What impact will the Deposit Return Scheme have on Irish business and consumers?

What impact will the Deposit Return Scheme have on Irish business and consumers

by Colette Devey, EY Ireland Consulting Partner and Consumer Sector Lead

Ireland is introducing a nationwide Deposit Return Scheme (DRS) on 1 February 2024 as part of its measures to combat waste and promote a circular economy. This move echoes similar schemes used across many countries worldwide with proven positive effects on waste reduction and recycling rates. The DRS has implications for businesses and consumers alike.

Customers purchasing plastic bottled or canned drinks which bear the Re-turn logo will pay a deposit of 15 cent or 25 cent, depending on the size of the container, which is refundable upon return to designated points. The Re-turn logo containers, with registered barcodes, will appear on the market from February 2024. Older stock without the logo can be supplied until mid-March and sold until the end May, meaning most drink containers sold nationwide will be part of the scheme.

The recent Future Consumer Index from EY reveals a global shift towards sustainability-focused consumers, increasingly acknowledging the reality of climate change and adjusting their consumption habits accordingly. The research discovered that 61% of people aim to be more conscious of the environmental impact of their consumption. Thus, the new DRS is poised to be a vital tool in steering consumers towards more eco-friendly practices.

The impact on B2B relationships in supply chains will be significant. Collaboration and strategic alliances are essential to reconfigure packaging, logistics, and recycling processes. Businesses should be planning to seize opportunities and mitigate the challenges presented by this measure.

Societal impact

Ireland, like all European countries, continues to grapple with an escalating plastic problem and continuing to meet set recycling targets. Consistent with approaches adopted by other European countries, the DRS has proven beneficial in boosting closed-loop circularity, waste reduction, and recycling rates.

Germany operates one of the most successful deposit return schemes, locally known as Pfandsystem, which ensures a record 98% return rate on eligible single-use drink containers. This success is due to the substantial deposit value and extensive, convenient return locations. In addition to facilitating the collection and recycling of single-use packaging, the German Packaging Law promotes refillable containers, which contributes to 42% of all beverages filled in the country. Germany updated its single-use deposit return system in January 2022, with plans for further modification in 2024, including the incorporation of single-use plastic bottles for milk-based drinks.¹

Significantly, one of the benefits of the DRS is the supply of clean, well-sorted materials, stimulating higher recycling rates among local businesses, and should have a domino effect for innovation in the material processing and recycling sector.

EY’s Future Consumer Index suggests that consumers are generally agreeable to sustainable government initiatives when they perceive value or no additional costs. However, the survey also found that only 47% say they are regularly recycling/repurposing products after use.

Therefore, the DRS provides an attractive option for consumers to redeem the cost as well as an incentive to create better recycling habits.

Retailer impact

Impacts on retailers hold both pros and cons that need to be considered. On the upside, it will enhance customer traffic and monetary incentives such as handling fees, and the scheme can contribute to an improved corporate reputation, while providing more comprehensive data for consumer intelligence.

Conversely, challenges include higher costs associated with collection infrastructure, alterations to retail floor space, possible staff training for new systems, and potential implications on staffing. Further challenges include cash flow, as customers are not required to return containers to their place of purchase and have the option of receiving a cash refund, leading to a potential delay in retailers’ reimbursement through the system.

Irish regulations also allow exemption from participation for certain retailers, such as those operating in spaces less than 250 square meters, ‘food to go’ shops, hospitality sector entities, and potentially online retailers. Yet, these exemptions necessitate further validation to ensure smooth operation amidst potential complexity.

Consumer impact

For consumers, the scheme may affect shopping budgets. 70% of consumers state that premium prices dissuade them from purchasing sustainable products so it’s important to consider how the DRS is positioned. Therefore, it must be clearly advertised that a full refund is available on the return of an undamaged container. Although all costs are refundable, consumers must adapt to the additional upfront cost, as well as an obligation to return bottles or cans to claim their refund and thereby minimise financial impact.

Also noteworthy is the possible increased volume of packaging to be stored and returned. Consumers might resort to more frequent shopping trips, potentially negating the scheme’s environmental benefits.

Moreover, the scheme might pose implications for consumers who rely on or prefer online shopping due to hectic schedules, accessibility issues, etc. These are considerations that need to be carefully addressed as the scheme begins to roll out.