Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Memorandum submitted by Dixons Group plc


  Dixons Group welcomes the opportunity to give evidence to the committee. We have been concerned about the unintended consequences of the implementation of these regulations since the Autumn of 2000 and have raised it frequently with the Department since that time (see letters attached at Annex 1). We have now had a number of meetings with the Department and with the minister and with other parties and offered suggestions as to potentially practical solutions. While we remain hopeful that a solution can be achieved we are concerned that further delay will endanger not only the chances of resurrecting the take-back system for refrigerated units but could also endanger the infrastructure for the take back of other white goods such as cookers and washing machines.


Dixons Group

  Dixons Group is Europe's largest specialist retailer of consumer electronic and electrical products. The Group has more than 1,250 stores across the UK, Ireland, the Nordic region, France, Spain and Hungary and trades in the UK and Ireland as Dixons, Currys, PC World and The Link. We employ 31,000 people, in a huge range of roles, of whom some 29,000 are UK based. In addition, as the Group sources very much of its product range in the UK, it is both a source of indirect employment and has been the trigger for inward investment in the UK by persuading a number of its overseas suppliers top locate in the UK.


  Currys is the leading choice for families buying electricals for the home. We deliver seven days a week to households throughout the UK. While delivering new products the Group collects 750,000 end of life white goods appliances, fridges, freezers, cookers and washing machines, from customers' homes each year, of which, until November, approximately 300,000 were fridges. Until November 2001 these were recycled or refurbished by a network of contractors, relieving Local Authorities, who would otherwise be obliged to collect or receive these products, of a significant burden. Many units were refurbished and resold at low cost, providing cheap products for families on low income (including through CREATE, a Dixons supported project to re-train long term unemployed people as engineers). Others were exported for further use and the remainder recycled and disposed of following CFC gas extraction meeting environmental standards.

  In effect Dixons Group provided a cost-free channel for the disposal of this domestic waste and one which minimised the generation of extra journeys by householders or local authority collectors and is thus more environmentally acceptable.


  It is important to understand why retailers offer such services. Electrical retailing is highly competitive. Currys, Comet, John Lewis, Debenhams, House of Fraser, Argos, Powerhouse and many thousands of small independent retailers all compete for trade in what many customers view as a commodity market. Low margins typify the offer and, such is the competitive nature of the industry, that a number of players have left the business either voluntarily (as in the case of Scottish Power's sale of its retail outlets to Powerhouse) or involuntarily as in the case of the failure of Tempo.

  In such a competitive market, price pressure is intense and retailers will routinely try to offer the lowest price in the market. Thus the customer gets used to the idea that prices will be similar in most outlets. Thus there is severe pressure to differentiate either by offering exclusive products or by excelling on service. That is why all retailers will offer competitive service offers including convenient delivery and after sales. No retailer will want to risk for too long a competitor being able to offer a new service unchallenged. As yet the withdrawal of take-back has had limited effects on sales, however one of the two main peaks for sales, the hot summer months, has yet to come.


  End of life refrigerated units are classified under UK waste regulations as special waste. This means that only registered licensed waste processors are approved to process or store such waste. Retailers are not entitled to store waste but are granted a 28 day exemption from the requirement to license in order to allow them to take back customers' used products. This allows them to collect the waste units but only to hold them for 28 days during which they must be collected and removed by a licenced reprocessor.

  Until 16 November 2001 Currys had 12 licensed third party contractors who provided its collection and disposal service for all white goods. These 12 companies are mostly SMEs which employ up to 50-employees. The three largest of these companies were responsible between them for disposing of around 80 per cent of end of life white goods while the remaining nine disposed of the other 20 per cent.

  These waste processors used to collect the appliances from our depots. They had three methods of disposal:

    —  refurbishment of those units that were suitable for low cost sale and re-use;

    —  extraction of CFC gases from the fridge compressors when present ("degassing") prior to export for re-use overseas (mainly in Africa); or

    —  recycling of materials and UK disposal following degassing.

  Until recently, some 70 per cent end of life fridges could be exported for further use (either commercial, public sector in schools and hospitals or for domestic use) providing an income stream for the contractors. Compressors were degassed prior to export and could be re-gassed at the other end either with CFCs or with another gas such as R134). The termination of fridge exports removed the largest part of the income derived from white goods disposal. This, added to the collapse in steel prices, means that there is now little income to be derived from this sector.

  Contractors withdrew take-back services for two reasons. Firstly the loss of the income from the 70 per cent of units previously exported undermined the economics on which their businesses were based—in some cases fatally. Secondly it was clear that they had no legal route for the disposal of non-refurbishable product after January as it could not be disposed of without the removal of the foam.


  Since they were forced to withdraw from the recycling of refrigerated products many of these businesses say they have ceased to be viable. Several contractors have exited the industry and more than one has given notice that it intends to cease collecting other white goods having already exited fridge collections. Others will require an increased unit fee to receive such units having lost the income derived from fridges that had previously cross-subsidised this part of their business.

  The additional cost of a new processing fee combined with the withdrawal of several contractors from the industry may limit our ability to provide a uniform standard white goods collection service (for cookers, dishwashers, washing machines, tumble dryers, etc.) across the country. This, in turn, would further increase the pressure on local authorities to meet their obligations to householders in this respect. Currys, like other retailers, does not wish to lose this service for its customers. If, however, these contractors cease operations, local authorities may well have to deal with the disposal of these other white goods on a permanent basis. (Around 500,000 additional pieces excluding refrigeration from Currys alone)


  Dixons' technical officers sought clarification on what the requirements of the regulations would be from DETR from 2000 onwards. When clarification and guidelines were not forthcoming Dixons Group's Chief Executive, John Clare, wrote to Environment Minister, Michael Meacher, in November 2000. He raised the concern that the consequences of a ban on the export of fridges containing CFCs in the foam insulation material could be that the companies that collected these end of life products from retailers would cease to do so and could go out of business. The letter urged that at the Council of Ministers meeting on 27 November 2000, at which this would be discussed, Britain should raise these consequences of any ban on the export of products containing CFCs in foam (letter attached in Annex 1).

  A fortnight later Dixons raised the issue with the DTI Minister Kim Howells at a meeting organised by the BRC (13 December 2000). He recommended asking his fellow DTI Minister, Patricia Hewitt, to raise the issue with DETR.

  Subsequently Dixons has participated in numerous meetings with DEFRA, DTI, retailers and recycling contractors to try to find a solution. We have been to the Commission to seek delay and repeatedly attempted to convey the urgency of the problem. Following an invitation to meet Mr Meacher himself with his officials we have presented two briefing papers outlining how a lead local authority partnership scheme could be the trigger to reactivating take-back (Papers dated 24 January 2001 and 18 February 2001 attached in Annex 2 and precised in point 7 below). We have also held bilateral meetings with Councils and with the LGA to try to secure a solution that is practical for local authorities as well as retailers.

  We remain committed to re-implementing a take-back solution as early as possible if it is practical to do so. We have repeatedly assured ministers, officials and local authority and recycling partners of this and our proposals to achieve this are set out in papers dated 25 January 2001 and 18 February 2002. We are aware, however, that small recycling businesses are exiting the industry with ever greater frequency. It is imperative that a solution is secured while they are still in business and that offers them adequate incentive to remain in business.


  Dixons put the following proposal to a meeting with the Environment Minister and officials at a meeting on 24 January. We subsequently provided further proposals to trigger and early return to take back on 18 February. The papers are attached at Annex 2.


  This scheme (set out in the paper to Michael Meacher dated 24 January and attached in the Annex) would create a system under which Local Authorities could bid for regional lead authority status. The "lead authority" would then take responsibility for all fridge reprocessing within a cross authority region. Under such a system the "lead authority" would be granted funding on a volume basis and would be responsible for collection from civic amenity sites and retailers' collection depots within their region without charge.

  This would enable retailers to re-start their collection infrastructure and immediately reduce pressure on Local Authority collection services. The "Lead Authority" would not be required to divide fridges and re-allocate to Local Authorities or postcode areas, speeding up the process, reducing storage requirements and reducing administration. They would be paid from Central Government funds based on volume and the number of fridges they recycle would enable them to fulfil part of their constituent local authorities' targets under the national waste strategy. They would have an incentive to maximise volume processed as the more units they collect and recycle the cheaper the unit cost of extraction. Because they would be negotiating on a contract basis with recyclers rather than imposing a centrally imposed flat fee they would have the opportunity to manage down prices or, potentially, buy from competing contractors.

  Such a system would require licensing which recognised that all these fridges are domestic in origin including those collected from retailers' sites. Retailers would thus be recognised as a channel for domestic disposal ie an agent for the customer rather than the present insistence by local authorities that household units, once removed by retailers, are classified as commercial rather domestic waste.


  We also considered whether there might be another route to re-starting the household fridge collection by retailers. If the contractors are not willing or able to collect from our local distribution centres it is important that the operation is as simple as possible. Dixons Group would be willing to deliver refrigerated products direct to local authority sites if we could identify one local authority site per local distribution centre that could receive all refrigerated products from that LDC without the complex and administratively expensive process of matching each fridge to the local authority of origin.

  If the Government identified local authorities to accept units from our local distribution centres, we would meet all delivery costs to those facilities and would deliver on a daily basis. (This would be required in order to avoid disproportionate accumulation at our sites or breach of our waste holding exemption.) We would also permit existing recycling contractors to remove any units they identified as suitable for refurbishment without charge before disposing of the balance to the local authority. This would reduce the number of units received by the local authority and potentially keep the small recycling contractors in business as they would have a flow of units for recycling without having to meet the cost of disposal of non-refurbishable units.


  We have asked DEFRA for advice on what measures have been adopted elsewhere in Europe. From our own researches the picture is as follows.

  Austria: There are sufficient plants to meet the treatment needs of the country. Appliance take-back is managed by the privately run "UFH" (Household Environment Forum). Minimum requirements for take-back and recovery are set down in the national waste management plan which stipulates a minimum quantity of CFCs to be recovered from insulating foam. Costs for collection and treatment may not exceed 37.97 euros (inc 10 per cent VAT). This cost is met by the consumer who buys a UFH voucher with his appliance. This voucher is a pre-payment for the end of life treatment of the refrigerator.

  Belgium: Since July 2001 a national collection system (RECUPEL) has been financed by a visible recycling contribution or fee to meet waste management costs.

  France: Approximately 10 million appliances will require treatment in France. Half are taken back by local authorities and half by retailers at the point of delivery of new appliances. Thus far there is no recovery infrastructure for CFCs. Ministers are presently drawing up draft regulations requiring the collection of appliances and the recycling of CFCs in compressors.

  Germany: German authorities estimate that there are 62 million products in household that will require treatment. Units are collected by local authorities with part of the cost being funded through general taxes and part by a direct charge to the consumer. There is sufficient recovery infrastructure. Recovery costs per appliance are estimated at 10-15 euros (excluding transport and storage).

  Italy: Has approximately 20 plants to extract CFCs from foams and circuits but CFC11 (from foam) is sent abroad for final disposal by incineration. A visible charge is added for recycling at the point of sale (17.6 euros). Recyclers charge 15-25 euros per unit for recovery costs. Italian law does not specify who must pay the fee although some local authorities are meeting the bill. A draft agreement (as yet unsigned) would make manufacturers and importers responsible for recovery and disposal of units collected by or returned to retailers.

  Netherlands: Since 1 January 1999 NVMP (which collects all brown and white goods) has collected 600,000 CFC containing refrigerated units each year. Its contractor, "Coolrec" recovers CFCs in foam and the compressors at a cost of approximately 8 Euro per unit. The consumer pays for this in the form of a visible fee added to the purchase price of the unit.

  Sweden: No current statistics but 275,000 units were collected and treated in 1996 and it is estimated that the annual number remains similar. Between 1983-1992 approximately 4.5-5 million CFC appliances were sold in Sweden. The council pays for the end of life treatment with three to four firms carrying out the actual CFC destruction. Appliances are then sent for materials' recycling after the CFC extraction. Recovery costs per unit (CFCs only) are approximately 21 euros per unit.

Dixons Group plc

27 February 2002

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