Annex 1
Why Producer Responsibility and Voluntary Agreements
in Preference to Detailed Market Instruments?
Producer Responsibility embraces the concept
that single point operators in product supply chains should accept
whole life cycle costs and responsibility for materials they introduce
into society. This mechanism will produce a dramatic improvement
in sustainability decision making and end market recyclate reuse
for the following reasons:
— Companies introducing products into
consumption supply chains, faced with end life waste management
liability quickly re-evaluate those externalities as a production
cost. There is a linkage between the authority to pollute and
the responsibility for pollution minimisation as it gradually
becomes embedded in the internality profit and loss account.
— Those pressures usually manifest
themselves in terms of:
— Reduction in the toxicity/dose content
of their products.
— Weight minimisation.
— The development of sophisticated data
capture systems with respect to life cycle product flows.
— The creation of innovative lease/take
back arrangements as a mechanism of sustaining market share and
competitive advantage.
— A re-assessment of primary manufacturing
technologies to accommodate reclaimed material as a raw material
input into their own supply chain (as in the case of Xerox).
— A re-assessment of in life pollution
potential where impacts are significant as part of the competitive
edge mechanism (this is typical in the case of many consumer capital
goods such as deep freezers, cookers and cars).
— Given the oligopolistic nature of
many inbound product supply chains, Producer Responsibility mechanisms
lead to the development of potential large scale, strategic and
high route density cost effective logistics reclamation systems.
— Such systems lead to the emergence
of accessible consumer information system/call centres on handling
methodology post code by post code which integrate into reverse
logistics waste/scrap reclamation infrastructures.
— There tends to be more focused product
centred leadership in relation to local authorities (particularly
in the case of consumer capital goods and household hazardous
waste). These have the potential to maximise environmental benefit
and minimise commercial cost.
— In response to the above transfers
of cost liability from local authorities to producers there could
be a benefit to the Exchequer of up to £500 million per annum
in the form of reduced local authority waste management costs
(based on a 50 per cent tonnage cost liability transfer).
— In the case of those products where
environmental impacts in use are significant relative to environmental
impacts of manufacture (cars, electrical and water using appliances
for example) Producer Responsibility accelerates strategic partnerships
between capital goods suppliers and suppliers of consumable materials
used by those capital goods (detergents and washing machines,
energy companies and white goods manufacturers, water companies
and washing machine manufucturers).
— Reverse logistics supply chain infrastructures
best operate on the basis of product sector specific geographic
monopolies subject to open tendering processes for 3-5 year periods.
Sectoral driven systems operating within PRO therefore require
significant supervision by the Office of Fair Trading.
How can Safety offset the cost of Producer Responsibility?
(= Internalise Externalities)
Corporate or sector driven Producer Responsibility
schemes should agree a basis for developing end life material
management reclaim systems and programmes—both in terms
of the service as well as database and management reporting infrastructures.
A sectoral Producer Responsibility Group (PRG)
thus formed should be in a position to agree the best methodology
to deliver the targets by geographic boundaries, by handling methodologies,
by end disposal routes (recovery/recycling, energy from waste,
burial, refurbishment, etc). Such processes accelerate an understanding
on the part of the PRG that end life material is their property
and therefore is available as a free raw material resource should
they decide to use it to their advantage.
Transparent accounting processes independently
overseen by a Government body are essential to this process. Tenders
should be let competitively and advertised on a regional basis,
possibly operating in conjunction with the Regional Development
Agencies in the context of their Sustainability objectives. The
Environmental Audit Select Committee has already suggested that
a Green Tax Commission (GTC) be formed and it would be rational
to integrate the overview responsibility of any PRG schemes under
that umbrella, with input from the Office of Fair Trading. Such
a body would operate constitutionally in a similar way to the
Office of the water, rail, electricity and gas Regulators.
It is important to involve the Office of Fair
Trading in this entire process and ensure that all framework systems
are subject to their authorisation within the context of competition
legislation.
Close liaison with the DTI is required with
regard to international competitiveness issues and the transition
impacts of shifting externalities into interality accounting systems.
Sectoral agreements developed by PRGs will impose
on-cost to those industry sectors. Our research identifying hypothetical
all in collection and reclamation costs of material streams originating
in different product areas suggest that these will often be in
the range of 1 per cent to 3 per cent of top line sales.
1 per cent to 3 per cent on sales turnover may
not sound much but it is often equivalent to the PBIT of the entire
supply chain. How are these incremental costs to be offset?
INCREMENTAL REVENUE
COSTS
Implicit in the process is a proposal that PRGs
should apply to an offset fund created from net proceeds of Landfill
Tax (and possibly supplemented on the basis that Waste Disposal
Authorities will experience a reduction in their landfill disposal
costs as and when PRGs assume responsibility for specified product
streams in their region). In our response to the National Waste
Strategy we suggest that in year one PRGs should be funded up
to the amount of their openly tendered and bid contracts for material
reclamation but then the PRG should agree with the regulator (OFFWASTE?)
a time period over which such support moves down to zero (15 per
cent per annum over a six year period). In this way externality
costs are transferred onto the producer and the initial kick-start
funding from tax sources becomes self liquidating within a foreseeable
time frame, with retail prices rising pari passu—but
in a controlled fashion.
We believe parallel drivers (in the form of
grants of around £10 per household to local authorities)
funded from net proceeds of the Landfill Tax, could kick-start
a substantial range of kerbside schemes for segregated retrieval
of household hazardous waste (including pesticides and garden
chemicals).
Tradeable Permit systems should receive greater
emphasis as an incentive for the PRGs (Producer Responsibility
Groups) as well as Waste Collection Authorities. We would, however,
commend the importance of horizontally based Tradeable Permit
systems (between competing "single point" players in
the supply chain) rather than the current packaging model of vertical,
supply chain Tradeable Permit systems (involving a flow of funding
from the supply chain to the reprocessors). Acceptance of these
PRG type schemes by industry will offset current dysfunctionalities
produced by the packaging system as currently operating.
September 1999
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