The administrators of the Deposit Return Scheme (DRS) in Scotland, Circularity Scotland Limited, has been issued with a pre-action letter concerning retailer handling fees.
The letter was issued by the Scottish Grocers’ Federation (SGF), which believes that the current retailer handling fee levels will not support the cost of running DRS in stores.
SGF claims the fees will impact on retailers’ sustainability and business growth, with potentially thousands of businesses facing closure next year.
Circularity Scotland has proposed that retailers will receive 2.69p per container while for automated returns – through reverse vending machines - the fee proposed will be 3.55p for the first 8,000 containers received and 1.35p for each additional container. DRS will be introduced in Scotland in August 2023 following numerous delays.
SGF CEO Dr Pete Cheema OBE said retailers need more detail about how this fee was calculated.
‘’SGF has repeatedly called for CSL to explain how these retailer handling fees were calculated and to this end have met with both Lorna Slater, the Minister responsible for DRS, and CSL directly to highlight the significant risk to convenience operators and have provided evidence to CSL that the retailers handling fee is insufficient. CSL have refused to review the Retailer Handling Fee, suggesting if SGF members can’t make it work with this fee, they should opt out and not participate in the scheme, placing their businesses at risk. However, as they know, the regulations make that practically impossible.”
Cheema warned that DRS could be very costly for independent retailers at a time when they are already vulnerable. “It is important that we once again highlight that thousands of local convenience stores are at risk due to insufficient funding through an inadequate and potentially illegal retailer handling fee structure. They are faced with the choice of taking on a significant financial burden to set up Reverse Vending Machines, with no means of properly recovering this cost through the scheme, or being forced out the scheme altogether and risk losing all their footfall to large businesses.
‘’This is particularly important given the challenging trading environment - convenience retailers are being exposed to soaring energy bills, escalating inflation, rising interest rates, the implications of Brexit and the war in Ukraine. In addition, the steady stream of legislation from government is also impacting on the sector thereby adding to their ongoing costs. When we receive a response from Circularity Scotland Limited, we will, in consultation with our retail members, consider our response in a balanced and measured way.’’
He added that Scottish retailers are supportive of the scheme but need answers. “As a trade body we must respond to the concerns and be accountable to our retail members which is why we instructed our legal team to send a pre-action letter to Circularity Scotland Limited as the scheme administrator requesting that the relevant information be made available as a matter of urgency and to provide clarity around how and on what basis the proposed retailer handling fees was set, given it is the responsibility of retailers to set the fee and not the scheme administrator. The letter details our concerns in an accurate and carefully considered way.
“SGF has been and remains fully committed to working with a range of stakeholders to ensure that Scotland has a world leading scheme. It is essential however that DRS remains cost neutral to Return Point Operators and does not leave them with an additional cost burden or put them out of business.”
In response, Circularity Scotland said:
“Circularity Scotland is a commercially operated, not-for-profit organisation that has been formed with industry to administer the Deposit Return Scheme in Scotland as efficiently and cost effectively as possible.
”The Return Handling Fees for the first year of the scheme were calculated in line with an approach agreed by our members, who represent the breadth of drinks producers and retailers in Scotland. During the process we consulted closely with industry and appointed independent advisers to develop a detailed cost model aligned to the requirements of the regulations. Data to populate the model was sourced from the broad range of Return Point Operators that will operate in Scotland. We also used data and insight from other operating schemes that are in place around the world. The model is designed to reflect the variation in costs across different types and sizes of Return Point Operators and the different materials that will be captured under the scheme. We will continue to work closely with industry and all the relevant authorities to ensure the scheme is a success as we build up to the go-live date of 16 August 2023.”
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