Advocacy & Policy

New Brunswick: Submissions

RE: Retail Council of Canada Comments on Electronic Waste Management and Extended Producer Responsibility in New Brunswick
October 29, 2009

Mr. Frank LeBlanc
Program Coordinator
Department of Environment — Stewardship Branch
Government of New Brunswick
Via E-Mail: Frank.LeBlanc@gnb.ca

Dear Mr. LeBlanc:

On behalf of Retail Council of Canada (RCC) and its members operating in New Brunswick, we are writing to provide our comments on developing extended producer responsibility electronic waste regulations in the province, as per the stakeholder consultation session RCC participated in on September 24, 2009.

RCC has been the Voice of Retail in Canada since 1963. We speak for an industry that touches the daily lives of Canadians in every corner of the country — by providing jobs, career opportunities, and by investing in the communities we serve. RCC is a not-for-profit, industry-funded association representing more than 43,000 store fronts of all retail formats across Canada, including department, specialty, discount, and independent stores, and online merchants.

The retail industry is one of the most competitive and vibrant sectors of New Brunswick's economy, creating nearly $9.9 million in sales in 2008, an increase of 5.9 per cent over the previous year. With nearly 5,000 establishments in New Brunswick, the retail sector reaches every corner of the province. Employment in the retail sector represents 12.2 per cent of the province's total employment, directly employing over 48,000 citizens. The contributions made by this economic sector are felt in every corner of the province and affect the lives of all residents.

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. RCC and its members are committed to waste diversion; our members are involved in virtually every aspect of responsible environmental stewardship.

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

Environmental Fees
RCC's industry-wide position is that it is each individual retailer's decision on how they wish to manage environmental fees (also referred to as "environmental levies", "eco-fees" and "environmental handling fees" in other jurisdictions) associated with provincial product stewardship programs.

Existing electronics recycling programs in British Columbia, Alberta, Saskatchewan and Nova Scotia (all of which are industry-led except Alberta) are all silent on how environmental fees are managed internally.

It is a business decision at the discretion of each individual retailer on how they decide to display the fee; for example, visibly as a separate line item on the sales receipt; hidden or imbedded within the final selling price; or to absorb the cost wholly.

RCC strongly believes that any new stewardship program must remain silent on how fees are managed, as this is a business decision, not a government decision.

Some stewardship programs (e.g., New Brunswick's paint recycling program) 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 analyzed the consequences of such practices on retailers and identified a number of serious impacts on them including but not limited to:

• 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 independent merchants.

• 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 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 driving business out of the province to neighbouring jurisdictions where the advertised price of a product is lower because there is not an imbedded fee.

Supply chains are complex. Products come to market through a variety of channels, different for every retailer depending on their business practices. 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 adding the 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 fee at point-of-purchase results in a lower cost.

Furthermore, retailers believe that the transparency of program costs provides an important opportunity to educate consumers about a stewardship program, and hence encourage their participation. 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 sustainable purchasing decisions.

Numerous studies/surveys have been conducted on the benefits of visible fees, including but not limited to the following:

• 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.

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

Anecdotally, there is a misconception that visible fees increase consumer costs as program delivery and administration costs are downloaded to consumers and that producers who choose to show the fee visibly as a separate line item on the sales receipt, are not accepting the costs of managing their product. This is incorrect.

Visible fees do not mean that program delivery and administration costs are downloaded to consumers. There are significant costs associated with stewardship programs and many retailers have dedicated staff solely responsible for complying with environmental regulations, assisting in the development of stewardship programs, reporting and remitting their obligations to stewardship agencies across the country, creating internal inventory management systems to track the designated products they report on, developing consumer education programs, and managing the used products they receive through their own voluntary take-back events. That takes significant financial and human resources. Retailers spend millions of dollars on these activities every year and they continue to put additional financial and human resources into managing the growing number of environmental programs across Canada.

It is important to realize that all other provinces (except New Brunswick) have chosen to remain silent in their stewardship legislation regulations on the issue of prohibiting visible fees. In fact, the Government of Nova Scotia originally intended to mandate hidden fees when they added electronic waste to their Solid Waste-Resource Management Regulations but after consulting with affected industry stakeholders they reversed their decision and decided to remain silent on how fees are managed in their regulation, recognizing that this is a business decision, not a government decision.

RCC strongly believes that the New Brunswick electronic waste regulation be flexible and must be silent on how fees are managed, as this is a business decision, not a government decision.

Fees and Design for Environment
There is a misconception that visible fees are not supportive of the goals of EPR and that they do not provide an incentive for Design for Environment (DfE). This is incorrect. RCC believes that the management of fees — regardless of whether they may be visible, hidden or absorbed by the business - has nothing to do with EPR. EPR is a policy approach directed by government, while the management of fees is a business decision. True EPR should allow the producer to decide how best to manage the program.

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 and has nothing to do with how fees are displayed at point-of-sale; the management of fees is a retailer 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, a notion which was also recognized in a legal opinion that RCC received (in cooperation with a number of other affected industry associations) from the firm McCarthy Tétrault on the validity of legislation (statutory or regulatory) that imposes EPR fees and, at the same time, prohibits affected producers from disclosing such fees to the public.

The legal opinion states that:

A government supporting the prohibition [of visible fees] would claim that the object of the EPR fees is not just to divert waste so that the product or its packaging is recycled, but also to encourage producers to reduce the amount of waste that their products generate. A major question would be whether the government will be able to produce credible evidence that a non-visible fees regime is required to achieve this objective rather than allowing producers to disclose the fees in question.

A prohibition on disclosing fees would not achieve the government's objective of reducing producer waste. To RCC's knowledge, there is no credible evidence that currently exists that a ban on visible fees would result in producers reducing the amount of waste they produce.

Clarification of Roles
It was clear during the stakeholder consultation meeting on September 24 that considerable confusion still exists regarding roles and responsibilities. In particular, the role that industry would play in developing and overseeing the program created confusion and considerable concern for participants. Given the significant cost, resource and business implications of the program being considered, clarification of roles from the outset is critical. RCC would therefore request that the Department of Environment develop a resource that would clearly define the roles of Recycle NB, the Industry Advisory Committee and the Board that would be created through the new electronics recycling program.

Targets
While retailers are committed to achieving high levels of diversion from landfill and compliance across product categories, RCC and its members contend that it is premature to identify performance targets in the program criteria at this time. The program should be operational for at least one year before performance targets are established, to allow industry to gather the best available data in which to set reasonable and appropriate targets.

Collection
RCC and its members understand the importance of ensuring that consumers have reasonable access to collection points, particularly in remote areas. An issue of concern, however, is that one method that is consistently proposed to achieve this objective is a return-to-retail collection system.

RCC has reviewed the issues arising if retail stores acted as collection points for used or leftover consumer products and packaging. These issues include, but are not limited to: lack of space to store used products; need for specialized staff training to handle incoming used products; employee and customer health and safety associated with handling and storing used products; store insurance coverage; store fire code compliance; store municipal by-law compliance; among others.

That being said, occasionally some retailers and their suppliers may operate specialized take-back events for used or leftover consumer products. The regulation should be flexible to recognize such voluntary programs and allow retailers the flexibility to operate them; however, the regulation must not require any mandatory requirements that used or leftover consumer products and packaging be returned-to-retail.

Implementation Time Frames
When deciding upon the actual start date for these programs, RCC and its members recommend that retailers be provided with adequate time for 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. In general, we recommend at least one year for program plan development and one year for program plan implementation; so long as the program is not launched around the holiday season (November-January), as this represents the busiest time for retailers and the detailed program implementation requirements that are necessary would not be possible to achieve during this time frame.

Harmonization
Inter-provincial harmonization of product stewardship programs is a fundamental concern for the retail sector. Approaches to product stewardship across Canada are far from consistent and increasingly place national retailers in the position of having to comply with a patchwork of requirements across the country. Implementing different programs in every province has proven to be costly and administratively burdensome for retailers; therefore, harmonization must be entrenched as a foundation of product stewardship programs.

In the interests of harmonization and given that New Brunswick and Nova Scotia have signed the Partnership Agreement on Regulation and the Economy (PARE), RCC strongly recommends that New Brunswick join the existing and successful Atlantic Canada Electronic Stewardship (ACES) program model used in Nova Scotia, which would allow New Brunswick to launch both Phase 1 and 2 materials at the outset. Ensuring such harmonization would require that New Brunswick adopt a flexible (ie. non-prescriptive) regulation for the development of an industry-led electronic waste recycling program.

Conclusion
Thank you for the opportunity to provide our comments on the intention to develop electronic waste recycling regulations in New Brunswick. We look forward to continuing to work with the Department of Environment, Recycle New Brunswick and other stakeholders on the development of an effective and successful electronics waste recycling industry-led program for the Province of New Brunswick.

If you require any further information or clarification, please do not hesitate to contact us directly at (902) 406-4350 or atlantic@retailcouncil.org.