As North America prepares to make a first leap of faith into an individual producer responsibility (IPR) regime within a legally-mandated circular economy, many newly liberated producers are contemplating a most unlikely strategy in meeting their separate legal obligations – re-collectivizing.
Conflicting Interests In Vertical Re-Integration
One of the looming challenges facing all producers, whether directly or through a producer responsibility organization (PRO), is the need to secure a supply chain for the resource recovery of their products. Most Extended Producer Responsibility (EPR) models start with a form of regulatory command and control mechanisms in which a governmental authority or its designate oversees most, if not all, of the supply chain movements, as well as the selection of the participating parties.
It is these relationships, however borne of the imperfections of the government scheme, which may appear most attractive to producers in an IPR model, particularly as it relates to capital intensive actors such as processors and re-manufacturers. A reversion to these alliances, however, promises more of the same and little in the way of innovation or chain supply dynamism, while likely coming at similar, if not increasing, costs now that the government regulator cannot set fees.
In short, the IPR supply chain may somehow become less robust if producers cling to the incumbent supply chain within a market-dominant PRO without meaningful external pressure to reduce costs.
“Strange Bedfellows” Within Horizontal Re-Integration
As EPR germinated around waste stream diversion, it captures all those market actors which happen to introduce the regulated waste stream into the regulated EPR jurisdiction, without consideration as to the different roles those parties might play in the economy. For many EPR-regulated products, they might be easily divided into:
- the regulated product manufacturer and/or brand owner, often international in scope with both direct and indirect sales into a regulated market, such as laptop maker;
- the vendor of the regulated product as component, such as an equipment manufacturer using waste-diverted oils; however peripheral that regulated product may be within the larger offering – this vendor may well carry a deep-seated aversion towards the regulated resource recovery world of that component; and
- the (embattled) retailer which has no control and usually imperfect knowledge as to the regulated product’s composition and resource recovery functionality, with a justifiably narrow focus on point-of-sale management of any resource recovery fees.
While none of these three groups would dare suggest that their interests and priorities are magically aligned in an IPR world, there is, nonetheless, a centrifugal force around the regulated product manufacturers (which rightly prioritize the resource recovery of their core product in IPR), luring the other groups through financial inducements and economies of scale to horizontally reintegrate as the (however imperfect) default choice. IPR can begin to look very much like a government-run EPR under another name, but with the angst of individual producer liability which cannot be returned to the whole.
Do Individually-Responsible Producers Really Want to Operate Within Re-Collectivized EPR?
The Waste-Free Ontario policy of the Government of Ontario heralds IPR as a driver of North America’s first circular economy, part of an industrial strategy to engender a multitude of competing and dynamic market parties, thereby creating scalable and exportable resource recovery technical expertise. Perversely, it is under this free IPR regime, and not the semi-command models operating in the EU, that the unlikeliest of tire recovery market participants may somehow choose to reunite.
To re-collectivize, without first assessing the possibilities that industry-segmented and specialized PROs may offer, not just for tire recovery but for a host of industry-specific regulatory and sustainability initiatives, is to assume all the risks of an individual within IPR without benefiting from the market opportunities that IPR has to offer.