The Scottish Government has recently launched a comprehensive deposit return scheme (the DRS) that will introduce mandatory compliance obligations for producers, importers, retailers (including online retailers) and wholesalers of all drinks sold in Scotland in single-use containers. The DRS applies not just to businesses trading from Scotland, but also to businesses trading from elsewhere in the UK that supply to the Scottish market.
Overview of deposit return schemes
The concept of a deposit return scheme typically involves consumers paying a small amount of money (the deposit) for the container when they purchase a drink to take away. This is refunded in full when they return the empty container.
A deposit return system for drinks containers is not a novel concept. Indeed, I have fond childhood memories of eagerly gathering up 'empties' of ginger after football in the mud and returning them to the newsagents (and spending the deposit refund on sweets) However, those halcyon recycling days were limited to the soft drink brands that chose to operate their own deposit return schemes. Scotland's DRS is far broader in scope and will apply to non-alcoholic and alcoholic drinks sold in containers of glass, cans and plastic in Scotland.
What is the rationale and objective of the DRS?
The rationale of the DRS is to promote a 'circular economy' and reduce the incidence of litter. It is estimated that 2.5 billion recyclable drinks containers are used in Scotland every year. The DRS aims to capture 90% of them by introducing over 30,000 return points throughout Scotland at various sites including retailers, hospitality venues, charities and community organisations.
The DRS is also targeted at significantly reducing the incidence of litter and according to research undertaken by Zero Waste Scotland, DRS implementation will result in a projected decrease of 34,000 drinks containers littering Scotland's streets and countryside.
What sort of drinks containers are covered by the DRS?
The Deposit and Return Scheme for Scotland Regulations 2020 (the '2020 Regulations') cover all alcoholic and non-alcoholic drinks products packaged in a single-use container made from PET plastic, glass, steel or aluminium sized containers between 50ml and 3 litres and that are first marketed or offered for sale to consumers in Scotland on or after 16 August 2023 (a 'Scheme Article'). It therefore covers everything from a fizzy drink can to a bottle of whisky.
It does not include HDPE plastic containers (the kind used for milk and some other drinks) or lined cardboard containers like Tetrapak.
Business impact and scheme mechanics
The 2020 Regulations apply to drink producers, drink importers and anyone marketing or offering for sale a Scheme Article. The scheme does not apply to products marketed outside Scotland. However, it will still apply to producers and (online) retailers outside Scotland that sell Scheme Articles throughout Scotland.
The fundamental principle is that all Scheme Articles sold in Scotland will be covered under the new rules. Businesses that sell drinks exclusively for consumption on-site i.e. in a bar or restaurant will not have to charge the 20p deposit and will not hold return point compliance obligations.
The first step in the process is that the producer or importer pays the deposit for each Scheme Article that they place on the Scottish market.
Producers will receive 20p when they sell a Scheme Article to wholesalers who will receive this back when they sell to retailers. The retailer will in turn receive that deposit sum back from consumers who buy a Scheme Article and the consumer is reimbursed when they return the empty Scheme Article to a return point.
The core mechanics of the DRS can be summarised as follows:
- 20p deposit - The producer or importer pays a 20p deposit for each Scheme Article they place on the Scottish market. The scheme administrator will invoice the producer for the deposit amount. The deposit has been set at the same price for containers of all sizes, made from all, in-scope, materials.
- Producer fee – all producers selling Scheme Articles in Scotland will have to pay a fee for every container they produce to help fund the operation of the scheme. This producer fee will cover the costs of collecting and managing containers for recycling. The level of the producer fee will be determined by the scheme administrator, Circularity Scotland Ltd (CSL).
- Handling fee – This is a fee charged to the producer by a return point operator, takeback service or hospitality retailer for the scheme packaging they have collected on behalf of the producer. It is intended to cover the costs of the time, equipment and additional storage space needed to operate the scheme.
Under the 2020 Regulations, producers and retailers hold prescribed compliance obligations, which we have summarised below:
PRODUCER | RETAILER | |
1 | Register with SEPA (either directly or through the scheme administrator). | Only sell drinks from a registered producer. |
2 | Pay the registration fee. | Only sell drinks to consumers in Scotland that a producer has made available for sale in Scotland. |
3 | Charge a 20p deposit on each Scheme Article. | Charge the 20p deposit when selling a Scheme Article. |
4 | Arrange for collection of empty scheme containers. | Make it clear to the customer that the drink is part of the scheme and a deposit applies. |
5 | Pay a reasonable handling fee to retailers and return point operators to cover the cost of the collection and storage at return points. | Clearly display the price of the deposit (20p) in any place that a Scheme Article is displayed for sale. |
6 | Meet collection targets. | Clearly display information on how the customer can redeem the deposit. |
7 | Facilitate the refund of deposits to customers. | Operate a return point and takeback service. |
Scheme administrator
Scheme administrators are responsible for the day-to-day management of the DRS. CSL is currently the only approved scheme administrator. A producer can either choose to nominate CSL to fulfil their obligations for a small fee or make their own arrangements to meet them, including registering directly with the Scottish Environment Protection Agency (SEPA).
Producer registration and applicable fees
The DRS will be regulated by SEPA. Producers will have to register with SEPA directly or by nominating CSL to fulfil these obligations on their behalf.
A single registration is required per producer, each year. Producer with annual turnover in excess of £85,000 are required to pay an annual registration fee of £365 to SEPA. That fee is payable either directly to SEPA or by CSL, if a producer elects to appoint CSL to act on its behalf.
CSL will be responsible for managing the collection of empty bottles and cans from return points. Producers that register with CSL will also pay a producer fee covering the costs of CSL facilitating the collection of Scheme Articles for recycling, on behalf of a producer.
Timescales and next steps
If your business produces or imports Scheme Articles for sale in Scotland, you must register to be part of the scheme. The following key dates apply:
- 1 January 2023 - producers will be able to register with SEPA.
- 1 March 2023 – all registrations must be received before this cut-off date.
- 16 August 2023 - The DRS will go live.
However, if a retailer sells any drinks that were placed on the market for sale before the scheme went live (i.e. prior to 16 August 2023), then the retailer must communicate to the customer that the drink is not part of the scheme and the empty container cannot be returned for a deposit.
Summary
Once the scheme goes live on 16 August 2023, all producers, importers, retailers and wholesalers that sell Scheme Articles in Scotland will take on compliance obligations under the 2020 Regulations.
Whether you are a retailer required to set up return points or a producer with formal registration obligations, it is important that businesses start to plan for the impact of the new scheme by taking into consideration the above timescales and compliance obligations. SEPA has issued helpful guidance detailing the roles and responsibilities of producers are retailers (as well as prescribed scheme exemptions) and we will also be issuing further commentary on this topic shortly. Meanwhile, if you would like more information on the DRS, please do not hesitate to get in touch with our team.
