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RETAIL ENVIRONMENT

The Waste Land

by John Wilson, Executive Editor

China’s 2018 decision to refuse to accept millions of tonnes of Britain’s waste plastic for recycling created a high-water mark in the environmental debate. It became clear, for the first time, that UK taxpayers (rather than the responsible industries) had been saddled with the clean-up costs of what has been termed “refuse refugees”—the name used for “orphan” single-use plastics that had no home to go to in the “circular economy.”

Spurred on by programmes such as Sir David Attenborough’s Blue Planet 2, which fed images of plastic-encrusted sea creatures into our living rooms, the UK Government introduced its long-overdue waste management strategy at the tail end of last year. The bid tries to resolve a growing waste crisis and hold the responsible industries to account for the by-products of their high-impact carbon footprints.

Prior to its introduction, the Government’s own Environmental Audit Committee (EAC) revealed that British taxpayers were meeting 90 per cent of recycling costs and that UK companies producing waste plastic were paying one of the lowest contributions towards its recycling of any country in Europe under the Producer Responsibility Obligations (Packaging Waste) Regulations 2007.

The new strategy, in part, aims to encourage recycling at the consumer end and throughout the retail supply chain, as well as empower local authorities to reduce the levels of waste to landfill. It hopes to achieve this by reintroducing returnable deposits on bottles, which is already used in parts of Europe and was common in the UK during the 1970s on glass drinks bottles. At that time, most households were having their daily pint of milk delivered in reusable glass bottles on electric milk floats. The growth of the supermarkets and the cheaper cost of producing plastic bottles meant that the service fell out of favour, but the waste crisis has seen a reappearance of the humble milkman and his reusable technology in what one packaging expert has referred to as a “back to the future” move driven out of necessity.

Phil Storer, UK and Ireland director for IPP Logipal, Europe’s largest pooler of sustainable wooden pallets, said, “Before the new strategy came into force, industry was already choosing innovation over regulation with retailers and packaging manufacturers setting ambitious targets for trying to minimise their use of single-use plastic, something I have long described as a failure of design and imagination.

“Now, the EU and the UK Governments are both looking in future for the producers to pay for the clean-up of single-use packaging in order to cut the numbers of plastic bottles that end up in land fill, which is no mean feat as the industry produces seven billion plastic bottles each year.”

Phil, who coined the phrase “ECOnomics” to describe the cost-effectiveness of recovery and continual reuse of durable packaging, continued, “Business is rising to the challenge of the ECOnomics of sustainability—not just as a ‘nice to have’, but as an economic and environmental necessity.

“The Netherlands has for a long time offered bottle deposit schemes not unlike the one the UK is looking to introduce, but the cost of implementation is upfront at the point of purchase via a statiegeld (deposit). Psychologically, it represents a form of ring-fencing or hypothecation that it is widely recognised as an upfront, one-off charge when the item is new and desirable, rather than a regressive tax when the merchandise is past its best. It is all about timing because it encourages a respect for recycling rather than a resentment of a so-called stealth tax. It is really all about how you package your arguments.”

Retail

The retail sector is one of the highly visible industries in the cross hairs of the Government’s strategy, which is attempting to reduce CO2 emissions, contributed to in part by plastics and the methane from rotting food waste. The strategy is both carrot and stick in that the Government seeks to incentivise good practice and penalise prolific waste generators through punitive landfill taxation and a crackdown on illegal dumping of waste.

Dealing with food waste is costing the UK around £3 billion each year, according to the Waste and Resources Action Programme (WRAP). This includes disposal of food from supermarkets, food and hospitality outlets, and convenience stores, which amounts to 460,000 tonnes of bread, 440,000 tonnes of pre-prepared meals, 320,000 tonnes of potatoes, 290,000 tonnes of milk, and 120,000 tonnes of fruit juices and smoothies that form part of our throwaway society. The surplus of those throwaway meals could generate somewhere in the region of 2,300 meals per wasted tonne to help feed 400,000 Londoners living in severe food poverty.

WRAP also looked at the amount of waste generated by the fast fashion industry. It found that the average item of clothing had a 3.3 years wardrobe life before being discarded, but in the fast fashion market, the average shelf life was just five weeks. Research from Sainsbury’s in spring 2017 revealed that 235 million items of clothing ended up in landfill every year as consumers readied themselves for a new summer wardrobe.

The potential brand damage of such profligacy in the fashion industry is compounded by other ethical concerns around fast fashion manufacture. Five years ago, almost 1,400 people were killed when a factory collapsed in Dhaka, Bangladesh, a tragic accident that galvanised the industry into changing practices to improve its ethical and corporate social responsibility (CSR) rating.

The fact remains that complex and opaque supply chain returns policies and intellectual property (IP) issues mean that the retail sector has not got the end-to-end strategies in place to dispose of surplus stock or waste and is between a rock and a hard place when it comes to protecting its brands. Luxury fashion brand Burberry found itself on the receiving end of damaging PR when it admitted to burning millions of pounds worth of its clothes every year in order to protect the brand from discounting and counterfeiting. Overall, the fashion industry is contributing more to climate change than the aeronautical and shipping industries combined. If trends continue, the industry could account for one quarter of the world’s carbon budget by 2050.

Mike Barry, director of sustainable business at Marks & Spencer, told the Guardian newspaper, “The signals are [fashion is] on the same trajectory as plastics and forests and alternatives to meat. These were all underlying concerns that got through to the mainstream consumer.

“There is not an obvious consumer backlash against fast fashion today, but it would be a very brave business leader who didn’t look into the next twelve to eighteen months and say we are not heading there. Every business leader in the fashion industry knows that clothing will have the same level of questioning and challenging that food has had for years.”

The retail journey focuses around the outward customer experience rather than the measurement of the returns and underlines the issue around the reverse logistics practices that are vulnerable to falling prey to criminal activities because no one really has a complete picture of where waste is ending up.

Earlier this year, MPs on the Environmental Audit Committee announced that they wanted to introduce a “penny a garment” tax on clothing manufacturers and retailers to raise £35 million per year for a sustainable recycling programme. Currently, only 1 per cent of UK fashion brands provide schemes for the return of older garments to ensure they don’t end up in landfill. In tandem with this announcement, the proposals for the UK’s new waste strategy include tackling the current postcode lottery under which different materials are recyclable in different areas and the introduction of clearer labels so that consumers know what can be recycled.

All councils will be compelled to offer separate food waste collections, and charges on garden waste will be scrapped because the fee drives bad consumer decisions as the compostable waste ends up illegally in landfill, contributing to powerful greenhouse gas emissions. Packaging manufacturers are to be encouraged to design longer-life products, and the Government will seek to electronically track waste shipments where illegal dumping is suspected. The new waste strategy has yet to report on how it will deal with a wide range of waste issues including crime as there is now a period of industry consultation.

The British Retail Consortium (BRC) has already said the problem with ocean and beach litter is more to do with on-the-go cups and containers rather than litre bottles from supermarkets. It also says that retailers will have to pay the cost of installing thousands of “reverse vending” machines needed for the bottle deposit schemes like those used in the Netherlands.

Shadow Environment Secretary Sue Hayman responded by saying, “You cannot aim to prevent fly-tipping without ending cuts to councils. And we need a plan for stopping the export of UK recycling and waste plastics to countries where they currently end up in landfill or polluting our oceans.”

Her comments echo the findings of the Independent Review into Serious and Organised Crime in the Waste Sector published in November 2018, which highlights how organised criminals had infiltrated the sector in the vacuum created by a lack of coherent joined up policy. Lizzie Noel, the chair of the organised waste crime review, said, “Industrial scale organised waste crime has emerged as an increasing problem in recent years—a problem which matters to us all in three respects: firstly, it blights the environment, adversely affecting communities and creating inconvenience and often misery for people where they live and work; second, it undermines our efforts to dispose of waste responsibly; third, it disadvantages the legitimate waste sector which is playing by the rules.

“The introduction of the Landfill Tax in 1996 has been transformational in commoditising waste as a resource, but its introduction has been to increase the attractiveness of the market to organised crime with very few barriers to entry.

“Compounding this situation, the Environment Agency (EA), while it lacks no shortage of highly committed personnel, has neither the necessary authority, powers, nor business model to counter this criminal scourge effectively. The current structure and organisation within which staff operate belongs to an older, simpler world where technologies for recycling and incineration were less developed, digital record keeping less common, and the waste industry less global.

“In this report we set out how we can modernise the structures, capabilities, and powers to manage and reduce the problem of organised waste crime now and in the future. Our intention must be to give the criminal responsible real cause to fear the consequences of their actions—today that is not the case.”

Of the 200 million tonnes of waste produced in the UK every year, 27 per cent of which comes from consumers and 5.7 million tonnes from businesses, it is estimated that £6.8 billion is pumped into Britain’s waste management sector.
Up until the Chinese ban, a total of 4.2 million tonnes was exported to other countries with little in the way of an audit trail or transparency as to how it was disposed of once it had left the UK. The cost of waste crime in England is estimated by the report to be between £600 million and £1 billion, some of which is generated as a direct result of the 1996 introduction of the Landfill Tax.

The cost of waste crime takes many forms, including fly-tipping (£209 million), illegal burning of waste (£19 million), disposal at illegal waste sites such as farms (£98 million), mis-description of waste so that its disposal costs are reduced or eliminated (£219 million), and illegal export (£30 million).

Serious organised waste crime is the result of the “colonisation” of previously legitimate waste and recycling businesses by groups who have identified high profits in return for a low risk of detection under the current regulatory regime. It is seen as so serious that Sir James Bevan, the chief executive of the Environment Agency described waste crime as “the new narcotics.”

The independent report used the National Crime Agency’s (NCA) mapping process to identify no less than 4,629 active waste organised crime groups (OCGs) of which 92 per cent were involved in environmental crime in the widest sense. More detailed analysis highlighted 70 per cent of the OCGs were involved in cash-based businesses, including the bribing of officials, while 55 per cent of OCG activity was involved in public sector fraud and business tax fraud. Environmental crime is so lucrative that each of the identified waste OCGs is linked to an average of seven other companies on the NCA database. A total of 71 per cent of OCGs were involved in environmental crime compared to 44 per cent of organised crime in other sectors.

Between 2011 and 2017, the EA stopped the operation of 1,800 illegal waste sites and secured 947 prosecutions, which resulted in just thirty-seven prison sentences despite the seriousness of the offences, including the illegal dumping and burial of hazardous chemicals and illegal exports.

In one south London investigation, a brownfield site was contaminated with hydrocarbons caused by the mis-description of the waste to avoid the landfill tax. All but 832 tonnes of the 48,000-tonne consignment of waste was described as “inert,” which carries a rate of £2.60 per tonne. The reality was that most of it was contaminated “heavy metals,” which carries a rate of £82.60 per tonne, so the criminals had pocketed the difference.

Illegal exporting not only carries the risk of not knowing what happens to the waste if it is accepted, but when it is not, it is often returned to the country of origin, the cost of which is the responsibility of the exporter. However, in the all-too-often case of them not being able to be traced, the UK Government would have to foot the bill.

Although the cost for illegal exporting has been put at £30 million, the figure could be much higher. This is because in England exporters have to complete an Annexe VII form to the EA, but this is not a requirement in either Scotland or Wales, so it is impossible to provide a UK-wide figure on this issue.

Powers

Although the new waste strategy aims to provide a more joined-up approach to the issue of waste, the details are sketchy as to how this would work in practice as the EA now has limited powers of arrest and surveillance, relying instead on what has become an increasingly depleted Police force. This has led to long delays in bringing cases to justice, but moreover, the agency is hampered by having to prove “significant risk of serious environmental harm” to bring a case with the added penalty of compensation being paid to those dumping if the procedures are incorrectly served.

All of these issues mean that there is a higher burden of evidence required, and the EA currently lacks the tools to quickly and effectively disrupt waste crime activity, which is why it is so lucrative to OCGs who, according to the report, have become more audacious in their approach. In 2017, one OCG made a £1 million profit by posing as waste brokers and targeting legitimate waste companies. Under this false arrangement, the OCG removed 28,000 tonnes of baled waste at a reduced cost, which was then illegally dumped at a series of farms and industrial units across the UK with the clean-up bill falling to the landowner and the local authorities.

Countering the Crime

But some waste companies are being proactive in recognising the threat to their businesses and the wider community. They have initiated positive action, including carrying out their own investigations and utilising specialist support resources to film and gather evidence against OCGs.

Subrosa Group is a business intelligence risk management and specialist security company experienced in countering crime in the waste management market. It is working with some of the major waste management companies to gather evidence using covert tactics to uncover illegal dumping, fraud, and bribery where cash is paid to officials to “turn a blind eye” to the incorrect description of waste.

Niall Burns, CEO of Subrosa said, “This is big business where the legitimate businesses have had one hand tied behind their backs. If tackled correctly with powerful evidence admissible in court and strong leadership from the industry, waste crime could be successfully disrupted with those arrested facing not only imprisonment but also seizure of not insignificant assets under the POCA (Proceeds of Crime Act).

“At the moment, it is still too easy for OCGs to get away with this profitable criminality. All businesses need to be more vigilant as to risks faced in the categorisation and disposal of waste as they could be exposed.”

In 2017, the Government introduced the Criminal Finances Act, which makes all businesses liable for any deliberate tax evasion among their employees, even though they did not know about it. This means that all businesses involved in waste management need to carry out more rigorous risk assessments as to their exposure to criminal activity from their employees.

The laws around waste management are about to change with the Government’s new waste and environmental strategy, and all legitimate businesses await the detail of how waste management supply chain will be impacted. With such high levels of visible waste, the retail sector is vulnerable to greater accountability from a Government trying to enforce new rules that protect an increasingly fragile environment. The jury is still out as to the enforceability of the new strategy and whether councils and enforcement bodies will remain down in the dumps over continued muted powers or, conversely, industry will work together to lay waste the criminal gangs that are effectively rubbishing the reputations of legitimate businesses and their supply chain partners.

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