What is a Deposit Return Scheme?
A Deposit Return Scheme (DRS) for drinks containers, is a type of extended producer responsibility (EPR) whereby producers are given a significant responsibility (financial and/or physical) for the treatment or disposal of post-consumer products. In a DRS a monetary deposit is put on the sale of beverages obligated under the scheme, which is refunded once the empty container is taken to a return point for recycling. Germany, the Netherlands, Sweden, and other nations across the world have a DRS in place already and have seen large success with increased recycling rates.
What are the benefits to a Deposit Return Scheme?
- Increased recycling of drinks containers, to achieve higher national recycling rates
- Provides better technical quality material, as it is less contaminated from other forms of waste
- Reduction in visible litter & the amount of public money spent on clearing litter
- Reduction in the use of virgin material in drinks containers manufacture, so equivalent reduction in resource and energy use
- Should lead to consumer behaviour change towards more circular practices
Table 1: Drinks containers (by material type) in scope of DRS in each UK nation
DRS in Scotland
Scotland are at the forefront of DRS implementation in the UK, with their scheme due to go-live on 16 August 2023. Although this hasn’t been without challenge; the scheme go-live date has been delayed a few times due to issues brought on by the Covid-19 pandemic resulting in the previous July 2022 go-live date being unfeasible.
Scotland’s scheme has been taking shape ahead of the other devolved nations and is aiming for 90% capture rate of in scope drinks containers in the first three years of operation.
Drinks containers in scope
As noted in the above table, drink containers that are single-use PET plastic, aluminium, steel or glass ranging in size from 50ml up to 3L, are in scope of Scotland’s DRS.
Scheme regulation, administration, and funding
The Scottish Environmental Protection Agency (SEPA) will be the scheme regulator, so producers will be required to register with them to demonstrate compliance. A scheme administrator has also been established by the drinks industry, Circularity Scotland Ltd, which is an industry-led, privately-owned body. Whilst responsibility for delivering the scheme does sit with drinks producers and importers (see below section on Producer obligations), Circularity Scotland has been created to administer the scheme on their behalf. A drinks producer can choose to administer the scheme by themselves; however the operational cost and complexity could be burdensome.
Circularity Scotland have signed an agreement with Biffa Waste Management Service to be the scheme’s logistics service provider. Biffa will be responsible for collecting drinks containers from return points registered with Circularity Scotland, and for managing the facilities that will process the material for recycling.
There will be three types of fees for producers in the DRS:
SEPA registration fee: Drinks producers will pay an annual fee to SEPA to cover the costs of registration at £360 per year. However, if your business falls below the VAT threshold (a taxable turnover of £85,000 or less) in the previous financial year, or you are a producer that only fills and seals single-use drink containers at the point of sale (e.g. a crowler, a craft beer can) then no annual registration fee will apply.
Producer fee: Drinks producers will be required to pay a small fee per container that is placed on the market to the scheme administrator, essentially making the fee proportionate to each producer’s market share in Scotland. This fee will cover the cost of collecting and recycling drinks containers within the scheme.
Handling fee: A fee will be charged to the drink’s producer by return point operators, take-back services, or hospitality retailers for the cost to the business of operating their returns service, such as staff time and returns equipment costs. This ensures that the scheme is neutral to retailers. The handling fee will be paid on a per container basis and will be determined by Circularity Scotland.
The scheme itself will be paid for by three sources of funding: producer fee charged by the scheme administrator (defined above), unredeemed deposits, and revenue from the sale of materials. The latter two sources will fluctuate over time, so the producer fee will be adjusted to account for this.
Under the scheme, producers are defined as: either the brand owner (for products branded in the UK), the importer (for products branded outside the UK) or someone selling drinks in single-use containers that are filled and sealed at point of sale (e.g. a crowler, a craft beer can).
Businesses in the Scottish drinks industry; drinks manufacturers, wholesalers, retailers, and hospitality retailers, will have a new legal obligation under the DRS. Drinks producers will need to register as part of the scheme with SEPA, either directly with SEPA or via Circularity Scotland who will register a producer with SEPA on their behalf. Producers can register with the regulator from 1 January 2023 for the scheme and this process is expected to take around 6 weeks. Additionally, producers will be responsible for managing collections of returned drinks containers for recycling.
Wholesalers, retailers, and hospitality retailers will be responsible for ensuring their drinks are purchased from another registered producer, and to charge a deposit on the drink at the point of sale to their customer. It will be an offence to sell a drink in a container in scope of the scheme if the producer is not registered with SEPA.
The deposit on drinks containers will be set at 20p per drink, which will be charged along the supply chain. It has been set at this price across all materials and sizes of drinks containers for simplicity and was considered enough to incentivise consumers to do the right thing and redeem it, but not so significant that it would discourage purchase. The seller of the drinks container to the consumer must display the deposit price separately from the product and provide guidance on how to redeem the deposit clearly in communications to customers.
Along the supply chain, the deposit itself is charged at each point acting like a fee, however this flow of deposits is cost neutral for all parties.
Producers will pay a deposit for each drink they place on the market and report the quantity placed onto the market to the scheme administrator.
The scheme administrator will then invoice them for the deposit amount. For example, if a producer places 10,000 bottles and cans onto the market, they will pay £2,000 in deposits
Each time the container is sold throughout the supply chain, the deposit is charged and paid by the buyer of the drinks, reimbursing the money to the seller:
- Wholesalers will pay 20p on every bottle or can they purchase from drinks producers
- Retailers will pay the 20p deposit on every drink they purchase from wholesalers
- Consumers pay the 20p deposit on every drink they buy from retailers or another business
Retailers/return points will then be reimbursed by the scheme administrator for all empty containers that they collect, pay the deposit back to the consumer, and return to the scheme.
Unredeemed deposits will be used to fund the operation of the scheme.
The Scottish Government are pushing for the deposit not to be subject to VAT, though discussions on this matter with UK Government are still ongoing.
Return points and take-back services
Consumers can return their drinks container to redeem the deposit once the container is empty, if the container is still whole, and if the barcode is still legible.
All retailers that sell drink containers to be taken away from their premises will be required to operate a return point and should register with Circularity Scotland to inform the scheme administrator if your return point will be operated manually or via a reverse vending machine (RVM). If a retailer sells any drinks containers that are in scope of the scheme, they must accept all materials in scope of the scheme at their return point, to enable all consumers no matter where they live access to a local return point, to ensure high capture rate.
Exemptions can apply to retailers operating return points. For instance, a retailer could be granted exemption from operating a return point if there is an alternative return point of equal convenience nearby that has agreed to collect containers on their behalf. Retailers must apply to Scottish Ministers for exemption in operating a return point.
- Return point: A location where a consumer can return their empty drinks container to redeem their deposit. The return point can be operated manually or by a RVM.
- Manual operation: Manually operating a return point will involve collecting containers in bags or something similar, which will then be collected by the SA
- Reverse Vending Machine (RVM): RVMs scan containers when returned, verifying that the container is deposit-bearing, and then enables consumers to get the deposit back. It will redeem the consumer’s deposit, for example with a voucher, or a digital credit, for the correct deposit amount. The consumer can then use the voucher against their shopping bill or request their money back from the till. Returned materials are stored in the RVM and collected for recycling by the scheme administrator.
- Planning permission for RVMs: Whilst planning permission is not necessary to install regular sized RVMs, for the larger RVM “car park” solutions in Scotland, planning permission is required. This applies to RVMs that are more than 3.5 metres tall and those with a footprint that exceeds 80 metres squared. If your RVM will be located within 15 metres of “the curtilage” (land directly associated with a building) of a residential building, you would need to apply for planning permission. Also, if you’re looking to install an RVM in the wall of a shop, you’ll need to apply for planning permission if it will protrude 2 metres beyond the outer surface of that wall. You will also have to apply for planning permission if you plan on installing an RVM within certain protected areas, which are: a site of archaeological interest; a national scenic area; a historic garden or designed landscape; a historic battlefield; conservation area; a National Park; or a World Heritage Site.
Other persons or bodies who don’t actually sell drinks containers in scope of the scheme can operate return points, such as shopping centres or schools, and would be classed as a ‘voluntary return point operator’. They must apply to Scottish Ministers to be able to operate a voluntary return point.
Online retailers of drinks containers will be part of the scheme too, but will not act as a return point, instead they will have to offer a take back service.
- Take-back service: Alternative to a return point for online retailers that don’t have a premises that consumers can visit to return empty containers to. Online retailers must offer a free take-back service in which they collect deposit-bearing products they have sold and refunding their customers.
Online retailers will still charge the 20p deposit on drinks containers in scope and consumers will have the option to have the empty containers purchased online collected by or on behalf of the seller from the place they were delivered. Or consumers will still have the option to take empty containers to any other return point.
The online retailer must provide this takeback service for free but may charge temporary fees which cannot exceed the cost of materials used to facilitate the collection e.g. bags and tags.
Online, or other distance sellers, who wish to sell drinks containers in scope to consumers in Scotland, will have to comply with the scheme regardless of where they are situated
Vending machines that sell drinks containers in scope of the scheme must charge the deposit and have the deposit cost clearly displayed separately from the sale price.
Organisations and businesses that have vending machines on the premises only and do not have a shop selling single-use drinks to takeaway, do not have to act as a return point for containers.
Hospitality (bars / pubs / restaurants / hotels / cafes)
Businesses in the hospitality sector that sell drinks exclusively to be opened and consumed on the premises, including bars, pubs, restaurants, hotels, and cafes, will not be required to charge the deposit to customers. They will be required to collect and return the containers they sell on their own premises though. Whilst these hospitality businesses are included in the scheme in this way, their interaction with customers will remain largely unchanged.
When hospitality businesses purchase stock, from a wholesaler for instance, they will be required to pay the 20p deposit on those items in the same way that shops will. These deposits will be refunded after the containers are picked up, free of charge, for recycling by the scheme administrator.
The regulations do not require a change to labelling, or to add new labelling or bar codes to drinks containers, however a business may decide that revising their labelling will help to minimise fraud and improve the return rate of containers. It should be noted though that the scheme administrator will take appropriate measures to minimise fraud and keep consumers informed on products that are in scope of the DRS.
Drinks producers will be responsible for arranging the collection of containers from retailers who act as a return point. It is expected that producers will fulfil this collectively through the scheme administrator Circularity Scotland, who will manage the logistics of the DRS with their logistical partner Biffa Waste Management Service.
All drinks containers deposited and collected will be recycled and the materials can be used to make more drinks containers, as there will not be contamination from other waste, creating an efficient ‘closed loop’ system. Closed loop recycling is essential for a circular economy in which waste is designed out of the system.
1 January 2023: Producers can register for the scheme either directly with SEPA or through Circularity Scotland
16 August 2023: Scheme goes live across Scotland
DRS across the other devolved nations
A consultation on the introduction of a deposit return scheme in England, Wales and Northern Ireland ran from 24 March 2021 to 4 June 2021. This consultation asked for views on how a DRS will operate in these three devolved nations, the scheme scope and design, implementation timelines, and scheme enforcement.
We are yet to receive feedback on this consultation from the Government detailing how they plan to go ahead with the scheme. We do expect to receive this feedback imminently.
DRS in Wales
Following Scotland’s lead, Wales are implementing an all-in approach with glass in scope of their DRS.
Wales decided to keep glass in scope of their DRS due a number of considerations:
- Consultation responses requested as wide range of materials as possible included in Wales’ scheme
- Advances in digital DRS technology solutions potentially allowing bottle deposit return via existing kerbside collection infrastructure, thereby reducing resilience on return points
- When glass was included in the scheme, an overall better return rate was expected from the economic impact assessment
DRS in England & Northern Ireland
Unlike Scotland and Wales, glass will not be in scope of England and Northern Ireland’s DRS and so will be in scope of packaging Extended Producer Responsibility (pEPR). This means that recycling targets will be placed on producers and will require them to pay for the cost of managing glass drinks container packaging generated by households.
The decision to not include glass in England and Northern Ireland’s DRS due to a variety of reasons:
- The possibility of glass being crushed and mixed, so ultimately resulting in poorer quality glass material compared to what is collected in kerbside recycling
- The potential increased handling costs and equipment complexity required from collecting glass bottles
- RVMs will need to be emptied more frequently and will have associated safety risks with handling broken glass
- The weight of glass and potential breakages pose consumer safety issues in transporting glass bottles to return points
Northern Ireland will keep glass under review once the DRS is fully operational, to ensure that glass drinks containers are meeting recycling targets through pEPR.
Should you have any question on DRS across the Scotland, England, Wales and Northern Ireland, please do get in touch with our team on email@example.com