Part Two of a two-part series on Extended Product Responsibility explores the business case for EPR.
By Francesca Rheannon
I never knew that post-consumer waste recycling was so interesting until I started writing about it earlier this week. But it turns out to stand at the nexus point of several critical issues of our time, including business competition for increasingly scarce resources, shrinking municipal and state budgets, climate change, and unemployment.
Moreover, solving the recycling crisis presents the opportunity to create win-win innovations in the relationship between government, NGOs and business. My earlier post explored an initiative spearheaded by the nonprofit As You Sow Foundation to get large consumer product corporations to support passing Extended Product Responsibility laws in U.S. states. These laws would set recycling rate targets and mandate the establishment of industry councils that would pay for recycling programs to meet those targets.
To find out why a large corporation would want to get behind the passage of such laws, I spoke with Nestlé Waters' VP (and former Sustainability Director) Michael Washburn. He made it clear that the decision to get involved was as economic as it was environmental.
Climate Change, Competition and Cost Volatility
Why did Nestlé Waters get on board with the EPR initiative?
There are two reasons.
The first has to do with the global dynamics around commodity markets. We use primarily PET plastics in our bottles. PET is a globally traded commodity and a derivative of fossil fuels. Every time the oil market fluctuates, so does the market for this material. When there are floods in Pakistan that take out the cotton crop, and the Chinese start using plastics to make textiles instead of cotton, that changes the price for PET. So the competition is increasing for these materials while we're still putting 70 percent of it into the ground every year. So, the first issue is volatility in the cost of the material.
The second issue is an environmental one.
We know that if we use recycled plastic for our bottles, we can cut our greenhouse gas emissions for packaging in half. But right now because of the limited recycling that's happening in the US, accessing that recycled plastic is very challenging. There's a lot of competition for a limited supply and, in a dynamic like that, its cost is high.
So we're in a situation where material that's already been taken from the oil well and turned into plastic is going to cost us 15 to 20 percent more to re-use than if we go back and use virgin material. And that's just crazy. There's so much material going to waste -- and a huge opportunity to bring it back and reduce our energy inputs. You can use PET plastic forever, by the way. It's not like paper where you can recycle it only seven times before the fiber falls apart.
So we're trying to create a system where we can manage that material in perpetuity, keep it out of landfills, keep it in productive use, and keep it in our bottles.
Bringing All Industry Into The Recycling Tent
If we want to go out and change the dynamic around recycling, there are only so many tools one can use. And one of the best systems is curbside recycling. But it is not fully developed in many places in this country. And it's often inefficient: neighboring communities don't take in the same materials. That makes it difficult for markets to respond and grow because the availability of the material is inconsistent and sometimes its quality is poor.
We want to change that system. We're interested in bottles and we're interested in corrugated cardboard because we use it in our cases; we're interested in glass and aluminum because we also package in those.
So it's not a plastic water bottle problem; it's a recycling problem. There's a lot of other stuff in that recycling bin besides our package. There are laundry detergent bottles, dog food cans, magazines.
Recycling As A Public Good, Not A Public Service
We have a political environment that seems to be very down on government as a means of making things happen. This EPR initiative is about passing laws. Is there any other way to do it?
No. In the past 30 years, there has been a range of efforts to bring companies together voluntarily to solve these problems. They're all wildly expensive. And they're all inequitable -- certain brands might want to be involved and then they realize, “my peers and my competitors don't want to play and so my costs are too high.” So, the voluntary initiative gets a lot of press and then disappears.
As for the role of government, we have historically treated recycling as a public service, provided to the citizens by government -- or at least with municipal governments having a key role. Maybe your municipality brings the truck to your door and you pay for it in taxes. Or you might get recycling by paying a private hauler that is authorized by your municipality to take your material.
We’re proposing to treat recycling not as a public service but rather as a public good provided through a robust marketplace.
How would that work?
Bringing Recycling Into The Supply Chain
The material that's flowing through the recycle bin has value. [Note: Post-consumer packaging is estimated to be worth $11.4 billion per year.] If that value is optimized, you can reduce the cost to provide the service.
Municipal governments have a mandate to pick it up on time and get it off your doorstep. They do not have a mandate (and often do not have a capacity) to broker those materials. They don't see themselves as sitting in an industrial supply chain. But that's what they do, essentially: they possess and move material that companies like mine want to use.
Now if you said, “Let's make private industry responsible for raising the level of recycling, moving the most material at the lowest cost,” that's what companies do every day.
We call it a supply chain -- that's how we provide products to the marketplace. Those skills and those principles could be brought to bear in organizing recycling in a way that improves the result, increases the amount and reduces the cost.
Government can set the bar and then get out of the way: a state legislature could require achieving a recycling rate of 65 percent for certain materials in three years and then hold private industry responsible for meeting that goal.
Win-wins for Communities and Business
We see a role for government to enable the power of branded companies to develop a marketplace [in recycling] that serves their own interests. Remember, this isn't a charitable exercise. We're talking about keeping this material out of landfills so that we can keep in productive use.
Government has an appropriate role in protecting the public interest by saying there has to be rules of engagement: everybody that sells a recyclable package into the marketplace has to play in this program. But how the recycling program is funded and operates should be left to industry to figure out.
And the magic of this is: if industry has to meet a high goal, but can do it in a way that makes sense, industry will meet that high goal, but do it at the lowest cost. For example, in Minnesota we've calculated that the cost of recycling runs on average $36 per year per household. Under EPR as we propose it, we think we can push that number down to $25 per year.
So we can save money, reduce greenhouse gas emissions, keep material out of landfills, grow domestic jobs, create local economic development, right-size the public sector role in recycling and grow a whole set of industries around it.