A key element of the Deposit Return Scheme (DRS) will be the fee paid to retailers, hospitality venues and other return points, the Return Handling Fee (RHF). International experience is that this is also one of the most contentious aspects of operating a DRS. In order to counter this when establishing Circularity Scotland (CSL) the founding members agreed a process for the determination of the RHF, which was incorporated into the Membership Agreement to which all members are contractually bound.
The procedure originally outlined in the Membership Agreement for setting the DRS is as follows;
Neither the Board, the Executive Leadership Team nor any Member will determine the Return Point Handling Fees. Instead, an appropriate independent entity (who should not be the Company's auditors or the accountants appointed to act by the Board on day-to-day matters relating to the Company) will be appointed by the Board, with input from the Strategic Advisory Group and such other persons as the Board considers appropriate, to calculate the Return Point Handling Fees based on agreed and published parameters. This will be a transparent and independent process and a report will be published at least annually regarding the Return Point Handling Fees. In carrying out its task, such independent entity shall be entitled to consult such persons as the independent entity considers appropriate.
This procedure was amended in December 2021 by a majority vote of the members to allow the board to set the fee based on evidence collected and analysis prepared by PWC. The process was amended as a result of the board being unable to identify a suitable party (acceptable to the members) which was willing to take on the assignment as defined.
By agreeing to the amended procedure, the members have confirmed that it is appropriate for CSL to determine the fee. Any other approach would be impractical.
The board have sought to comply with both the letter and spirit of these requirements. The work carried by PWC was comprehensive, thoroughly researched and carried out with professional diligence and experience. PwC consulted extensively with Return point operators and evidence was obtained from established DRS schemes in other countries. In their consideration, the board were careful to achieve as fair an outcome as possible, reflecting the fact that the burden of the RHF will be passed onto producers and ultimately the consumer, and ensure that no one type of Return Point (RPO) was unfairly advantaged or disadvantaged.
The regulations require a reasonable RHF which puts the RPO in a cost neutral position. The consideration of reasonable is important and the fee is not intended to cover unnecessary or disproportionate expenditure by the RPO.
As there has been considerable feedback on the fees determined by the board, in addition to legal action, we are today issuing further information on the calculation of the fees. This additional information is an addendum to the original RHF document issued in June.
We must also make clear that the parameters used to calculate the fees do not represent guidance or instructions, explicit or implicit, to RPOs on areas such as whether or not to install a Reverse Vending Machine (RVM). All such matters are a commercial decision for the RPO and must be based on the circumstances and judgement of the RPO.
This information does not reflect any potential impact of the recent announcement from the Scottish Government regarding the operation of exemptions for return points.
David Harris, CEO