How will Scotland’s Deposit Return Scheme affect businesses in Glasgow?

The Deposit Return Scheme is set to launch in Scotland in August 2023, but what will it mean for businesses in and around Glasgow?
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The recycling scheme - which sees consumers charged a 20 pence deposit when they buy drinks containers – is due to go live in August 2023. However in June last year, members of a Cross-Party Group on Beer and Pubs called on the Scottish Government to urgently take time out to clarify and reappraise the scheme and that a fundamental review of the net benefits of the scheme is required.

The report, The Impact of the Scottish Deposit Return Scheme, followed an inquiry carried out by MSPs which took written and oral evidence from a broad section of witnesses including small brewers, pub owners, online retailers, local authority representatives and Circularity Scotland. Witnesses told the inquiry that a huge amount of detail was yet to be decided before they could fully understand what steps to take and that it’s further complicated by DRS imposing de-facto barriers to trade at Scotland’s borders.

They warned of unintended and negative consequences for consumers as price rises and the range of products would be reduced, as well as for health policy as DRS distorts the Minimum Unit Pricing. Particular concerns were raised about fraud through online sales and ‘booze trips’ across the border into England as well as the impact on Scotland’s small independent brewers, hospitality and retailers. These risks were increased by the recent decision of the UK Government to not proceed with DRS for glass, which creates further logistical problems and costs.

Commenting on the report, Convenor of the Cross-Party Group Craig Hoy said: “Everyone understands that we need to delivery circularity and net zero, but to be successful the scheme has to be effective. It’s clear from the evidence we heard that the Scottish DRS is far from ready and if these details are not addressed it will not be viable. Scottish producers and retailers are still recovering from the pandemic and the Ukrainian conflict is hitting supply chains, energy and costs. The Scottish Government needs to carefully consider our recommendations so that we get this right.”

Cross Party Group member Fergus Ewing MSP said: “All the witnesses we heard from wanted to see a workable scheme in Scotland but their view was that it would be easier and less costly to do this on a pan-UK basis, especially when different containers are included. The risks of the Scottish DRS failing are too high to get this wrong and urgent action is needed from the Minister to ensure these issues are addressed urgently.”

As well as an urgent review, the report recommends that the Scottish and UK Government work together to align their schemes so that there is a single market for brewers and retailers. Without doing so there will be three different markets with knock on impacts of complexities, costs and wastage. It also argues for a phased introduction of products, starting with plastic, would build consumer understanding and allow the infrastructure to develop.

Particular concerns were highlighted about smaller businesses, such as Scotland’s independent brewers, bottle shops and online retailers with the costs being disproportionately felt by smaller businesses. It recommends that a de-minimis threshold could protect these businesses while the scheme beds in.

Similarly, businesses said that there is no way to deliver the online take-back service, where empty containers are collected from people’s homes. The report suggests that this should be delayed from the rest of the scheme until a cost effective and environmentally positive solution has been found.

Producers have until 28 February to register for the scheme ahead of its launch on 16 August.

Despite persistent criticism, Lorna Slater, the circular economy minister has said it is all “systems go for Scotland’s deposit return scheme.

“Our scheme is very similar to successful schemes around the world that do, as you say, increase recycling but also do that really important piece to reduce litter on our streets.

“We have all seen cans and bottles and broken glass. We’ve got to do something about it and the deposit return scheme is our answer to that.”

How will the scheme impact Glasgow businesses?

In written evidence to the committee, the team behind Glasgow’s Wee Beer Shop said: “Retailers need to purchase and install expensive equipment to process returns - something my business has no physical space to host - I literally have a wee shop. I also have concerns about the ability of small shops to manually process and store returns. I staff my shop myself and will struggle to process returns and run the shop at the same time…I also have an online shop and having to offer the takeback service will be undeliverable. It will be far too costly for us to arrange the pick-up of empty containers.”

Jamie Delap from Fyne Ales added: “We need to get to net zero, but will this scheme make a meaningful impact with all the complexities and changes that have come about since it was first suggested? A lot of decisions still need to be made which need time to feed though the supply chain. This is going to be a very high-profile environmental initiative and if it is an expensive failure it will do no favours when it comes to achieving net zero.”

Some other business owners and industry insiders warned that businesses may leave Scotland to relocate to logistics hubs south of the border.

There could be an impact in councils and bin collections, as detailed by Mo Baines, deputy chief executive of the Association for Public Service Excellence (APSE). Ms Baines commented that the environmental costs and benefits had not been properly assessed for refuse collection. The analysis of material going into household waste had been conducted pre-lockdown, meaning consumer behaviour, and the effects on waste streams of hybrid working, had not been reviewed.

What does this mean for households?

The majority of recycling is dealt with by kerbside collection by Scotland’s councils. The cost of this lies with the local authority, and it can recoup some costs by selling the raw materials. But if these are no longer being made available to the council, will they still be able to afford the kerbside recycling?

Under the DRS, high value glass items such as wine bottles will either no longer be going into kerbside recycling or there will be fewer bottles, but the obligation to collect other items of glass will still be there. Ms Baines explained this could cause problems for local authorities locked into longer-term waste disposal contracts. British Glass, in written evidence, said Dumfries and Galloway Council had announced the end to its kerbside collections for glass.

“We will only be collecting a small percentage of the glass items we currently collect, making kerbside collections for glass unsustainable and not cost effective,” it said.

A spokesperson for Circularity Scotland, the company which will act as the DRS administrator, said: “Scotland’s Deposit Return Scheme is one of the most significant environmental infrastructure projects ever introduced in the UK and the most comprehensive deposit return scheme anywhere in the world. Circularity Scotland has been established by producers, retailers and hospitality operators to act as a scheme administrator for the scheme and our members include trade associations who provide input from the perspective of smaller companies. We are working at pace to ensure that the scheme runs effectively and efficiently, and at as low a cost as possible, from August 2023.

“Following a robust and in-depth due diligence process we have recently secured investment of £9m from the Scottish National Investment Bank and a further £9m from Bank of Scotland, both of which will be repaid over time, to support this crucial set-up phase of the scheme. With this backing, we look forward to continuing to engage producers and retailers of all sizes, as well as other partners across Scotland as we build towards the launch of the scheme.”

You can read the cross party report in full here.