EPR and the Impact on Private Brands

The concept of extended producer responsibility (EPR) has been around for some time, where manufacturers and importers of products should bear a significant degree of responsibility for the environmental impacts of their goods, with costs based on the real product lifecycle. But it would appear EPR hasn’t really been taken seriously by packaging manufacturers. Despite the impact EPR legislation has and will have on companies, nearly two thirds of 60 executives - interviewed for a Packaging Machinery Manufacturers Institute survey - said their respective businesses weren’t yet looking at the impact of EPR legislation in their packaging.

While the U.S. is still behind many European nations on this front, the wind is blowing very strongly in the direction of EPR. California, Colorado, Maine and Oregon have already brought in legislation to enforce it, and there are more than 30 bills relating to EPR and packaging currently being discussed across the U.S.

Beware The Shadow Ban

What this means on a practical level is that the stores behind the private label brand essentially need to pay for the real cost of what they create. Whether directly or indirectly could vary by state, but the result will be the same. Less sustainable packaging options will come at an increased cost to the brand. The thinking behind implementing this is two-fold; it balances the books at a governmental level in terms of the responsibility for waste disposal being more equally shared, and it also drives behavioral change, theoretically making manufacturers more aware of what they are doing and pushing them towards more sustainable practices.

The consensus within the wider industry is that this approach is the right way to go, and will accelerate the journey towards being more sustainable in a way that previous EPR initiatives simply didn’t have the teeth to do.

Given the breadth and scale of store brands, unless they are already actively engaging suppliers to mitigate costs, then there is potential for them to be sleepwalking into a dangerous situation.

The risk is that some types of packaging have such a substantial environmental impact that the cost of ensuring they are responsibly recycled is astronomical. If this cost is then having to be passed on to the customer, the likelihood is that the food manufacturer is going to stop using said packaging, resulting in what amounts to a “shadow ban.”

So, while the new, stronger EPR legislation has been seen in some quarters simply as enhanced reporting, it also has the potential to have an almost terminal impact on some businesses.

The whole dynamic of the packaging industry is having to change because of this legislation, and a larger number of businesses than ever before are having to get a more granular understanding of where their suppliers are on their sustainability journey.

Supplier engagement will be essential for accurate data collection, reporting and compliance. But more importantly to collaborate with suppliers to ensure sustainable and cost effective solutions for the future.

Get Ahead

In the long run, the ongoing effects of EPR legislation will be a net positive for the industry. However, it will have far reaching and potentially unknown effects in the short-term, particularly as businesses learn how to adapt to the impacts increased shelf prices have on consumer behavior.

The industry is currently in a moment of flux as we wait and see what impact the legislation has – and how quickly it happens – but what is clear is that the scope of EPR is only going to grow over time. More than 87% of consumers are currently favoring store brand products in the current climate, so measures to control costs and manage its potential waste are only going to become more pressing.

There will either be higher targets for manufacturers to hit, or higher penalties for not hitting them, so they need to be looking at how to get ahead of the game and make their wares as environmentally friendly as possible, even if they don’t necessarily fall within the lower limits of the incoming legislation.

There isn’t going to be a situation where these EPR regulations become less stringent, so now is the time for packaging manufacturers to understand how their supply chains can be more sustainable, or risk paying a hefty price in the near future.