Deposit Return Scheme Implementation Advisory Group minutes: August 2019

Attendees and apologies

Attendees

• Don McGillivray, Scottish Government (Chair)
• Jill Farrell, Zero Waste Scotland
• Andy Tighe, Scottish Beer and Pub Association (by phone)
• Gavin Partington, British Soft Drinks Association
• Bryan McCluskey, Natural Hydration Council
• Shahid (Mo) Razzaq, Federation of Independent Retailers (NFRN)
• John Lee, Scottish Grocers Federation
• Pete Cheema, Scottish Grocers’ Federation
• Morag Garden, Scotch Whisky Association
• Colin Smith, Scottish Wholesale Association
• Margaret Smith, Scottish Wholesale Association
• Paul Rhodes, Scottish Retail Consortium
• David Barnes, Zero Waste Scotland
• Donald McCalman, Zero Waste Scotland
• Robert Orr, Zero Waste Scotland
• Ginny Gardner, Scottish Government
• Scott Wood, Scottish Government
• Charles Holmes, Scottish Government
• John Davidson, Scottish Government
• Alana Tyrell, Scottish Government (secretariat)

Apologies

• Raymond Gianotten, British Soft Drinks Association
• Colin Wilkinson, Scottish Licensed Trade Association
• Willie Macleod, UK Hospitality
• Ewan MacDonald-Russell, Scottish Retail Consortium
• Adrian Roper, Federation of Independent Retailers (NFRN)
• Laura McKelvie, Federation of Small Businesses

Items and actions

Welcome and apologies

1.1. Don McGillivray welcomed everyone to the fourth DRS Implementation Advisory Group. Charles Holmes and John Davidson had joined the group. Apologies were received from Raymond Gianotten, Colin Wilkinson, Willie Macleod, Ewan MacDonald-Russell (with Paul Rhodes substituting), Adrian Roper, Laura McKelvie and Tim Chant.  

Minutes of previous meeting

2.1. Don McGillivray noted the withdrawal of the initial set of papers circulated in advance of the meeting, acknowledging that these had been issued in error.  

2.2. The group reviewed the minutes from the previous meeting. John Lee requested an update on an action item from the previous meeting on VAT exemptions. Scott Wood confirmed the Scottish Government’s view that deposits should not attract VAT.  Early discussions had taken place with the UK Government on this issue and formal representations would be made to HMRC in the near future. Scott also confirmed the Scottish Government’s view that material captured through DRS should be exempted from wider packaging producer responsibility arrangements. Further discussions were planned with the UK Government on this issue.

2.3. Bryan McCluskey requested a revision to the previous meeting’s minutes to reflect that John Lee (rather than Bryan) had sought an update on a possible relief from non-domestic rates for Reverse Vending Machine (RVM) sites.  

2.4. The minutes were agreed on this basis.

Action: SG to update the minutes of the previous meeting as per 2.3.

Highlights report

3.1. Speaking to the highlights report, Jill Farrell outlined a number of developments with the DRS programme, including:

• work with the Scottish National Investment Bank (SNIB) to explore potential support in accessing funding for the establishment of scheme administrator infrastructure and the acquisition of RVMs
• continued progress towards publication of the legislation to establish the scheme
• appointment of a professional services firm to help support production of the DRS Full Business Case (FBC) Stage 2 and associated business plan
• significant ongoing activity being led by the DRS working groups
• ongoing engagement with stakeholders including CalMac, the Co-Op, and the Scotch Whisky Association to better understand how DRS can best work for island communities

3.2. The group highlighted the importance of the DRS Programme Board having full visibility of the contribution being made by industry to the implementation of DRS. Jill Farrell agreed to explore how this could best be achieved in advance of the next meeting.

Action: Jill Farrell to explore options for updating the DRS Programme Board on the contribution of industry to the implementation of DRS.

Establishing the scheme administrator

4.1. The group considered the “Plan on a Page” (POAP) for the programme. The POAP highlighted the establishment of a scheme administrator as a key early deliverable and Donald McCalman provided the group with an update on this work. 

4.2. The scheme administrator working group had held a number of conversations focussed on testing possible corporate models and associated Board structures. In the course of those discussions, it was highlighted that a final decision on the identification of a preferred structure would be aided by: a shared understanding of the scale and composition of the Scottish drinks market; and an accepted methodology for the calculation of the retail handling fee, drawing on recognised metrics. 

4.3. Donald McCalman confirmed further work had been undertaken by BSDA and partners to better understand the composition of the drinks market.  That work concluded that a DRS of the type proposed by the Scottish Government was likely to have a significantly higher volume of containers falling within its scope than had previously been estimated by Zero Waste Scotland.  Donald thanked those involved in taking that work forward, highlighting that the outputs would support the refinement of estimates for the FBC Stage 2. 

4.4. With regards to the retailer handling fee, Donald confirmed that the identification of an accepted methodology for calculating that fee would be a key priority for the professional services firm appointed to support development of the FBC Stage 2.  That work would commence in the near future.

4.5. Colin Smith highlighted his wish for any FBC Stage 2 to take full account of the additional costs falling on wholesalers as a result of the introduction of DRS. He proposed that a separate handling fee be established to meet these costs. The group noted that a final Business Regulatory Impact Assessment outlining the cost and regulatory impact of DRS for business would be published following passage of the final Regulations.

4.6. The group indicated the need for consideration to be given to lead times associated with operational changes across sectors as a result of the introduction of DRS. Donald highlighted the work being taken forward by representatives of the Scheme Administrator Working Group to better understand these. 

4.7. Donald McCalman also highlighted the work being taken forward to explore lead times for the infrastructure that would be required by any scheme administrator, noting that supplier engagement continued to progress in this area. 

4.8. The group agreed that a discussion on the implementation timetable should be included on the agenda for its next meeting. 

Action: Donald McCalman to circulate slides on possible corporate structures for a scheme administrator.

Action: Scott Wood to include an item on the implementation timetable on the agenda for the next meeting. 

Updates from working groups

Producer working group

5.1. Gavin Partington offered a brief update on behalf of the working group, noting that its initial focus had been to explore implications associated with labelling and alternative measures to address potential fraud. A further update on that work would be offered at a future meeting.

5.2. It was agreed that any potential branding for DRS should be given early consideration in order that it could be taken into account as part of wider considerations surrounding product labelling.

Retailer working group

5.3.  John Lee offered a short update, outlining the early work which had been undertaken to explore potential issues around handling of returned DRS packaging in close proximity to areas used for food preparation.  An early discussion with Food Standards Scotland to identify preferred solutions was now being planned.

5.4. The working group had started to consider the implications associated with collection of DRS material, noting the importance of ensuring that any collection schedules properly took account of relevant local authority restrictions. The working group was also investigating the possibility of using backhaul as a way of maximising efficiency and environmental benefits associated with the scheme.

5.5. The group welcomed the updates, noted the extensive amount of work being taken forward and requested that Zero Waste Scotland prepare a summary of all the working groups and upcoming workshops planned to support DRS implementation in the coming period.

Action: Donald McCalman to prepare a summary of the working groups and upcoming workshops planned to support DRS implementation in the coming period

Legislation and next steps

6.1. Building on a presentation offered at the last meeting of the group, Scott Wood provided an overview of the duties which the draft Regulations would likely impose on producers, retailers and any scheme administrators. 

6.2. The Regulations would:

• prohibit the marketing or sale in Scotland of single-use drinks containers if the producer was not registered SEPA. The producer would be either the brand owner (for products branded in the United Kingdom) or the importer (for products branded outside the United Kingdom)
• require that a 20p deposit be applied each time a single-use drinks container was sold in Scotland. The seller would also make clear that the packaging could be returned in exchange for reimbursement of the deposit
• require producers to collect a target percentage of the packaging which they place on the market in a calendar year, by collecting their own packaging from retailers and return points, and accepting the return of packaged products from wholesalers. Producers would reimburse deposits for any packaging returned or collected. The group raised concerns about the proposal that producers accept the return of unsold stock
• provide for targets which would increase over the first three years of the scheme’s operation (70% in year 1, 80% in year 2 and 90% in year 3)
• provide for producers to appoint a scheme administrator to meet the above obligations on their behalf. Anyone seeking to act as a scheme administrator would require approval by the Scottish Ministers
• require retailers to operate a return point at premises from which sales of products are made. This would involve accepting packaging returned by consumers, reimbursing deposits for that packaging and retaining the packaging for collection by or on behalf of producers
• provide for Scottish Ministers to exempt a retailer from acting as a return point and approve any other person who wishes to act as a return point
• require retailers selling products by means of distance sales to provide takeback services

6.3. The group noted that the Regulations would be pre-laid in the Parliament for 90 days promptly following the Parliamentary recess. Scott Wood offered to meet with individual members of the group to discuss the Regulations at that point.

Future meeting schedule 

7.1. Scott Wood reminded the group of the deadline for responding to the Doodle poll to agree future meeting dates. The group agreed to meet on a six-weekly basis going forward.

Any other business

8.1. No other business was raised.

Next meeting: 9 October 2019