There is still uncertainty around key aspects of DRS: SGF’s Cheema

Scottish Grocers’ Federation (SGF) has on Sunday (5 March) indicated that while it reaffirms its commitment to a fit for purpose deposit return scheme (DRS) for consumers and small retail businesses, the present scheme fails to provide this.

This follows the recent DRS parliamentary statement on 1 March by Circular Economy Minister Lorna Slater which the trade body said does not appear to recognise ‘the critical business viability issues that the many of the unresolved operational aspects of the scheme are presenting to small business and the convenience retailers who will be return point operators’.

SGF also noted that the publication of the ‘Deposit Return Scheme: Blueprint for retailers and hospitality providers’ by Circularity Scotland Limited (CSL), the scheme administrator, has significantly changed the payment terms for all return point operators (RPOs) in Scotland without sufficient notice. This will mean that many businesses will face the scenario of being in financial distress while waiting for significant sums of money back from CSL, the SGF added.

“We have met extensively, for over 18 months, with both Circularity Scotland the scheme administrator, and the Scottish government with a view to securing the guidance, clarity and support needed, to allow us to help our members successfully play their part in the scheme. To date however, there is still uncertainty around key aspects of the scheme and there is the real risk of thousands of stores closing due to cash flow issues or significant loss of footfall,” Pete Cheema, SGF chief executive, said.

SGF has listed some of the current key issues:

Payment terms: CSL have significantly changed the payment terms for all return point operators in Scotland without sufficient notice. Many RPO’s have committed to Reverse Vending Machines (RVMs) based on 7 day payment from when scanned into the RVM’s in their stores as CSL have previously highlighted. Now, for the first time in 18 months they have been informed it will be a full month before payments are made to RPO’s at a time when they have invested tens of millions buying RVMs and installing them. Now many simply do not have the cash flow to cope with this very late change to maintain their business, especially the convenience industry. For manual takeback, given there is no uplift schedule it is now suggested the minimum period is two full weeks before payments are made, dependent on when product is uplifted.

Appeal process: The appeal process is wholly unreasonable, 28 days to review and then a further 14 days before payments may be made. A full six weeks later, after payments should have been made, the scheme administrator will make payments. This is unsatisfactory and will seriously impact small business cash flows.

Exemptions: The exemptions process is extremely confusing and overly complex. A proximity exemption is only available to retailers where there is another return point within 400m (which is considered to be approx. 400m as a pedestrian would travel, instead of a straight-line distance) and that return point has consented to the application for an exemption. Alternatively, they can seek an environmental health exemption but in doing so are required via an online process to upload glass policies, planning applications and send in pictures but limit to 5 megabytes. They also must be able to demonstrate that there is no reasonable way for them to operate a return point on their premises without breaching their obligations towards food safety, health and safety, fire safety, environmental protection, and public health. It is not clear, from a business perspective, how to advise a retailer about their options around exemptions as nobody knows the volume and capability until the collection process is published as a confirmed contract – CSL were going to deal with but now seems this has been pushed back to retailer.

“Unfortunately, our plea for support was not followed through and there is a serious crisis at present, with business being required to participate in a scheme with an administrator that, in our view, is simply not listening to us,” Cheema said.

“Retailers members are pragmatic and resilient, they proved that through their exemplary service to communities up and down the country during the pandemic. However, they are being confronted with the scenario of putting their business at risk by signing up to prohibitive terms and conditions, or stop selling drinks in Scotland which will put thousands of community stores out of business.”

SGF has sent a paper to Lorna Slater on 27 February setting out in detail over 40 outstanding issues around the scheme which still require to be addressed and have asked for a response within 14 days.

Other key issues listed by the SGF include:

• Retailers who have closed loop operations with compacted glass, there is still no detail on how reconciliation of glass is being done, yet unreasonably being asked to commit to this scheme administrator.
• The collection frequency is vague, non-committal and ignores what the convenience industry has asked for. To state small, medium or large with no volume beside it means RPO’s cannot plan for waste storage based on this and there is simply insufficient time for them to build structure due to scheme administrator refusing continually to engage on a timescale that was achievable.
• The collection frequency based on this is insufficient and does not serve convenience business who need frequent uplifts due to minimal storage of scheme vessels, this has been highlighted for 18 months to both Lorna Slater and the scheme administrator, all of which has been ignored. The guidance issued by the scheme administrator and Zero Waste Scotland on 21 February was simply shut down your service and send consumers elsewhere if you are over capacity. This document gives no confidence businesses will be able to operate within the scheme due to chronic failure by the scheme administrator.
• Clarity is still required around price marked packs. Currently the Price Marking Order and DRS regulations contradict one another in how they interpret display of deposits. The Scottish government must seek a solution to this to establish who has the authority over this matter, whilst pushing for definitive guidance.
• Following clarity in early February on VAT rules, details still required on if the deposit charged to consumer is ZERO rated, or VAT EXEMPT.
• Clarity is required around customer receipts in terms of what retailers legally must display. Thereafter they will need to change their ePOS systems to reflect agreed legal requirements.
• The Zero Waste Scotland opt out process is not fit for purpose and failing industry as advised to Lorna Slater repeatedly in the past 12 months. On 21 February 23 Zero Waste Scotland confirmed that circa 90 per cent of all applications were not being approved by the Scottish government. The scheme administrator reduced its producer fees based on removing thousands of RPO’s from the scheme to make it efficient for big producers, this is not on track as less than 200 applications have been made according to Zero Waste Scotland on 23 February.
• The Scottish Government failed to plan fairly or properly for convenience in Scotland. The government’s planning officials in 2020 were informed to only adapt regulations “PDR” for supermarket and retail park installs. Many convenience businesses now trying to find solutions are unable to attain planning consents and coming up against significant obstacles despite local authorities trying to support them.