A Business Case for a Deposit Return Scheme for Kenya

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Introduction

Packaging is essential in reliably delivering products to consumers. This is not just for practical convenience but also to ensure product safety and quality.

Some packaging such as plastics, however, continues to be a major source of pollution in Kenya, negatively impacting the environment and having an adverse socio-economic effect on vulnerable communities of waste pickers who mainly recover these materials from the environment for recycling.

Evidence already shows that banning some packaging is not only essential but practical. Indeed, Kenya placed a national ban on plastic carrier bags in 2017 and all Single-Use-Plastics in national parks and other protected areas in 2020.

However, for some packaging such as plastic bottles, prohibition faces many practical challenges.

This document gives a business case for the establishment of a Deposit Return Scheme for certain types of packaging including plastic bottles to manage the runaway pollution in the country.

What exactly is a Deposit Return Scheme

Deposit Return Scheme or Deposit Refund Scheme, often abbreviated as DRS is a system where consumers pay a small fee when they make a purchase for a product on the premise that the fee will be refunded when the consumer returns the empty container that carried the product.

This system has been widely used for products packaged in glass such as sodas and beers in many countries for many decades. It is only in the last two decades that several governments have passed legislation for the system to cover beverage bottles in plastic, glass, and cans.

The system works on the foundation that if you create a financial incentive for consumers, they are likely to return the packaging, helping increase collection. This ensures higher recycling rates and stops materials leakage into the environment.

According to a report by Changing Markets Foundation, as of 2020, this system is legally in place in over 40 countries and jurisdictions around the world, including several states in the United States of America and most of Canada and Australia. More countries in the European Union including the United Kingdom and only except the Czech Republic, Bulgaria, and Italy are set to adopt this system as part of the EU’s Green New Deal before 2023. By then, almost a fifth of the global population will have DRS mandates.

Infographic Credit: Statista

The system, however, continues to be resisted in many developing countries, including Kenya. Led by the producers and the Business Member Organizations to which they belong, and enabled by a slew of green-washing Non-Governmental Organizations, the organizations continue to view such systems as a plan to further burden the cost of running businesses.

The industry also argues that the responsibility to manage waste is largely a government project and blames packaging pollution on weak waste management infrastructure and poor consumer behavior.

The Government of Kenya has also made no efforts to develop a DRS law and ongoing plans to introduce an Extended Producer Responsibility law fail to consider this as a solution.

In the long term, however, the adoption of a DRS system in Kenya is inevitable as the war on packaging pollution increases and the rest of the world adopts this model.

How Deposit Return Schemes works globally

There are two Deposit Return Scheme models that have been adopted around the world.

Europe tends to favor a return-to-store model while the United States and Canada both have bottle banks, depots, or special collection centers where consumers bring the empties. Research from Reloop Platform shows that more consumers prefer a return-to-store than collection centers by up to around 10%.

The schemes around the world adopt Manual-Take-Backs, Automated-Take-Backs, or a hybrid of the two. Under Manual-Take-Backs, the returned empties are received without the aid of any technology. This happens in most of Israel. On the other hand, Germany and Norway have one of the biggest installations of reverse automated machines. These machines are able to even sort, crush and compact the empties.

The deposit fee varies from country to country. In some countries, it is the government that sets the fee while in others it is the industry. For example, in Norway, a not-for-profit firm owned by the industry sets the fee while in Israel, it is decided in the law.

The fee varies from 0.06 Euros to 0.35 Euros for plastics. In a country like Germany, plastics have a higher deposit fee than glass because the latter is likely to be reused while plastics have a more adverse effect on the environment. Global Deposit Book has found out that the higher the deposit, the likely the container will be returned.

In some countries such as Estonia, Producer Responsibility Organizations are responsible for running the system. In other countries such as Hungary, municipalities run the system.

Most DRS are however run by not-for-profit organizations owned by the industry with government oversight.

Consumers are required to return non-contaminated containers for their deposits. Photo Credit: Pixabay

Case Studies – Germany

Even though several Canadian provinces and Australian states and 10 federal US states have legally adopted a DRS system, Germany with a population of 80 million, is the largest jurisdiction where this scheme is in place.

The country adopted this scheme in 2002 and all shops that sell beverages, are required to take back the bottles and return the deposit back to the customer regardless of whether the beverage was bought at the shop or not.

In the country, the deposit for plastic is pegged at 0.25 Euros for plastics, and up to 0.15 Euros for glass. This means a consumer pays up to 30 Kenya Shillings as a deposit for a single plastic bottle.

One of the reasons the system is so successful in Germany by up to 99 percent return rate is because it has the support of industry including from associations like the German Mineral Water Association (VDM) and Cooperative of the German Mineral Water Companies.

This video shows why Germany DRS is very successful

Case Studies – Norway

Norway set up its DRS system in 2000 after the government passed legislation establishing Infinitum, a non-profit organization run by producers and retailers in the country.

One of the reasons why the Norwegian system is very successful is because the government has introduced an environmental tax for all producers that fail to reach a return rate of 95 percent. The producers are therefore incentivized to meet the targets to avoid this tax.

All retailers selling beverages are required to accept the containers for return. In recent years, Infinitum has set up guidelines for the design of the containers to ensure they are recyclable and properly labeled.

This model shows that if the industry is given the right incentives, it can be able to run an effective system that can truly contribute to a circular economy. Currently, the return rates in Norway are 97 percent for plastics.

The Norwegian model shows that an effective Deposit Return System must first have a legal basis with specific collection goals and some form of penalties for noncompliance.

Infinitum runs both automated and manual return collections.

Norway has one of the highest recycling rates in the world thanks to an efficient DRS system. Photo Credit: Pixabay

Case Studies – Israel

Israel lawmakers passed the proposal to set up a Deposit on Beverage Containers Law in 1999 with the law coming into effect a year later. The law specifies the containers that are subject to a DRS, who is to manage the system, and how unclaimed deposits are to be utilized. The law was recently amended to include more sizes of plastic bottles.

Two organizations make the system work. ELA Recycling Corporation and Asofta Recycling Corporation, are all non-profit and owned by the producers or importers.

Israel is among the countries where the deposit fee is quite low at approximately 0.06 Euros. Even in spite of this, the return rate is still high at over 80%.

The system is largely manual with supermarkets, shops, and recycling depots accepting the containers. Supermarkets however only accept 50 containers from an individual on a day.

Funds generated from DRS are also used to run behavior campaigns. Photo Credit: Pixabay

Financial Implications of a DRS

Most DRS systems have some form of an independent not-for-profit administrator. These administrators have three principal ways in which they make money to run the system. The first one is that they receive Extended Producer Responsibility fees from producers. The second method is they make money from the sale of collected materials and lastly, from unclaimed deposits.

Because establishing and operating a DRS system can be an expensive undertaking, producers in markets where the system has not been established argue that the Extended Producer Responsibility fees increase the cost of running businesses. They also argue that a DRS is going to increase the prices of commodities as this cost is transferred to consumers. There is no evidence though that setting up a DRS has increased the prices of commodities in the countries that have this system.

There is, however, evidence that producers are willing to pay fees to run a subsidy program for the recovery of plastic bottles in Kenya, and therefore financial commitments may not necessarily be a strong impediment to the establishment of the DRS system. Besides, producers can redistribute budgets meant for anti-littering campaigns and other related Corporate Social Responsibility activities towards managing a DRS.

Kenya Extended Producer Responsibility law
DSR will create more opportunities for employment in collections, transportation and recycling. Photo Credit: Clean Up Kenya

Socio-economic Implications of a DRS

Establishing a DRS has many visible economic impacts on a country. Because the system has to run, thousands of new jobs are created especially in managing collection centers and transportation. More materials are also made available for recycling creating even more jobs.

This then contributes to efforts to tackle unemployment and increases government tax revenue. Government is also able to save money meant for managing packaging pollution. Communities and corporations also save money they use for community cleanups.

The system may however have negative medium-term impacts on vulnerable groups such as waste pickers who depend on the recovery of these materials for employment. However, a proper design can ensure waste pickers are incorporated into the new waste regime in a way that sustainably improves lives. Some of the Extended Producer Responsibility fees can indeed also be set aside to rehabilitate and empower these vulnerable persons economically ensuring that no one is left behind.

Women and children bear the highest cost of packaging pollution. Also, set to suffer if a Deposit Return Scheme system is implemented without proper design. Photo Credit: Clean Up Kenya

Environmental Implications of a DRS

Evidently, because of the increased collection of packaging, DRS is the only proven method of minimizing such waste from leaking into the environment. In most European countries where the system has been adopted, what is not returned is very minimal. Norway amazingly has a return rate of 97 percent but in all of the other countries, it’s over 80 percent.

This system can therefore be important in countries with weak waste management like Kenya in stopping waste from ending up on dumpsites where it undergoes open-air incineration or pollutes rivers and other water bodies. The benefits of a DRS on the environment can therefore not be overestimated.

Plastic waste destroys ecosystems. Photo Credit: Clean Up Kenya

How a Deposit Return Scheme can work for Kenya

There is a strong business case for Kenya to adopt a Deposit Return Scheme if the country wants to end the problem of packaging pollution. Over 40 countries across the globe have already transitioned towards this system. Kenya can show leadership by becoming among the first countries in Africa to welcome a DRS.

This is because the country has a weak waste management infrastructure and laws on segregation at source are hardly implemented. This means packaging waste is largely recovered by vulnerable communities of waste pickers at dumpsites. The industry proposal to provide a subsidy to these groups to increase recovery faces many structural and ethical challenges and will prove unsustainable in the long run.

It is, therefore, necessary to enlist the help of consumers through the creation of a financial incentive or a refundable deposit, to help end packaging waste.

Kenya has then to follow the examples of other countries to set up this system. The examples of Germany, Norway, and Israel provide very strong case studies.

The first place to start is the development of DRS legislation. There would have been a strong case for this law to be anchored in the Extended Producer Responsibility law which is being developed by the Ministry of Environment and Forestry. However, the proposed EPR law is fundamentally flawed and does not provide for DRS as the primary basis for producer responsibility. Even if this law proposal was amended at parliament, this would only be an afterthought, and there would be a lack of goodwill in implementation.

This means Kenya will need to develop a simple bottle deposit legislation. In fact, the Norway legislation on bottle deposits is just one page.

Such a law will define the containers that are subject to a DRS, set a deposit and handling fee for every container, state who will be responsible for managing the infrastructure and what charges producers will bear for this work, and specify what sanctions producers will bear for failure to meet specified targets.

Using the example of Norway with some variations, the law can place a tax on every container, equivalent to the deposit and handling fee, payable by producers who opt not to be subject to such a scheme, with these funds used for packaging waste management and behavior campaigns.

The Israel model shows Kenya does not need to set up any expensive infrastructure. Israel’s model is largely manual.

ABOUT CLEAN UP KENYA

Clean Up Kenya was established in 2015 to advocate for and promote sustainable public sanitation in Kenya. Since then we have become the de-facto national public sanitation advocacy brand. We are also experts in community mobilizing for cleanups. We have done numerous cleanups over the years, some of which have been attended by over 1000 volunteers on singular sites. At the core of our work is honest and actual engagement in communities – not PR events. We also run advocacy campaigns holding duty bodies, consumer brands, green-washing NGOs, and other stakeholders to account for unsustainable public sanitation in Kenya and the global South. We receive no funding for our work but collaborate with others on projects.

ABOUT THE AUTHOR

Betterman-Simidi-Musasia---Clean-Up-Kenya

Betterman Simidi Musasia

Founder, Patron and Spokesperson, Former CEO

Betterman is a sustainable public sanitation advocate and a pollution control evangelist. In 2015, after becoming extremely tired of seeing all the trash in Kenyan neighborhoods and hearing the authorities fake promises to clear the mess, he sold his trucking business to establish Clean Up Kenya. Today, the organization is a leading national sustainable public sanitation advocacy brand. In September 2020, he stepped down as Clean Up Kenya Chief Executive Officer and currently serves as Founder and Patron.