How [DXP] technology repackages the problems of EPR

The UK new environmental regulation for packaging and packaging waste – known as Extended Producer Responsibility (EPR) – came into force on January 1, 2023. Some producers, identified as “Large Organisations” in the regulation, should have submitted detailed packaging data for the first six months of the year to the Environment Agency by October 1.

It is unclear how many producers complied, or how granular their data will have been. There is anecdotal evidence that consultants are advising producers that they probably won’t be penalized if they “sit it out” and file late or incompletely. One man at the heart of the storm, the operations director of a large company manufacturer, comments: “People have no idea how to even get started about it [EPR data submission], and most might not even report in October, or do a guesstimate. For the first year or two, the detail won’t be there.”

The Environment Agency has tacitly admitted that EPR is running into difficulties by postponing the implementation of EPR fees to local authorities (who go “kerbside” to collect waste that cannot be recycled) to October 2025, a year later than planned.

However, the reporting obligations remain unchanged. 

The demands of EPR are causing problems, but no one doubts that the regulation is necessary and important, not even the manufacturers and distributors struggling to implement it.

So, first, a brief word about sustainability and the EU-wide strategy of EPR regulation.

Why EPR is necessary

Sustainability is no longer an ambition or an ideology; it is a strategic consideration for every business, be they banks or manufacturers. The packaging leader we quoted earlier admits that his company missed out on a large deal because its tender scored too low on Corporate Social Responsibility (CSP) and Environment, Social, and Governance (ESG) weightings. “These are now as high as 10% or even 20% for some of the RFPs we are seeing,” he says.

The public supports environmental objectives, and in survey after survey consumers agree they are willing to spend more to make “sustainable” choices. While this may be true, the government was unwilling to risk the costs of EPR being passed on to the consumer during a cost-of-living crisis – and the implementation of fees was put off for a year.

That EPR works is not in question. Broadly speaking, the regulations incentivize the use of recyclable materials for packaging by levying serious financial penalties for failing to do so. This is proving to be highly effective in practice. Recent research into the impact of EPR on paper and packaging recycling programs in British Columbia, Quebec, Belgium, Spain, South Korea, the Netherlands, and Portugal found that in almost all these jurisdictions EPR policy accelerated the collection and recycling of target materials to over 75%. For Portugal and Quebec, this figure came in at 60%, still a dramatic improvement.

Once EPR is successfully implemented (or adjusted) in the UK, the outcomes will no doubt be equally encouraging. 

But we are nowhere near there yet. 

Why EPR is challenging

The new rules capture more producers

EPR is a radical overhaul of the UK Packaging Waste Regulations which had been in force from 2007. One of the significant changes is that EPR lowers the threshold for producer compliance to include “Small Organisations” with an annual turnover of over £1m and responsible for supplying or importing between 25 and 50 tonnes of empty packaging or packaged goods in the UK.

A lot depends on the word “responsible” as we shall see. For now, it is enough to note that Smaller Organisations will not be obligated to pay a Local Authority Waste Management fee – so the deferral of this fee does not affect them. However, Smaller Organisations do have to report data once a year – a complex task that will incur costs.

Smaller Organisations are not due to supply 2023 data until April of next year. Another category of producers ought to have filed half-year data already as we saw. These are producers defined in EPR as “Larger Organisations” with an annual turnover of over £2m and responsible for 50+ tonnes of packaging or packaged goods in the UK.

Larger Organisations report twice a year and pay the disposal costs for the packaging waste that goes into household collection and street bins.

One of the great shocks for both categories of producers is the granularity of packaging data required under EPR which is like a game of three-dimensional chess compared with the Packaging Waste Regulations it replaced.

We offer a high-level breakdown below.

Producers have to collect more data

Businesses need to report the type and weight of material; the packaging type (primary, secondary, shipment, tertiary); waste type (separated into household and non-household waste for the first time); and packaging activity, which describes how the packaging was supplied.

The activity segment is important because it has a bearing on who is responsible for the cost and compliance of the packaging under a new “single point of compliance”, probably the most impactful break from the former Packaging Waste Regulations.

EPR breaks down packaging activity as follows:

•  Brand owner
• Importer
• Packer/filler
• Online marketplace operator
• Service provider
• Distributor

It is impossible to map packaging activity directly to the single point of compliance but typically this will be the brand owner or importer. Under the current system (because the fee implementation of EPR has been kicked into the long grass), costs are shared across the supply chain, with percentage responsibility allocated to different points. At the moment, manufacturers of packaging materials contribute 9%, which under EPR will fall to nothing – 0%. By contrast, brand owners or importers (who usually contribute 37% now) will bear 100% of the cost and compliance burden as the single point of compliance.

Data reporting is further complicated by the additional requirement to break down packaging data into the four nations that make up the United Kingdom: England, Scotland, Wales, and Northern Ireland. This new reporting element will be required by December 2024.

The operations director of the UK manufacturer of packaging foresees a lot of complications. “Say I’m a brand owner selling to a distributor in Swindon who then sells to Scotland. As the single point of compliance I am duty-bound to report that but how would I know where my products have gone? If you call Defra [Department for Environment Food and Rural Affairs] they can’t give you a clear answer.

“A Defra webinar on EPR had about 1,000 producers on the call because people are desperate for guidance. In the meantime, consultants are printing money.” 

How DXPs can help ease the pain of EPR

Digital Experience Platforms (DXPs) emerged to solve a number of problems: that of data and content insularity for customer experiences; a lack of interoperability between legacy systems; and as a flexible and future-proof technology to absorb the shocks of change.

Where do the composable functionalities of a modern DXP intersect with the demands of EPR? As we see it, along the following lines:

1. Businesses need to be nimble in the face of changes to legislation that promotes sustainability, fights climate change, and holds them accountable on wider ESG measures. With forms, workflows, and custom objects, a DXP provides the agility needed to quickly create digital processes to handle new requirements in this fast-changing regulatory landscape.
2. EPR calls for a digital file to be created in a specific format. Using a DXP, it is simple to organise the integration of various systems to collect the information required, assemble the data in the right format, and submit it to the Environment Agency in the UK context.
3. Not every manufacturer is a brand owner, designated as the single point of compliance under the new regime of packaging regulation. But many will be and suffer considerable financial and regulatory consequences as a result.

To address the issue of cost first. The Environment Agency has said it will give an indication of fees once it has digested the first data that Larger Organizations filed by October 1 (or were supposed to have filed). But we don’t need an “indication” to conclude that brand-owning manufacturers will face a steep rise in costs. 

Under EPR, producers will fund the full net cost of the collection, sorting, and treatment of packaging waste, which is estimated at £1.2bn. The current system is said to be costing UK businesses from £200m to £300m a year, which would imply a fourfold increase in costs at best if the bill were to be shared equally between the Large Organizations obligated under EPR.

This is not the case, as we saw, because EPR makes brand owners and importers 100% liable for cost and compliance. 

It is not surprising then that EPR systems in Belgium and elsewhere have speeded up recycling programs dramatically. However, manufacturers cannot change their packaging materials and systems overnight. To keep control of costs going forward they need to systemize how they collect, store, and segment packaging data.

DXPs are an intuitive platform to consolidate packaging data from the shop floor through to warehousing, fulfilment (eventually segmented for England, Scotland, Wales, and Northern Ireland), and recycling or “kerbside recovery” where the fee will be incurred. 

Getting this compliance in place will give manufacturers an early indication of costs and build insight into what areas of packaging and packaging materials can be adapted in the short to medium term to cut those costs and minimize the impact of EPR. 

Conclusion

EPR is necessary, so the time to confront the challenges is now. If you are struggling, you are not alone. This blog is the tip of an iceberg of complexity that is overwhelming not only manufacturers, but Defra itself. The Ministry’s only answer so far has been to postpone part of EPR. 

To get in front of this issue, or catch up on your EPR readiness, you could explore how the digital agency Webtown leverages Ibexa DXP to find innovative and customized solutions for manufacturers, and other organizations in the B2B space.

Webtown has been an Ibexa Partner since 2016. During this time, it has helped build the online platforms of the Hungarian National Lottery, the B2B portal of the Swiss manufacturer MeierTobler, and the web platforms of William Reed, the UK publishers. 

As B2B gamechangers, Ibexa and Webtown work in unison with manufacturers from across Europe and have implemented future-proof solutions that are customized to deal with the challenges of here and now – and those that lie ahead.