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A European Commission directive expands corporate responsibility for recycling packaging products to reduce waste sent to landfills.
In the United Kingdom, which implemented the directive with new regulations earlier this year, companies that fail to comply with the law risk fines.
Risk managers should keep an eye on the regulations concerning waste packaging, according to Hilary Gallagher, coordinator of health, safety and the environment at Courtaulds P.L.C., a London-based diversified manufacturer.
The regulations are likely to become a major financial issue for some companies, Ms. Gallagher warned.
The U.K. law requires companies to ensure that ever greater amounts of packaging are recycled or retrieved to be reused. The legislation applies almost universally, from manufacturers of raw packaging materials to packaging manufacturers, as well as to users and retailers of any packaged goods.
Despite the potentially heavy fines, which have not yet been determined, companies may join programs that help industries comply with the law.
Under the British regulations, which were passed in March, all companies that handle more than 50 metric tons (110,000 pounds) of packaging materials a year or have revenues exceeding (British pounds) 5 million ($8.3 million) a year must register with the government-funded Environment Agency by the end of August and report how much packaging they use a year.
Companies must then ensure that they help meet the national targets for recovering used packaging and recycling established for each type of packaging material in the regulations. Materials include paper, glass, metals, plastic and wood.
The regulations "are immensely complex, and a lot of businesses have no idea what it means for them," noted Simon Paul, environmental issues manager for British Telecommunications P.L.C. in Swindon, Wiltshire.
"Many companies are only just waking up to the regulations and discovering that compliance with them is going to be very costly," said Allan Rickmann, environmental director at consulting firm Willis Corroon Ltd. in Abingdon, Oxfordshire.
The next few years, in particular, will be particularly burdensome in costs and management resources as companies "get to grips" with the regulations, said Mr. Rickmann.
But, in the long term, the regulations likely will be "effective in that they will make industry use less packaging," he predicted.
Others are more skeptical of the long-term benefits. Mr. Paul called the regulations "unworkable" and said they will be very costly for British industry. The regulations call for companies to ensure that used packaging is either recycled by the consumer or recover it themselves.
Most companies do not consider recycling of packaging a pressing environmental issue, such as energy use, he said. Trucks "trundling up and down the country collecting used packaging" may be more environmentally damaging than the packaging itself, he argues.
The U.K. regulations are exceptionally complex because they allocate differing levels of responsibility along the packaging chain. For example, companies that make components used in manufacturing a box would have a lesser obligation than those that sell the finished containers.
In many other European countries, responsibility lies chiefly with the manufacturers of consumer products. The consumer also undertakes a greater role in many European countries.
"The U.K. approach is different as we have put the onus on the whole chain, from raw material suppliers to manufacturers of packaging to the packaging fillers to the consumer," said Mr. Rickmann.
"Other E.U. countries have focused on a specific sector and have simpler regulations," agreed a spokesman for London-based Incpen, the Industry Council for Packaging & the Environment, an industry-backed special-interest group.
Under the U.K. regulations, the amount of packaging a company must recycle and retrieve-from customers or disposal areas, if necessary-depends on its role in the packaging chain as well as increasing national goals as stated in the E.C. directive.
The E.C. regulations set overall recycling and recovery targets for packaging that each country should reach by certain dates. By 1998, 38% of all packaging should be recovered and 7% recycled. These levels increase to 43% recovered by the year 2000 and 11% recycled; and in 2001 to 52% recovered and 16% recycled.
A formula accounting for companies' role in the packaging chain determines what percentage of packaging must be recycled and recovered according to its "activity obligation," or role in the chain.
Each year, starting this August, every company that handles more than 50 metric tons of packaging or has revenues exceeding (British pounds) 5 million ($8.3 million)-this threshold will be lowered to (British pounds) 1 million ($1.7 million) in 2000-must notify the Environment Agency of the estimated tonnage of packaging, broken down into different packaging materials, it uses/produces in a year.
The company's recycling obligation is then worked out by multiplying the amount of packaging handled by its activity obligation by the U.K. recycling target. Recovery obligation is assessed by the same method. The complexity of the regulations has left "people still scratching their heads despite endless seminars" on the subject, the Incpen spokesman said.
Traditional insurance coverage is not available for companies' exposure to fines, though companies can join "compliance programs." For a fee, these programs assume members' responsibility for meeting the recovery and recycling obligations.
Mr. Rickmann, whose company offers seminars and advice on the regulations, believes that most companies plan to join a compliance program.
Joining a program frees members from the risk of prosecution for non-compliance and represents the "lowest cost, least worry solution for most businesses," according to John Bell, chief executive of London-based Valpak Ltd., the largest compliance program, which has about 750 U.K. member companies.
The Labour government already has recognized the complexity of the rules and pledged to review the obligations as soon as data has been collected from companies later this year.
New Environment Minister Michael Meacher announced in June a modification and review of the Packaging Waste Regulations to ensure that the "share of the responsibility between the sectors in the packaging chain is fair."
He also warned industry that failure to take early action to achieve recycling and recovery would result in a tougher approach.