondary, transit or shipment/sales packaging. This creates further pressure on businesses already grappling with rising costs and heavy regulatory burden.
According to the BRC, retailers are making every effort to use more recyclable materials and less packaging. The survey indicated that, 85% of retailers intend to increase the proportion of sustainable packaging placed on the market and that 78% of retailers intend to reduce the total volume of packaging they place on the market.
With prices set to increase as a result of the new tax, the BRC urges the government to provide greater transparency regarding the benefits for consumers and the environment. Additionally, the BRC strongly advocates for the government to ring-fenced recovered ERP revenue, which should be exclusively utilised by local councils to manage and operate local recycling initiatives, thereby ensuring that the revenue generated can be effectively directed towards enhancing local recycling systems.
“Retailers support the polluter pays principle and are making significant changes to reduce and improve their packaging. But the packaging tax is also a multi-billion pound levy being paid by consumers during a cost-of-living crisis. They will ask: what are we getting for higher prices? Unless funds are spent transparently and effectively, EPR threatens to just be another burden on an already overtaxed industry with no tangible benefits for customers or the environment,”said Andrew Opie, Director of Food & Sustainability at the BRC.
