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Governance Design: Circular Economy and the EPR

17th May, 2022

BACKGROUND

Following strong support from industry, local government and NGOs, the Government committed to introduce packaging Extended Producer Responsibility (EPR): a major pillar of their circular economy strategy. The current producer responsibility system has been in place since 1997 and it is clear that the approach needs updating. The aim of the EPR is to incentivise producers to design packaging that is easy to recycle and ensure that they pay the full net cost of managing this packaging once it enters the market.

Whilst the benefits of introducing an EPR are clear, there are numerous approaches to implementing it. Key trade associations in the sector wanted to understand how the EPR might be best governed and the impact this could have on the market. The EPR is coming within an already complex policy landscape, including devolution and other reforms such as the proposed Deposit Return Scheme and new plastic packaging tax.

During the consultation and policy development phase, we were commissioned by the industry to undertake research and propose recommendations in relation to scheme governance, accountability and stakeholder engagement. The research has been used to inform discussions with key stakeholders including government officials.

OUR APPROACH

Our work proposed a governance model based on consultation and market analysis supported by our expertise designing and running schemes in other industries.

Extended Producer Responsibility is an established policy approach adopted by many countries around the world, across a broad range of products and materials. Our team of analysts undertook desk-based research to understand the structure and governance arrangements of the various schemes across Europe. The case studies from across Europe and the UK were investigated and categorised based on each scheme’s defining characteristics and we assessed the governance arrangements’ strengths and weaknesses. We then synthesised the market research and developed evidence-based and balanced conclusions using the team’s excellent understanding of UK/European policy dynamics and client objectives.

A gap analysis was then undertaken which compared the above governance structures against capabilities to inform our view of the relative merits of each approach. We created a high-level plan of potential vehicles and how these can transition to a structure that delivers the scheme operating model.  We assessed the suitability of the funding model to support both the set-up costs and the ongoing costs of ‘business as usual’.

We advised on legal implications and likely governance and organisational structure of the Scheme Administrator. Finally, we advised on the internal resource and the external legal, commercial and technical support that would be needed to set up the delivery vehicle.

OUTCOME

The report findings were shared with key industry stakeholders and discussions around the governance of the EPC scheme administrator are ongoing with government officials. The report enhanced the industry’s understanding of the impact of EPR and how they could engage with its delivery. It also provided an evidence base for future consultations.

Authors