Product Stewardship Solutions

1. Product Stewardship Solutions The NPCA paint stewardship demonstration project:“Understanding the Retailer role in Canadian Paint Stewardship Programs” Product Stewardship Institute Conference CallDecember 13, 2007 by Mark Kurschner, President, Product Care Association

2. Overview • The Canadian Extended Producer Responsibility (EPR) system and Product Care. • Paint Stewardship Program elements • How are retailers involved in Product Care and other EPR programs?

3. 1. The Canadian EPR system and Product Care Regulatory background: • EPR regulations: Provincial governments pass “extended product responsibility” regulations on a product by product basis, to shift “end of life” product cost from local government (taxpayer) to industry (consumer) • Designated Products: EPR Regs currently exist in one or more provinces (see next slide) for: • Paint • Household hazardous waste • Tires • Used motor oil • Beverage containers • Electronic equipment • Pharmaceuticals • Paper and packaging • Regulatory design: Regulations vary, but generally require “brandowners” / “first importers” to be part of an “approved program” (in BC and Quebec - or comply with “default program” requiring return to retail or “near retail”) • Industry role: The industry role varies and can extend from partial financial responsibility to 100% financial and operations responsibility

4. Source: MGM Management and the Conference on Canadian Stewardship

5. In a nutshell: • The government requires industry to manage the end of life product • Industry forms associations (such as Product Care) to deliver the programs • The association collect fees from its program members • The association expends the fees on program delivery

6. About Product Care • Product Care is a “real life” example of paint (and other HHW - household hazardous waste) stewardship programs, in operation for 13 years. • Product Care is a non profit organization formed by industry to develop and manage paint stewardship programs in Canada (and other products too). • Product Care’s members include manufacturers, distributors and retailers, many based in the US. • Product Care’s board is all industry: manufacturers and retailers • Product Care has paint/HHW stewardship programs active in 3 provinces in Canada, and has several more in development (see next slide). Product Care also manages an electronics waste program. • The Quebec paint program is operated by éco-peinture. • Product Care is providing services to NPCA to help develop the MN paint project.

7. Paint stewardship programs in Canada Éco-peinture 2001 2008 2008 2008 PCA 1994 2008 PCA 2002 PCA 2006

8. Product Care BC Program - leftover paint - liquid paint volume collected annually (US gallons) 1998-2006 BC Population: 4.3 million people BC Paint Sold 2006 9.6 million US gals (2.2 gals per capita) BC Paint Recovered 546,000 US gals (0.13 gals per capita) % recovered v sold 5.7%

9. Key program management performance indicators: • recovery volumes, program cost

10. 2. Paint Stewardship program elements • collection system • transportation • processing/recycling • communications • risk management • administration The following series of slides cover the following elements of a paint stewardship program:

11. Collection system • in BC program • Product Care operates 100+ depot system – municipal and private sites • also “infill” one day “events” • in NS: province wide 70+ bottle depot system and some participating municipalities • in SK: the province wide 70 bottle depot system is used (also manage electronics waste) • in QC: over 1000 return sites, including retailers • collection system • transportation • processing/recycling • communications • risk management • administration

12. Transportation/Consolidation • all programs use reusable collection bin systems • pick up frequency varies from several times a week to several times a year. • programs contract trucks to pick up full bins, drop off empty bins from depots • must comply with federal Transportation of Dangerous Goods regns. • database system used for tracking • consolidation points used to reduce transportation costs and build full loads • collection system • transportation • processing/recycling • communications • risk management • administration

13. Processing / Recycling • Sorting and bulking: In BC, Product Care manages central sorting bulking facility, in SK, NS, QC sorting/bulking contracted out • Reuse: Product Care operates “at depot” and “central paint exchange” reuse programs in BC and SK • Recycling solutions include paint reprocessing, latex in cement/concrete, solvent extraction, for asphalt use, fuel blending, metal and plastic recycling for containers • R & D: two year latex paint in concrete study just completed • collection system • transportation • processing/recycling • communications • risk management • administration

14. Communications Tools include: • consumer oriented web page, • 800# hotline, • municipal mailouts, calendars, • point of sale material – brochures, stickers on cans • point of return promotion (cross marketing) • collection system • transportation • processing/recycling • communications • risk management administration

15. Environmental Risk Management Objective: To protect program, brandowners, directors, consumers, the environment Tools: • environmental impairment national insurance policy • insurance reserve fund established • development of good management practices, depot guidelines • system wide manifest and tracking system • due diligence reviews of depots, transporters and recyclers • require certificates of disposal, only use reputable recyclers • collection system • transportation • processing/recycling • communications • risk management • administration

16. Administration • program is funded by “eco fees” paid by members to the program based on unit sales in the jurisdiction • Fees are per unit, e.g. $0.40 for 1 gallon paint • multi jurisdiction approach provides administrative convenience for members (one stop, common product lists, single audit) • Admin functions: • Identify and recruit brandowners and first importers (“level playing field”) • report non members to regulator for enforcement • process of member reports and fee remittances • maintain database of sales reports • online reporting system • member audits conducted to ensure correct reporting and remittances - level playing field • collection system • transportation • processing/recycling • communications • risk management • administration Fee rates: • In BC, SK, NS, fees vary by container size: • 100- 250 ml $0.10 • quart $0.25 • gallon $0.40 (BC,SK) $0.50 (NS) • 5 gallon $1.00 • aerosol $0.10 • In QC program, fees are $0.25 per container for all sizes

17. 3. How are retailers involved in Product Care programs? Possible Misconception: the government sets the fees • Underlying regulations place obligation essentially on “brandowner” or “first importer” into the jurisdiction • This can be a manufacturer, distributor, or a retailer • Note: there is no mention of “fees” in most of the EPR regulations, instead, industry’s legal obligation is to deliver a program. • Fees are a funding mechanism established and enforced by the industry program, based on units sold in the jurisdiction

18. Possible Misconception: all retailers must file reports / remit fees to the program • Many retailers do not belong to the program, instead their suppliers do. The retailer “pays on purchase” from the supplier. • Fees are typically “invoiced down”, “recovered up” the distribution chain. e.g. retailer pays fee and wholesale price on supplier invoice, recovers fee and retail price on sale to consumer. • Often supplier and retailer “work it out” to determine who will join the program and report and pay the fees to the program. • Note, in order to pay the correct amount of fees, the program member must know the final destination of the product, ie. the volume of sales in the jurisdiction. • The program’s concern is that a fee is received for each unit of the designated product sold in the jurisdiction • Some retailers prefer to be a program member and report and remit in order to: • Ensure compliance with regs and program • Improve cash flow (instead of paying fee to supplier at time of purchase, retailer collects fees from consumers, holds them until remittance)

19. Possible Misconception: all retailers must display visible, separate fee • Canadian programs do not require fee to be visible or invisible on cash register receipt • In Canadian programs, most retailers choose to show the eco-fee separately for a number of reasons: • Evidences program participation and compliance • Communicates existence of program to consumers • Allows regional/national pricing • In certain leases, avoids % rent

20. Example 1: Home Depot – not a program member • Is not a member of any Product Care program, files no reports to Product Care. • All Home Depot suppliers (e.g Behr Paint) are members of PCA programs • Behr “ships to store” and knows Home Depot’s sales volume for their product in each jurisd. • Behr charges volume based fee as line item on invoice to Home Depot • Home Depot paint prices are “plus eco-fees” and eco-fee shown as separate “visible” line item on cash register tape • Home Depot recovers fee from consumer at time of sale • Home Depot makes program brochures available

21. Example 2: Wal-Mart – a program member • Wal-Mart is a member of Product Care programs and files and remits monthly • Most Wal-Mart paint suppliers, e.g CIL (ICI) Paint are in fact already members of Product Care programs, but in the case of sales to Wal-Mart, ICI Paint does notinclude the eco-fee as line item on invoice to Wal-Mart. • Instead, Wal-Mart, as a member of Product Care, reports sales and remits fees directly to program(s) • Wal-Mart paint prices are “plus eco-fees” and eco-fee shown as separate “visible” line item on cash register tape • Wal-Mart recovers fee from consumer at time of sale • Wal-Mart makes program brochures available

22. The Upside - provide an environmental solution to your customers In either scenario (retailer as program member, retailer not a program member), for minimal effort and essentially no cost, participation in a paint stewardship program sends the right environmental message to your retail customer. From a Product Care member website: “… we're proud to support this worthwhile program” Questions??

23. Mark Kurschner, Product Care Associationmark@productcare.org604 592 2972 x 201 Thank you!