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Plastic Packaging Tax – one year after implementation
A Plastic Packaging Tax has now been implemented for over a year in the United Kingdom. Deloitte explores the learnings about the challenges businesses have met along the way as well as policy opportunities.
The UK introduced its plastic packaging tax (PPT) with effect from 1 April 2022. Its aim is to encourage the use of recycled plastic instead of new plastic within packaging. It applies to plastic packaging manufactured in or imported into the UK which does not contain at least 30% recycled plastic by weight. The rate of tax increased from 1 April 2023 to £210.82 per tonne of plastic packaging. Businesses have had to work out processes to meet PPT compliance obligations in a timely manner. One year on, this article looks at key learnings and explores what related developments are on the horizon.
A year after implementation – key learnings
Data is key. PPT placed quite significant administrative requirements on many businesses. PPT creates a need to gather more detailed data on the plastic packaging used, which may be held outside of the usual finance systems or come from disparate sources. Businesses have had to consider how to capture information on packaging from supply chain counterparties and communicate responsibilities. Obtaining more granular data remains an area of focus for many businesses.
Assigning responsibilities in a cross functional team. The operational nature of PPT means that a cross-functional effort is often required to manage compliance obligations. Responsibility for PPT often sits with the tax team (but not always), and many businesses are considering how best to manage the various packaging compliance requirements, whether a tax or levy or regulation. Collaboration is required between the tax team and other parts of the business, typically including procurement, logistics, compliance, IT, product and sustainability teams.
Embedding circularity at all levels. PPT and related measures are designed to encourage businesses to consider the climate impact throughout the product lifecycle. From reducing (virgin) plastic to embedding recyclability in the product design, businesses are taking steps to embed circularity into everyday decision making. However, there’s still more to do to before the UK economy becomes truly circular. A shift to a circular economy will require new approaches and business models, with collaboration across the value chain and ecosystem.
Where next – policy developments
New plastic packaging taxes. All EU member states are required to make a contribution to the EU budget (since 1 January 2021) based on the amount of non-recycled plastic packaging waste. Spain introduced a PPT with effect from 1 January 2023 at a rate of €0.45 per kilogram of non-recycled plastic packaging. Similarly, Italy has been looking into introducing a similar tax, but the entry into force was suspended until 1 January 2024 (with further delays possible).
Extended Producer Responsibility (EPR). Changes to the EPR programme in the UK will take effect in a phased approach from 2024. Businesses are required to pay the cost of collection and recycling for packaging they put on the market; after two years of implementation, eco-modulation will be introduced which will mean companies paying more for less sustainable packaging. This will significantly increase the cost of packaging compliance for businesses and the data requirement characteristics such as polymer type and colour may need to be reported for eco-modulation.
Other policy changes. Other regulatory changes are being implemented, such as bans on certain types of single-use plastic products in various jurisdictions like Canada (from December 2022), France (phased introduction from 1 January 2021) and the UK (from October 2023). A deposit return scheme for drinks containers is also under review in the UK with a potential introduction from 2025 (and implementation currently scheduled for August 2023 in Scotland).
Thinking strategically about plastics
Tax and regulations are policy levers that governments can use to encourage changes in behaviour towards more sustainable practices. Businesses must keep up to speed with the evolving tax and regulatory landscape and many have also made voluntary commitments to increasing the percentage of recycled content in their packaging. Thinking strategically about plastic packaging is becoming increasingly important. Some actions that businesses can consider include:
1. Embed PPT and EPR requirements into existing processes to support ongoing compliance e.g. incorporate requests for packaging information into procurement processes, and enhance systems capability for data capture, reporting and measurement (solutions range from large enterprise software providers to more boutique players).
2. Wherever you are in the value chain, map your plastics footprint, including on-site waste, own product packaging and plastics in the value chain.
3. Assess how to reduce plastic packaging e.g. is there a plastic-free option?, could a different type of plastic be used?, could there be a reusable solution?, could packaging be collected?, and what key performance indicators is the business committed to and place on its suppliers?
Deloitte, April 11, 2023.