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Extended Producer Responsibility – April 2023

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Overview: Extended Producer Responsibility (EPR), also known as Product Stewardship, is a strategy to place shared responsibility for end-of-life product management on producers, and other entities involved in the product chain, including end users like restaurants and retail establishments. This approach places the responsibility on the supplier and extends it to the purchaser rather than on the general public. The theory is that this approach allows for the cost of processing and disposal to be incorporated into the total cost of a product. It places primary responsibility on the producer, or brand owner, who makes design and marketing decisions, but ultimately includes everyone involved in the supply and distribution chains. This concept isn’t new and EPR policies and programs are well established in Europe, Canada, and Asia for a wide range of products. Additionally, here in the U.S., similar programs exist around numerous environmentally toxic products like paints, carpets, tires, appliances, and electronic waste such as computers and cell phones. What is new in this space, however, is the wide-spread effort to include food packaging and other products important to restaurant operations and business models in these types of programs.

Background: Over the past decade, the industry has been increasingly grappling with environmental and sustainability issues. Most notably, the industry has faced restrictions or outright bans on plastic straws and cutlery as well as polystyrene products. Two big events have taken place recently that have significantly altered the playing field with regard to this issue set. The first is China’s decision to stop importing waste products from foreign countries, including the U.S. About five years ago, the Chinese government started to worry about all the amount of trash coming into the country. A lot of the plastic was contaminated with impurities that made it difficult and expensive to recycle – paper, food waste, and plastic wrap (which is not recyclable). And some of the plastic was hard to recycle as well and thus not profitable to import. They began burying vast amounts of waste in landfills that eventually became farms and then the obvious public health issues arose from there. As a result, in 2017, the government started to cut back tremendously on plastic trash imports. And then in 2018, partially in response to a burgeoning trade war with the U.S., China banned almost all imported waste, essentially destroying the recycling marketplace in the U.S. which was already teetering from a very flawed business model. The action by China was the last straw. As a result, elected officials at all levels of government have since been struggling with mountains of trash and nowhere for it to go. 

The second big event was the global COVID pandemic and the subsequent explosion of an already burgeoning delivery economy. With delivery becoming – and likely remaining – a vital part of the restaurant and retail industry business model going forward, the problems with managing trash and other waste have catapulted exponentially leaving governors and mayors in increasingly difficult operational and political situations.

Current Political Environment: There are significant social and political trend lines at play that put tone and context on this issue set. First, as noted above, policy makers face a dilemma. They have to address immediate waste challenges, but also look down the road in hopes of mitigating the problems to come. To address the immediate challenges, they are essentially going to have to artificially create or recreate a recycling marketplace. To accomplish that, they are going to need the participation of every player up and down the supply chain – including restaurants. To pay for it, they’re either going to charge taxpayers or they will charge the producers or suppliers of these products – including restaurants. Increasingly, this dilemma will take on a less partisan hue. There is an immediate economic reality facing mayors and governors that will eventually override a lot of the political dynamics in most parts of the country. The second part of their dilemma is looking down the road and as such, they will be exploring ways to disincentivize the manufacture and production of these products in the first place, likely through a combination of taxes, restrictions, or outright bans. On either side of the ledger – dealing with both the immediate problem facing mayors and governors today and their looming future challenges, the industry is well positioned to shape a program that they can live with – one that can help policymakers and their communities address the problem but doesn’t unfairly burden the industry and small businesses.

Legislative Approaches: To date, Maine and Oregon have been the first two states to holistically approach the issue and they took very different political approaches. Maine sought very little input and cooperation from the impacted industries. While Oregon did actively seek input and collaboration. As such, they were very different products. However, at the heart of both new laws is a requirement that producers will pay into a fund that will stand-up a third-party-managed product stewardship council in the state to oversee the states’ recycling programs. Following is a quick overview.

Maine – LD 1541, An Act To Support and Improve Municipal Recycling Programs and Save Taxpayer Money, was signed into law in June of 2021 but it will take years to write all of the corresponding rules and regulations for such a massive program. Likely, that will mean that effective dates are years away, and could potentially be further pushed back. Highlights include:

  • Maine’s Department of Environmental Protection (ME DEP) will select and contract with a stewardship organization to operate a packaging stewardship program that will reimburse and assist municipalities in providing recycling services throughout the state. 
  • Brand owners selling packaged goods must pay fees on all packaging materials to the stewardship organization to fund the system based on the costs of recycling for each material, including infrastructure investments or resident education needed to capture materials statewide. 
  • The fee structure, to be determined by DEP rule with multi-stakeholder input, will also include financial incentives for recyclable packaging. 
  • Producers will conduct an assessment of the statewide recycling system to determine the funds needed for the program, collection and recycling infrastructure gaps in the state, and consumer education needed to ensure robust recycling. 
  • The law also provides an “on-ramp” to the recycling system for more challenging packaging materials, allowing producers to establish, fund, and operate “alternative collection programs” to facilitate reuse and recycling of these materials. 
  • It includes a small business exemption for entities with gross annual revenues of under $2 million.

Oregon – SB 582, The Plastic Pollution and Recycling Modernization Act, was signed into law by the governor in August of 2021. Unlike Maine, producers would only pay a portion of the costs and generated revenue will go toward recycling system upgrades.  Highlights include:

  • Under the new extended producer responsibility (EPR) law, brand owners selling packaging, paper products, and food service ware into Oregon will join stewardship organization(s) and pay fees to support the improvement and expansion of recycling programs and infrastructure statewide. 
  • Consumer brand payments will cover roughly one-quarter of the costs of a modernized recycling system. 
  • In contrast to Maine’s law, which covers all recycling costs, producers under Oregon’s law will not cover the costs of collection, which will continue to be paid for by residential and commercial ratepayers. 
  • Local authorities will maintain operational control for collection services and public education programs, while producer funding will enable improvements such as recycling facility upgrades, broader collection services, and more accessible educational resources.
  • There is debate on whether restaurants are exempt which will likely be resolved in the rulemaking process. 

Colorado – In early June of 2022, Gov. Polis signed legislation, HB 22-1355 making Colorado the third state with an EPR program. However, the Colorado Restaurant Association was successful in getting language included in the bill that exempted the vast majority of restaurants from being covered by the new law.  Highlights include: 

  • Producers will pay annual membership dues to the producer responsibility organization (PRO) based on the amount and type of packaging or paper they use. 
  • Companies would thus have an incentive to reduce unnecessary packaging and use more recycled content in order to pay lower fees. 
  • Fees would go toward funding new or improved recycling services, and residents could keep using their usual recycling services if they wish, according to the bill. 
  • The bill also includes unique provisions for processing compostable packaging. 
  • The bill exempts small businesses with less than $5 million in gross annual revenue.
  • The PRO will hire an independent third party to assess Colorado’s recycling services and identify which recycling needs aren’t being met. The assessment, due by April 2024, is also meant to give guidance on how to expand recycling programs past residential services to include places like businesses, government buildings and other locations, with the goal to expand to such places by 2028.
  • Guidance would also include proposed recycling rates the state would need to meet by January 2030 and January 2035.
  • Restaurant exemption language inserted by CRA:
    • (f) An individual business operating under a retail food establishment that is located at a physical business location and that is licensed under section 25-4-1607 (1)(a) or section 32-106.5(1) to section 32-106.5 (5) of the Denver code of ordinances; 
    • The only restaurants it wouldn’t cover would be those paying a fee under 25-4-1607 (1)(a.5):
      • (a.5) A retail food establishment limited to preparing or serving food that does not require time or temperature control for safety, providing self-service beverages, offering prepackaged commercially prepared food and beverages requiring time or temperature control, or only reheating commercially prepared foods that require time or temperature control for safety for retail sale to consumers shall be assessed an annual fee of two hundred seventy dollars.

California – On June 30, 2022, California Governor Gavin Newsom signed Senate Bill 54 (S.B. 54) or the Plastic Pollution Prevention and Packaging Producer Responsibility Act (the Act) into law. The Act establishes an aggressive extended producer responsibility (EPR) program for single-use plastic packaging and plastic single-use food service ware by requiring all covered material sold in or imported into California to be recyclable or compostable by 2032. Highlights include:

  • The Act requires a 25% reduction in the use of plastic packaging by 2032 and a 65% recycling rate of the remaining single-use plastic packaging by the same year.
  • Producer Responsibility Organizations (PROs) are required to remit a $500 million surcharge to the California Department of Tax and Fee Administration on an annual basis beginning in 2027. 
  • The law regulates two classes of “covered material,” including (a) single-use packaging that is routinely recycled, disposed of, or discarded after its contents have been used or unpackaged, and typically not refilled or otherwise reused by the producer; and (b) plastic single-use food service ware, including, but not limited to, plastic-coated paper or plastic-coated paperboard, paper or paperboard with plastic intentionally added during the manufacturing process, and multilayer flexible material.[1]
  • Food service ware will include (but is not limited to) plastic-coated paper or plastic-coated paperboard, paper or paperboard with plastic intentionally added during the manufacturing process, and multilayer flexible material. This category includes food trays, plates, bowls, clamshells, lids, cups, utensils, stirrers, hinged or lidded containers, and straws as well as wraps or wrappers and bags sold to food service establishments.
  • The definition of plastic includes polyethylene terephthalate (PET), high density polyethylene (HDPE), polyvinyl chloride (PVC), low density polyethylene (LDPE), polypropylene (PP), polystyrene (PS), polylactic acid (PLA), and aliphatic biopolyesters, such as polyhydroxyalkanoate (PHA) and polyhydroxybutyrate (PHB). 
  • The new law will primarily affect those companies that put their product name and brand on the covered material, whether or not they have actually manufactured the plastic packaging. Otherwise, retailers or distributors will be obligated to comply.  

2023: Many states continue to pursue EPR bills on a variety of products, most  not directly connected to the restaurant industry. The handling of carpets, paints and other toxins are usually at the top of the list. The states we are watching most closely in 2023 are:

  • Maryland – An extensive bill, SB 222, was watered down to just a “study bill” and is headed to the governor’s desk for his expected signature. The amended bill now calls for establishing an advisory council and requiring the Maryland Department of the Environment to hire an independent consultant to conduct a statewide recycling needs assessment. The assessment must cover details of the state’s current solid waste and recycling systems, including its infrastructure and capacity, as well as key costs and revenues. It must also determine disposal and recycling methods by material type and amount, as well as estimate how many materials are currently not being recycled. The original legislation had called for the establishment of a formal EPR program and it should be expected that similar legislation returns next year;
  • Connecticut – Pending legislation, HB 6664, was put on the House calendar for floor action. It was introduced by the governor in January and would create a state authority to pursue an EPR program. 
  • Washington – SB 5154 failed to meet the March 10 crossover deadline.
  • New York – Legislation, S 4246, is pending but delayed for lack of support;
  • New Jersey – Legislation, S 426 is pending but delayed for lack of support;

Industry Position & Talking Points – As legislative proposals on EPR continue to proliferate in cities and municipalities across the U.S., the restaurant industry stands ready to work with legislators to ensure that any legislation in this area is fair and effective. We believe the following should be considered in any EPR legislation: 

  • Restaurant exemption
  • Restaurants do not produce packaging, and many do not have a wide variety of choices available to them.  They work with their suppliers and distributors to choose the best packaging that meets their needs and local regulations.
  • As such, these businesses should not be included in the definition of producer in EPR legislation.
  • Encourage legislators to include an exemption for restaurants. If a full exemption is not accepted, encourage a broad exemption based on a variety of factors (e.g. revenue numbers, tonnage, etc.)
  • Additionally, if the legislator will not accept a full exemption for all restaurants, and is determined to include the corporate franchisor, then work with national and local restaurant brands to ensure the legislation is not overly burdensome.
  • Goals and definitions
    • The definition of terms related to recycling and composting such as recyclable, compostable, etc. should be based on existing national standards. 
    • Any recycling or composting targets or goals should be set after an appropriate baseline is determined. All goals/targets should be feasible and achievable.
  • Industry-led organization
    • The program should include an industry/producer led and run organization. This organization should have insight and influence over the EPR program and be responsible for developing and managing goals, fees, and other aspects of the program, in consultation with the government agency.
    • The program should also include shared responsibilities and decision making between the producers and local governments and not solely rely on fees or costs as the only responsibility of the PRO.
    • To avoid conflicting programs throughout the country, coordination among states and programs should be considered if needed.
  • Fees and Funds
    • The fees should be directed towards programs that will increase recovery and should be directed towards the specific infrastructure the fee is placed on.
    • Fees should be controlled by the PRO and dedicated/restricted to projects that increase packaging recovery, recycling and composting and not outside projects.
    • Restricts fees and funding from being used for packaging disposal or landfill. This ensures that the funding is used for recovery, recycling, composting, etc.
    • Allow the PRO to adjust fees as necessary for environmental and recovery issues.
  •  EPR Programs
    • The program should only include residential sector packaging and exclude the commercial, industrial, and institutional sectors.
    • Timelines and dates should be agreed upon by the local government and industry.
    • A system must be in place to ensure that producers have adequate time to prepare for their obligations.
    • The program should include all consumer packaging and be material neutral.
    • Administrative costs should be reasonable with appropriate caps.

Summary: EPR programs will be on the table in numerous states in 2023 and going forward. While it’s easy to dismiss these programs as environmental community initiatives, that would be a mistake. The supplier community, in some instances, are having difficulty accessing virgin materials and are now advocating for workable recycling programs. And, the immediate economic realities for mayors and governors is likely to transform them into the real drivers, and the environmental community will be recast as cheerleaders for the efforts – not the driving force. Those economic realities will force the issue set to our front doors sooner rather than later. As such, there are huge opportunities for the industry to engage in these conversations early and lay the groundwork for policies that are workable and affordable and not disruptive to business models. 

Action Items: In an effort to prepare before this type of legislation is filed, SRA heads should consider, among other things:  

  • Discuss with your boards of directors and advocacy committees to get their general sense of the issue;
  • Discuss with major chain members as many may have existing programs and initiatives underway and would likely would not be covered by any small business exemptions;
  • Discuss with franchisors as the intent of many of these efforts is to target the franchisor, not the franchisee;
  • Work toward a high threshold for small business exemption;
  • Advocate for a producer-led stewardship program to oversee these programs.

Resource Library: See below a catalog of additional resources.