Deposit return scheme for Scotland: full business case addendum

Executive Summary

The publication of the Full Business Case (FBC) Stage 1 for a Deposit Return Scheme (DRS) in Scotland followed the Scottish Government’s announcement of a climate emergency in April 2019. The FBC Stage 1 set out the case for proceeding with an ambitious scheme to increase recycling, reduce littering, and cut emissions in Scotland.

The FBC Stage 1 follows the HM Treasury Five Case Business Model process, starting with the Strategic Outline Case (SOC), moving to the Outline Business Case (OBC) and onto the Full Business Case (FBC). This staged approach incorporates the five cases (Strategic, Economic, Commercial, Financial and Management) at each point but with increasing detail.

It was initially proposed that the FBC be developed in two stages, with Stage 1 providing the overarching framework for the preferred scheme design and commercial approach, and Stage 2 further developing the approach to, and delivery route for, the scheme.

We have carefully considered how best to give effect to HM Treasury guidance in providing a finalised Government view of the business case for DRS, to accompany the Regulations. The development of the Commercial Case at FBC Stage 1 concluded that, as a form of extended producer responsibility, the scheme should be operated by producers. The development of the Full Business Case should result from the procurement phase of the project, following negotiations with potential service providers and prior to the formal signing of contract(s). Those negotiations are a matter for industry, likely supported by a single scheme administrator, as opposed to Government. As such, the remaining stages of the business case process will fall to industry to develop.

From discussions with industry in the period since publication of the Full Business Case Stage 1, it is clear that a scheme administrator will only be established once the Regulations have been finalised. It is only at this point that they will have certainty about the nature of the legal obligations being placed on them.

The Scottish Government and Zero Waste Scotland, working with Deloitte, have nevertheless been working closely with representatives of the producer, wholesale and retail sectors to update key aspects of the Economic and Financial cases presented in the FBC Stage 1.

This includes an updated and refined analysis of the key areas that have been of interest to Parliament and stakeholders, namely the total cost, the handling fee and the producer fee, as well as the overall economic case for the scheme. In line with Treasury guidance, the figures allow for areas of remaining uncertainty through the use of optimism bias/sensitivity analysis. We have completed all of the analysis which we believe is feasible in advance of the creation of the scheme administrator.

The intention is that this analysis will be provided to industry to support them in progressing commercial negotiations, which will then form the basis for the business plan of a scheme administrator.

The figures presented in this document therefore represent the Government’s final view of the business case for the scheme, ahead of the handover to industry leadership of the implementation process.