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Advocacy & Policy

National: Submissions

RE: RCC Comments on CCME's Canada-Wide Action Plan for Extended Producer Responsibility
May 29, 2008

Daniel L. Friesen
Programs Coordinator
Canadian Council of Ministers of the Environment
123 Main Street, Suite 360
Winnipeg, Manitoba R3C 1A3
Via E-mail: dfriesen@ccme.ca

Dear Mr. Friesen:

On behalf of Retail Council of Canada (RCC) and our members operating across the country, we are pleased to provide comments on the Canadian Council of Minister's of the Environment's (CCME) Discussion Document: Towards A Proposed Canada-Wide Action Plan on Extended Producer Responsibility (February 2009).

Retailers, as the sellers of designated products and the touch point for both consumers and manufacturers, have a significant stake in the development of stewardship programs. Currently, RCC's members are active participants in over 30 such programs across the country and will be called upon to expand their role as new ones are developed.

Indeed, retailers support the principles of waste diversion as a whole and look forward to working together with CCME and other key stakeholders in creating a harmonized and viable approach to Extended Producer Responsibility (EPR).

The following represents the initial thoughts of retailers, which may be added to and/or refined as further discussion and consultation takes place.

1. Do you see value in CCME seeking through the adoption of the Canada-wide Action Plan for EPR more harmonious and consistent EPR program regulation and implementation across the country?

RCC supports developing a harmonized approach to developing EPR program regulation and implementation that is consistent across Canada. Harmonization is a fundamental concern for the retail sector and should be entrenched as a foundation of product stewardship programs to encourage compliance and administrative efficiency. We believe that the CCME — as a national body — is in the best position to be tasked with this issue as the membership of CCME is comprised of every provincial and territorial Environment Minister in Canada.

Product stewardship programs are gathering strength as more provinces mandate the development of waste diversion programs for various materials. However, the model used for such programs varies across the country to accommodate each province's specific requirements/regulations, placing national and regional retailers in the position of having to comply with a patchwork of different requirements. Implementing different programs in every province has proven to be costly and administratively burdensome for retailers, not to mention confusing for consumers.

2. Do you see EPR as an environmental instrument which can be used to encourage design for the environment in products and improved product life cycle environmental performance? Can EPR policies, regulations and programs be structured to maximize incentives for improved environmental performance in products?

RCC does not agree that the purpose of EPR should be used to encourage Design for Environment (DfE). EPR is a policy approach directed by government, while DfE is a business decision. Manufacturers must be compelled to change the design of their products. This could be done through regulatory standards, incentives, responding to customer demand, and an internal desire to decrease the manufacturers' environmental footprint. DfE is a manufacturer's issue.

A February 2006 study from the OECD entitled EPR Policies and Product Design: Economic Theory and Selected Case Studies, discusses the DfE impacts of EPR policies and investigates the extent to which EPR policies can be expected to contribute to DfE.

The study states that:

Much that is written on the topic seems to take it on faith that any form of producer responsibility will provide DfE incentives, but there is very little careful conceptual thinking on how such incentives work through the system and sparse documentation of real-world changes that have been made in response to policies.

In assessing whether design changes have taken place in response to the EPR policies, the study first discuss the incentives provided by the policy and whether, and by what means, changes may take place. It then describes anecdotal evidence of such changes — i.e., reported changes that particular producers have made and also try to look broadly across some industry-wide measures. Unfortunately, this is a somewhat circumspect exercise. In terms of industry-wide changes, one does not know the counter-factual — i.e., what would have happened in the absence of the policy. For the anecdotes reported about changes to particular products, it is hard to know whether firms made the changes in response to the policies or for cost-savings or other reasons.

It is too early to say whether more complex forms of DfE for highly designed and engineered products such as electronics and motor vehicles can be encouraged with EPR policy, but it seems unlikely that large changes will result from the types of policies we currently see in place; in particular, PROs [Producer Responsibility Organization, similar to an IFO], as they currently operate, provide very little incentive for members to engage in DfE.

The findings of the OECD study strongly suggest that there is no clear link between EPR and DfE.

3. Do you see the benefit in shifting the focus of responsibility for EPR programs to the producers, who are responsible for the design and manufacturing of products?

In theory, RCC supports the concept of Extended Producer Responsibility (EPR). However, it is a complex concept and one that conjures up competing and different definitions: a simple search on Google for the definition of EPR shows over 150,000 results.

The CCME defines EPR as "an environmental policy approach in which a producer's responsibility for a product is extended to the post-consumer stage of a product's life cycle.

The key issue with the definition is the need to maintain a flexible approach in recognizing that responsibility can either be physical, financial or both. The Organization for Economic Co-operation and Development (OECD) defines EPR as:

An environmental policy approach where the producers' responsibility, physical and/or financial, for a product is extended to the post-consumer stage of a product's life cycle. Producers accept their responsibility when they design their products to minimize life cycle impacts and when they accept legal, physical and/or economic responsibility for the environmental impacts that cannot be eliminated by design.

It must be recognized that a producer's responsibility under EPR can include either financial responsibility for the management of the products and packaging and/or the physical responsibility for the management of products and packaging.

RCC believes that any definition of EPR must be flexible enough to recognize that there is no "one size fits all" solution and that while full EPR may work for some programs, shared responsibility works for others (e.g., Ontario Blue Box).

At times, there appears to be confusion among provincial governments wanting to shift to an EPR legislative-based approach to waste management, and that of industry (ie. brand owners and first sellers of designated materials) assuming 100% responsibility of the costs, and only costs. This is not just about financial responsibility but about physical responsibility. As mentioned above, the definition of EPR must recognize that responsibility can include either financial and/or physical responsibility for the management of the products and packaging. Further, it must be flexible enough to recognize that there is no "one size fits all" solution and that while full EPR may work for some programs, shared responsibility works for others.

RCC recommends that the definition and the role of the "producer" be clearly defined (ie. manufacturer of the product/packaging or the first seller/importer?)

4. Do you agree with the list of priority products (Phase 1 and Phase 2) identified for risk management through EPR regulations and programs?

The proposed list of products is extensive; as such, RCC believes that we will need a measured approach to achieving success in across Canada recognizing that different provinces are at different stages of development and/or implementing these programs already.

5. Do you agree with the scheduled timetables for EPR action — framework legislation within 5 years of the EPR Action Plan's adoption, operational Phase 1 programs within 6 years and operational Phase 2 programs within 8 years?

It is difficult to determine if the proposed timetables for EPR action are feasible. Every province is at a different stage of developing/enhancing waste management legislation and/or developing and implementing waste diversion programs. Existing provincial legislation/regulation are unique to those provinces and cover a wide range of packaging and products: everything from scrap tires, used oil, waste electronics, paint, hazardous waste, beverage containers, etc. It will take more than just harmonizing existing regulations with the proposed CCME EPR framework (once completed) to ensure success. More work needs to be done to ensure that any changes to existing provincial legislation, and ultimately the programs themselves, will be viable.

Experience has shown that industry stewards must be provided with adequate time for program plan development and implementation. Retailers have expressed concerns in other jurisdictions with the extraordinarily quick pace that governments have allocated for the development of product stewardship programs. Retailers require ample time and opportunity to fully digest any program plan, budget for it, and take the necessary steps to prepare their respective organizations for compliance with the program. This is compounded by the fact that retailers are engaged in the development of other stewardship programs, which can leave them resource challenged.

Retailer Black-Out Periods

It should be noted that implementing any new programs cannot occur during retailers' black-out periods, which take place during the back-to-school shopping period (August/September) and the holiday shopping period (November-January). As these are the busiest time for retailers, it could make program plan implementation unfeasible for many retailers. Any EPR framework legislation should recognize this.

6. Do you agree that the 5 key performance indicators suggested are useful measures of the efficiency and effectives of operational EPR programs? Are there any key performance indicators which are missing?

In general, any key performance indicators should be consistent with those used in existing programs. Overall we support the proposed national performance measures outlined by CCME though we need more information to understand how the avoided or reduced greenhouse gas emissions proposed performance indicator will be tracked and who would be responsible for reporting it.

7. Do you agree with the key EPR program elements identified and in particular with how issues such as fees, targets, stewardship plans, reporting and Producer Responsibility Organization responsibilities are addressed?

Overall, RCC agrees in principles with the key elements outlined by CCME with a few comments:

Approvals

The discussion paper states that "stewardship plans need to be available for review and consultation, but do not necessarily require the approval of the jurisdictional authority."

RCC requires clarification on why the jurisdictional authority may not have to approve a stewardship plan. Without final jurisdictional approval Producer Responsibility Organizations do not have the authority to assess fees or operate a program on behalf of Stewards.

Design for Environment

Please see our response to question number two. RCC does not agree that the purpose of EPR should be used to encourage Design for Environment (DfE). EPR is a policy approach directed by government, while DfE is a business decision. Manufacturers must be compelled to change the design of their products. This could be done through regulatory standards, incentives, responding to customer demand, and an internal desire to decrease the manufacturers' environmental footprint. DfE is a manufacturer's issue, not an EPR issue.

Fees

RCC does not support CCME's statement that "costs associated with an EPR program should be internalized as a factor of production of the product and not be visible to the consumer."

The management of fees is not a government decision, it is a business decision, and legislation and regulation must remain silent on how fees are managed.

Some stewardship programs have been designed to require retailers to bury the eco-fee within the final selling price of a product, thereby, hiding the costs from consumers. RCC has analysed the consequences of such practices on retailers and identified a number of serious impacts on retailers both large and small:

• Retailers who lease their premises pay more rent: rent is based on gross sales, which increase as prices are increased to cover stewardship program costs. This is a particularly troubling concern for small, local retailers.
• Higher advertising costs are incurred for national or regional retailers who must produce separate production runs with province-specific pricing.
• Some national and regional retailers have information systems that are not easily (or simply cannot be) configured for higher prices in a given province for the same product.
• Product prices in the province may become inflated as a result of the mark-ups that occur along the supply chain.
• Some retailers lose customers to neighbouring jurisdictions where the advertised price of a product is lower because there is not an imbedded eco-fee.

Mandating hidden fees has effects across the supply chain, typically resulting in increased costs for consumers; much more than if the retailer chose to add the fee visibly as a separate line item on the sales receipt.

Since most supply chain fees are based on product cost, weight, cube and handling requirements, among other things, adding the fee at the beginning (as would be done if the fee had to be hidden) increases the cost throughout the supply chain as illustrated in the example below (for illustrative purposes only).

Using product costs and 10% handling fees at each level of the supply chain (column 1), paint as the example and assuming a $20 manufacturer cost and a $1 eco-fee, the below chart is an example of the impact on the final total cost of the product using a hidden fee (column 2) and showing it visibly as a separate line item (column 3):

The above example illustrates that by adding the eco-fee at the beginning of the supply chain because of mandated hidden fees, results in a higher total cost for the product by the time it gets to the consumer. Whereas, separating the eco-fee at point-of-purchase results in a lower cost.

If a stewardship fee on a product or package reflects the true cost of managing that end-of-life product or packaging, the consumer has the ability to make choices that reflect his/her environmental thinking.

Ultimately, consumer decisions have a very significant influence on the way in which producers make, package, and market their products. As part of this, it is always important to ensure consumers are educated about the purpose of fees.

To that end, that is why point-of-sale (POS) consumer educational materials are vital to the success of product stewardship programs. Having POS materials available ensures that a uniform message is delivered to consumers and will assist in increasing compliance with such programs. POS materials coupled with transparent program costs provides an important opportunity to educate consumers and encourage their participation. This approach is also consistent with existing stewardship programs in other provinces.

Some examples of consumer POS materials in other provinces can be found at:

• British Columbia Tire Program
• British Columbia Electronics Recycling Program
• Alberta Beverage Container Recycling Program
• Saskatchewan Waste Electronic Equipment Program
• Nova Scotia Paint Recycling Program
• Nova Scotia Electronics Program

A common theme of the materials clearly explains to the consumer what the fee is used for (ie. exclusively used to manage the costs of the program expenses such as transportation, recycling, collection costs, etc.), that it is not a tax and that no part of it is remitted to the government.

Recent research shows support for visible fees:

• In January 2009, Harris/Decima conducted a study on Quebecers' attitudes regarding eco-fees associated with recycling electronic products. The results show that 75% of respondents believe that retailers should display the eco-fee separately from the price of the product. Further, most respondents (86%) would like to see the eco-fee indicated on the sales receipt (ie. as a separate line item).

• In December 2008, the European Commission published proposals for amending the WEEE Directive, in particular, as it relates to the visibility of fees. As such, producers would be allowed to show consumers at the time of purchase, the cost of collection, treatment and disposal of products in an environmentally sound manner, without a time limitation and for all electronic and electrical equipment. Originally, the visible fee section of the Directive had a timeline of 2011, at which time all would have to be buried (ie. hidden), but now the use of visible fees will be allowed to continue without a set end date.

• In June 2008, the Alberta Recycling Management Authority (ARMA, who operates Alberta's recycling programs) issued a news release entitled "A Major Milestone is Achieved by Canada's Oldest Electronics Recycling Program" with a quote from Doug Wright, ARMA's CEO, that says: "In surveys commissioned by Alberta Recycling, more than 90% of Albertans support the program which is funded by an environmental fee being charged at the point of purchase of new TV's, computers and printers." Past ARMA surveys confirm this support for visible fees: In ARMA's 2005-2006 Annual Report, results from a 2005 survey that showed that over 60% of Albertans support the environmental fee for recycling electronics and nearly 70% support the environment fee added to the purchase of new tires.

• In April 2008, Angus Reid Strategies conducted a provincial public opinion poll on Ontario recycling fees and determined that more than half of those surveyed support adding the recycling fees to electronics and tires: 50% support adding recycling fees to the cost of new computers and televisions; 55% support adding an eco-fee on any new tire sold in Ontario.

• In 2008, Ipsos Reid conducted a research study of British Columbia's Return-It Electronics program. According to the study, 60% of those surveyed know that they now pay an environmental handling fee when they purchase new electronics products and that 100% of the fee is used to help pay for the system to recycle both new and old products.

• In November 2007, a survey was conducted for the Conseil qubcois du commerce de detail (CQCD) on Quebec consumers and environmental costs. The results show that a large majority of Quebecers think it's important that environmental costs be clearly identified: approximately 75% believe it is sufficiently or very important that environmental costs be clearly and specifically detailed, regardless of which communication tool is used (store signs, sales bill, flyers/advertising, shelf labels); and 78% of respondents said it is sufficiently or very important that the environmental cost be clearly identified and specified on the sales receipt.

Retailers believe the transparency of program costs provides an important opportunity to educate consumers about a stewardship program, and hence encourage their participation.

8. Should EPR programs be supported with other policies and regulations and if so is the list of supportive policies and regulations identified in the Canada-wide Action Plan appropriate?

Eco-Labelling

RCC agrees that eco-labelling can play an important role in consumer education. However, this must be done at the federal level to ensure a harmonized approach and to avoid a potential patchwork of provincial regulations.

Should eco-labelling be used to support an EPR program, CCME should recognize the work already done by the Competition Bureau, in collaboration with the Canadian Standards Association (CSA), who released Environmental Claims: A Guide for Industry and Advertisers on June 25, 2008.

The purpose of the guide is to provide businesses with tools to ensure their advertising practices are not misleading and to improve the accuracy of environmental claims. We recommend that CCME work with the Competition Bureau on this issue.

Toxic Substances

The health and safety of consumers is of the utmost concern for retailers. From our members perspective, the top priority is to be assured the products that they sell are safe. That is why RCC and our members support the comprehensive and systematic review of chemical substances currently being undertaken by the federal government.

That said, toxic substances are a separate issue outside of EPR. RCC supports the Canadian Environmental Protection Act, 1999 (CEPA) review, where Health Canada and Environment Canada are drawing on unprecedented resources and scientific expertise to conclusively determine the safety thresholds for over 23,000 substances currently in commercial use in Canada. Indeed, Canada is leading the world in this regard.

We urge CCME to support the CEPA review and encourage all provinces to support the creation of a national set of standards designed to protect both human health and our environment from harm. The federal program is best positioned to prevent potential dangers to all Canadians and the environment by establishing uniform safety standards for the safe use of chemical substances. If provincial governments introduce their own toxic substance reduction legislation, it would result in a patchwork of provincial regulations potentially in conflict with each other and the federal program.

9. How should federal, provincial and territorial government roles and responsibilities for the implementation of the Canada-wide Action be addressed?

The federal, provincial and territorial governments must have a clear understanding and delineation of what aspects of EPR will fall under their jurisdictions and work to harmonize each provincial and territorial approach to any federal framework or regulation.

Areas such as toxic substances and eco-labelling should be the sole responsibility of the federal government to ensure a national approach is taken; rather than provincial governments developing unnecessary and competing labelling and toxics reduction strategies which would create a patchwork of requirements across the country.

10. Is there a role for municipal governments in the implementation of a Canada-wide action plan for EPR? If so, what is it?

RCC supports industry-led waste diversion programs. In some cases, municipalities have an important role to play in waste management. For example, municipalities — as a service provider and funder — are an important partner for Ontario's Blue Box program. Some municipalities have existing infrastructure in place which makes them potential service providers for programs, their role should be reviewed on a case-by-case basis depending on the kind of services they can provide. Municipalities also have an important role to play in communicating with their residents and educating them on the importance of reducing waste, recycling and not littering. In any case, municipalities should work collaboratively with their provincial counterparts and not introduce policies that compete or hinder provincial waste diversion initiatives.

Conclusion

Once again, thank you for the opportunity to comment the CCME's Discussion Document: Towards A Proposed Canada-Wide Action Plan on Extended Producer Responsibility. Retailers are committed to responsible environmental stewardship and waste diversion as a whole and we look forward to continuing to working with CCME and other affected stakeholders on developing a viable approach to developing a national Extended Producer Responsibility framework. If you require any further information or clarification, please do not hesitate to contact me at (416) 922-6678.

Sincerely,

Rachel Kagan
National Director, Environmental Affairs