Out-Law News 2 min. read

Packaging price hike to hit booming online retail


Online retailers are facing spiralling packaging recycling costs in the run up to Christmas, according to one industry expert. While online retailers will sell more this Christmas than ever before, they will also face a rising recycling bill.

Internet sellers depend on effective packaging to ensure that their goods reach consumers in usable condition, but they must ensure that a certain percentage of that packaging is recycled.

Most use recycling schemes, which do not have to ensure that a particular box is recycled, but which arrange with recycling plants to ensure that an equivalent amount of the same material is recycled.

But falling commodity prices are driving the cost of this activity up, according to Adrian Hawkes, the director of policy for the UK's biggest recycling scheme operator, Valpak.

"If there is a high market price for the material then the price of the evidence [of its recycling, which retailers buy] is lower, and the converse is the case," he told technology law podcast OUT-LAW Radio. "For the first half of this year world commodity prices were very high and therefore [the price of] recycled material products was also high. So the extra financing that was required from producers was actually quite modest."

"Over the last few weeks that has completely flipped around in that global commodity prices have plummeted down to very low levels which means that in order to continue to recycle, the subsidy, if you like, has to increase to compensate and that is exactly what has happened," he said.

Hawkes estimated that the cost to UK industry of recycling packaging could increase by 50% this year because of this hike, from £100 million to £150 million. He also said that the rise would make it less likely that the UK reach its packaging recycling target this year of 60%.

CapGemini has said that UK consumers will spend more online this Christmas than ever before, despite predicting a fall in overall retail sales. It said consumers would spend £13.16 billion in the last three months of this year.

Retailers do have a responsibility to recycle packaging under UK laws derived from EU Directives. Though the packaging is not the primary product they sell, most are considered to be producers or importers of packaging, said Kirsty MacArthur, an environmental law specialist with Pinsent Masons, the law firm behind OUT-LAW.COM.

"The Producer Responsibility Obligations are designed to encourage minimisation of packaging and incentivise increased recycling. If you are a company that is bringing in packaging – whether you are supplying raw packaging or importing and selling packaging in the UK there are a set of regulations which will apply if your turnover exceeds £2 million and if you are handling over 50 tons of packaging," she said.

"A company such as Amazon, if you are importing packaging or selling goods with packaging around them in the UK the likelihood is that the regulations will apply to you," she said.

Amazon recently announced a frustration-free packaging programme which had two aims – to cut down on the amount of packaging and to increase its usability.

Access to goods can be hampered by packaging which is difficult to open. This is particularly an issue for older people who are more likely to have problems with dexterity, said David Sinclair, head of policy at Help the Aged.

"We know that actually packaging is a big issue and that people tell us all the time that actually they have not bought the same product because of it," he said. "There are difficulties like just literally getting into some of the packets, the opening up, particularly I think some of the sort of vacuum-packed plastic packs. The big issue has been inclusive design, how we design products and services to meet the needs of an aging society. I really thing that industry is beginning to recognise that we need to do more."

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