The costs faced by Romanian producers seeking to meet their targets for selective waste collection and recycling – a market valued at EUR 250 million per year – are experiencing an artificial increase due to the problems in the system, thinks Ionut Georgescu, CEO at FEPRA International, one of the main Organisations that Implement Extended Producer Responsibility (OIREPs) in Romania.
How has the approach to waste management evolved at the European level?
Currently, waste management systems across the globe are based on the principle that the polluter pays. The EU first transitioned from this principle towards waste management 40 years ago, with the intent to establish who the polluter is. In light of this, the easiest answer would be that citizens are the polluters. They generate waste and decide when a product turns into waste. But the EU has raised some exceptions for some products, where the product manufacturer has been established as the polluter, instead of the consumer, and packaging waste is one example of this switch. It is important to note that 75 percent of what happens in the operational and logistic flows that follow manufacturing is a result of the product design process. Hence, there has been a transition from the “polluter pays” principle of towards manufacturers taking responsibility for their packaging waste flows. Later, this responsibility was extended to other products like electrical and electronic equipment, batteries, tires, and used oil. This transition has allowed state authorities to find out whether manufacturers meet their environmental protection responsibilities.
Why is separate waste collection important?
Collecting unseparated waste means landfills growing near cities, with them catching fire during the summer, causing unpleasant smells, air and groundwater pollution – in short, a danger to the environment and human health. Certain recyclable materials can pollute more than cars when they burn. Landfills around big cities like Bucharest, for example, have expanded and are now a real danger to inhabitants’ health, and they can no longer be ignored. In order for the recycling circuit to be properly tracked, the waste must be collected separately. Throwing them out together significantly complicates the separation process and increases its costs. Moreover, some recyclable materials can get contaminated and become impossible to recover. Recycled materials can become raw material for other materials and thus generate savings on electricity and water consumption. Waste can also be used as a raw material for energy production, for example in cement manufacturing. FEPRA has always promoted a functional system in which selective collection generates quality materials for recycling. That is why we are trying to develop an ecosystem by expanding our business in the collection and recycling areas.
Who should contribute to the successful management of waste?
There are several important actors, and citizens’ support is essential. The entire circuit is known as a collection scheme and is regulated based on European norms. Everything that happens in this scheme must be transparent and traceable. First of all, manufacturers are responsible for packaging waste until it reaches recycling or recovery plants. They can delegate this responsibility to Organisations that Implement Extended Producer Responsibility (OIREPs) – professionals who integrate all other market players – or they can choose to pay a penalty to the Environmental Fund Administration. But if they choose to pay the penalties, this automatically diminishes the chances for recycling targets imposed by the EU and transposed into the national legislation to be met.
The next players are distributors, who must ensure that they only distribute products whose packaging is included in the collection scheme. Next in the scheme are consumers, who must be aware of the need for selective collection and understand the negative effects of non-compliance. Local authorities must make the collection infrastructure available and work with the “suppliers”, namely sanitation companies, which comply with legislation and collect waste selectively. Sanitation companies take the separated waste and transport it to an authorised sorting station, then the waste is taken over by transporters and delivered to recyclers. Recycling can mean that the waste is reintroduced into the economic circuit,.
Organisations like FEPRA have the role of integrating all these players and contribute to the success of the system. The financial resources provided by our clients as a result of us taking over their responsibility for packaging waste are used to stimulate the collection and separation of waste, mainly with the support of local authorities and sanitation companies. Together with sorting stations and transporters, we make sure that the collected waste reaches recycling plants.
What role do citizens play in the selective waste collection process?
There is an inherent connection between the increase in consumption and the increase in the amount of generated waste. The European Commission wanted to cut waste generation rates without negatively impacting economic growth. This was possible through a system of shared responsibility between manufacturers and consumers. The “pay as you throw” principle thus became a tool designed to encourage individuals to selectively collect their waste. This means that the amount of money a citizen pays for municipal selective collection services depends on the quantity and the quality of the waste which is generated and collected selectively. Through their actions of separating waste or cleaning it when needed, individuals bring added value to the waste and thus contribute to lowering the costs associated with its collection. As a result, the consumer who generates the waste eventually has the highest impact on it.
What can you tell us about the costs of selective waste collection?
The EUstipulates that costs for selective waste collection should be calculated based on its quantity and quality and since 2018, the market value of the material has been added to this calculation. For example, at the international level, the price for a tonne of recycled paper was USD 120 a couple of years ago, but right now it’s down to almost 0. According to the European Commission, the negative difference between the value of the virgin material and that of the recycled one should be covered by producers. In 2018, the EC issued a new directive which further clarified the ways in which costs and incomes in the system are set, as well as the link between them. Unfortunately, FEPRA is the only company that wants to implement such a system on the Romanian market.
What kind of challenges will Romania’s waste management system face?
According to the European Commission’s 2019 Country Report on the implementation of EU environmental policies (EIR), the municipal waste recycling rate remains very low in Romania, at 14 percent, which means that Romania risks not meeting the recycling target which has been set for 2020. Therefore it is clear that several system deficiencies must be addressed, and increasing the degree of transparency would be a good starting point. The role of OIREPs is very important in relation to manufacturers, for at least two reasons. First, if it had to meet targets individually, a manufacturer would have to collect and recycle its own packaging, which is absurd. From this perspective, the advantage of an OIREP is that it collects all types of packaging in separate containers and recycles them regardless of their manufacturer.
Secondly, manufacturers must meet two types of legal targets: one is related to the type of material – a 60 percent target for glass and 20 percent for aluminum – and the other one is the overall target, of 60 percent on all types of waste. OIREPs put all types of materials together and meet the 60 percent overall target, helping manufacturers meet their responsibilities and optimising their costs, especially for plastic (except PET) and aluminum. And this is what FEPRA does: it provides a way for all the players involved in waste management to be more effective.
Third, OIREPs don’t sign individual contracts with collectors and recycling companies; an OIREP contracts a certain number of collectors and recyclers who work for all its clients. Actually, OIREPs pay for that loss in the system so that the recycling targets are met. Last but not least, I think that it is important to think about how OIREPs will face the challenges beyond 2030, when the global target for selective collection will go up to 85 percent, compared to today’s 60 percent. They should think of ways to support this increase and reflect on the ways in which they will work with collectors, sanitation companies and recycling firms in order to support investments in infrastructure.
Will Romania face a crisis in the collection of packaging waste?
There are three types of packaging: primary (which cover the product), secondary (which allow products to be sold in a pack) and tertiary (used for transportation). Primary waste is generated by the population, and the city hall is responsible for collecting it separately, therefore it can collect, provide bonuses and meet targets on the primary packaging segment from the public flow alone. But there is a paradox here: while the government knows that city halls are not ready to do this yet, it forces manufacturers to work with city halls. At the moment, city halls contribute with a maximum of 5 percent of the quantities entering the system. There are about 1.5 million tonnes of packaging on the market, of which our target amounts to about 900,000 tonnes (or 60 percent of the total). Considering that about 550,000 tonnes of those 900,000 are primary packaging, this means that each county should have a target of 15,000 tonnes. The best performing county in Romania from this perspective is Covasna, but it only contributes 1,000 tonnes to the system, followed by Arges county (600 tonnes).
What is the solution to this problem?
FEPRA has decided to take the lowest risk for its clients, namely the risk of losing its operational license. We made this decision considering that our clients’ biggest risk is not meeting their targets. Hence, FEPRA has committed to meet the targets in its clients’ names, regardless of the type of packaging, but taking the type of material into consideration. The market’s response to our initiative has been very positive. Although local authorities have introduced some regulations which will be good in the long term, they don’t offer a short-term solution. As such, the government has to make a decision around the sanctions imposed for not meeting the targets. Another important issue is accountability for false data in the system. Back in 2017, Romanian authorities first established that if the manufacturer entrusts its responsibility to an OIREP (formerly known as Responsibility Transfer Organisations), the latter gets a fine if it doesn’t meet the targets. Yet 2019 came with a new regulation, which says that the responsibility for the fine belongs to those submitting false reports, namely collectors or the recycling companies, not OIREPs. There are some OIREPs which are not visible in the field and yet they were reported to have met their targets in 2018. In my opinion, the system is still poor, and it especially works against manufacturers, which pays for the inefficiency of all the players.
This means that there is a need for change. What should be done to improve the system?
There are two models through which producer responsibility can be implemented: a partial cost system and a full cost system. Romania has adopted the first model, which means that it only covers the negative cost and everything depends on what all the other players in the system do. But wouldn’t it be better to adopt a full cost system? It implies that the manufacturer is the owner of the packaging, meaning that some financial transactions that can significantly alter costs are eliminated from the system. In addition, in this case, the manufacturer will be fully responsible, will fully manage its waste privately and will no longer depend on local authorities in the medium and long term. In this case, manufacturers will contract the selective collection service for the entire packaging amount, as well as all the services required in order to get the material back. The major benefit in this case is that the manufacturer keeps the recycled material. Therefore, a circular economy can truly be created. It is not easy to implement such a system, but it would be easy for FEPRA, because we know how to do it. Not all OIREPs know how to implement such a system.
In this context, what are the new things FEPRA brings to the market?
FEPRA is a trendsetter for the Romanian market, both from the perspective of applying the legal framework in the environmental sector as well as in terms of its business model and the actions it takes. First of all, we bring credibility: we’ve never failed in our efforts to meet selective collection and recycling targets.
FEPRA’s goal for this year is to provide maximum transparency in regards to our activity. We are currently working on a reporting and tracking software which addresses the reporting we do to our clients, the reporting done by collectors, as well as the tracking of waste. The novelty is that the data will be recorded in a blockchain, which means that it will be unalterable. Furthermore, from our experience in the American waste management sector, we are in talks with Dropbox to apply the optical character recognition system for standard documents in the reporting system. This way, manufacturers will be able to see the quantities FEPRA manages in real time, as well as the companies it works with to meet the targets and the average cost for each type of packaging for the municipal, industrial and commercial flows. Producers will also be able to find information about the money FEPRA spends on bonuses and waste tracking and the value of our operational costs. FEPRA intends to operate the waste management system with a maximum of 15 percent of its operational costs (less than 2 percent of its net profit). Last but not least, we will allow state authorities (Environment Ministry, Oversight Committee, Environmental Fund Administration, Environmental Guard) to create their own user accounts in order to access relevant information depending on their specific activities.
Along with meeting their targets, manufacturers are forced to submit sustainability reports. As a novelty for the Romanian market, FEPRA will offer carbon credits to its clients, based on the European Commission documents regarding the contribution to decreasing carbon emissions resulting from recycling. The next step is to get authorised on the carbon market, so that these credits may be used. In addition, because each manufacturer has the obligation to elaborate a set of documents regarding the prevention and reduction of waste generation in the chain, throughout GIS, a company that is part of our group and specialises in prevention and design services, we will be able to offer support to our clients, as an extended responsibility service.
We’re also working on a system for collecting not just waste, but also reusable packaging. This system will help the manufacturers impacted by the new local legislation (which requires them to meet a minimum target for reusable packaging) and will also contribute to increasing their cost effectiveness.