Extended Producer Responsibility – Lessons from the Electronics industry

Co-written with: Pascale Moreau, Ohana Consultancy

This article appeared in edited format in Ecotextile News, April/May 2017 edition.

The buzzword ‘Circular Economy’ has gained traction over the past few years, at global scale and across industries. The concept has indeed caught the attention of legislators around the globe.

Within the EU, legislative requirements have lead to implementation of Extended Producer Responsibility schemes (EPRs) in the following industries so far: packaging, electrical and electronic equipment, batteries and automotive industries.

Products covered by (mandatory or voluntary) take-back schemes, include: tyres, waste oil, paper and cardboard, construction and demolition waste, farm plastics, medicines and medical waste, furniture, agricultural films, mobile homes, furniture, amongst other.

France is the only EU member state, which, out of its own accord, implemented a mandatory EPR for textiles (called EcoTLC), although the related implementation framework lacks stringency on national level, and at the same time ‘accidentally’ punishes brands that roll out their own take-back schemes, for being trailblazers.

In this context, it is important to clearly define what Extended Producer Responsibility (EPR) means:

‘Extended Producer Responsibility [EPR] is a policy principle to promote total life cycle environmental improvements of product systems by extending the responsibilities of the manufacturer of the product to various parts of the product’s life cycle, and especially to the take-back, recovery and final disposal of the product.‘ (Source, OECD Definition)

This therefore means, that the manufacturer (i.e. the brand) becomes responsible for the entire life-cycle of the product, specifically for the take-back, recycling and final disposal of the product once it is discarded by the consumer. EPR therefore is a tool to manage waste generated by products placed on the market, and not under any circumstances a product eco-design tool.

Based on existing experiences, as well as the insights by public, private as well as academic authorities who suggest that compulsory EPR-type systems are indispensable to increase recycling and reduce landfilling of products, the European Commission published in December 2015 its action plan for the circular economy. One corner stone of this action plan is the revision of the European Waste Directive, requesting that the concept of the EPR be extended and applied also to industries other than those mentioned in the introduction.

The textile, garment and footwear industry therefore, – a recent favourite of EU legislators –, is seen as a valid candidate for such an EU-wide extension, for a number of reasons:

• An elevated percentage of textile waste – apparel, footwear, home-furnishing – is either landfilled or incinerated, as a consequence of lacking end-consumers collaboration.
• There exists no industry-wide harmonised approach to recycling, repair, reuse activities.
• The number of players offering the above services is growing, but the quality of practise and implementation is unclear and mostly intransparent.
• Scalable technology – and the related R&D – is few and far between. This is thought to be consequence of a lack of economic and/or legislative incentives.
• A relevant number of individual EU member states are working on local solution/legislation, which is rather undesirable from an EU-wide perspective where a unified/harmonized approach would be preferred.

In the remainder of this article, we would like to look sidewise, and see what can be learned from the electronic and electrical equipment industry, as they have been ahead of the curve – although not always voluntarily, since the 1995 laws came into place – when it comes to the implementation of EPR.

Insight No. 1: Seeing the Value of Waste

The reality is: the concept and ideas behind EPR are not new, will become more important as time goes bye, and are without a shade of doubt here to stay.

The key question therefore is: What are the opportunities related to this approach, and how can they be beneficially leveraged?

Over the course of the past 20 years, the electronics industries, alongside their progressively professionalised and sophisticated implementation of EPR, has seen value being added to their core business as a direct consequence of EPR in the following ways:

1. Growing pool of secondary raw materials of clearly identified quality.
   This in turn led to an improvement in the availability of scarce materials resources.
2. The improvement in the availability situation of scarce resources as lead to reduction of the impact of raw material price volatility on business operation costs as well as sourcing costs. This therefore led to more accurate pricing, sourcing and forecasting models and results.
3. The responsibility for the whole product life cycle led to a re-think on value generation: the electronics industry expanded from a pure-product industry to a product-with-service industry, including repair, re-use and upgrade services amongst other.
4. The expansion into service offerings resulted in the re-think of the product ranges offered, core competencies of their business, as well as the value added for the customers. Some of the innovations that resulted were:
   1. Creation of product lease offerings
   2. Product lines made entirely from re-used components; increased standardisation of built-in components for later scavenging and re-use.
   3. Win-win collaborations with non-adjacent industries, which are keen and able to use some of the recovered materials.

Insight No. 2: Harmonisation vs Regionalisation

The reality of EU legislation entails that aspirations are geared towards harmonisation, but that implementation invariably is much more fragmented, with responsibility for implementation/enforcement remaining with individual member-states or even local regions.

In the case of the electronics industry this has led – very unfortunately one might say – to 28 implementation schemes each with its own respective fees, and internal network coordination.

Evidently, what for multinationals is a drain on resources already, for SMEs is a real challenge to their survival.

Insight No. 3: Legislation must address, and apply to, all relevant actors

But even ignoring for a moment the realities of such a patchworked result, what could be learned from the EPR experiences as of to date, is, that any such effort needs to be very clear about the ownership of materials, and related responsibilities/accountabilities along the whole chain of material recovery.

Legislation typically outlines

1. Mandatory reporting activities to national authorities.
2. Mandatory take-back schemes at national (and sometimes regional) level
3. Mandatory collection targets per company and industry

However, the above aspects only can successfully be tackled if it is clear

1. What to report on (framing, standards) and how to report year-on-year.
   => Importantly: mandatory collection targets must be divided by, and attributed to, the different existing waste streams and their actors, so as to ensure high rate of collection to meet the set targets, while also avoiding potential black market activities.
2. Who is responsible (and accountable) for which parts of the material recovery chain.
3. What are the implications of missed targets – such as fines –, as well as attributing accountability for amendments/improvements to the correct entity.

The reasons why the above points are critical to the success and effectiveness of EPR implementation across different member states are the following:

• Brands/retailers will typically not legally (contractually) own the waste that the EPR law holds them accountable for.
  • Why: once the end-consumer commercially acquires a product, ownership is transferred for good.
  • But: Once the end-consumer discards a product, s/he also discards ownership, and the forward ownership of the product is unclear from a legal point of view.
• Following on from the above: The assumption typically is as that at discarding, ownership responsibility is transferred to the entity offering take-back services, such as retailers, communities, recycling centres.
  • However, this is a hugely disputed point causing endless disagreements among the different players.
  • It is important therefore to clearly identify either in the law or the respective implementation provisions to what entity the ownership of the ‘waste’ is assigned/transferred.

What can be learned from the electronics industry and their experiences in the past 20 years, is: over time, more and more actors are interested in collecting waste due to its increased value and improved business case.

Some of these actors, initially, were not covered by the legislative provisions, allowing them to do as they pleased, with negative effects on the remainder of the material recovery chain.

It is therefore good advice to ensure that all actors – recyclers, services providers etc – are held accountable and responsible for the waste they handle and the respective processes.

Insight No. 4: Standards for Quality and Processing are Competition Enhancing

For each take-back/recycling stream interface, the quality and processing standards for materials need to be clearly and stringently defined.

This is for 3 reasons:

1. Most importantly: to ensure that the collected and re-processed materials can indeed be re-used again for the purposes identified/envisioned. This aspect therefore could be considered common practice for quality control, and is nothing new other than the fact that it also applies to material recovered under EPR.
2. Clear standards for quality and processing enhance competition and reduce the risk that comes from profiteering (‘sell them what they want, give them what you have’). It creates trust in products, and therefore, helps effective trading of products and materials.
3. Clear standards for quality and processing also help the exercise of costing and capital allocation, both for material recovery, processing, and sourcing. The clearer the standards, the lower the risk for losses, the clearer yearly yields can be anticipated, and therefore the lower the price volatility.

Insight No. 5: Legal Compliance vs ‘Making it Happen’

To implement EPR successfully, experience so far shows that there are 2 critical roles that need to be fulfilled:

1. Interaction with legislators and authorities on principles and concepts of EPR (strategic)
2. Role out and implementation of materials recovery stream as a consequence of EPR (operational)

As individual entities, brands are badly placed to deal with both of these roles, given that – even more so in textiles – the recovered materials are not very uniform.

The so far most promising approach resulted in 2 industry-collaborative entities (membership organisation), each covering one of the above roles as a single point of contact (SPoC) for the industry in a given region or country, and acting on behalf of their respective members.

These entities would also be best positioned to have oversight of quality and production standards across the whole materials recovery chain, and ensure that these are in agreement with the needs of the relevant players (their members).

Summary and Conclusion

Extended Producer Responsibility (EPR) is a policy principle, and with that – for better or for worse – a legislator’s tool to ‘encourage’ recycling across the product usage chain.

However, while legislative measures always are a last measure, and certainly never popular, experience shows that it is not all bad news.

Experience shows that EPR leads to an improved valuation of waste at the different stages of the materials recovery chain, as well as to increased recycling rates particularly at the end-consumer stage.

It is quite sobering to admit, but EPR has so far been the trigger to ‘seeing’ the value contained in electronic waste, and in this way triggered wide-ranging efforts to exploit it.

The material recovery chain is formed by a whole eco-system of players, with different expertise, skills and business targets. The success of a legal framework resides to a large extent on whether, or not, all of those players are suitably accounted and made accountable for their contribution to mandatory targets, and product outputs.

With all that in mind: Applying EPR in a suitable way to the textiles, apparel and footwear industry could well be an opportunity to finally gain ground in the area of both, recycling rates as well as available scalable technology.

The prerequisite of success however is a trusted, effective and open-minded collaboration between industry and the lawmakers, where expertise on both sides is leveraged.

Acknowledgement:
We would like to thank Eelco Smit, Head of Group Sustainability at Philipps (Netherlands) for sharing his insights on EPR in the electronics industry.