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Grocers need to manage change, not give away the store

We get it that the current BC residential Blue Box “system” is a complicated patchwork of different collection and processing arrangements and control points, with a confusing array of instructions on what does, or does not go, in the box or bag.

We get it that this patchwork needs to be transformed into a system that makes sense, is logical in structure, uniform and standardised where possible, harmonised with other programs where applicable, as well as being cost-efficient, effective,  and environmentally sound.

We get it that the provincially regulated move from 100% municipal control to 100% industry control is a major process change that has to be managed carefully and over time so that the new industry-run and paid-for system evolves with minimum disruption to consumers. We appreciate that other services (such as garbage and organics collection) are inter-related.

We get it that politics is always present when regulatory change is in the air: that some municipal leaders don’t want to lose the control they have assumed over the years; that local government workers don’t want to lose their jobs; that some fear competition with the private sector. Many of these local government voices have not exactly been shy in recent months, ratcheting up the political heat and fear-mongering through print and social media.

What we don’t get is why the drafters of this plan have so readily caved in and thrown a large bone to the local government lobby. For that is what this particular plan does.  In effect, the drafters are saying: “We (industry) will give you the ‘right-of-first-refusal’ on collection and will allow you to continue to base collection on municipal borders. We know it’s not the most efficient way to collect materials but by allowing you to stay in the game maybe you will tone down the rhetoric somewhat and ease the transition.”

The rest of the draft plan flows from this key political decision to offer local governments the “right-of-first -refusal” on collection. The private sector (which actually does most of the collection in BC today as contractors “managed” by municipalities) could be effectively shut out of competing directly for collection contracts. It will only get to bid on a piece of the action if the current (mostly local government) collection manager, decides to opt out. A local government wanting to stay in, however, could still seek a private sector contractor to do the actual work on its behalf at a lower cost than the draft plan’s “market clearing price”, then pocket the difference. Why do we need this middleman? Why shouldn’t private sector contractors be able to bid for the service directly?

There are major consequences (additional steward costs) that flow from this political decision on collection policy. Now the plan is not just a relatively simple province-wide collection plan based on the best logistics management to get the most material out: now it has to manage alternatives (should a local government opt out) to fit around municipal borders. Now the plan has to have a mechanism its drafters are calling a Market Clearing Price (MCP), an idea that hasn’t worked successfully with printed paper and packaging anywhere else, and should take years of consulting studies to sort out, if ever. Now there will be not one province-wide promotion and education administration but many (one for each of the municipalities opting in, and one from Multi-Material BC when local governments opt out). Even if they get their act together, there’s a duplication of costs here.

The most significant extra costs to stewards of this political deal on collection will come from the processing side. Under the “incremental approach” suggested by the drafters of this plan (adding new materials only “when markets become available”), BC processors could be re-designing their material recovery facilities (MRFs) several times: once to adjust to the new collection list currently being floated, then again and again as other materials are added (or maybe not) over the years.

This “brownfield” approach is the worst, most costly way to design a system. It is far better to design for the most expected eventualities upfront, a new (greenfield) operation rather than tacking on bits and pieces over time. There’s an extra benefit to going greenfield: a new MRF can be designed to handle all (not just select) printed paper and packaging materials. This leads to another option: why not collect all printed paper and packaging from the start? Sure, not all of it will find ready markets and may have to go to energy-from-waste (EFW) or landfill, but if the steward fees are fair, those non-recyclable materials will pay a penalty for that, which in itself should spur packaging re-design and reduce MRF residue rates.

But there’s a problem. Process re-design costs big money: about $25 million for a decent two-stream MRF, even more (in excess of $30 million) for a single-stream one. That’s borrowed money that has to be paid back over at least 15 years. And it won’t be loaned unless there are guaranteed contracts for the supply of materials. So BC processors need long-term contracts. A 5-7 year contract, likely all that would be guaranteed under the draft plan’s  requirements to secure tonnage from collection contractors, would be insufficient for processors to even consider innovating by building a greenfield MRF.

Allowing processor companies to bid directly for long-term collection contracts in a tendering process supervised by the steward organisation (Multi-Material BC) would at least give them the opportunity to secure that supply, but the BC draft planners have closed that particular door, forcing the processors to negotiate separate contracts with as many as 60 different municipalities. The additional administrative costs of undertaking these multiple negotiations (legal, accounting) will all be passed on to the stewards in their processing costs. So will the “risk costs” of the empty space that has been set aside at the MRF for the “someday” addition of new materials to the collection system. And what happens if the collection contractor changes at some point? Assuming that two seven-year contracts had been signed at the outset, the processor could now be left holding the bag with only half the MRF paid off.

Political decisions on collection have consequences (and costs) downstream. What is really frustrating is that there is a viable, logical, industry-led, lower-cost alternative to the draft planners’ current approach, and that the MMBC’s planners have known about this for months.

  1. Establish collection zones: The province can easily be divided into collection zones based on geographic and demographic factors. Where are the materials and what are are the most efficient logistics to capture them?  Collection based on municipal borders or where one municipal border happens to run up against another does not make economic sense. What collection zones do, of course, is place the focus on effective and efficient collection, rather than who does it (local government or private sector).

 Whoever meets Multi-Material BC’s qualifications criteria for collection should be allowed to compete. No one is excluded. Local government bids welcomed. A level playing field. If you don’t perform (whether you are a local government, private sector contractor or subscription service) you are out. Set conditions for the bids so that maximum diversion is achieved. Phase the zones in as existing contracts end, they don’t all have to start at the same time.

 

  1. Include all residential paper and packaging from the start: This meets the provincial Environmental Management Act’s Recycling Regulations section 11 (2) that “a producer must operate a collection facility for all products (printed paper and packaging) currently or previously sold…”  With this option, all stewards would have the opportunity to have their material collected (and not be paying for a program that doesn’t collect their particular items). It would create a level playing field between materials (instead of having a funding formula that is over-weighted towards the cost of recycling materials rather than penalising those that aren’t), and it would promote a consistent, harmonised, simple message (all printed paper and packaging) to consumers across the province.

 It would place an increasing emphasis on design for recycling or end-of-life (something the BC ministry also wants), forcing stewards to focus on materials that are not recyclable and/or compostable and likely headed to energy-from-waste or landfill. Steward fees should reflect the province’s stated management hierarchy. This option would also allow processors to design now for all materials, and to start processing them immediately, rather than to (as we have noted earlier) pay for the capital costs of empty MRF space and/or adding bits and pieces of equipment to MRFs later (a more expensive option for the stewards who will end up paying).

 

  1. Establish collection methods for the province: The type and proportion of materials to be collected (80% paper) and the need to maximise market revenues suggest that a two-stream approach (paper fibres and plastic, glass and metal containers) is a lower cost and efficient option. Single stream (throw everything in the box) tends to become a secondary garbage pick-up with higher residues to be sent to EFW or landfill. Householders have no problem distinguishing between fibres and containers and feel they are doing something for the environment, not simply dumping stuff in a box or bag just to get rid of it. A dedicated truck picking up fibres one week and containers the next is easy to promote and works successfully in Ottawa, and even meshes nicely with garbage and organics collection.

 

  1. Let tenders for collection and processing: A single body (MMBC) should control the letting of tenders for collection and processing (with appropriate dispute resolution mechanisms). It makes sense to have one administrative body controlling the big picture (collection, processing, logistics management and communications) and reporting to the MoE. There is no need to perpetuate the current disjointed approach and no need for a Market Clearing Price (MCP) and the endless tinkering that will result. MMBC ‘s role should be to manage and control overall program costs, liaise with local governments, and to stimulate innovation through pilot projects and research and development programs.

 We know it’s late in the day (the just-released-for-consultation draft plan is meant to be in the Minister’s hands by November 19), but stewards need to know the consequences of the path they are being led down. There’s no question that the grocers need to manage the process. Our concern is that the planners have already given away the store.

 

 

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John Mullinder

John Mullinder, Executive Director, PPEC - Regular posts on environmental and sustainability issues impacting the Canadian paper packaging industry

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Comments

  1. Wow. You have hit every nail right on the head John. A beautifully-written summary of what the recycling industry is thinking right now. Everyone with an interest in this program should read this piece.

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