Extended Producer Responsibility, The Planet, and Your Business
Nov 1st 2021
Extended Producer Responsibility & Your Business
You've likely been hearing a lot about Extended Producer Responsibility recently, as a spate of new related bills have been introduced across the country. Read on to learn what EPR is, how these policies are structured, their potential impact on climate change and waste management, and what this legislation means for your business.
What is Extended Product Responsibility (EPR) and How Common Is it in the United States?
EPR legislation is designed to place more of the financial and operational burden of the treatment and disposal of certain consumer products on the producers, manufacturers, and retailers that sell and profit from those items.
According to EcoCycle and PSI, there were over 115 EPR policies across 33 states in 2019, a tremendous increase from fewer than 10 policies in 2001. These policies target different types of hard-to-recycle products, including electronics, paint, mattresses, carpet, fluorescent lighting and pharmaceuticals.
There is no standard or single way to structure an EPR law. But, in general, the EPR typically mandates that producers and/or retailers of these hard-to-recycle products pay into a Producer Responsibility Organization (a PRO) that then helps manage the receiving and recycling process for that item. This cost is generally then embedded into the pricing of that product in some way.
A classic example of EPR is paint. Previously, unused paint was difficult and expensive to recycle, causing most people to simply landfill it. This led many states, including our home state of Colorado, to start EPR programs that mandate paint producers to collect and process unused paint. On July 1, 2015, Colorado’s Architectural Paint Stewardship Act allowed for the establishment of PaintCare, a non-profit organization (a PRO), to collect unused paint in Colorado, generally by working with participating retailers as drop off locations. Unused latex paint is either reused or recycled into new paint. Unused oil-based paint can be used as a fuel source. Since the passing of this act in 2015, paint in Colorado has included a $0.75 per gallon EPR fee that pays for PaintCare’s services.
EPR bills have been around for awhile. Why is this concept gaining so much attention and traction recently? Because states (and the federal government) is now looking to EPR to help address waste created by Product Packaging and Paper Products (PPP). As of the writing of this post, two states - Oregon and Maine - have passed EPR bills related to packaging, and another nine state-level EPR bills (as well as a federal bill!) are under consideration. While the specifics of how these EPR bills are structured varies greatly, the general approach is similar. The brands that are selling packaged items (and in some cases, the producers and printers of that packaging), would be required to join a collective producer responsibility organization (a PRO). The PRO is then responsible for developer and managing a producer responsibility plan. Bills typically call for improved education, increased outreach, improvements to recycling infrastructure, and end market development for recycled materials.
Maine and Oregon: Blazing a Trail for More Recycled and Recyclable Packaging
On July 2, 2021 Maine passed LD 1541, “An Act To Support and Improve Municipal Recycling Programs and Save Taxpayer Money.” The goal of the legislation is to increase recycling rates, reduce packaging pollution, and save taxpayers money. This law will require packaging producers (i.e. brand owners) to contribute fees to a Stewardship Organization (SO). The SO will compensate municipalities managing the packaging waste generated by their households and businesses. This compensation will cover everything from infrastructure improvements, to household education to developing end markets for recycled content.
Oregon’s Recycling Modernization Act was passed on August 6, 2021. According to Oregon’s Department of Environmental Quality, the Act aims to “update Oregon’s recycling system by building on local community programs and leveraging the resources of producers to create an innovative system that works for everyone. The law requires packaging producers to share responsibility for effective management of their products after use. The new law goes into effect January 1, 2022 and program changes will start in July 2025.”
New Jersey, New York, Washington, Hawaii, California, Vermont, Maryland, and Colorado are among other states in which groups have or are actively trying to pass EPR legislation for packaging and paper.
While the introduction and passage of these bills is exciting, it is important to note that their direct effects are still a long way out. Both Maine and Oregon incorporate lengthy timelines for the establishment or selection of the Producer Responsibility or Stewardship Organizations, and once set up, these non-profits must then establish the detailed rules and plans for their producers, municipalities and households. For both states, producers will begin paying fees starting in January of 2026, over four years from now. We strongly hope significant progress is made towards recycling modernization and a more circular economy in the coming years, even before EPR policies are in full effect.
What Are the Pros of EPR? How Can it Help Create a Landscape of More Sustainable Packaging?
Ultimately the goal of most EPR legislation is to build a truly circular economy, one in which all packaging is recycled and can be turned into valuable goods in their next life.
EPR policies can help us move closer to this end goal in a few ways:
- Eco-modulation: Eco-modulation is a term to describe financial incentives that reward certain packaging decisions and discourage others. For example, EPR policy could require producers to pay more if they produce a high volume of black plastics, which are extremely difficult to recycle. Similarly, producers who use high rates of post-consumer waste may pay significantly less (or nothing at all), because the system wants to encourage the development of end markets for recycled content. Strategically designed eco-modulation can help shift the design of and inputs into packaging to be more circular over time. EcoEnclose has seen firsthand that amazingly intentioned brands struggle to choose between a 100% recycled poly mailer and a virgin or PLA mailer made overseas that is priced far below the recycled option. If eco-modulation helps narrow the price differential between options that are far better for the planet, we know this will help brands collectively make more responsible choices.
- Statewide consistency: It is a well known fact about recycling that two households can live a few miles apart and still have very difficult rules about what they can and can’t recycle, all based on the MRF receiving their waste. This creates confusion, distrust and discourages recycling overall. Most EPR legislation drives towards a consistent, statewide set of goods that can be recycled (and then the stewardship organizations would work with and financially support MRFs individually to ensure they can recycle the materials they are receiving).
- Improved labeling: EPR legislation can be designed to ban misleading labeling. For example, #5 and #6 plastics typically carry the chasing arrows sign on them, despite the fact that very few households have ready access to drop off locations for these notoriously difficult to recycle materials. Additionally, PLA packaging (an industrially compostable plastic) often carries the chasing arrows with a #7, which many individuals would assume to mean “recyclable.”
- Increased education and access: Finally, most proposed EPR legislation sets clear targets for access to curbside recycling and education around how to recycle. This would undoubtedly improve recycling rates and build towards a more circular packaging economy.
- Ensuring that producers (and through producers, consumers) more directly pay for the management and advancement of the recycling supply chain that needs to be improved in order to build a thriving circular economy.
What are the Challenges and Limitations of EPR and Circular Packaging?
While EcoEnclose is in favor of Extended Producer Responsibility, and we believe EPR can play an important role in helping companies, consumers and municipalities move towards more recycled content, recycling and circularity, we also recognize that EPR (as legislation is currently constructed) has some major shortcomings that we hope are addressed as more states embrace this tool for change.
The State By State Approach: Perhaps the most important downfall is the fact that the legislation is all state-specific. This limitation is unlikely to be addressed, given that the state-specific nature of EPR policy in the US is the only reason we are seeing traction at all. Additionally, while we believe the state-by-state approach will create major challenges, we also do not necessarily believe a federal EPR policy is yet appropriate (in many ways, we are eager to see what states can accomplish, so federal policy can build from the most effective and successful state policy). That said, state variability will cause a lot of issues. Similar to sales tax, brands will have to figure out how to navigate state-specific EPR legislation and PRO fee structures. Some state policies may incentivize certain types of packaging that are actually disincentivized in other states, which would cause complexity for brands selling nationwide. Labeling requirements may differ as well. In today’s economy, even the smallest brand can find itself selling across state lines, meaning that many companies won’t have the resources to properly navigate these challenges.
In fact, it could be argued that ultimately, a global economy requires a global EPR system. This isn’t necessarily the right thing to advocate for now, but it is important to recognize how global supply chains mean that state and even country-specific policies related to packaging, recycling and circularity are inherently limiting.
Fees are passed down to consumers: It is important to be real about who ultimately will pay - consumers. When advocates are lobbying for EPR legislation, they are quick to say that these laws will hold “producers” accountable for the packaging waste they are creating. But, as with any fee imposed on a brand, they will very likely be passed down to consumers, as they are with the $0.75 / gallon paint fee we now incur in Colorado. We are all for this type of packaging fee, that we hope will help end consumers be more cognizant of the impact of the packaging their products arrive in. However, we believe lawmakers and advocates should be up front about who is likely to be ultimately incurring the fees created by EPR legislation.
Many don’t deal with carbon, and even incentivize choices that run counter to carbon emissions goals: One of the Catch-22s of packaging is that thinner, flexible plastic packaging is (currently) more difficult to recycle or make with recycled content. However, it has a significantly lower carbon footprint than the paper packaging and rigid plastic packaging that it is replacing. In some cases, the eco-modulation incentives of EPR legislation will discourage flexible film packaging (because it is a waste management challenge) without necessarily taking into account carbon emission.
Could hinder bigger picture innovation: We are still a ways from PROs establishing the framework and rules that producers will have to abide by and pay into. But there is a fear that if rules are made based on the current technological landscape of recycling, they may be restrictive in counterproductive ways long-term. This fear is relevant only if EPR legislation or the selected PROs establish frameworks based on specific features rather than the impact of these features on circularity. For example, a state could set up a fee structure that disincentivizes black plastic (as described above). However, technology could definitely advance over time making black plastic much easier to recycle. Additionally, it is easier for plastic to be recycled into a black package (because there is less concern about the impact of inks and impurities). EPR legislation that discourages black plastic would also discourage this type of technology advancement from being pursued (and if this advancement was made, the state isn’t likely to adopt it). Alternatively, if frameworks were either reviewed and edited regularly, or were developed based on characteristics (i.e. how difficult is it recycle, how difficult is it to make this material with recycled content), we could avoid this concern. Black plastic is one of many issues where this could be a concern - flexible film, bioplastics, next generation natural fibers, chemical recycling - all are areas where industry is advancing rapidly, and it is critical that EPR legislations supports rather than hinders progress.
What Does All Of This Mean for My Ecommerce Brand?
Unfortunately, very little has been written or clarified about how EPR policies will impact ecommece brands. The questions are manifold.
Will pure ecommerce brands (that do not sell through retail establishments) pay into PROs at all? Will they only pay into PROs if they have a physical warehouse or fulfillment center in a state? Or will they pay into PROs based on the customers they are shipping to, and how many shipments they make into a state?
None of these questions appear to be well fleshed out in any EPR legislation - proposed or passed. Likely, this will be a major question for Stewardship Organizations to hammer out.
We believe EPR policies will continue to be passed across the country and over the next 5+ years, they will affect ecommerce brands. We are confident that:
- Given the role of Amazon and Walmart in our economy nationwide, legislators and producer responsibility organizations will ensure that ecommerce shipments are factored into the development and management of their strategies.
- These issues will likely evolve. Early on, PROs may focus more on ecommerce brands that have a physical, established presence in their state. Over time, they may begin to include some concept of “nexus,” and the amount of packaging that they ship to their customers in a given state. The evolution of sales tax and ecommerce may create a foundation for EPR legislation to draw from.
- Small businesses, brick and mortar and ecommerce, will be exempt. For example, Oregon’s EPR legislation excludes charitable organizations, government agencies, retailers with a single location (and no online sales), and any small Businesses with revenue of less than $5 million in the most recent fiscal year that has sold less than one metric ton of covered products in or into the state.
Additionally, while EPR policies are by no means perfect and post some challenges and concerns, we also believe our EcoAlly community stands to benefit from them and hope the policy tool continues to gain traction across the country. Why?
First, the eco-modulation components of EPR policies will hopefully narrow the cost differential between standard and recycled sustainable packaging options. Additionally, on-package labeling requirements and increased consumer education will help make consumers more aware of the environmental impact of packaging, allowing eco-focused brands to stand out. Finally, most businesses we work with are committed to reversing climate change and addressing the complex environmental challenges our world faces today. While imperfect, we believe EPR policies will help our community of conscious businesses collectively move towards our collective vision.
How Can I Learn More?
While there are countless articles available to help you learn more about EPR Policies, we have found the following resources most valuable: Sustainable Packaging Coalitions EPR Guide and research conducted by the Product Stewardship Institute. Finally, the Ellen MacArthur Foundation's website is also chock full of resources, as the organization has brought together over 100 global corporations who have signed a position statement advocating for EPR across the world.