Extending the Responsibility for Sustainability
Extending the Responsibility for Sustainability
Thanks to consumer concern about the environmental impact of their favorite brands, more and more companies are producing more sustainable products and implementing processes to prevent materials from going to waste.
Currently, only a fraction of our plastic waste – 14%, according to a report by the World Economic Forum and the Ellen MacArthur Foundation – gets recycled. The rest ends up in landfills or in the oceans and waterways, contributing heavily to global warming.
At the same time, new regulations and policies are being established to address these issues through the application of Extended Producer Responsibility (ERP) laws. Essentially, these regulations ensure that the manufacturer of a product is responsible for its ultimate recycling, reuse or disposal.
Additionally, there’s been a surge in plastic taxes especially in the European Union, which impose a charge on companies using materials that do not contain a certain amount of recyclable content, such as non-recyclable plastics.
Managing regulatory complexity
This is great news for the planet, but the new scenario creates a market-by-market challenge especially for large producers, as it is very difficult to manage regulations on their products in different geographies. In fact, managing thousands of products and tens of thousands of materials across hundreds of regulatory systems in multiple regions is one of the greatest complexity challenges facing global brands in the years ahead.
According to new regulations, companies are required not just to design products and packaging to eliminate waste and pollution. Companies are also required to keep material in use at their highest for the longest period of time. Therefore, the key selling factor going forward will be based on sustainability and recyclability. This change is driven by customer demand, the availability of technology and the new regulatory environment.
Manufacturers embarking on transformational journeys are challenged by complex supply chains, heavy assets and legacy technology. They must also transition to circular business models that require a new approach to product design that reintroduces the product or its materials into the manufacturing cycle at the end of its lifecycle.
One way in which we at SAP are responding to the drivers behind the change and helping tackle the challenges is with our new Responsible Design and Production solution. This will help enterprises tackle this complexity as they move away from a take-make-waste linear economy to a circular one designed to reuse, repurpose, and recycle.
The complexity begins with the roughly 400 different regulatory schemes that are currently in the pipeline around the world.
The tool is essentially an extension of enterprise resource planning (ERP) - something SAP has been doing for 50 years – with an additional element. Now, we’re not only planning the optimisation of resources; we’re optimising them to be regenerative.
Investing for the long term
Extending producer responsibility won’t come cheaply. In the UK, packaging consultation predicts £2.7bn EPR cost per year for postconsumer packaging waste. The UK scheme incentivises producers to design packaging that is easy to recycle and ensure that they pay the full net cost of managing this packaging once it becomes waste, in line with the polluter-pays principle behind the EPR concept.
That is the cost in the UK alone, which is only 3% of the world. Looking at the global picture, some of the larger manufacturers produce thousands of tons of materials each year. In these markets, you're talking about very meaningful numbers. And don’t forget the plastic taxes which tally up to £250/ton in the UK and €400 a ton in the European Union.
That may sound like a high price to pay, but as we all know, the benefits far outweigh the cost. Visionary enterprises like Unilever find that short-term sustainability costs lead to long-term savings. The company has cut costs by $1.5 billion through sustainable sourcing since 2008, according to the company's February earnings call presentation. Unilever executives said they see a pattern — up front sustainability investments very often result in long-term discounts.
In the long run, the EPR approach encourages industry to be more innovative in product and packaging design. Reuse and recycling use less energy than manufacturing from new materials, and as the costs of collection, processing and recycling are shifted from taxpayers to the producers of the materials, enterprises will find ways to cover the EPR costs through savings in other areas.
DESCRIPTION:
Extended Producer Responsibility (EPR) is a policy approach which makes manufacturers responsible for the entire lifecycle of their product and especially for its take-back, recycling, and final disposition (incl. packaging material). SAP is helping enterprises tackle this new approach as they move away from a take-make-waste linear economy to a circular one designed to reuse, repurpose, and recycle.
