02 - DRS is on the rise

When we give plastic a value, we help ensure that it is treated as a resource that can be used again and again. This is why deposit return systems (DRS) work to greatly accelerate the circularity of beverage containers. In this episode of TOMRA Talks Circular, we chat to Michael Löwe, VP Public Affairs and Head of System Design at TOMRA, about what makes this system so successful, and how it is being implemented around the world.  

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

Show Notes

• What is DRS? [02:07] 

• Restrictions you find collection intelligent collections through RVM reverse vending machines on the streets. [06:13] 

• Sweden was the 1st in Europe to implement the deposit. [08:18] 

• In the future, this is could become a kind of a common packaging. [15:10] 

• So that's a challenge to those systems that are gearing up to start up, beat the 98%. [18:44] 

• The extended producer responsibility for the financing. [20:47] 

• Communication with the consumer. [22:45] 

• The question is what means successful? [23:44] 

• The convenience of the return system. [24:32] 

• if it's extremely high and deposit value, but you have a bad infrastructure for the collection. [32:03]

Transcript

Mithu: Welcome to Tomra Talks Circular where we explore how businesses, municipalities and governments are collaborating towards a circular economy, my name is Mithu Mohren. Over the last few decades plastic has proven itself to be very useful, even necessary if used properly. Its durability protects its contents from toxic substances among other things, It's lightweight and actually reduces carbon footprint when it comes to transportation .But as the world looks to find solutions to slow the tide on climate change, several culprits have been named as to how we actually landed up in this state of affairs at all one of those culprits that has been called out is plastic to be fair though plastic in itself is not the problem here. The problem, as we mentioned several times in this program is plastic waste and how we manage it. So how do we manage it?
 
One tried and true solution is a system that was first put into place in the 1970s and that is the deposit return, the good news is that implementation of these systems is on the rise globally. Why is that? Joining me today is an expert that can help us understand that question. Michael Loeve, vice president of public affairs and head of system design at TOMRA, has been working with governments all over the world, yet the right models of DRS in place and their specific regions for almost 30 years. 
And he doesn't even look it until fairly recently his focus has been in Europe. But that has changed and I'm hoping Michael can tell us why, Michelle, welcome to the program. 
 
Michael: Thanks for having me today and thanks for the compliment.
 
Mithu: It's a fact, so Michelle, let's get started, just a very quick reminder. What is DRS? We've had it a few times on the show, but just as a quick reminder. 
 
Michael: Right, and I guess it has been explained also but anyhow the DRS is deposit return scheme in some other markets they might call it container deposit scheme or even bottle Bill which is very common in the US. 
 
Mithu: Deposit return system right as well.  
 
Michael: Or deposit return system for sure. 
 
Mithu: Yeah OK good. 
 
Michael: And just to continue the concept of the deposit is more or less 150 years old for beverage containers, it started in Sweden where a brewery wanted to motivate its customers to return the bottles to be reused and this motivation came through the deposit so the deposit amount reflected the value of the bottle. 
In consequence, if the consumer didn't return the bottle, then the brewery could use the deposit to buy new content. That's the kind of the origin of a deposit, the address, the DRS we're now addressing today is we will talk about single use containers or one way containers which are only used one time so unfortunately, a lot of those single use containers they do not find their way to a proper waste disposal in nature, be it terrestrial or marine litter such a DRS for single use containers must be legislated.They are not as a deposit solution for refillable which are normally voluntary setup between industry and retail. 
 
The deposit for single use containers is an artificial set value which should be high enough to motivate consumers to return. Then finally their containers and when consumers buy beverage in an eligible deposit container, then they have to pay a small extra amount. The deposit, which then will ultimately be fully reimbursed when returning the containers to dedicated collection points. 
 
Mithu: And this is an important point I think, and it's often confused, so this is a deposit. It's not a tax, It's not a rebate, it's not a refund, It is a deposit. 
 
Michael: Absolutely, absolutely and some markets do an integration of the deposit and the product price.Then it's called a kind of a refund. This is what we see in the in Australia, but the clear recommendation is to have it a separate amount, which is clearly indicated to the consumer, be it on the shelf, but also in the final receipt which you receive at the checkout and this amount should be also fully reimbursed when you return the container and the kids are going up, it's you pay it, you get it back so it's the only thing it's the trigger point. The motivation to really return the container.
 
Mithu: and this happens everywhere.
 
Michael: And not everywhere we have some markets as set in in Australia, it's an integrated amount, so it's not really visible, it's set. It contains a $0.10 refund. But it's not obvious on the receipt and we have some markets in Canada where you pay the full amount, but then you only get a portion of the deposit back. It's called the half back system and this system is then using half of the deposit amount, which remains with the organization to finance the operations of the system.
 
Mithu: OK, so that's not ideal, I guess.
 
Michael: No, the clear recommendation is to have it as a separate amount fully reimbursable. 
 
Mithu: OK, good. 
 
Michael: Right, no, and I think talking about deposit so you pay deposit when you pay, the price and the product and where to get the money back and those are then the collection points, and you can find different kinds of collection points. You can have them at retail sites which are called then a return-to-return model, but you also have markets where you have dedicated depots, even in some way. 
Restrictions you find collection intelligent collections through RVM reverse vending machines on the streets. This is for example in Australia, in New South Wales. We have a kiosk on the street and there you can redeem your containers for possible reimbursement. I just focused for the time being on the automated collection, but for sure in many markets you also have in Parallel manual collection. 
So you go to small stores, kiosks, petrol stations where you can return your containers and then it's a manual acceptance. So somebody is standing there at the cash out, you give the container, it's inspected, you get your refund, and so it's for the consumer. It's kind of the same thing you can do. 
 
Mithu: OK, OK I haven't seen that here in Germany, but I'm sure it exists.
 
Michael: Yes, absolutely. 
 
Mithu: OK, so we've mentioned, or you've mentioned some of the the countries and regions that the systems are in place. 
 
Mithu: Can you give us a good overview of where we might? Come in contact. 
 
Michael: Yeah absolutely, so I think today and now we're again just talking about the DRS for single use backpacks. You can find almost 50 of such schemes throughout the world to be really precise, It's 49, actually, but it's growing trend. 
 
Mithu: It's about precision here, yeah? 
 
Michael: Yes, and so the first DRS on single use packs started back in the 1970s in British Columbia and Canada, and so it was number one and #2 in Canada and #3 was already in the US that was implemented in 1972 in Oregon, uh, then the first outside US and Canada was number I think #13 on the list, which was Australia, so in SA they implemented the deposit system in 1977 and then looking into Europe. 
 
Uh, Sweden was the 1st in Europe to implement the deposit and it started in 1984. At that time, it was only focusing on cans to be part of the deposit system and then in 1994 it was advanced and expanded to also cover PT bottles and in the coming years and in decades, we see a lot of more there as coming into play. So, in the in the first decade from 1779, it was total of eight deposit systems being implemented. 
 
From the 80s it was eight again and also for the 90s. Then there was a slight growth in in 2000, so from 2000 to 2009 we had a total of 10 and from 2010 to 2019 we had 11 deposit systems and just looking at now at this decade we have already established 4 new systems and it can be expected and we will hopefully talk about this a little later that more are coming into play looking now at the distribution just to get an overview. We have a total of 12 deposit systems in Canada, we have a total of 10 in the US, Australia is currently at 6 deposit systems, Europe and the after, we are at 13 and some other markets we have some small islands which implemented deposit systems. It's purely manual and so, but it's working, and they reached the targets they intended to reach. Return rates reduction littering so we have eight of those smaller jurisdictions where you can find deposits and even there is a growing trend just to get hold of the material. 
 
Mithu: OK, so get hold of the material and reduce litter I'm guessing. 
 
Michael: Oh absolutely, absolutely. 
 
Mithu: OK.
 
Michael: Right and just looking at 2022, there were three additional markets coming into play in Europe. That was Slovakia, Latvia and Malta. 
 
Mithu: OK, you've just mentioned the different regions and even the islands, so I'm guessing this is not a one-size-fits-all system. 
 
Michael: No, absolutely not, so there is definitely no one system which is exactly the same as the other. There are always some nuances, some differences. so there are some points which differentiate the one system from all the others, and one finds differences with regards to deposit value so. What is the deposit value the height of the value of the deposit?But also is it a flat rate for all containers covered?Is there a differentiation, maybe by packaging size, in some markets we have small deposit values for small containers.and higher deposit values for larger containers, which would make sense in a deposit system for refillable because there you can assume that a bigger container has a higher value in in acquisition. 
 
Hence you need a higher price on the deposit value for single use containers, it's rather about the motivation and the consumption. So small containers, they're mainly consumed or often consumed away from home, so it would make a lot of sense to have a higher motivation to carry on those containers and get them to dedicated locations for the return. Then for the big containers which you consume at home, there is easy to store and to collect them for redemption. So, it's kind of, uh, opposite to how it would probably work better, but that's the case. Today, but many markets now are looking into deposits, they're really looking into flat rates or flat deposit values, other solutions for differentiations could be beverage categories covered. 
 
So, it's the classical ones. It's soft drinks, it's beer. Now more and more fruit juices and nectars. Some countries are looking into alcoholic drinks, wines, spirits, liquors. Then it's about the packaging material covered. I talked about Sweden, which started with cancer, only advanced to PT, but still, they're not looking into the glass. So, you have a set of different systems, Netherlands for example. They started only with the large PT bottles, then in 2021 they advanced it to small PT bottles and just this year in April they will also intake the cans. But still not considering glass, Germany has glass as well Finland as well, so it's there is also differentiation by that. 
 
Mithu: And why is that, why are these differentiations, where do they exist? 
 
Michael: It's in some markets, especially now looking into new models, some are of the opinion that some of the systems work fairly well, especially on the on the glass side. So, you have the infrastructure for the collection of glass, mainly at drop off locations like Igloos, and those reach fairly good results and hence the question is, do we really need to integrate? On the other hand, one could say, the bigger the that the kind of universe of containers, of course. This also is something to leverage on, you have kind of economies of scale. 
 
You have aromatization through more containers, so there are pros and cons and all jurisdictions today and all the ones looking into deposits going forward, it's really, it's about plastics. There is no doubt plastic is part of this and cats and glass could be a question now in the in the recent years it's also tetra pack or liquid paperboard Tetra is brand but liquid paper boards, which are also looked into, and we see trends also in in direction of liquid pet boards. It's jurisdictions like Quebec, which is now up for renewal this year. They will take liquid paperboard into consideration, and we are working in the market in Latin, which is also looking at in liquid paperboard as being part of the considered containers, so maybe in the future, this could become a kind of a common packaging.Also being part of the deposit system.
 
Just, uh, just to finish the kind of the list of differentiation means it could be managed, operated by a central organization, for example. So, you have one entity which is fully taken care of by the management. The operation of the system, but you can also have decentralized systems where there is no one central organization that might have more players or maybe you have no central player at all which for sure requires then some clear governance, some clear kind of rule, rules for all the players participating in the market. 
 
Financing to mention one more of the system could also vary and there are some more variations, so not one system is the same as the other.Uh, in Europe, for example, we have a clear return to retail mandate, so retailers selling the beverages they're also obligated to take the eligible containers then back and of course there you might have some exemptions with regards to take back obligations. 
Germany for example. If you look at exemptions, it's 200 square meter stores and below. They are only obligated to take back the packaging materials and the brands they are selling. So if I'm in a small shop, a kiosk, for example, selling a coke can, then I'm obligated to take this Coke can back, but I don't need to take back a beer can. Then we have stores above 200 square meters and they must take back all the materials they are selling with no limits to the brands. What does that mean? 
 
So, I'm selling PT water one brand by doing that being above 200 square meters. Then I have to accept all other plastic bottles. It could be a private label from another retailer, it could be a global Brand. I need to take back everything, but I don't need to take back cans and glass if I'm not selling it. It's only really focusing on the material of the packaging. 
 
Mithu: OK
 
Michael: That's the kind of the differentiation and just to add to the German just to kind of explain a little more. We have around 130,000 connection points, out of which only 30 thousand are equipped with RVM technology and the total of RVM technology is around 45000 machines and due to the decentralized system setup, the automated return ratio is difficult to assume because we don't have the numbers. There is no overview of sales versus return and but it's said that the return rate in Germany is around 98%, so 98 only two out of 100 containers which are sold in single use in Germany are not returned back to the system. 
 
Mithu: Any other system that can beat that or does at least as well.
 
Michael: No, 98% is unbeatable so far, and of course we're looking for a new system to come into play which is beating 98%. But, uh, a lot. A lot of the of the well-designed systems reach 90% and more. 
 
Mithu: So that's a challenge to those systems that are gearing up to start up, beat the 98%. 
 
Michael: That's yeah.
 
Mithu: So, Michelle, have you talked about the differences a little bit earlier, can you, there must be or are there guidelines on how to set up deposit return system? 
 
Michael: Thanks for asking, yes and it's coming from Tomra. The White Paper, which is called rewarding recycling, It was released in early 2021 and here it really, uh, describes how to ideally set up DRS to reach best performance. And actually, it, uh, kind of communicates for principals and a total of 12 elements which should be applied together so it's not, uh, like a wish list where one can pick from and say one and this one and this one no and it's really recommended to apply all those key elements and this then will lead to a good solution which will address global waste challenges and advance a circular economy and just to highlight the principles. It's about performance.Then it's talking about producer responsibility. 
 
It's talking about convenience and system integrity, and each of those of those principles is then clustered in three elements where we talk about the scope of the containers covered the deposit value targets on return rate and then the producer responsibility is looking into the responsibility. The extended producer responsibility for the financing, It's about the reinvestment of the unredeemed deposit and the material value, its requirements on the recycled content. 
 
Then we have the convenience which looks at the convenient redemption for the consumers or convenience in the return. It's about the and we talked about this already about the separately charged and fully reimbursed deposit, and also about clear visual marking and marking as such for the consumer also so, at this of course has different purposes not only for the consumer, but it's also for the take back, So a container should carry a visual rather visual logo than written information.Uh, for example in Croatia previous years it was in small letters in Croatian language you notice that this is a deposit container difficult to understand for every tourist for everybody who's not speaking the language, now they're using a visual logo. This is also kind of advertised on the shelves, etc., so that everybody knows this is a deposit container.This is a signal for the consumer when holding and owning or having the. 
 
Container but also for manual returns. So, if you go to a manual store then the manual store, they need to somehow prove the legibility of the container and this could well and easily be done through the existence of the marking.Last, at least, talking about system integrity. Then it's we are promoting definitely a centralized operated system. It requires reporting and consumer communication reporting to the government communication with the consumer and then also government enforcement is needed. So, what happens if targets, for example those which are set, are not met? There must be consequences and so on, so if you if you take all this into consideration and look into the well working systems of this world, then there is no need to develop something really from scratch kind of piggyback on the achievements and the and the already run through kind of diseases of the of the other mark. 
 
Mithu: OK, but and this all sounds good and logical, and you make it sound easy, but I'm guessing it's not, but there are 12 elements, 12, that's a lot to get together and put into a system, I think. What would you say is absolutely necessary, This is, these are things you absolutely cannot do without to make a system successful. 
 
Michael: OK, successful, the question is what means successful? I guess we're saying that DRS is comprehensive, is reaching the high targets with best effects for the environment and also the limited resources and this at a moderate or acceptable price. If that is the gun of the understanding about success. 
 
Mithu: Let's define it that way. 
 
Michael: Yes, and I would say it's probably the highest impact on the return rate and but there's all the consequences for the environment taking out of the of the environment all the littering and so on is definitely coming from 2 elements. It's one the deposit value and two the convenience of the return system so the deposit value should be high enough to motivate the majority of the consumers to treat packaging as a resource rather than trash, enhance return the containers after the consumption. 
 
Mithu: To really make it worth their while to bring it back. 
 
Michael: Absolutely, absolutely right and the case of redemption data. They show that meaningful deposit level really effectively drives the container returns and taking them out of the waste stream and bringing it into the recycling stream and so one could say the higher the deposit amount placed on the beverage container. The higher the collection rate, but of course one needs to have a kind of a balanced amount. It should not go for the euro and above that is definitely not needed. 
 
So, Germany for example, uh, they're using a 25-euro cents flat deposit for all single use containers and but this, as said before reaching this world class result of 98% in return rate. And I said before it's transparent it's not centralized system, so this assumption is an assumption which is not coming from us, but it's assumed by insiders and by the standard setting organization. 
 
So, we have somebody who talked about standards for all players to cope with values setting for different sizes, different categories, different materials, but $0.25 is definitely on the on the higher end. Whereas on the other side, looking at the deposit systems in the US, there one finds the lowest deposit values in the world, which are €5 cents $5 cents, which is even less than five-euro cents and as we also said those systems, most of them have been established and not been renewed since the 70s and 80s of last century. So, at that time, five cents were meaningful to the consumer, but due to inflation and the kind of the value kind of degraded those low values than lead to the fact that so most of the US systems. There they really provide low performance if you compare them in the league of the deposit markets, OK, now coming to the second important driver for a well performing deposit system and that is the return location. It should be easy and convenient to reach. 
 
So, this is why we are saying that the return to retail model and not say we see it in the results is so successful. It means no extra trips for the consumers. They can simply combine the shopping, so they do the shopping and then do the recycling at the same time and the normal order is you step into the market. Then in the entrance area, now it's very common to have recycling in the entrance area you redeem your recyclables. You get your receipt, you get into the shop, you do the shopping, and then at the checkout you present your receipt and then you can kind of pay with your deposit part of your purchase. However, there is no obligation to buy products for the deposit value. 
 
So, if you only want to redeem, you can also go in present your receipt, get your money and off your and the combination of the of the shopping and the recycling. What does that mean? That means, of course, it has a benefit for the environment because there is no extra trip to be done. That means no extra traffic, no extra missions and it's not only the beverage industry producing the beverages and seeing news packs which might end up in nature, but it's also the retailers being part of the challenge as they are selling the beverages to the consumers and therefore, they also should be somehow involved in realizing a circular economy for the beverage containers being involved through the collection of the containers. This is not the case everywhere and we talked about the different solutions that could be returned to retail, it could be a depot. In the US, for example, many of the connection points there are dedicated depots where people just have to drive to return the containers, so this is for sure then creates extra traffic those depots they are not set up in just or in such a dense network as the retail net. 
 
Mithu: So, they're outside of the retail stores, right? Not where they go to pick up groceries there's, It's a separate. 
 
Michael: They're separate, and of course they're also not in these posh areas where you have high rents. They're rather in the industrial zones, so you have to drive there you have to you, you will create extra admissions through that and it's not something you would normally combine with the shopping, so you have to go there just for the purpose of doing the recycling and then of course it's a question kind of a trade-off calculation about time spent about money spent for fuel against the amount you received back in deposit, so ultimately this will impact the overall return rate of the of the system, and this is what we see. 
 
So, it's a combination really of both its low deposit values in the US, it's a not too convenient or inconvenient collection infrastructure and that both leads them to the to the low return rates. Some are below 60% which is unfortunate, but that's the case because they are not designed the concept as such. The deposit works, but you need to adjust all the kind of all the possible level levers exactly to reach also the maximum from the system up to a certain extent, one can assume that one of the four mentioned key elements deposit or convenience can somehow compensate for. So for example, if the deposit is rather on the low level, but the return infrastructure is extremely dense and convenient. 
 
Then still one can assume that the return rate could be decently high and the other way around. So, if it's extremely high and deposit value, you have a bad infrastructure for the collection. Then you would rather consider going there, even though it's a longer way, but you get high amount of money back. But of course, none of those is kind of idle and therefore its ideal thing should be to find a balance between the deposit value and the intensity or density of the of the infrastructure. Yeah, I said those are the two probably most relevant elements on the of the 12 ones. 
Nevertheless, to really reach something successful, one should also take all the other ten in consideration and not fully neglect them, so you won't reach something just by having a high deposit value and good infrastructure. You would need to set targets and a lot of other things, kind of defined or recommended in the White Paper to really reach something long lasting, sustainable, viable. 
 
Mithu: But I think the beauty of these principles and elements is that yes, you need to take them all into consideration but because you can and should probably adjust them to local conditions, local situations. It's really something that a model that can be used throughout the world in some form and fashion. Michael, thank you so much for your time and explaining what is going on in DRS around the world today. 
We look forward to having you back in a couple of weeks to talk about what to expect in the future, both here in Europe and around the globe. 
 
Michael: Thank you me too. 
 
Mithu: If you've enjoyed this podcast, please leave us a rating, subscribe and turn on notifications to comment on this episode. Visit circular-economy.tomara.com/podcast.