PRNs: Stick or twist on packaging responsibility?

Defra has backed the UK’s system for assigning responsibility for packaging waste, but doubts remain. Resource surveys the industry to see what needs to be done

The room was in agreement. At June’s Resourcing the Future conference, a poll asking whether the government should undertake a complete review of Extended Producer Responsibility after Brexit was met with a virtually unanimous positive response.

Chief among the topic’s thorny issues is the packaging recovery note (PRN) system for assigning responsibility for packaging waste, which, in a nutshell, requires producers to purchase evidence from reprocessor or exporters that the packaging that they have put on the market has been recycled on their behalf. The PRN system was established in 1997 to comply with the EU’s Directive on Packaging and Packaging Waste, which required each member state to create a system that ensures recycling and recovery targets for core packaging materials are met.

Just a few weeks after the conference, however, Defra published a review stating that the system was ‘fit for purpose’. Indeed, the system has so far jumped through all the target-based hoops it has faced. But the Circular Economy Package (CEP) is set to bring higher recycling targets. There are doubts as to whether the system will be able to help us reach the heights required, and with worries about transparency, volatility and infrastructure created by the system, is it still the most suitable available?

With that question in mind, we approached stakeholders from across the industry to see what they thought about PRNs, and whether it’s tweaking or total overhaul that is needed to set the system straight.

Does the UK need to improve the PRN system?

Phil Conran, Director of waste consultancy 360 Environmental: “The PRN system has allowed businesses to meet producer responsibility obligations without any sense of engagement beyond paying a trading-market driven marginal cost. Supporters point to stats that show that packaging recycling has risen more than 150 per cent at a fraction of the cost of many member states. Detractors point to the lack of full-cost Defra has backed the UK’s system for assigning responsibility for packaging waste, but doubts remain.

“As a commercially competitive system, those providing compliance for producers will tend towards the lowest short-term cost and will struggle to fund non-essential add-ons such as communication support or the collection and recycling of high-cost problem packaging like plastic film. Is this sustainable as we move on from low-hanging fruit to the more challenging materials that will have to be collected to meet the higher targets? I do not believe so: it’s a reactive process that leads to short-term high PRN costs that encourage fraud and provide no basis for long-term recycling growth.”

Jacob Hayler, Executive Director of the Environmental Services Association (ESA): “The current system does what it was designed to do very well, which is to deliver compliance with recycling targets at the minimum cost to producers. However, experience has shown that it is vulnerable to political interference – in terms of changes to baseline estimates and targets – when PRN prices spike.

“Measures like longer-term targets and more accurate reporting could help to reduce this political interference and shore up the PRN system. Investment could also be helped by the introduction of a price floor for PRNs, while a bonus/malus system [rewarding good performance and punishing bad] would help incentivise recyclability and resource efficiency.”

Angus Macpherson, Managing Director of PRN marketplace The Environment Exchange: “The PRN system does not require a complete overhaul. It is a curate’s egg: there are some parts that are good and some, surprisingly few, that are bad. Many of those that are concerned do not fully understand how the system operates and what it is currently asked to achieve.

“Issues that can be resolved by tweaking the current regulations include: certainty of targets; definition of costs covered by the system; timely and accurate submission of data; robust penalties for fraud; and opaqueness of spend. PRN price volatility is an inevitable reflection of the inherent volatilities in a global economy. We would express caution about introducing a floor price. Who would be responsible for covering this additional cost? Through the judicious use of forward contracts it is possible for both buyers and sellers to fix costs and income and reduce the impact of volatility.”

Lee Marshall, Chief Executive of the Local Authority Recycling Advisory Committee (LARAC): “From a local authority (LA) perspective, the current system doesn’t fully implement the concept of producer responsibility for packaging. The public purse is spending millions of pounds each year collecting and passing on packaging to reprocessors for recycling. The amounts spent are far greater than the total value of PRNs so if producer responsibility is to mean exactly that then the system needs to change, and by change it should be an overhaul rather than tinkering around the edges.”

Nick Brown, Head of Sustainability at Coca-Cola European Partners: “At a fundamental level, the links between producers and collection authorities are not strong or effective enough. There are some great examples of voluntary actions where businesses and LAs have cooperated and achieved good outcomes but we need a framework for collaboration that engages all parties in the chain and brings real scale to initiatives.

“We want to see reform to develop a broader and more sustainable source of funding that can be targeted towards key change initiatives. Reform of producer responsibility should also give clearer signals to business on the importance and economic value of good eco-design and using recycled materials. In the area of plastics, splitting the categories into use types will also allow companies to more clearly focus on the reuse and end-of-life of the specific packaging formats they use.”

PRNs: Should the UK stick or twist on packaging responsibility?
Producers like Coca-Cola GB are having to think more carefully about their packaging supply chain

Does the PRN system have an imbalance towards export? If so, how could this be resolved?

Macpherson: “The supposed imbalance towards export is based on the assumption that lower quality secondary raw material is exported rather than used domestically and that protocols established for exports don’t take into account process losses. If these assumptions can be proven then the protocols can and should be adjusted to reflect it.”

Conran: “The lack of certainty around long-term recycling growth created by the PRN system encourages exports as the growth tool rather than UK infrastructure development, an increasingly risky dependence as overseas market dynamics change. If the volatile PRN system remains, more accountability should be applied to compliance schemes for long-term planning which in turn suggests a more transparent revenue accounting system with some fixed cost contributions towards sustainability.”

Chris Taylor, Commercial Manager of compliance scheme Clarity Environmental: “UK reprocessors have long been lobbying for changes to the current PRN system, which they believe incentivises waste materials being sent abroad. Our experience is that producers knowing where their money is going comes second to cost. It is important that we have a PRN system that incentivises packaging recycling in the UK, allowing for further investment in the sector. Amendments to the regulations in recent years appear to do the job of increasing recycling levels. However the imbalance towards export is a very difficult issue to balance, and in 20 years nothing has yet been put in place to do so.”

Hayler: “It should be resolved through stronger enforcement of current rules. Non-target material should not be receiving PRNs or PERNs. Significant levels of contamination should be addressed through transfrontier shipment regulations.”

Brown: “We know the challenge British reprocessors can have with lower quality materials receiving PRN credits when exported. There might be occasions where materials are better exported but we shouldn’t be driving materials down that route as an unintended consequence of producer responsibility. Clearer quality specifications for export materials and greater enforcement can play a role, as could the reduction of the ratio of exported material that can be credited, reflecting the real lower yields on lower quality materials.”

How does the UK’s system compare with systems in other countries?

Conran: “The recent Valpak Packflow 2025 study has shown that recycling rates are not proportionate to cost. The PRN system can therefore claim to be among the most efficient, but this assumes that the PRN has been responsible for recycling growth.

“In many other member states, producers take direct control of packaging collection from households, often under monopoly systems that have led to excessive cost and bureaucracy. Therefore there’s a spectrum of centrally-controlled, high-cost, strategically-implemented systems and the UK’s low-cost, market-driven, short-term system with many in between.

“To move the UK across that spectrum will cost producers significantly more than the PRN system – estimates range from 4-10 times that average cost. Will this achieve an outcome that is 4-10 times better? Probably not. But can the UK achieve higher targets without such a move? Probably not.

“The question is: are higher recycling targets the best environmental performance measure? Many would argue that resource efficiency should be the key measure, and that goes way beyond packaging recyclability. The CEP appears to apply politically-driven targets with little evidential support of their overall environmental benefit.”

Hayler: “The clear lesson from research commissioned by the ESA last year is that there is no other ready-made system that could simply be plonked into a UK context. That doesn’t mean that we can’t learn from others: modulated fees adopted within the French system for recyclability and recycled content could be usefully replicated over here.”

Marshall: “What the PRN system hasn’t done is pay for the costs of collecting household packaging – LAs are doing that. The small element of PRN that goes to process support is obviously better than nothing, but material income does not cover collection costs, it just offsets it a bit. We need to look at countries like Slovakia and Belgium and others across Europe and see which elements of their systems might work in the UK.”

How would changing the system impact on costs to producers and consumers?

Hayler: “At the end of the day we all have to pay for our waste and recycling. This could be as consumers through producer responsibility schemes, as council tax payers, or as individuals if direct charging was introduced. A well designed producer responsibility scheme would put the incentives in the right place to improve resource efficiency throughout the supply chain and drive down whole system costs.”

Macpherson: “If changes result in a worse system any additional costs would be disastrous. Some of the tweaks proposed need not have any financial impact on producers and consumers. Any additional obligations must be anticipated to bring additional costs. The aim would remain to be achieving maximum impact for minimum cost.”

Marshall: “In theory, any change that moves towards producers bearing the proper costs of collection will increase costs to them and therefore consumers. That means looking at ways to minimise that extra cost through better packaging design and efficiencies in collections where possible. But why shouldn’t producers and consumers be exposed to the true cost of dealing with the items they produce and purchase instead of local authorities being left to deal with the problem?”

Brown: “The financial contributions of business within the current scheme are opaque and the monies are not focused on key initiatives. What’s clear is that the cost to business in the UK is much lower than comparable schemes in other countries. With so much delivered through LAs it will be good for industry to support a new framework driving collaboration across the material chain leading to improvements in recovery of packaging.”

Does a review of the system need to wait until Brexit?

Hayler: “There is nothing to stop us starting a review of the current system now, though the terms of Brexit might affect the range of options available. One scenario is that we adopt the CEP, meaning a new system would have to meet new, much higher packaging recycling targets and would also have to meet new criteria in the Waste Framework Directive for full cost recovery. An alternative scenario is that we adopt the new Packaging Directive (a single market directive) but not the new Waste Framework Directive (classified as an environmental measure). Then we would have to design a new system capable of meeting higher targets, but would not be bound to meeting the cost recovery criterion. We could also decide not to adopt any new measures, in which case anything goes when it comes to PRN reform (and pretty much everything else).”

This article was taken from Issue 89

Marshall: “It doesn’t have to wait at all, the UK has the possibility to shape its own environmental policies. It is likely it will wait, though, and that might start to make the relationship with the EU a bit clearer. Packaging legislation will need to consider trade with European countries and that is likely to be a key consideration when the UK looks at producer responsibility, along with how we access material end markets in Europe once we leave the EU.”

Taylor: “Given that the UK is still to iron out the details of Brexit and our adoption of the CEP, this is perhaps not the time for reform. We welcomed the results of the Defra review, which recommended that the current system be retained as it provides some certainty in the short-term. We hope that any decisions made following our exit from the EU continue to drive increased recycling without placing unnecessary costs on producers.

Brown: “Whilst there is a crowded legislative agenda focused on Brexit it is even more important that industry speaks with one voice to government on the case for change and also develops credible policy options to make it as simple as possible for politicians to enact the changes our industry needs.”

Conran: “Brexit could give the UK the opportunity to reconsider priorities, to determine what it is we really want to achieve and then consider the best way to achieve them. Until we know that it would seem that despite its shortcomings, retaining the PRN system is the best way forward.”

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