White Paper Extended Producer Responsibility: Stakeholder Concerns and Future Developments Extended Producer Responsibility: Stakeholder Concerns and Future Developments A report prepared by the INSEAD Social Innovation Centre with the support of European Recycling Platform (ERP) Nathan Kunz Atalay Atasu Kieren Mayers Luk Van Wassenhove INSEAD Social Innovation Centre Bd de Constance 77305 Fontainebleau FRANCE About INSEAD INSEAD is one of the world’s leading and largest graduate business schools, with campuses in France, Singapore and Abu Dhabi. As a global educational institution, INSEAD’s mission is to create a learning environment that brings together people, ideas and cultures from around the world, in order to transform businesses and individuals through business education. With 146 faculty members from 34 countries, INSEAD teaches more than 1,300 degree participants annually in MBA, Executive MBA, Master and PhD programmes. In addition, more than 12,000 executives participate in INSEAD’s Executive Education programmes each year. Besides education, INSEAD also conducts research through its research centres. The present project was carried out by the INSEAD Social Innovation Centre, an inclusive platform for cross-disciplinary research, education, projects and engagement in the area of business in society. This centre aims to develop innovation for sustainable economic, environmental and social prosperity. Its fields of research include Corporate Social Responsibility & Ethics, Humanitarian Research, Social Entrepreneurship and Sustainability. About the authors: Nathan Kunz, Postdoctoral Research Fellow, INSEAD Social Innovation Centre Atalay Atasu, Associate Professor, Scheller College of Business, Georgia Institute of Technology Kieren Mayers, Executive in Residence, INSEAD Social Innovation Centre Luk Van Wassenhove, The Henry Ford Chaired Professor of Manufacturing, Professor of Technology and Operations Management, INSEAD Social Innovation Centre Contacts: Miranda Helmes, Communications INSEAD Social Innovation Centre Bd de Constance - 77305 Fontainebleau - France Tel: +33 1 60 72 91 16 Email: [email protected] Web: http://centres.insead.edu/social-innovation Acknowledgements The authors wish to thank European Recycling Platform (ERP) for funding and supporting this research. The authors would also like to thank the 23 interviewees who answered our questions. 2 About ERP European Recycling Platform (ERP) started its operations in August 2005 in response to the introduction of the European Union’s Waste Electrical and Electronic Equipment (WEEE) Directive. ERP’s mission is to ensure cost-effective implementation of the WEEE, Batteries and Packaging EPR legislations for the benefit of participating companies and their customers. This is achieved through innovative waste management strategies and by encouraging national implementation of the Directives according to a set of core principles fundamental to the protection of consumers and businesses, as well as the environment. ERP operates directly or through solid partnerships in 16 countries—Austria, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Netherlands (partnering with WEEE NL), Norway, Poland, Portugal, Slovakia, Spain, Turkey and the UK. Expansion to further countries will soon follow. Contacts: Samantha Charalambous, Communications European Recycling Platform Tel: +39 02 92 14 74 79 Email: [email protected] Web: http://erp-recycling.org 3 Motivation For This Report By attaining an overall collection and recycling volume of 2 million tonnes of waste electrical and electronic equipment (WEEE) in 2013, European Recycling Platform (ERP) reached an important milestone in its development. In its 8 years of operation, ERP had collected approximately 2.5 times the volume of all consumer electronics waste recycled in the entire US in 2011, 1 or the volume of all WEEE collected in Germany, Italy, UK and Spain in 2010. 2 ERP reached its first major milestone of 1 million tonnes in July 2010, 5 years after starting its operations. The 2 million tonnes milestone was reached in October 2013, only 3 years later. This demonstrates ERP’s growth in recent years, due in large part to its expansion into additional countries as well as organic growth of collection. Removing hazardous gases from end of life electrical appliances has allowed ERP to prevent the release of 3,000 tonnes of ozone-depleting substances 3 (i.e., CFCs). The release of these substances into the atmosphere would represent a global warming potential of 19 million tonnes of CO 2 equivalents. 4 Recycling valuable waste for reuse in new products is another benefit deriving from these 2 million tonnes of WEEE. Over these first 8 years of operation, ERP recovered 16 tonnes of gold, 130 tonnes of silver and 160,000 tonnes of copper. 5 Besides the positive impact on the economy, the recovery of these amounts of valuable metals obviated the need for their extraction, a 6 highly energy-consuming task that would have emitted approximately 2.7 million tonnes of CO 2. Together with the benefits from recovering CFCs, this equals 21.7 million tonnes of CO 2 equivalents avoided, or nearly 40% of Denmark’s greenhouse gas emissions in 2011. 7 To mark this important milestone, ERP supported INSEAD in conducting a study on the future of extended producer responsibility. The publication of this report also coincides with the 14 February 2014 deadline for the transposition of the WEEE Directive Recast into national legislation in EU Member States. This report therefore provides a timely and interesting view on the future of extended producer responsibility. 1 US EPA (2013). Municipal solid waste in the United States: 2011 facts and figures, p.68 2 Eurostat (2014b). Waste electrical and electronic equipment (WEEE) 3 ERP (2014) 4 RWTH Aachen University (2010). Analysis of WEEE output flows on the greenhouse effect 5 ERP (2014) 6 RWTH Aachen University (2010). Analysis of WEEE output flows on the greenhouse effect 7 Eurostat (2014c). Environment 4 Executive Summary Developed at a time when waste had come to be seen as a cost producers should pay for, the concept of extended producer responsibility (EPR) evolved into a legislative tool to handle this cost, using the mechanism of producer responsibility organisations (PROs). Increasing commodity prices over the last decade are changing this paradigm, however, and waste is increasingly considered as a potential source of revenue. Legislation has largely failed to adapt to this paradigm shift, and therefore does not fit the reality of waste markets anymore. Indeed, from the legislative tool it was initially, EPR has developed into a market driven by multiple forces, one in which legal and market- based approaches try to cohabit, which has led to an inefficient and partially dysfunctional system. Our report aims to explore recent advances in EPR and to provide recommendations for the stakeholders involved in this market. After a brief introduction on the history of EPR in Europe, we discuss pending issues in the current practice of EPR, with particular emphasis on the WEEE Directive and its Recast as they are the focus of recent discussions on implementation. Then, based on a series of interviews with a set of stakeholders, we analyze the perspectives and key concerns regarding EPR implementation. From the analysis of stakeholder concerns, we identify five factors that limit or disrupt the stability and effectiveness of EPR systems: • Commodity dynamics 8: Volatile commodity prices influence leakages of waste outside the EPR system and the value producers recover from waste • Volume dynamics: Uncertain volumes of waste collected by PROs limit planning of future investment for waste operators • Competition dynamics: Variations in the level of competition between PROs may change the efficiency of EPR markets • Regulatory dynamics: The possibility of unexpected changes in future legislation may negatively impact the stability needed by producers and waste operators • Design dynamics: Potential product design changes lead to uncertainty in terms of waste to be recycled in the future As they play against the long-term stability that businesses need to operate, these different factors should be alleviated through some legal and operational mechanisms. For example, we recommend flexible adaptation at national levels of a limited number of general principles imposed by the European Commission. In order to let competing PROs contribute to increasing performance and efficiency, we also suggest national authorities further open EPR markets to competition. We also recommend that PROs take a role in providing stability to EPR markets, thus helping to improve the effectiveness of EPR in achieving its objectives. 8 In this paper, the term dynamics is used in the sense of “the forces or properties which simulate growth, development or change within a system or a process” (Oxford Dictionaries, 2014) 5 Table of Contents ABOUT INSEAD ................................................................................................................................................................ 2 ACKNOWLEDGEMENTS ......................................................................................................................................................... 2 ABOUT ERP ...................................................................................................................................................................... 3 MOTIVATION FOR THIS REPORT ...........................................................................................................................................