04 - Setting the Benchmark: Lithuania's Pioneering Deposit Return Scheme

In this episode, Harald Henriksen, Head of TOMRA Collections, takes listeners through a TOMRA first – and a global first – 100 days to help rid a country of their plastic beverage container litter.   

Due to TOMRA’s level of experience, high-performing service, and unparalleled digital solutions, the Lithuanian government chose us to implement a national Deposit Return Scheme (one of the most effective solutions to plastic waste litter). Harald explains how the system works, as well as the impact that it has had on the Lithuanian public, and key stakeholders. 

Listen to the episode below, or use your favourite platform (Apple Podcast, Spotify, Google Podcasts)

Show Notes

• Why is Lithuania a front runner in waste management? [04:04] 

• How Lithuanian system made it possible? [06:26] 

• What according to Harald, makes a well-functioning deposit system? [09:56] 

• 360 flow technology explained. [12:11] 

• Linear economy vs Circular economy as explained by Herald. [14:16] 

• Visible changes post DRS introduction in Lithuania. [17:42] 

• What is the critical success factor in waste management, for policymakers? [22:38] 

• How retailers can benefit from Deposit Return Scheme. [25:19] 

• Final thought. [26:19] 

Transcript

Vanessa: Welcome to TOMRA talks circular, where we explore how businesses, municipalities and governments are collaborating towards a Circular Economy. In this podcast, listeners will learn about a global first. Five years ago, The Federal Government of Lithuania made the environment a national priority and launched a national Deposit Return Scheme. By its third year 56,000 tons of plastic beverage containers or 1.5 trillion beverage containers have been collected. That is the equivalent to six Eiffel towers. And not only this, it has exceeded its 2025 targets and it only takes nine people to administer the system.  

I am Vanessa Lorenz and our guest today to discuss this game changing waste management approach is Harald Henricksen, head of TOMRA collections. Harald, welcome.  

Harald: Thank you, Vanessa. Thanks for having me.  

Vanessa: Absolute pleasure.  

Vanessa: Harald, five years ago Lithuania launched a government led national deposit return scheme, which comprises two main areas that is collection and recycling of largely plastic beverage. What was TOMRA´s part in that? 

Harald: Yeah. The government chose what we call the return to retail collection model, meaning that grocery stores selling beverage containers must also take back the used containers for recycling. After a public tender process TOMRA was selected, to provide the reverse vending solutions for the complete the Deposit Return Scheme in Lithuania and that was a real honor to be appointed for such an important task. So TOMRA´s part in this was to automate the return of containers by rolling out our solutions, with a very short deadline of approximately 100 days to establish this state-of-the-art deposit system. And in Lithuania the annual volume or beverage containers is around 600 million and it's a combination of glass, plastic and metal beverage containers which is part of then this mandatory deposit system many of the stores because this is returned to retail meaning that you take the container the empty container back to the stores and many of the stores didn't really have room for a reverse vending solution so part of our project was also to build and deliver 350 kiosks where everything was built from scratch in factories in Estonia. Hundreds of workers working seven days a week which built warm waterproof easily transportable small houses, plug and play for electricity and Internet connection it was a huge project, but then we had people from all Nordic countries helping us. Also, we have told me sorting products in in plastic fiber plant in Lithuania and we established TOMRA Lithuania to always be close to the customer and consumer which we usually do when we have to renew country so today, we have around 40 people in TOMRA Lithuania     collection system doing service and maintenance, so forth. 

Vanessa: Right. I mean it's extraordinary case study and 100 days 350 kiosk is just phenomenal. It's a fantastic story, I've seen the video. This is just such a shining testimony of the power of great leadership, isn't it? And in fact there's this Lithuanian Bureau association which is a key supporter is quoted as saying that we can be proud of our deposit system which brings us closer to the Lithuania we want to see, cleaner, more beautiful and more modern country. Does this put this way Lithuanians around the front runners in the EU now, do you think? 

Harald: Yeah, I would say they are definitely the front runners in the EU. At least now over the last ten years and the first of many that will make DRS the mainstream approach in Europe, I believe. A political decision is needed to establish the deposit legislation, countries like Norway, Sweden, Denmark, Finland in the 80s and 90s, Netherlands, Germany, Estonia in the early 2000 and then Lithuania launched their system in February 2016 which, we see as the first in a wave of European Countries introducing national deposit systems because of the requirements of the European Union. So I would definitely say that Lithuania is the frontrunner. Also, actually this was a completely new. this sign of assistance, especially the financial part of the system, where the investment of the RVM infrastructure is taken by TOMRA. In this case retailers received the machines free of charge including service, including maintenance, data administration, digital tools and TOMRA then the recuperate its investment via fee received per the bottle collected. Then this week all all inclusive throughput arrangements. So this is this was in a way really new and Lithuania now front runner in that kind of model.

 Vanessa: Right, it's quite a unique model, isn´t it?  

Harald: It's unique model. You know you have something similar in the in the US but that's per retailer. This was actually the first where the setup was with the state or with a separate one organization in the country. So that was completely new. 

Vanessa: There was a survey conducted quite recently that indicated that consumers had seen a decrease in the amount of garbage and parks and lakes and other natural places visited by people. I mean for a country to do this in 100 days it's quite remarkable. I know that it took 100 days to roll everything out. Could you just go a little bit into that, you said perhaps into the structure of how this rollout was done? 

Harald: First of all how the system works just a few words on you know what deposit system for those that don't really know the details of that so so in this case when a consumer buys a beverage in a recyclable bottle or container in Lithuania, they pay them 10 euro cent extra which is held back in a sort of a trust fund until the consumer returns the container and then get the €0.10 cents paid back so in a way the consumer buys the contents, but only borrows the bottle. So that's the basic of the deposit system and then it's based on a political decision and main players in the system in in Lithuania and in most countries is first of all the beverage producers, which are making the deposit package with a deposit logo, charging the deposit of 10 euro cents for each sold package and then you have the retailers, when you have a return to retail solution, which is of course selling the product and taking back the beverage container then they container from the consumer and then returning the deposit amount and also in Lithuania and in most most countries you have a deposit system operator which is running the deposit system and this was in Lithuania established by different associations. Brewers association, natural water, mineral water association and then the retail association, which are responsible for the data management, the logistics, the clearing of the posits, marketing and also to educate the different stakeholders. Just to understand how the system runs financially as well then the sources of income are threefold. It includes the redeem deposits meaning if you buy a bottle, pay deposit and you throw away the bottle, then you are actually financing the system because you don't get your deposit back that's. The redeem deposits.  

Vanessa: Of course a lot of people can forget to, also we get refund.  

Exactly.  

Harald: Exactly, and also you have the value of the material because the collected material, glass aluminum, plastic has a value and then the third part is the administration fee, which is paid by the beverage producers. So, so this sort of makes up the whole system. 

Vanessa: Right. And of course you can have everything in place but you've got to get consumers educated to actually carry out this process, which you know if you've never had it before, it is a process you have to keep your bottles for start, not throw them away you need to take them to a certain place and then you need to stick them in a hole and then you get a refund and then you had to get a refund. It was there a lot of, what was their consumers response? They get it did it take a lot of effort and time to get them over the line on this?  

Harald: Well, I think that you know that's actually one of the reasons why Lithuania is very good showcase because it was extremely positive feedback from the consumers. So already at the end of 2016 and that was the year it was launched I still remember the number 99.8% of the all Lithuanians were aware of the system and in this survey with already 90% of everyone had used it at least once and close to 80% of population reported that they believe that deposit system is good and necessary and I also recently I read that poll from last year that showed that 98% of the responsibility that deposit answer is useful. So a good way of measuring success in the deposit system is to look at return rates. So before the introduction of the deposit scheme, only one third of the plastic models were returned. and approximately 75%, at the end of the first year, and in 92% at the end of the second year of all plastic containers that were solved were actually returned. 

Vanessa: It's amazing, two years you can clean up a country of beverage containers. I mean choosing a retail vending machine vendor what was the tender selection criteria out of interest. What was unique about the specific machines over the competition do you think? 

Harald: Well as I said we were chosen to deliver all the machines, to all the stores in the whole country so and there was different selection criterias. But we were chosen due to our national experience with successful the systems, because we are the leader in those markets and of course it was a very short time as well so our ability to roll out and implement the solution in this short time also counted lot in addition to high performing service and maintenance setup and then because of all the different store layouts, it was important to have the diversity of products which we have for a mix of low medium and high volume stores because different retail stores take back different amounts of containers and then you have the high speed, the high capacity, the reliability of the machines which for our case was based on what we  call the flow technology which was 360 degrees reading the cameras and then, we also saw that our digital solutions made the  offer attractive among other things it's what we call the TOMRA connect backbone which is the IT infrastructure where all machines are connected to the cloud enabling full control over the top and then of course that helps to have an unbeatable uptime of all the machines and when we talk about return rates and collection rates the machine has to be up and running. So that's why the uptime is extremely important for a country to achieve the collection targets and recycling targets.  

Vanessa: Can you just unpack at this 360 flow technology? Explain what that is? 

Harald: yeah. So, by 360 we mean that there's circular reading cameras in the machine, so this means that you actually don't need to rotate the bottle to read the barcode and to read in any marking and it makes the machine lot faster it's easier for the consumer to use. The machine can then also accept all different kinds of shapes you know, not only run bottles that needs to be rotated but flat bottles or square cartoons and so forth. It's really really good technology and very easy to use for the consumer.  

Vanessa: And you can read what's in the plastic material itself?  

Harald: Well, we we actually don't do that. We, we read the barcode and we read the the security mark or the marking. It's also possible to sort based on the plastic type and so forth. We have, we do that in some markets but we don't do that in Lithuania near where you have the market.  

Vanessa: Right, out of interest the local waste management companies do they have to make many adjustments to fit in with this national scheme? 

Harald: Yeah, I think I have a general answer to that because I think that's fairly the same in most countries that when you introduce a national DRS, deposit return scheme all stakeholders will have to make some adjustments, this includes retailers which we've talked about beverage industry, but also waste management company. So I think we have to remember that changes had to be made the reason for implementing the deposit system in the first place was to satisfy new collection and recycling targets coming up. We know that deposit system show unmatched performances on high collection rates and high quality recycling. So the traditional waste management sector has a definitely a vital role play in creating circular economy, because that's what we're talking about this is about meeting in circular economy setup as we describe Lithuania. So traditionally what happens is of course that collected materials are disposed of at the end of the use which is, you know linear economy. While a circular economy is aiming at recovery and reprocessing of high-quality materials as a valuable feedstock for producing new materials and this means a change in perception. So waste is not waste anymore but valuable resources when it's sorted, reprocessed and reused. My view is that the future waste management sector will need to be focused on resource management. Maybe some companies will actually rename themselves to  resource management and step up larger so you can see in some countries is actually in some countries have to adapt to make it work in a good way and one last comment is that there is a requirement also from European Union now is that by 2035 only 10% or less of all waste can be landfill and this will really require massive changes in the waste management sector or the resource management sector. 

Vanessa: Like the new label resource management, that would be so much more aspirational and it's so true. 

Harald: It's a bit more positive in a way you know where you want it so waste and talk about resources instead. 

Vanessa: Absolutely.  

And let's talk about results, so far. So already your targets have been met and even the 2025 times have been exceeded. So what have the results being and how would they exceeded to such an extent? This is a message for everybody in the world to hear. 

Harald: Yeah of course our target has been to support the deposit organization in Lithuania to achieve their targets, but according to the single use plastic directive from European Union, every member state has a target on collecting 77% of all plastic beverage containers in 2025 and 90% in 2021. And in Lithuania this was already achieved in 2017, the second year of operation of the scheme, really really impressive. And as you said I think in the interest well in the first three years of operation, 1.5 billion beverage containers was collected, preventing 152000 tons of CO2 emission. It's really amazing actually to satisfy the targets in that short time. 

Vanessa: That's my next question actually, carbon dioxide emissions, we haven't talked about that it has enormous repercussions on emissions savings. Can you talk a little bit about what has been saved here?  

Harald: Yeah, also if you look at both the benefits for the environment and the emission savings. So what this is also a sort of a start by what we see generally when that DRS is implemented is that when you introduce a high performing system you will always see that beverage packaging will not pollute the surroundings anymore. You will see that littering of the materials also obviously reduced. so not only the beverage containers which are part of the system but also all the material will largely disappear from nature, because people will in general show more responsibility towards reducing littering and also sorting a waste in general. So, and in this consumer survey that was conducted in 2018, 95% of the consumers in Lithuania said that the amount of garbage in parks and lakes and around in nature decreased visibly after the introduction of the DRS. So, it's really a strong example of circular economy. Recycling containers are transformed as I said into high quality raw materials we can produce new packaging. Glass and aluminum because you have a comprehensive system it's not only plastic, but it's also glass and they there can be recycled unlimited number of times I'm plastic can also be recycled many many times, which is saving energy, saving all the natural resources and then also reducing the CO2 emissions as I said so all extremely. 

Vanessa: And this must have had a huge effect on the incinerators, the landfill, and massive impact on that too, right? 

Harald: Definitely, you take away material from landfills and you don't really want to incinerate valuable material. why do you want to burn it when you can actually use it at as feedstock. 

Vanessa: Absolutely. Let's just look at the timeline again, because it is super fast and means that you guys can do it others can do it. A deposit law was passed through parliament in 2014. Then a return vending machine provided was agreed on by public tender. Then the rollout of 1000 vending machines took place and the whole system was officially launched by the ministry of environment in 2016, which mandated that all beverage manufacturers and importers, with few exceptions were, obliged to participate in the deposit system. So can this be a blueprint or is there any reason why this shouldn't be a blueprint for other countries? 

Harald: No, I would say definitely yes, to that this can be a blueprint and it is in a way you know it's over delivering, on, its targets, it's highly popular with the population still now, after many years you know it's been popular every year since the start and we know that governments and waste management specialists from many countries has visited between Lithuania. So there's been delegations from Australia, China France Scotland and others have all been to Lithuania to learn more about the implementation and how they have managed to deliver on the targets you know within such a short time and in a positive way. So, actually just a couple of years after the implementation in Lithuania yeah probably less than two years New South Wales in Australia implemented a similar system with a very short timeline, same kind of financial sector where TOMRA invested in all RVMs and outdoor kiosks and where we're also running the logistics and sorting of the material together with a joint venture partner, clean away. So it's a sort of a different system, it's still very similar retailers not participate but it's still a one network corporate type of approach which is a good way of running it down, 1st of February next year neighboring country Latvia will also implement similar system as Lithuania based on the approach. So yeah, back to you  previous question on whether Lithuania has been the front runner, yeah that´s definitely the case.

Vanessa: Looks like Eastern Europe is becoming a front runner. What about China? China´s delegates have been coming to Lithuania, are they interested in taking up the system do you think?  

Harald: Yeah, a lot is going on in China. Of Course, China is huge and is more region by region and they have a different approach in some way or somewhere let's say modern focused more on circular economy and environmental issues than others, but China looking into this and of course we are in China so we are also consulting as good as we can to help the Chinese local governments to hopefully in the future sometime implement the best possible model there.  

Vanessa: For policymakers around the world, what would you say with the most critical success factors?  

Harald: Yeah, I think you need to have a high performing deposit system, to have it successful. So it's mainly for elements and this and Lithuania are actually satisfying all of this so one is the performance of the system and a meaningful deposit value is part of that and a minimum collection target for all containers. So you need to have a target to aim for and a target could be a staggering one like you start with 70% first year 90% the third year or something like that, to be able to satisfy it and have success. And then on the deposit value, you need to give a financial value to the empty beverage container that indicates that it has value for the society, and then it's treated like a resource and not waste. And the deposit value is different from country to country because setting the actual value you have to consider the purchasing power in respective markets will €10 cents in Lithuania is a real incentive high enough to motivate to return, so that's performance is number one is convenience. So to make high performing successful DRS it has to be easy to understand the redemption system accessible for all users, visual marketing on the bottles, clear definition of which containers and beverages are part of the system. Yeah, that and then the third one is the system integrity, where actually you need to have trust in the system through transparent management and the data driven clearing house reliable technology, where we can fully trust the collection technology. Because it's a lot of money flowing through the system. And we see that the best systems are run by one centralized non for profit organization, which is owned by different stakeholders like beverage industry and retailers and the fourth one is producer responsibility, where the beverage producers finance and invest into the system, so that the system is financed by a combination of as I said earlier and redeemed deposits, commodity revenue and also EPR fees extended producer responsibility so they this will make up the perfect system and I think Lithuania is good example of that 

Vanessa: And of course, this has massive benefits for the retailers. The managing director of the Lithuanian retailer’s association was quoted in the Scotsman as saying, I can say with absolute confidence the deposit return scheme was the right thing to do. So with this said what is the biggest benefit for retailers? 

Harald: Well, retailers are through this participating in closing the loop you know contributing to reducing littering and increase recycling. I know they feel proud about making an impact on the plastic pollution problem. So retailers are really at the heart of we call this clean loop recycling. It’s a opportunity for them to show that they care about the same thing as their customers consumers do. It's also an opportunity for them to drive profitability through increased footfall from satisfied recycling customers and I also remember one of the interviews you know what start of the system in Lithuania where retailers said that people will come back to our shop with their deposit bottles and then buy new products again so this is a big benefit for our business. 

Vanessa: Herald, thank you it's been a real pleasure our lead listeners with one last thought, “in June an open letter by a plastic planet to the G7 summit called for a globally consistent response to the plastic crisis with more than 70 government supported. Lithuania maybe a small population of only 2.8 million but his political leadership has produced bold and game changing precedent for the future just as a German and Norwegian governments have done”. Let's hope more governments will find the confidence to implement approaches like this with more urgency. To learn more about how to roll out deposit return scheme at a national level please contact TOMRA at tomra.com. That's it for now. 

Harald: Thank you. Vanessa!