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What you'll learn
EPR Schemes — Saif Hameed
Transcript:
SAIF: Welcome back to the State of Sustainability. I'm your host Saif Hameed. This time we're covering another content bite and I'm going to give my hot takes on the rarely talked about topic of EPR schemes. What are EPR schemes? Where are they hiding? What are they trying to do? Who's behind them? We'll look at the problems, the advantages, the upsides, the opportunities. It's going to be a fun episode. I hope you'll enjoy it.
I had a fun conversation with Michael Kobori — who I know is a regular listener — but for those who don't know Michael, he was previously the Chief Sustainability Officer at Starbucks. In our chat, we were talking about what we think the next themes are within the broader sustainability space: what's hot, what's trending, what's coming soon. One of the things Michael said he thinks everyone is going to be thinking about, talking about, and acting on is EPR schemes. Fortunately, I knew what EPR schemes were. But following that conversation, I started asking people in my circle, and more often than not the answer I got was: "What is an EPR scheme?" So I thought it might be useful to run an episode on it — and to make it a little more interesting, I'm going to focus on my hot takes: what I think is going to be interesting in this space and what I'd keep an eye on.
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What Is an EPR Scheme?
Extended producer responsibility schemes come from a sense that business needs to own more of the problem — that there is an externality not covered in the course of normal business operations, but which imposes a cost on society and the environment. The first EPR schemes came out of Sweden, and the idea was to impose a cost on corporations so they fund the collection of the packaging waste they produce. "Extended producer responsibility" basically means: we're going to extend the boundaries of what the producer or brand is responsible for beyond the point of sale. You are no longer just responsible for making sure the consumer doesn't die from your product. You are also responsible for making sure the end of life of that product is managed safely for society.
My own exposure to EPR goes back to around 2014–15, when I was involved in a report called "Stemming the Tide of Ocean Plastic" — a collaboration between McKinsey, Ocean Conservancy, and a bunch of corporations looking at how to stop plastic waste entering the ocean from Southeast Asian markets. Subsequently, that report was recanted by Ocean Conservancy — stripped from the website, with an apology for its publication, following a very angry letter from Greenpeace and other nonprofits. That's a story for another day. But that's where I got introduced to EPR schemes. At the time, at McKinsey — the Jesuits of capitalism — we thought EPR schemes were never going to be a real thing. The idea that companies would be held responsible and would fork out the money for that responsibility seemed like the stuff of fantasy. Flash forward ten years, and EPR schemes are now becoming law. Several American states have their own EPR legislation, and Europe is requiring country-level EPR schemes — I believe European legislation kicks in by 2026, with most countries required to have their own variations ahead of that point.
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How EPR Schemes Are Structured
The typical structure works like this: the government brings in a law requiring an EPR scheme to exist. A business — the brand or whoever is held responsible for the waste being generated — pays money to an intermediary called a PRO, a Producer Responsibility Organisation. The PRO is responsible for receiving those funds and making sure they go towards waste collection, recycling, and proper end-of-life management. So you have four parties: the legislator, the company, the PRO, and then the entity the PRO pays — which might be a municipality, which in turn contracts a waste management company.
You can already see where I'm going: there are a lot of actors in this chain, and a lot of data that has to get pulled together.
The dollar amounts that have to be paid are not huge in the scheme of things — most countries estimate we're talking about low hundreds of millions of dollars for a G7 economy in additional costs on corporations. But the reporting and data gathering requirements can be pretty onerous in their own right. If you're a large global company, you might end up complying with dozens of different schemes across the US and Europe, all with their own PROs, their own municipalities, their own rules. That is Problem #1.
Problem #2 is: who are these PROs anyway? I did a bunch of research and was intrigued to find that most PROs were organisations I'd never heard of. In the UK, for example, there appear to be several reasonably established PROs, all owned by different companies — many of which appear to be waste management organisations. Which is interesting, because waste management organisations are generally incentivised by volume of waste — they get paid by municipalities based on the amount of waste they collect and process. Yet they also appear to be owning, backing, and partnering with PROs that are ostensibly responsible for reducing the amount of packaging waste being generated. That's a potential conflict of interest worth noting.
Problem #3 is scrutiny. It doesn't seem like there is uniform scrutiny across PROs. A case I found quite interesting is Redisa — the Recycling and Economic Development Initiative of South Africa, launched around 2012. I actually met the CEO of Redisa around 2014–15 and thought it was a really exciting organisation. They focused purely on tires — a uniform, reasonably high-value waste category that is also easily reusable. The ambition was not just to collect tires but to bring them back to the original producer — Michelin, Goodyear, whoever — so that producers would be incentivised to make more durable tires and actually lower their cost of goods through recycled content. It was a brilliant model. I found out some time later that Redisa had collapsed due to financial mismanagement allegations and various behaviour patterns I won't call fraud but let's say were fraud-adjacent. That made me quite alarmed at the level of scrutiny that may be required for PROs versus what actually exists.
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[Sponsor break – Altruistiq]
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Hot Takes: What's Coming
EPR schemes are going to accelerate significantly. I think over the next several years we're going to see a steady uptick in the number of schemes. In the US, several states will become a few dozen. In Europe, the legislative rollout is already mandated. And other geographies will follow. There are two drivers for this. The fluffy one: consumers are starting to care more about waste — it's become a very emotive issue. The harder one: most municipalities are chronically short of money. Waste management is one of their biggest costs. It is very much in the interest of municipalities to find a way to impose a cost on corporations and say: we are not going to pay for waste collection and treatment anymore — you are. I also think EPR schemes are sidestepping the sustainability and ESG backlash that's been playing out for the last few years. They tend to be treated as a municipal services topic, not an ESG topic, which means less visceral political opposition. The road to rollout looks relatively smooth.
A consolidation opportunity is emerging. For large global companies, meeting compliance requirements across dozens of different schemes in different geographies is going to be a nightmare — not just disclosures and form completion, but payments, fees, and collaboration requirements with different PROs and municipalities. That creates fertile ground for a consolidator to step up and say: we'll take this burden away from you and cover it across all the geographies where you have exposure. I can already see most sustainability consultancies setting up EPR compliance programmes for their clients — and I think of consultancies as the fruit flies of the corporate ecosystem: where there is fruit, they will come. Whether the eventual consolidator is a consultancy, a software provider, a waste management company, or some kind of macro-PRO — one PRO to rule all the PROs — is unclear to me. But the consolidation opportunity is real.
PRO conflicts of interest will eventually face scrutiny. I think at some point there will be some form of exposé or scandal that triggers reform around who PROs are, who owns them, and whether waste management companies should be running them. Expect some separation of roles to come to the fore over time — but it'll take a while.
The really exciting opportunity is circularity, not just compliance. The area I find most interesting is not the fee-paying and data-gathering, but whether EPR can actually get material back to producers. The Redisa model — bringing tires back to the original manufacturer — pointed to something really powerful: if I'm P&G making Head & Shoulders, I don't just want to buy recycled HDPE on the open market. I want my specific packaging back, because if I know I'm going to get it back, I can design it with that in mind and actually reduce my cost of goods. The company that does this best is Tetra Pak. Tetra Pak is really good at taking an old Tetra Pak carton and converting it into a new one — they've designed their packaging with that circularity in mind. The bottleneck, of course, is getting the material back to them. Once it's out in the ecosystem and sold at a supermarket near you, how do you get it back? That's the problem I'm most excited to see PROs try to solve — moving beyond fee collection into actually providing producers with their own recycled content.
Durability and single-use regulation will reinforce EPR. We're also seeing a lot of regulation around single-use packaging, particularly plastic. EPR and single-use regulation can go quite nicely together — both push towards more durable packaging formats. And durability matters because even in the best recycling processes, you tend to lose 30 to 40% of material mass. If you're going to get your packaging back, you can design it to be more durable — which means less material loss, less need for virgin content top-ups, and less incremental packaging entering the system overall. I think that's going to be a really interesting space to watch.
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To bring this full circle back to my chat with Michael — what I think is most interesting is not EPR compliance itself, but what it unlocks: genuine circularity of material. I'm keen to see how the different stakeholders in this system rise to the challenge of not just getting it done, but actually making it better.
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