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Making producers pay – from product stewardship to innovative EPR programs

product stewardship

Product and packaging waste is increasingly drawing public attention across the globe. This stems, in part, from a growing awareness of massive plastic pollution accumulation zones in our oceans, government bans of single use plastics, China’s recent import ban on scrap plastics, and news of the Philippines wanting to return Canadian “recyclables.” In this era, governments are increasingly turning to innovative waste management and diversion policies and laws.

To date, Canada has focused on two approaches for managing products and their packaging at end-of-life: (1) extended producer responsibility or “EPR”, and (2) product stewardship programs. For the most part, these programs (which cover various categories) fall under provincial jurisdiction.

To varying degrees, these programs shift the end-of-life waste responsibility away from governments (and tax payers) and on to producers (e.g., brand owners, manufacturers and first importers). Depending on the program, this responsibility includes reporting and funding (at least in part) the management of the waste created by their products.

Stewardship versus EPR

Although often used interchangeably, there are key policy differences between product stewardship and EPR programs (as well as significant corresponding financial implications for companies). Generally speaking, EPR programs place responsibility (and costs) on product producers, whereas product stewardship programs generally rely on consumer-paid environmental fees or public funds. Although the emphasis in Canada has historically been on product stewardship programs, there is a growing shift towards transforming those initiatives to full-fledged EPR programs. Such EPR programs place full responsibility for designing, operating and financing diversion programs, and accountability for the program’s environmental performance, on producers. The concept is intended to incentivize companies to not only bear responsibility for, but actually reduce, their product waste footprint (e.g., through recyclable product and packaging innovation).

Status of EPR Programs

Provincial level

In 2014, British Columbia became the first jurisdiction in Canada to implement an EPR system making producers fully responsible for funding and managing curbside and drop-off recycling programs for packaging and printed paper. Under the province’s Environmental Management Act and Recycling Regulation, producers must recover 75% of the paper and packaging they produce, and face fines if they don’t achieve this target.

Full EPR programs have not yet been implemented in other provinces – some provinces do require producers to pay for part of their recycling, but none outside of BC require producers to manage the actual system. At the local level, municipalities often bear the burden of dealing with urban waste generation, and towns and cities are increasingly expressing support for full EPR implementation to help cover the costs of expensive recycling programs. For example, the City of Calgary recently passed a motion to push the province into looking into EPR programs.

Similarly, in Ontario producers are required to pay for 50% of the recycling system, but municipalities are actively calling for a full EPR model. In 2016, Ontario passed a groundbreaking bill that instituted an EPR requirement for all product categories. The bill also sought to prevent producers from discharging their liabilities to a third party, thereby making them fully responsible. These efforts culminated in the adoption of several new laws, including the Waste Diversion Transition Act, 2016 (which includes payments to municipalities to cover their costs associated with the blue box recycling program), and the Resource Recovery and Circular Economy Act, 2016 (which led to the development of the Strategy for a Waste-Free Ontario: Building the Circular Economy).

Federal level

At the federal level, the Canadian Council of Ministers of the Environment began taking action in the late 1990’s in regard to its waste reduction target of 50% of the product waste that is placed into the market. Since 2004, the CCME has published several reports, analyses, studies, tools and progress reports in regard to the Canada-wide Action Plan for Extended Producer Responsibility, with product packaging recognized as a priority in that plan.

International level

EPR has a long history in Europe, where it has existed in varying forms since 1990. Sweden and Germany led the way by encouraging industries that made and sold products to be responsible for the waste stage of those products. EPR programs subsequently spread to other EU countries and beyond.

Challenges with recycling recently led to the EU’s approval of a law banning 10 types of single-use plastics by 2021 as part of its shift towards a circular economy (which aims to keep resources in use for as long as possible, extract the maximum value from them whilst in use, and recover and regenerate products and materials at the end of each service life). Canadian federal MP Nathan Cullen has recently introduced a private member’s bill, Bill C-429, the Zero Waste Packaging Act, which seeks to follow the EU lead.1 Stay tuned on the progress of those efforts as they evolve here in Canada.

The spotlight on product and packaging waste

A dispute between the Philippines and Canada has recently drawn attention on Canada’s product and packaging waste system. In April 2019, the Philippines demanded that Canada take back shipping containers full of waste and recyclable plastics. Canada originally argued that it is not responsible for returning the waste that was shipped. This dispute, spanning over 5 years now, is complicated by obligations under international law (including the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, 1992). As threats from the Philippines President escalated in late April 2019, Canada offered to accept and pay for the return of close to 70 shipping containers. Those containers are now on their way back to Canada.

This international dispute has placed the spotlight on the state of recycling in Canada (as many did not realize Canada ships its waste elsewhere). This, coupled with the public criticism over the effectiveness of Canada’s recycling regime, could spark local governments to expedite implementation of waste reduction policy and full-EPR programs.

In summary, EPR and product stewardship programs are here to stay and will increasingly impose significant requirements on product producers.

By Mark Youden and Maya Stano, Gowling WLG

Occasional Contributors

In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.

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