The latest on the Deposit Return Scheme...
REGULATION
England and Northern Ireland: In January, the Deposit Return Scheme (DRS) regulations for England and Northern Ireland passed through parliament. The following week, Defra issued the following press release, guidance and social media post featuring a short video on what DRS is.
Scotland: Scottish Government have notified the World Trade Organisation (WTO) of their two Scottish Statutory Instruments (SSI) and will lay them before Scottish Parliament in April 2025. The first SSI will be regulations to amend the existing Scottish DRS regulations, and the second will be a designation order which elects a body as the DMO and sets out its functions. There are some differences between the DRS in Scotland and the scheme in England and Northern Ireland, such as:
- Return point exemptions: In Scotland, return point exemptions will not expire after a set period; however, the Deposit Management Organisation (DMO) will be able to revoke an exemption through agreement with the return point operator (RPO) or if there is a change in circumstance. RPOs must advise the DMO if there is a change in circumstance.
- Voluntary return points/takeback services: In Scotland, any organisation may apply to the scheme administrator to run a voluntary return point or takeback service, not only retailers of scheme articles as in England and Northern Ireland regulations.
- Terminology: Some terminology and definitions in the regulations will be different because they have amended their existing regulation. Interpretation should align with England and Northern Ireland regulations. E.g. they refer to a ‘Scheme Administrator’ rather than a DMO.
DEPOSIT MANAGEMENT ORGANISATION
Responsibilities: The DMO is responsible for delivering DRS including setting deposit amount charged for each drink, the communications to businesses and to consumers, meeting collection targets, setting producer fees and the retailer handling fee. They are required to consult with industry before making key decisions such as the logo, deposit level, or retailer handling fee. Read our briefing on the DMO here.
Timelines: Defra asked industry for DMO applicants and set the deadline as 3rd February 2025. It is expected that the DMO will be appointed in April 2025. After appointment, the DMO will begin to operationalise the scheme. Currently, the scheme is due to go live in October 2027.
Our application: The group of Trade associations (BRC, BSDA, BBPA and NSWA) and investing members, making up the SteerCo, have formally sent in the DMO application to Defra. PwC have supported the SteerCo in writing the application and worked as the secretariat for the group.
Current DMO activity: Whilst the application sits with Defra to review, we have been told by Defra that the DMO must be incorporated and have long form legal documents completed by 28 February. This means that documents will be drafted and reviewed by DMO Board and SteerCo in an intensive consultation period in February.
DMO Board: The Board is made up of four retailers, four producers, two independent former execs, an independent Chair, a CEO (non-voting) and a CFO (non-voting). We have secured three retailer Board representatives with the remaining seat needing to be filled by a wholesaler. PwC is coordinating the recruitment of CFO, CEO, Chair, and remaining board positions. The Board of the DMO has been set up and have met twice already. Conversations so far have focused on the feasibility of the timeline and getting up to speed with the work SteerCo has completed for the application.
WALES
Leaving UK DRS: In November, Welsh government decided to pull out of the four-nation approach in pursuit of a DRS that centres reuse and includes glass. The decision has left industry with significant interoperability concerns and logistical challenges. It has also meant that the already optimistic timeline to deliver DRS by October 2027 is no longer feasible – more on this later.
Next steps: We believe there are two potential ways forward. Our first option would be to re-engage with Wales and bring them into the four-nation approach to DRS. The second option is to explore the option of a voluntary scheme; however, there are significant risks, legal considerations and costs attached. PwC have set up a Welsh Working group amongst the TAs and one of each of our members to coordinate the activity in Wales which met for the first time on 4 February.
Wales’s DRS Consultation: Welsh Government are looking to engage with industry on their DRS consultation in February and March. There is likely to be a conference to engage with the supply chain and DMO on 6th March 2025 which will be used to inform the consultation. In terms of timescales, they hope to release the consultation for industry to formally respond to in the summer with the aim of releasing a response by the end of the year.
LEGAL CONSIDERATIONS
UK Internal Market Act (IMA): Currently, UK Government is considering whether it applies for an exclusion from IMA.
- In the case UK government does not apply for an exclusion from IMA: Producers, based in Wales, supplying DRS products into England, Scotland and Northern Ireland would not need to comply with those nations’ DRS requirements. This means they would not need to register, have deposits or label those containers as part of the DRS. There would still be the option to comply with DRS, under IMA market access principles, when supplying into the three nations with the DRS.
- In the case UK government applies for an exclusion from IMA: Producers would need to comply with DRS like any other producer in the UK
Extended Producer Responsibility for Packaging: Currently, EPR doesn’t apply to Welsh producers because if there's a DRS operational in any part of the UK then the material subject to the DRS are exempt from EPR. So, unless that was to change, a producer in Wales would not be paying any EPR fees. If they registered with the UK DRS, then they would pay DRS fees.
Defra have stated they are working closely with Welsh Gov on EPR and DRS to understand their DRS’s design and timeline. As they get more information on the scheme, they will then work out what that means for EPR and other regulations. Defra’s intention is to ensure that all materials are captured by either DRS or EPR.
Competition Law: In a case of a voluntary scheme in Wales, there would be nothing within the IMA that prevents it; however, the key concern would be competition law. With a voluntary scheme, many businesses will be making agreements with each other which may or may not restrict access to the market and trade. The advice from Defra has been to seek legal advice.
Windsor Framework: Windsor framework requirements override the UKIMA. If DRS requirements in the Windsor framework are required in Northern Ireland, then producers in Wales, just like England, Scotland, Northern Ireland would need to comply with the DRS requirements in Northern Ireland.
TIMELINE: LOBBYING
Activity to date: We have had conversations across HMT, DBT and Defra to raise our serious concerns on the feasibility of the timeline and the impacts of an unaligned scheme. We met with Minister Creagh to highlight our concerns and sent a letter to the Secretary of State, stating that the current timeline was not feasible and asking to meet with him to discuss the challenges that face retailers in the implementation of DRS. Responses from Defra have been dismissive and disappointing as they have not agreed to meet with retailers.
BRC’S ROLE GOING FORWARD
- Coordinating communications between the DMO Board and Members going forward and providing regular updates on DRS developments.
- Continuing to support investing, SteerCo members until April as we transition responsibilities to the Board and DMO organisation.
- Lobbying work to re-engage with Wales and agree a feasible timeline with Defra.
