Deposit Return Scheme Implementation Advisory Group minutes: June 2019

Attendees and apologies

Attendees

• Don McGillivray, Scottish Government (Chair)
• Andy Tighe, Scottish Beer and Pub Association (Telecom)
• Gavin Partington, British Soft Drinks Association
• Raymond Gianotten, British Soft Drinks Association
• Laura McKelvie, Federation of Small Business
• Bryan McCluskey, Natural Hydration Council
• Adrian Roper, National Federation of Retail Newsagents (NFRN)
• David Woodrow, National Federation of Retail Newsagents (NFRN)
• John Lee, Scottish Grocers Federation
• Ewan MacDonald-Russell, Scottish Retail Consortium
• Beatrice Morrice , Scotch Whisky Association
• Colin Smith, Scottish Wholesale Association
• Margaret Smith, Scottish Wholesale Association
• Colin Wilkinson, Scottish Licensed Trade Association
• David Barnes, Zero Waste Scotland
• Don McCalman, Zero Waste Scotland
• Robert Orr, Zero Waste Scotland
• Scott Wood, Scottish Government
• Tim Chant, Scottish Government
• Alana Tyrell, Scottish Government (Secretariat)

Apologies

• Jill Farrell, Zero Waste Scotland
• Willie Macleod, UK Hospitality
• Ginny Gardner, Scottish Government

Items and actions

Agenda item 1: Welcome and apologies

1. Don McGillivray welcomed everyone to the third DRS Implementation Advisory Group. Apologies were received from Jill Farrell (Zero Waste Scotland), Willie Macleod (UK Hospitality) and Ginny Gardner (Scottish Government, Circular Economy Unit).

Agenda item 2: Minutes of previous meeting

2. The Group reviewed the minutes from the previous meeting. The minutes were then agreed upon. 

Agenda item 3: Highlight report

3. Don McGillivray noted the intention to circulate a short Highlight Report detailing key developments across the programme as part of the papers for all future meetings of the Implementation Advisory Group. Donald McCalman then went on to summarise the content of the first of these reports which had been shared in advance.

4. In particular, Donald highlighted the significant amount of engagement with partners which had taken place since the Group had last met. This had taken a number of forms, including a session held on 22 May where stakeholders had the opportunity to engage directly with the Cabinet Secretary for Environment, Climate Change and Land Reform regarding the Scottish Government’s DRS scheme design.

5. Following the announcement of the design, early supplier engagement had commenced in order to better understand likely lead times for key infrastructure required to support the scheme’s operation. Significant progress had also been made to establish three working groups looking at: implications of DRS for producers and distributors, implications of DRS for retailers, and establishment of a scheme administrator. 

6. All of the above activity would be used to inform the content of the Full Business Case (FBC) Stage 2 for DRS. Margaret Smith highlighted the need for that document to be underpinned by robust data if it was to carry the confidence of all partners and Colin Smith highlighted the value which could be gained through the appointment of independent experts to support that process. Donald McCalman agreed and Scott Wood confirmed that work was underway to secure the necessary support. 

Action 1: Scottish Government to provide an update on procurement of external support to aid development of the FBC Stage 2 at the next IAG meeting.

Agenda item 4: Programme plan

7.  Donald McCalman briefly updated the group on progress with the development of the detailed programme plan for DRS. In particular, he highlighted that a phased approach to implementation would be adopted, with the first of three tranches of activity due to be completed in quarter 4 of the 2019-2020 financial year. At this point, the secondary legislation to establish the scheme will have completed its passage through parliament, a scheme administrator will have been established and a target operating model for the scheme agreed. The group raised concerns regarding the deliverability of the scheme on that timetable and highlighted that these concerns were exacerbated by the decision to bring forward a scheme which, due to the inclusion of glass, was more complex and costly than it may otherwise have been. Finally, it was noted that the implementation of DRS was being taken forward at a time of significant uncertainty linked to Brexit.

Agenda item 5: Working group updates

8. Gavin Partington presented a short update on progress within the scheme administrator working group which had held several discussions since the last meeting of the IAG. Those discussions had benefited from the input of legal advice from Brodies LLP and had explored a number of possible corporate structures for the scheme administrator. Whilst the discussions had been informative, no clear preference had yet been identified within the membership. It was recognised that the group’s work would benefit from the availability of robust data on the size and composition of the Scottish drinks market along with clarity on the content of the secondary legislation which would establish DRS. In the meantime, work to explore potential corporate structures would continue.

9. Colin Smith noted his disappointment that the Scottish Wholesale Association had not been invited to participate in further discussions of the scheme administrator working group following their attendance at its first meeting. He highlighted the significant financial and operational impacts that DRS would have on the wholesale sector and flagged the need for these issues to be properly understood and accounted for when decisions were being taken. Donald McCalman acknowledged those concerns and agreed to discuss with Colin how best to engage the wholesale sector going forward. Don McGillivray emphasised the need for implementation of the scheme to be a collaborative and inclusive process.

10. Bryan McCLuskey provided a short update on the producer and distributor working group which had also convened since the last meeting of the IAG. Following a mapping session to identify potential workstreams, the group concluded that its immediate focus should be on matters linked to product labelling and messaging, including cost implications, fraud risks, futureproofing for technology advances and label design requirements. In addition, the Group identified a number of additional issues of strategic importance to producers which required early resolution by any scheme administrator, including:

• payment terms for the redemption of deposits
• process for determining producer fee levels and payment terms
• material specifications for DRS containers
• policy on material sales and the potential to offer brand owners a first right of refusal for recycled materials

11. The group highlighted that the scheme administrator needed to be formed as soon as possible to allow definite decisions to be made on these issues.

Agenda item 6: DRS legislation

12. Scott Wood provided the group with a high level overview of the legislative approach being taken by the Scottish Government in relation to DRS. The overview covered the legal obligations that would likely be placed on producers and retailers through regulations and also described the role of the scheme administrator and exemption arrangements for return points. 

13. Bryan McCluskey sought clarity around the role of online retailers and, in particular, their obligations to operate a takeback service.  Scott Wood confirmed that the regulations would oblige all retailers, including online retailers, to accept the return of the containers and David Barnes explained how this duty had been discharged by online retailers in other schemes internationally. Ewan MacDonald-Russell suggested that online retailers may wish to put forward an alternative proposal concerning the operation of takeback arrangements and agreed to raise this with Scott Wood following the meeting. 

14. Scott Wood indicated that the 90 day pre-laying process for the regulations would likely commence towards the end of the Scottish Parliament’s summer recess. The outputs of that exercise would be reported to Parliament at the point at which the affirmative procedure for scrutinising the legislation commenced, likely in late 2019. 

15. Ewan MacDonald-Russell expressed concerns relating to the proposed timeframe for laying legislation given the possibility of a no deal Brexit. A no deal Brexit would significant hinder the retail sector’s ability to implement the DRS regulations, with focus instead shifting to more pressing matters concerning the supply of consumer goods. 

16. Andy Tighe asked whether commencement dates would be included in the regulations. Scott Wood confirmed that this was the subject of ongoing discussion within Government.

17. Colin Wilkinson asked whether the regulations would require glass bottles to be collected intact, and questioned whether DRS labelling would be mandated for glass containers. Scott Wood confirmed that the Regulations would likely stay silent on both these points, with responsibility for labelling resting with any scheme administrator. 

18. Bryan McCluskey noted that the inclusion of glass would likely attract significant scrutiny once the regulations were published and noted that the evidence underpinning that decision (recently released in response to a Freedom of Information Request) raised significant questions about this aspect of the scheme design. Mr McCluskey noted that Cabinet Secretary had indicated further work would be undertaken to better understand the implications of including glass in the scheme and requested an update on this. Donald McGillivray highlighted that much of this work would be supported through the Retailer Working Group and that the focus would be on identifying the best handling, storage and collection solutions to accommodate glass.

Agenda item 7: AOB

19.  The group requested an update regarding VAT exemptions on container deposits. Don McGillivray again confirmed that there was a strong case for VAT relief and early conversations were underway with the UK Government on this point.

20. John Lee requested a timescale for a decision on the potential award of a relief from non-domestic rates for reverse vending machines. Both Don McGillivray and Scott Wood confirmed that discussions were underway within the Scottish Government on this point.  It was hoped that a more substantive update could be provided at the next Implementation Advisory Group meeting. 

21. Finally, the group again pressed the Scottish Government to ensure that appropriate exemptions to existing and future packaging producer responsibility schemes were put in place for packaging captured through DRS.

Action 2: Scott Wood to take forward discussions on VAT, non-domestic rates and packaging producer responsibility exemptions and revert to the group.

Next meeting: 20 August 2019

Scottish Government
July 2019