Memorandum submitted by Dixons Group plc
INTRODUCTION
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.
BACKGROUND
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 WHITE
GOODS COLLECTION
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.
THE INDUSTRY:
COMPETITIVE BACKGROUND
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.
HOW TAKE-BACK
WORKED
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.
IMPLICATIONS FOR
THE COLLECTION
OF OTHER
END OF
LIFE WHITE
GOODS
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)
WHAT HAS
DIXONS DONE
TO TRY
TO RESOLVE
THE ISSUE?
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' PROPOSAL—THE
LEAD LOCAL
AUTHORITY SCHEME
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.
A "LEAD AUTHORITY"
SOLUTION
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.
RESTARTING TAKE-BACK
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.
WHAT IS
HAPPENING ELSEWHERE
IN EUROPE?
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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