Plastic Packaging Tax

Plastic Packaging Tax is aimed at increasing the use of recycled plastic in the UK and is part of a broader strategy to decrease the amount of plastic waste which goes to landfill or is unmanaged each year. Italy and Spain are expected to introduce similar taxes at the start of 2023. (albeit the mechanics of the tax will be different in these two countries compared to the UK). In addition, next year will see changes to the Extended Producer Responsibility (EPR) programme in the UK. This will lead to companies paying the cost of collection and recycling for all plastic packaging they put on the market, paying more for “less sustainable packaging”, as well as the launch of a deposit return scheme (DRS) for some products in Scotland (with consultations taking place for this to be rolled out in the rest of the UK).

The new, more proactive approach to tackling plastic waste is also playing out at a global level. The United Nations Environment Programme convened UN Member States to agree to a global treaty for plastics, and after two years of negotiation this will be put forward for ratification in a similar fashion to the Paris Agreement. With new initiatives being introduced in the EU - including mandatory recycled content targets - the legislative and public interest in plastics is forcing consumer businesses to take positive action.

What does Plastic Packaging Tax mean for UK consumer businesses?

The UK tax incentivises companies to source more recycled plastic. However, it also places new requirements on businesses, creating a need to gather more detailed data on the plastic packaging used and communicate responsibilities to counterparties across their supply chain. The operational nature of the tax means that a cross-functional effort is often required to manage compliance obligations. The tax is paid by both importers of filled or unfilled packaging, and UK packaging manufacturers.

Many companies have already made voluntary commitments to increasing the percentage of recycled content in their packaging, for example through the Ellen MacArthur Foundation’s New Plastics Economy commitment. Demand for recycled plastic has risen to an all-time high and, like many markets this year, the recycled polyethylene terephthalate (R-PET) flake market is hitting new price territory having doubled in the last year to over £1400 per tonne. R-PET is now priced higher than virgin PET according to data provider ICIS.  The food industry has suffered disproportionately from R-PET rising prices and supply issues over the last year - food grade plastics are largely sourced from PET drinks bottles which have been in short supply since the pandemic hit the on-the-go drinks market. As a result, a tonne of clear used drinks bottles can now fetch over £1000. [1]

Thinking strategically about plastics:

It is more important than ever for companies to have both a short- and long-term plastics strategy, that can get ahead of future regulation and minimise the impact on the planet. Some key considerations from our circular economy team at Deloitte include:

Wherever you are in the value chain, think about your plastics footprint

Companies are used to measuring and thinking about their carbon footprint, which is broken down into scope 1, 2 and 3. This kind of segmentation and baseline can also form the basis of a plastics strategy. While there is no official way of breaking it down, a useful segmentation (in this case for a retailer) would be the following:

• On-site waste. The company’s own waste (what ends up in your bins)
• Own product packaging. Plastic packaging for products you put on the market that you have full control over but which ends up in customer’s bins (think own brand)
• Value chain plastics. Plastics that you do not have full control over, but which sit in your value chain (products which you sell from other brands)

Companies can measure a baseline for each segment and create a strategy for each. The solutions and relevant stakeholders to deal with on-site waste will likely be very different to those in own product or value chain.

Next look at all of your packaging and ask a few questions

Is there a packaging-free option?

Some packaging often seems vital - until it isn’t. For example, the 5p charge on plastic bags brought down their use by 86% with customers quickly adopting reusable options. [2] Offering and incentivising the use of refillable solutions for other products can provide better choice and value to customers, and some products can be sold loose. Companies are starting to offer services providing high-end reusable packaging to people’s homes through delivery models; in many cities zero-waste shops have proliferated; and re-use targets are starting to feature in the plans of some major food and beverage brands.

Could this be a different type of plastic or a different material?

Not all plastic is created equal. As a rule of thumb, PET and high-density polyethylene (HDPE) are the most widely recycled types of plastic in the UK, whereas materials such as polystyrene end up in the waste bin. Switching to these polymers will up recycling rates and make it easier to source recycled content. Other materials such as sustainably sourced cardboard or paper may provide a more premium feel as well as environmental benefits and new innovations such as seaweed or pea protein-based packaging are on the commercial horizon. However, it’s important to weigh any trade-offs which could occur (e.g. carbon emissions and food waste) when making changes.

Could the packaging be redesigned?

Packaging which is small format or involves the fusing together of different types of plastic or other materials (think a disposable coffee cup, sachet, or a crisp packet) is harder, if not impossible, to recycle. Could the packaging be designed to be made from just one material and maintain the same properties? Perhaps there is another way to open it without tearing the top off?

Could you collect packaging?

With recycled plastic markets running at high costs, could you set up a scheme to take packaging back and create your own supply of recycling feedstock? This could be incentivised with a deposit return scheme. Some companies have also brought recycling capacity in-house or invested in new recycling technologies.

Do you have a plastic KPI?

Are people in your company incentivised to think about the impact of using plastics? Do you track how much plastic you use? KPIs such as the weight of plastic per item sold or other performance metrics can help drive continuous improvement over time and data can be tracked with a dashboard. For your value chain plastics what is your strategy to engage with your suppliers? Do your procurement guidelines include plastic packaging as a consideration?

These questions are, of course, just the starting point. However, consumer and regulator attention on plastics is here to stay and having a plastic strategy should be part of every company’s long term sustainability plan. If you would like to learn more please contact James Pennington.

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[1] Packaging Europe (2022) Available at: https://packagingeurope.com/news/rpet-prices-reach-record-high-across-europe/6953.article

[2] UK Government (2018) Available at: https://www.gov.uk/government/news/plastic-bag-sales-in-big-seven-supermarkets-down-86-since-5p-charge