Chris 0:00 Welcome back to the Sustainable Design Lab podcast brought to you by Veritiv. In this podcast, we explore the big ideas that are reshaping the future of packaging. My name is Chris Bradley, and I lead the sustainable design lab for Veritiv. This episode is part two in our EPR for Packaging Master Class series. We are assuming you have listened to the EPR overview and part one, the fundamentals, where we discussed how EPR works, equal modulation fees, PROs, covered materials categories, and other important topics. If you are not familiar with these topics or have skipped ahead, we strongly encourage you to listen to those episodes before continuing with this class. Okay. Let's dig in. This episode is a deep dive into Oregon's specific program. Once you join the PRO and sign your producer agreement, you will gain access to Oregon's three hundred and ninety seven page program document. This document outlines the full program, including the very important fee schedules and all of the details you will want to understand to be compliant and to be able to figure out how to reduce your total feed burden. I've read this full program document in detail several times, and today, we will be reviewing the highlights of what is included and what you need to know as a packaging producer. Now I'm not gonna review every detail of what is included in that program. I'm just going to highlight the areas that are important to producers of packaging. First, the program outlines four goals for the program, and we will focus on the two that are relevant for producers. Goal number one is to reduce the negative environmental, social, and health impacts from the production and end of life of packaging, paper, and food service wear. So to do this, the first objective is to ensure that the materials collected and processed for recycling in Oregon are consistently delivered to responsible end markets. You will hear a lot of discussion and this term of responsible end markets to ensure that these recycled materials are actually recycled and reused over and over again. Objective number two of that program goal is to design and implement producer fee structure incentives that properly incentivize producers to improve the environmental outcomes associated with the production and recycling of packaging and food service where in the Oregon market. Now they are outlining base fees or fee structure in 60 different reporting and fee categories for covered materials. Now they've also integrated ecomodulation factors into these producer fee schedules to adjust fees for greater impact reduction. Goal number two of the program as it relates to producers is to increase the diversion of recycled materials from disposal. Now there are lots of materials today that are just too difficult to sort through, and so much of what is technically recycling winds up being landfilled because it is just too costly to sort out. So one of the big objectives of the program is to create a USCL or a uniform statewide collection list. This means that every collection site, doesn't matter if you're in a rural area or in a city within Oregon, would accept the exact same materials and that the Circular Action Alliance would take steps over time to increase the list of items that are collected and recycled and delivered to these responsible end markets. So the program also has a goal that they achieve a statewide plastic recycling rate target for packaging and food service wear of 25% by 2028, '50 percent by 2040, and 70% by 2050. Now the current rate of recycling in Oregon is estimated at 17%. So how are they gonna achieve these very aggressive recycling targets? When we get into the fee schedules, you'll see that some of the covered materials categories are just so outrageously expensive, as much as $2.79 a pound in fees, and that's because these materials are destined for landfills, and there's just no responsible end market for them. And so the plan is really to reduce the usage of these materials that aren't easy to recycle through this fee structure. High fees will incentivize producers to eliminate those types of materials. Now some of the other big goals of the program are to take fees from the producers and use those funds to invest in better recycling infrastructure across the state and the development and validation of responsible end markets. So this includes the addition of many more collection points, better sorting technologies, etcetera. They also want to ensure that consumers are not paying any more in waste management fees as a result of this change or this EPR law to ensure that it's completely funded by producer fees. So a lot of the program goes into those details as well as how the Circular Action Alliance will operate as a PRO. Although a lot of this is interesting, we will not be covering those details in this particular class. Again, we will be focusing on just those details that are important to producers looking to navigate the regulations, comply, and minimize their total cost burden. Okay. Before we get into the fee structures, and I know everybody's anxious to see what is the cost per pound of the material that I'm using, there are three definitions as it relates to materials that I wanna make sure that we cover before we get to the fees. The first is, again, this uniform statewide collection list or the USCL. So this is a standardized list of materials that must be collected. So it's mandatory that every collection point in Oregon, across all communities that provide residential recycling services, that they accept the same things. Now this is what's been typical of recycling across The United States is that each and every city, county, or municipality that has a recycling program accepts different materials, and so this creates widespread confusion. So this USCL, or uniform statewide collection list within Oregon, will include items like corrugated cardboard, aluminum cans, PET water bottles. The easiest to recycle materials that already have a good end market in place. There's also gonna be another list, which is called the PRO Recycling Acceptance List. Now, this is a broader list of materials than the producer responsibility organization or the Circular Action Alliance agrees to manage and support under the EPR program. Now items that have made it onto the PRO list include items like thermoformed PE trays, aluminum and steel aerosol cans, aluminum foil, shredded paper, glass jars and bottles, poly coated paper, and even single use plastic cups. Now these items are not required to be recycled by the law, but the PRO can decide to trial or establish their own programs to recycle them if they so wish. And so the CAA or the Circular Action Alliance is gonna do a number of trials to try to increase the percentage of totally recycling in the state. So why would they wanna add these items and make their job even more difficult? Simple. In order to meet the state required recycling rates, things like PET thermoforms or glass packaging, which is not recycled across the state today, represents a massive amount of material that could be recycled if they weren't enable to make this possible. So, again, the PRO is gonna step in and try to add in these additional items so that they can achieve the mandatory statewide targets that are part of the statute. Now what is also important to understand as a producer is the amount of effort and money that will be spent on consumer education and awareness. And now this has some serious implications for your brand as well as any fees that you're gonna be assessed for your packaging because we can packaging because we can expect consumers to get a whole lot smarter about what good packaging looks like. The state and the PRO are gonna invest lots of money to show Oregon consumers this is what's sustainable, this is what's recyclable, and this is what's not. And that will also change the way that consumers react to packaging when they see it on the store shelf. Now the PRO will specifically do public outreach and awareness for Oregon consumers and waste generators so that they will gain an understanding of what the USCL is and this PRO recycling acceptance list materials, and as well as how to prepare those materials for recycling. They're also gonna be training consumers on which materials will be collected at the curbside versus which materials will need to be handled at depot drop off points and other drop off locations such as collection um, awareness of steps to prepare recycled materials for collection and to limit contamination. Okay. The third definition that I want you to remember is for a single item material or a sim. Now, a SIM refers to a distinct category of packaging or printed paper material or food service that is treated as a separate line item in the fee structure under Oregon's EPR framework. So each SIEM has its own estimated base fee, which is determined based on a number of factors like the material type, is it a PET, plastic, a corrugated fiber board, its actual recyclability, potential contamination rates of that material, processing costs, and environmental impact. Okay. So these SIMS are gonna be the key to understanding as you select packaging materials or you look for redesign, what is the actual fee gonna be per pound for that material? So let's jump into the fee structures. Now the Circular Action Alliance has indicated that they have created a base fee structure that will attempt to harmonize a national fee setting methodology that will be used consistently across states. Now so far, Circular Action Alliance has been named as the PRO in Oregon, California, and Colorado. And so they're gonna try to create some harmonization to try to reduce the complexity of dealing with multiple states, but the fee rates will vary by state due to differing state requirements and program costs. So, again, there will be differences across states, and you're gonna need to really keep track of the complexities of these different programs. Now, the estimates that they are providing today in Oregon's fee schedule are really just estimates at this point based on what they expect the producer data to show when they receive it. Now they are waiting to get all of the producer data for 2024, which is due back from producers on 03/31/2025, they will then take all of that data and they will release an updated fee schedule with the start of the program on 07/01/2025. But we believe that the estimates that they're using now in their initial program document are truly representative of what we can expect since they were modeled after other programs. Now before we get into the rates for each covered material category, we should point out that there is a flat fee option for small producers. If you have under $5,000,000 in gross revenues, then you are exempt, and you do not need to report or pay fees at all. However, if you have gross revenues of between $5,000,000 and but less than $10,000,000, then they do offer an option to pay a flat fee instead of going through the whole program and doing the full reporting. So they have a tiered flat rate fee structure, again, for producers with gross revenues between 5,000,000 and up to and just under $10,000,000. And so that fee structure, which is outlined in the program document, depending on the amount of tonnage that you are shipping in the state, could be as low as $700 or as high as $4,400 per year. So if you do not want to submit all of the data and go through the reporting, you can opt as a small producer to just pay the $4,400 per year fee as a minimum, and you do not need to report at all if you meet that size requirement. Okay. Let's get on with the meat of the master class, and this is the part you're waiting for. At this point, we've discerned that you are not exempt and you are not eligible for the flat fee structure. So you are like most producers and will have to use the fee schedule to determine what fees you will actually owe. So now included with this master class is a PDF companion document. It is, in essence, the notes version of this class, and there is a full fee schedule available for your review. So I'm not gonna go through each and every cover material class, but we will go through most of the big categories, pointing out where there are some big fees for certain materials and talking about what you could do if you find yourself with some significant tonnage in some of these categories. Okay. So the draft base fee rate estimates, if you look at some of the different categories, one of the big material classes is printing and writing paper. This is basically gonna be 1¢ per pound for any type of printing or writing paper, so it's a fairly minimal fee. Glass packaging, so glass bottles, jars, and other containers, on the low end is currently estimated around 10¢ per pound and will go up to about 14¢ per pound. That is a somewhat minimal fee, but again, glass is really heavy in comparison to plastic, so it can add up pretty quickly. Ceramics, if you use ceramics in your packaging, are gonna have a range anywhere from 48¢ to 84¢ a pound. So, there really isn't a recycling system or market for ceramics, and so that is one of the reasons why the cost structure is much higher. Things like aluminum beverage cans, again, highly recyclable. The ranges here are from 6 to 8¢ per pound. Now the reason that I'm giving you ranges is because, again, Oregon doesn't know the exact amount of material that the producers are gonna present as kind of the estimated volume. So once this data is produced, they will kind of submit an actual rate sheet. So they're giving kind of a low to high estimate. Now, within metal containers, again, aluminum beverage cans like a soda can is expected to be pretty cheap in that kind of 6¢. But if you go to something like aluminum foil or aluminum molded containers, those are gonna be anywhere from 43 to 58¢ a pound. Significantly higher price because it's much more difficult to recycle those materials. And then something like an aluminum aerosol container. So, if you think about a container for shaving cream, for example, a steel container that is aerosol, that is actually gonna have a cost anywhere from 73¢ to 98¢ a pound. Now some of those cans can actually weigh almost a half a pound just in the packaging. So you can see, you could in some cases, you could be paying 20 to 40¢ per package. And so, again, those incentives or disincentives are built into the fee structure because some of these materials are just really difficult to recycle, and therefore, you're gonna pay a much higher cost. If we look at different types of paper and fiber packaging, in general, paper and fiber packaging has very low cost structure. So things like kraft paper, corrugated cardboard, are generally 3¢ a pound. It's gonna be fairly minimal, um, but aseptic or gable top containers and cartons like milk cartons or Tetra Pak will typically range from 29 to 39¢ a pound, much higher because, again, it is much more complex to recycle. There are some components like polycoated paperboard that have been specifically called out in the fee structure, so between 32¢ and 43¢ a pound for polycoated paperboard versus 3¢ a pound for regular paperboard. This is gonna drive people to ideally pick other materials or other coatings than poly. Again, poly coated paperboard is just much more difficult to recycle, and therefore, it has a much higher cost structure. Okay. If we jump into plastics, PET or number one, you know, this is things like bottles, jugs, and jars, which is in a clear plastic material, is gonna be somewhere between 17¢ and 23¢ a pound. If it's colored, so something like green or light blue plastic, the PRO is actually, um, still wants to collect those materials because there is a market for them, but the cost will be significantly higher between 58 and 78¢ a pound. And as you start to go through the structure and, again, I'm not gonna walk through everything, but I will pull out some of the big ones, like HDPE jugs and bottles and certain things like that will have a pretty low cost structure, 17 to 23¢ a pound. But the cost of plastics start to escalate considerably as you get into harder to recycle materials. So even like low density polyethylene, so this could be bottles, jugs, jars, lids, things like this, you can be paying 82¢ to over a dollar a pound for these materials. Polypropylenes, again, in the 44 to 58¢ a pound. And then some of the materials which are really considered much more toxic, almost impossible to recycle, are things like polystyrene, expanded, foamed, hinged containers, plates, cups, tubs, things like that, a dollar 94 to $2.58 a pound. So, again, these costs are escalating so quickly because they're really trying to keep you from using these types of materials. Again, you'll see the full rate schedule when you go through it, but what you should know is most plastics, unless they are PET number one bottle flake, you're gonna be paying upwards of 80 to sometimes over $2 a pound for these materials, and that's really gonna drive behavior change. Now, flexible materials. Flexibles are very typical. Multilayer films, things like this are gonna be well over a dollar a pound for these types of materials under the Oregon program. And so there are a lot of options that you consider right away after digesting the fee schedule. And, again, you can see the full fee schedule in the companion PDF that we've included that if you sign up in the show notes, you can get by signing up for the newsletter. But can you move from an unrecyclable plastic to a recyclable one? If you can, you can dramatically reduce your costs, and that's what the fee schedule will really show you. You can look for ways to convert to paper. Again, there's this massive trend right now called paperization, where people are figuring out how to move from plastic packaging to paper packaging. And if you can do that, the fee schedules will certainly pay dividends because you're gonna be going from something maybe a dollar pound down to 3¢ a pound for similar packaging. This is really where sustainable design comes into play. This is the meat and the potatoes, and this is really what we do every day at the Sustainable Design Lab. We use these rate schedules, we use performance requirements of what you need in your package, and we can design alternative solutions for packaging. So, really, the whole space of sustainable design is to generate these alternatives, do life cycle analysis to understand the impacts and the costs of these different options. Now, before you get to work trying to figure out exactly how you can possibly game the system, let's talk about another very important rule that is part of this Oregon law. It's called the SAF. Now Oregon law says that non recyclable packaging materials, those that are not accepted in the recycling system, must have higher average EPR fees than the ones that are recyclable. So to make sure this happened, the Circular Action Alliance uses a tool called the SAF or the SAF, which is the State Adjustment Factor. This tool allows them to adjust the base fees so that producers don't save money by choosing cheaper, non recyclable materials. So why this matters? Without adjustments, some non recyclable materials might have lower fees than recyclable ones, but don't get too pulled in by that because that would really discourage innovation and delay improvements to the materials that are on the path to becoming recyclable that are within this SIMS or single item material, um, schedule. So the SAF ensures fairness in the fee structure and keeps Oregon's environmental goals on track. So, again, this is how this SAF or SAF works in a very simplified process. The Circular Action Alliance compares average fees for recyclable versus non recyclable materials. If it discovers that non recyclables are actually cheaper, then CAA will use the SAF to shift some of the recycling costs from recyclable to non recyclable materials. So you might find some short term gain, but that could later come back to haunt you if you move to a non recyclable material. So they're really trying to incentivize all producers to move to recyclable materials wherever they can. Now, the goal that they have with the SAF is to make sure that non recyclable materials are at least 5¢ per pound more expensive on average than a recyclable material. Now these adjustments for SAF are applied carefully to avoid overcharging and to reflect the actual waste management costs. Now SIMS, which we talked about, which are the single item materials, which are outlined in the fee schedules, most of these are materials that aren't recyclable yet, but may become recyclable with investment. So they've been called out specifically so that they are indicating that there is a pathway for those materials, and they can have higher fees now due to the cost of building the infrastructure, but the goal will be to reduce the fees over time as infrastructure is built. Okay. So, again, the SAF, which is an important concept just to know that you can't just find a a non recyclable material that has a lower fee structure and get out of it, is really a tool that is gonna be put in place to prevent producers from choosing unsustainable packaging just because it's cheaper. And this will really protect the investment in these new and better materials, and it supports Oregon's long term goal of reducing the environmental impact of packaging and promoting a circular economy. Okay. Let's jump into the next very exciting part of the Oregon program, incentives, and how you can save money for your company through sustainable design. This is one of the most exciting and forward thinking parts of the Oregon EPR program from my perspective. It's this incentive system, and it's designed not just to penalize poor packaging choices, but to actually reward producers for making their packaging more sustainable. And this is called ecomodulation, and it's all about aligning your fees with the environmental impact of your packaging. So here's the big idea. The better your packaging performs for the planet, the less money that you're gonna pay under the EPR program. So, to do this, Oregon's PRO, or the Circular Action Alliance, has created a graduated fee schedule that gives you access to bonus credits if you go above and beyond. Now, there are two major bonuses and a third one that is currently in development. But let's jump into the first two. So bonus a is the voluntary disclosure bonus. So the way this program works is if you conduct a life cycle assessment, also known as a LCA, on one of your packaging SKUs and share the results with the state, you can get a 10% off of your base EPR fees for that SKU. Now this bonus is capped at $20,000 per SKU, and you can batch up to 10 SKUs, so you can do 10 LCA's at a time. So you could actually save $200,000 in fees in the first year. Now the bonuses that you get are credits that you can use in the following year. So it's important to know that if you get ahead of this and you actually conduct up to 10 LCAs in 2025 on your top 10 SKUs, you can get that bonus in your 2026 bill. Now at the Sustainable Design Lab, we actually have an LCA practice. We can help you develop these LCAs, and there's other consultants, etcetera, that are out in the market that could do the same, um, but it's an important opportunity that you take advantage of if you're gonna reduce your total cost structure going forward. Now, they also have bonus b, and this is an even bigger bonus tied to LCAs, and this is where the real savings start. If you do an LCA and you show that your packaging changes led to a very significant reduction in your environmental impact, then you qualify for bonus b. And depending on how much you improve through things like switching materials, light weighting, or increasing recycled content, you can earn up to a $50,000 per SKU bonus. Now, there are three tiers of rewards based on your impact reduction. So tier one is between a 1040% reduction, tier two is between a 4070% reduction, and tier three is over 70%. So bonus b is at least double the value of bonus a and is gonna begin in the 2027 program year. So So what you need to think about this year, during 2025, is that you have up to 10 SKUs that you can do your initial LCA's on, and then in the following year, you'll be able to show some big savings and benefits, and you'll be able to apply for bonus b. There is also a bonus c, which hasn't been outlined as of yet, but we know it's coming soon, and they will reward companies that switch from single use to reusable or refillable packaging if they can demonstrate real environmental benefits. So again, details are coming through future program updates on the value of that bonus c. So again, couple things to note. All bonuses that are in this organ system are tied to SKU specific supply weights. So the more product you sell with better packaging, the more money you will save. And you can't stack bonus a and bonus b for the scheme SKU, but bonus b is designed to be a stronger incentive. But again, remember, you can get bonus a starting in this very first calendar year. You'll also need to submit a third party verified LCA through ISO 14,400, and you'll need to follow the Department of Environmental Quality's life cycle evaluation rules. Again, this is something that we could help you manage if you were looking for help, and all bonuses will be credited on the next year's invoice. So the bottom line is if you're investing in better materials, if you're designing for recyclability, or even if you're just measuring your package's impact, and, again, we've been doing LCA for years now, but this is the first time that the LCA is gonna have a true financial incentive tied to it. So I'm, like, super excited about that. Now you really have a financial incentive to do LCAs. It's gonna pay big dividends, and this system is really gonna reward data driven decisions and sustainable design so that it can become your competitive advantage. So that's it for the Oregon deep dive. Hope you learned a lot. Again, there is a companion PDF that we highly encourage you to download, which will have all the details that we went through in this episode, and we look forward to seeing you in the next episode where we dive into Colorado specific details. Thank you.