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National Audit Office Report finds concerns with UK packaging waste system

National Audit Office Report finds concerns with UK packaging waste system
by Ellen Thornton at 13:44 in Emerging, Environmental, Packaging

A report by the National Audit Office examined the packaging recycling obligations in the UK in response to a request from the Environmental Audit Committee. The report was published on 23 July and below summarises the key findings.

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The UK's Environment Audit Committee asked the National Audit Office to review the system due to concerns that it could be subject to fraud and non-compliance. The NAO found that due to a lack of follow-ups by the Environment Agency, at least 4.5% of obligated companies may not register under the scheme; businesses only pay £73 million towards the cost of recycling their packaging, but local authorities spend £700 million according to 2017 figures and estimates; there is a financial incentive for companies to fraudulently claim they have recycled packaging, particularly for plastic; the Environment Agency has low visibility and control over waste that is sold for recycling and is sent to landfill or littered; the Government has no evidence that the scheme has encouraged companies to minimise packaging or make it easy to recycle; and the Department for Environment, Food and Rural Affairs does not know what value the scheme has added in its 20 years of operation. Mary Creagh MP, Chair of the Environment Audit Committee said:

"The PRN system should have made packaging simpler and easier to recycle, delivered high quality UK recycling, and protected our streets, countryside, rivers and seas from plastic litter. But today's NAO report shows the PRN system has become a tick-box exercise. Waste is exported with no guarantee that it will be recycled, producers are not made to recycle their packaging, and the system is open to fraud and error.

"The Government must fix this broken system in its upcoming resources and waste strategy. The PRN system should make producers pay to recycle their packaging, encourage simpler packaging, support the UK recycling industry, and be open and transparent so people can be confident what goes in the recycling bin gets recycled."

In the UK, the Packaging Recovery Note (PRN) system forms part of the producer responsibility obligations. Producers create packaging and sell it to the consumer. Packaging waste is collected, recovered and recycled by an accredited reprocessor, at this stage a PRN is generated and is awarded for the amount of recyclable material sorted in the UK or the whole amount of unsorted material if it is exported. Packaging compliance schemes can then buy the PRN to meet the producer's obligations. Packaging data and PRNs are submitted to the appropriate environment agency to demonstrate compliance with the Packaging Waste Regulations. PRNs are sold on an open market which means that prices fluctuate according to supply and demand. If there is a perceived shortage of PRNs, then prices will increase but if there is a perceived excess of PRNs then prices will decrease.

The PRN system spreads the cost of packaging waste over the supply chain. Manufacturers, who produce the raw materials that will be made into packaging, cover 6% of the cost; Converters, who convert the raw materials into packaging cover 9%; Pack Fillers, who apply the packaging to goods and products cover 37% and Retailers, who supply the packaging to the end user cover 48%. The advantages of this approach have been that all levels of the supply chain are aware of the environmental impact of their packaging and therefore there is an incentive to reduce packaging waste at each level of the chain. However, there has been criticism of the PRN system recently as it can incentivise export of material for recycling. When material is reprocessed in the UK, it is sorted, and a PRN is awarded based on the amount of recyclable waste that is separated. In contrast, when material is exported for recycling, PRNs are awarded for the whole volume of unsorted material meaning more PRNs can be awarded by exporting your materials than reprocessing it in the UK.

The Government has committed to reform the packaging recycling obligation system as part of the new waste and resources strategy which is expected to be published this year. Reported packaging recycling rates have increased from 31% in 1998 to 64% in 2017, exceeding the EU target of 55%. There are however, other policy measures in place which have influenced the packaging recycling rates, including landfill tax which provides a more significant financial incentive. Furthermore, Defra's estimates of recycling rates are not adjusted to account for undetected fraud and error. The recent ban by the Chinese authorities on certain waste imports could lead to a dip or decline in recycling performance. Since 2002, the total amount of packaging waste exported abroad has increased sixfold while the amount recycled in the UK has remained the same. In the UK, businesses paid £73 million towards the cost of recycling their packaging through the system in 2017. The Department reports that this is lower than the compliance costs that companies in a number of other European countries pay. It equates to a cost to business of 13 euros per tonne recycled, compared with costs to business of more than 48 euros per tonne in Germany, Belgium and the Netherlands. The NAO's reports states their concerns that the Environment Agency does not have strong enough controls to prevent the system subsidising exports of contaminated or poor-quality material. Compliance inspections are a key part of the Agency's approach to tackling fraud and error, although these have fallen well short of targets, and do not focus on exporters that the Agency knows to be high risk. The Agency only carried out three unexpected visits in 2017-18 and only 124 planned visits, missing the target of 346.

Earlier this year the Government published their 25-year environment plan which included measures to minimise waste. This consists of meeting all existing waste targets (landfill, reuse and recycling); working towards achieving zero avoidable waste by 2050; working towards eliminating avoidable plastic waste by the end of 2042; seeking to eliminate waste crime and illegal waste sites over the lifetime of this Plan, prioritising those of highest risk; delivering a substantial reduction in litter and littering behaviour; significantly reducing and where possible preventing all kinds of marine plastic pollution – in particular material that came originally from land. Although, the Plan has been criticised by the Committee for a lack of specific measurable, achievable, results-focused, and time-bound targets.

We'll be keeping you up to date with the progress of the PRN system reform on LinkedIn and twitter. If you are interested in reading more articles and blogs like this one, please sign up to our free monthly digest. If you have any questions regarding packaging compliance in the UK, please contact us here to speak to one of our consultants.
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