Deposit return scheme - gateway review: action plan assurance

3.0 Findings

3.1 Schedule and Scope (Gateway Review recommendation 3)

3.1.1 The previous Gateway Review had recommended that the SRO should urgently evaluate the Scheme 'go-live' scope and schedule. The Review considered that delivery of a full scope DRS by the 16 August 2023 target was not feasible. This AAP heard that Ministers remain strongly committed to an August 2023 go-live [redacted]. During this AAP most interviewees commented that CSL and industry partners were also committed to an Aug 2023 go-live, having sunk much effort and cost – it was thought not credible to further extend the go-live date. There was almost complete agreement amongst interviewees (one contrary opinion) that the go-live date should remain, albeit all felt that only a reduced scope go-live was achievable and should be targeted.

3.1.2 There was a surprisingly consistent vision amongst all interviewees as to what an August 2023 go-live would look like. The common vision presented would see: most large retailers and producers "largely" prepared; many, but certainly not all, medium producers and retailers prepared; many small businesses not prepared or even unaware of the requirement[redacted]; a nationally functioning collection system albeit with some geographic weaknesses, some black spots and collection schedule "teething problems;" a

broadly working, "early issue," ICT system, again albeit with initial operating problems, and an "early standard" but functioning deposit (£'s) management system. This AAP did not see, or hear of, a written description of what go-live scope and functionality should be; whilst there appeared to be much agreement of vision, there is not yet an agreed vision. Whilst presenting some communications challenges an agreed vision of what a go-live functionality is urgently required to allay the many fears of the community and, importantly, to build unity and enable sensible planning. This agreement should recognise and present the areas where some implementation flexibility will be tolerated and allowed, with transparency on a phased/evolutionary approach. This will require an exceptionally effective communications operation – see paragraph 3.4.2.

3.1.3 There are undoubtedly many significant threats, risks and challenges which require resolution and/or may yet emerge and de-rail DRS roll-out. These issues are certainly made more complex and more profound by a less than full-scope go-live. These issues include, but are not limited to: agreeing and publishing a cut-over strategy/plan; achieving a final decision from HMRC on VAT application; confirming and publishing a workable on-line solution; publishing the Scheme operational plan and, most importantly, refining and putting into action the exemptions system. It was recognised that there are many issues of detail still to be resolved, some of which may not yet be known, however, the other issues mentioned include the cross subsidy of materials within the Scheme, trading standards, clarification of interpretation of 'scheme article' and 'put to market' by SEPA.

3.1.4 Much comment was made in the AAP interviews about collection points and retailer exemptions. There are mixed incentives for small retailers to participate as collection points, they would wish to provide customer service and benefit from DRS 'footfall' but have physical space, admin, resource, and capital investment limits to providing a collection function. Furthermore, operating costs for the DRS scheme are dominated by the collection logistics system and the principal variable for this is the number of collection points. There are therefore clear incentives to minimise and optimise the collection network, but this is at odds with the legislation which obligates all scheme article retailers to participate or seek an exemption. Currently, CSL and the logistics contractor (Biffa), with support of SG, are trying to rationalise the initial, high estimates of the number of collection points; these high estimates have influenced the critical producer fee and retail handling fee which are proving contentious with respective industry partners [redacted]. A number of concerns and differences of opinion with the exemption system were raised in interview, these are preventing a clear picture of the collection network to be formed. It was understood that Biffa have taken the initiative to produce a mapping tool to assist this process, however, some concern was raised with the commercial data that this requires. Those officials and agencies with responsibilities and interests in the exemption system are working positively and cooperatively with CSL to refine and implement the system; however, it is recommended that SG 'up-the-pace' with prompt attention, to reach unified agreement and deliver action to provide clarity and efficiency to the exemption system. This will provide comfort to small retailers and enable more effective modelling of costs and hence build support. It seems that a greater use of 'proximity'

collection, shared collection and/or the involvement of local authorities could be useful to improve collection efficiency; these require further exploration.

3.1.5 It was notable to this AAP that, apart from a small comment from one party, the Orkney Return Initiative received no mention from interviewees. Whilst this initiative may provide valuable data and experience it may also be a distraction. [redacted]

3.1.6 This AAP, in common with recent Gateway Reviews, heard an overwhelmingly strong voice from all stakeholders that "we really want it to work" or "we want a world leading DRS," but stakeholders then continued to say "but we need answers on the detail" or made similar statements. Answers to the major outstanding questions, and the many significant but less contentious operating details, are required urgently by stakeholders; all appeared to be on, or very close to, their implementation critical paths to allow functionality in August 2023. Indeed, there was clear evidence that individual partners are making their own decisions, based on assumptions [redacted].

3.2 Governance and Leadership (Gateway Review recommendation 2 & 5)

3.2.1 The previous Gateway Review had recommended actions to review and clarify the governance and leadership of the DRS in both the immediate and longer term. This AAP was delighted to observe that CSL was taking a much stronger and visible leadership role for DRS implementation. CSL now has sufficient initial funding, a fully functioning Board and a permanent, strong executive team with most posts filled or shortly to be so.

3.2.2 Amongst interviewees there was a broad view that there is an improving leadership situation, though there remained much consternation that decisions have not yet been taken [redacted] – this is a shared challenge between CSL, SG and other stakeholders, as not all issues are in the hands of one stakeholder. Government could help [redacted], with prompt decisions and clarification. Again, effective communication is also key.

3.2.3 Mixed views were presented as the roles and effectiveness of the System Wide Assurance Group (SWAG), Executive Oversight Group and other governance/leadership meetings. A lack of clarity of leadership and, particularly, governance roles remained, interviewees were uncertain as to roles and responsibilities [redacted].

3.2.4 Further, to the immediate governance needs, some interviewees expressed concern that appropriate "checks and balances" may not be in-place to govern the scheme administration in the longer term. [redacted] Previous Gateway Reviews have recognised the courage and innovation of government policy and strategy that aims to promote extended producer responsibility with a transfer of responsibility. [redacted]

3.3 Value Capture (Gateway Review recommendation 1)

3.3.1 Previous Gateway Reviews had recognised and praised the innovation that this policy initiative had sought in both societal change and in its implementation strategy of responsibility transfer to industry. Some of these aspects are reflected in paragraph 3.2.4 above. There were a number of examples revealed in this AAP where this innovative responsibility relationship could be seen to be working – faced with regulation but limited implementation guidance industry was finding and evolving practical solutions – activity that industry does well. [redacted]

3.3.2 In the opinion of this AAP, the courage and innovation of government should be celebrated and applauded and, most importantly deserves serious study and examination to inform future policy development, whilst also revealing the strengths and weaknesses of this implementation. Currently, limited action has been taken against recommendation 1 of the previous Review which sort to address this opportunity. The SRO may wish to consider external resource (i.e., University public policy unit) to fully study and report on the lessons from DRS.

3.4 Communications (Gateway Review recommendation 4)

3.4.1 Recommendation 5 of the previous Review sought to engender action to improve the coordination and leadership of Programme communications. The AAP heard that good progress was being made to managing communications, stakeholders appeared to be working very collaboratively and CSL had agreed to take a leadership role for communications. It is understood that CSL have recruited a [redacted] Director/Head of Communications who will join the Company in

January 2023. Fulfilment of this position should further improve communications management.

3.4.2 All stakeholders recognised that communications and engagement was very important. [redacted] It should also be remembered that the central aim of this Programme, and its derivative policy, is to effect societal change (over and above implementing an operational DRS system) and therefore efficacious communication and engagement is the pivotal tool to achieve success. Given this central aim, the challenges of a phased go-live, public interest and media attention, then the scale of the communications challenge should not be underestimated. This AAP is concerned that even with the anticipated improvements to communications leadership and coordination, insufficient resource and importance will be applied to communications.