Let’s talk about “Return Chains”

The new requirements under the German Packaging Act (Verpackungsgesetz, VerpackG) introduce further obligations to manufacturers and final distributors. These obligations originate from the EU Directive 2019/904 (“Single-Use Plastics Directive”) which is part of the EU’s “circular economy action plan” (CEAP) - one of the main blocks of the European Green Deal.

These developments present a challenge and an opportunity for companies that have to re-design their operational processes to comply with the new requirements. Further, these developments necessitate a paradigm shift in thinking and the approach taken: “return chains” need to be considered and become a central part of business operations, meaning that taking back obligations are operationalised in a way that is comparable to supply chains. If done well, new sustainability requirements can be integrated seamlessly and the offering of reusable packaging can improve brand image and customer loyalty. On the other hand, late or improper implementation can likely create costs and operational inefficiencies down the road and invoke national authorities’ attention and in the worst case national authorities’ penalties as required by the Single-Use Plastics Directive from the Member States.

How do the recycling registration requirements for packaging change as of 1 July 2022?

Extension of the registration obligations

As of 1 July 2022, registration with the “LUCID” platform provided by the Central Agency Packaging Register (Zentrale Stelle Verpackungsregister – “ZSVR”) will not only be mandatory for packaging participating in the German recycling systems, but for all packaging filled with goods (Sec. 9 (1) VerpackG). Manufacturers must register all their packaging that is supplied to end consumers within the scope of the German Packaging Act with LUCID, including reusable packaging, sales packaging and repackaging that does not typically accumulate as waste at private end consumers after use, system incompatible packaging, transport packaging (Sec. 12 VerpackG). 

Verification and Monitoring obligations for distributors, marketplaces and fulfilment service providers

Additional obligations are introduced to ensure a more effective monitoring regime for the licensing and registration obligations (Sec. 7 (7), 9 (5) VerpackG). Distributors, operators of electronic marketplaces and fulfilment service providers will have to verify that they do not offer/carry out operations with regard to non-licensed packaging subject to recycling system participation in Germany or packaging which is not registered with LUCID.

What are the specific obligations for final distributors with respect to reusable packaging? 

Take back and recycle reusable packaging

Since July 2021 final distributors (Letztvertreiber) already have to take back and recycle any reusable packaging (such as multiway bottles) of products available within their own product selection (Sec. 15 (1) no. 5 VerpackG).

Reusable packaging or packages (Mehrwegverpackungen) means any packaging designed and intended to be reused several times for the same purpose and for which actual return and reuse is made possible by sufficient logistics and is promoted by appropriate incentive systems (e.g. deposits) motivating the consumer to return the packaging (Sec. 3 (3) VerpackG).

Generally, the take-back and recycle obligation of final distributors applies irrespective of whether the individual packaging was used by the given final distributor, i.e. final distributors must take back any packaging whether it was put on the market by them or not. 

Information about return options

To promote returns and recycling, final distributors must inform end consumers about the different return possibilities for their reusable packaging. In addition, they have to inform and educate end consumers about the objective and purpose of the return options (Sec. 15 (1) sentence 5 VerpackG).

Documentation and yearly records

Final distributors shall keep yearly records inter alia on the fulfilment of takeback and recycling obligations regarding the reusable packaging (Sec.15 (3) VerpackG). 

What are the new obligations for final distributors of to go and (at-home) delivery food?

Provision of reusable alternatives 

Sec. 33 VerpackG introduces new obligations for final distributors of “to-go” and delivery food and beverages, such as e.g. (fast food) restaurants and bars including “food trucks”, coffee shops, supermarkets and kiosks as well as delivery businesses (to-go distributors). By 1 January 2023 they have to offer reusable alternatives to disposable plastic food packaging and cups for all food and drinks sold for immediate consumption 

Information obligation of end customers

Also to-go distributors are obliged to inform end consumers at their point of sale about the new option of receiving the goods in reusable packaging by means of clearly visible and legible information boards or signs. In the case of at-home-delivery of goods, this information shall be given by means of the same media form which is used by the distributors for offering their service and goods (such as mobile apps, flyers and websites).

Ensure equivalence

To-go distributors may charge a deposit for the reusable alternatives offered by them but, in general, the reusable alternative must be considered equivalent by the end consumer to the disposable option. 

Which businesses must observe the new requirements?

The abovementioned provisions apply to manufacturers, final distributors, operators of electronic marketplaces and fulfilment service providers. 

Manufacturers

Manufacturers (Sec. 3 (14) VerpackG) have to keep records on the fulfilment of takeback and recycling obligations (Sec. 15 VerpackG). Starting 1 July 2022, the extended licensing and registration obligations will come into force (Sec. 7, 9 (1) VerpackG). If the manufacturer is not established in Germany, an authorised representative may be named to fulfil the manufacturers obligations (Sec. 35 VerpackG).

Final Distributors

With respect to the obligation applicable to final to-go distributors according to Sec. 33 VerpackG, small to-go distributors with a maximum of five full time employees (or equivalent) and a maximum of 80 square meters of sales area, are exempt from the new requirement to provide customer with reusable packaging options. Such small distributors must however allow the use of reusable packaging brought by customers themselves (rf. Sec. 34 (1) sentence 1 VerpackG). Further, as to the obligation under Sec. 15 (1) No. 5 VerpackG to take back and recycle any reusable packaging, an exemption exists for small final distributors with a sales area below 200 square meters; these final distributors have to take back only the type of packaging (brands) they are using themselves (rf. Sec. 15 (5) sentence 2 VerpackG).

Operators of electronic marketplaces/ Fulfilment service providers 

As of 1 July 2022, operators of electronic marketplaces (Sec. 3 (14b) VerpackG) and fulfilment service providers (Sec. 3 (14c) VerpackG) will also be included in the scope of the German Packaging Act. They in particular are subject to the obligations to verify whether packaging processed by them is properly licensed and registered (Sec. 7 (7), 9 (5) VerpackG).

Consequences of non-compliance

The German Packaging Act imposes administrative fines of up to EUR 10,000, EUR 100,000 and EUR 200,000 for violations of the imposed obligations (Sec. 36 (2) VerpackG). In addition, and most relevant in practice, violations of packaging law requirements fall under unfair commercial practices under the Act on Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, UWG) which may give rise to cease and desist claims such practice by competitors, commercial associations and other entities such as consumer protection organizations.

Further changes on the horizon

As of 1 January 2024, certain exemptions from the mandatory deposit for one-way beverage bottles made out of plastic will cease to apply (Sec. 31 (4) No. 7 VerpackG).
As of 1 January 2025, all non-refillable PET bottles must contain at least 25 % recycled plastics. 
As of 1 January 2030, this number will increase to 30 %. The quota can be achieved either per bottle or in relation to total production (Sec. 30a VerpackG).

Practical implications

Final and other distributers face new and ever increasing takeback obligations with respect to packaging. 

• This development may set incentives for businesses to gradually reduce the amount of packaging used in order to also reduce the amount of packaging that they have to take back. However, this will require joint industry-wide efforts as the obligation to take back and recycle reusable packaging is not limited to packaging which has been released by a specific distributor. 
• In the medium term this can lead to voluntary new technical solutions for package reduction, recycling system and reusable material on the one hand as well as new regulatory requirements to further aid packaging reductions on the other hand.
• Most of the market players will likely need to establish or expand their existing infrastructure to fulfil their takeback obligations.

Brief glance on steps towards more product sustainability 

EU targets for waste management are key drivers of increasing recycling rates: Whereas the EU Waste Framework Directive sets forth targets for the recycling and preparing for reuse of municipal waste, the EU Packaging and Packaging Waste Directive defines targets for recycling packaging waste and the EU Waste Electrical and Electronic Equipment (WEEE) Directive sets targets for separate collection and recycling of electrical and electronic waste. In total, EU waste legislation includes more than 30 binding targets for the period 2015-2030.  Key principle of EU waste policy is to move waste management up the ‘waste hierarchy’ and to follow the principles of a circular economy, namely to maintain resource value in the economic cycle to prevent and reduce the negative effects of using primary resources on the environment and society. Recycling is one of the main ways to reduce the consumption of primary resources.

Returned products 

In addition to sustainability requirements for packaging, the 2020 reform of the German Waste Act (Kreislaufwirtschaftsgesetz, KrWG) to implement the recast EU Waste Framework Directive 2008/98 as amended by Directive (EU) 2018/851 already significantly extended the product responsibilities of companies. In this context, an extended duty of care for manufacturers of goods was introduced in particular with Sec. 23 (2) No. 11 KrWG, which aims to ensure that returned products are also recycled wherever possible within the framework of a sustainable economy and do not simply become waste. The legislative materials refer to destruction of returned products, where reprocessing costs are too high, such as e.g. in the area of fast fashion, as the reason for introducing this provision. Although the required implementing regulations are still pending, in a society with an ever-increasing awareness of sustainability, this topic will likely receive more and more attention. 

In the age of e-commerce, companies are confronted with an ever-increasing number of customer returns. Companies are well advised to work with all stakeholders in the value chain to find resource-efficient and economically viable ways to shape their pursuit of greater sustainability in the changing legislative environment.

Electrical and electronic equipment (WEEE)

Key learnings can be taken from recycling waste electrical and electronic equipment. In force since 2003, Directive 2002/96/EC on waste electrical and electronic equipment (WEEE) was recast 2012 by Directive 2012/19/EU (so-called WEEE II). The latest amendments came into force on 15 August 2018.

Waste electrical and electronic equipment must not be disposed as unsorted municipal waste but collected separately (Art. 5 WEE II). Electrical and electronic equipment must be labelled accordingly (labelling obligation, Art. 14 WEE II). All producers supplying electrical and electronic equipment to EU markets must be registered in the respective EU country (registration obligation, Art. 16 WEE II). Member states are obliged to continuously record the quantity of products placed on the market (annual reporting, Art. 16 WEE II). The costs for financing return and collection systems must be borne by the producers and distributors of electrical and electronic equipment (Art. 12 WEE II). For final consumers the return of their waste equipment is free of charge.

Recycling includes mechanical, thermal and chemical processes that allow further recovery of materials. Current recycling practice consists of three main steps: Pollutants are removed manually, then the materials are mechanically shredded in several stages, and finally the material is separated. 

Medical devices

However, mechanisms for the sustainable use of resources are not yet implemented in each and every business area. For example, the EU Medical Device Regulation 2017/745 (MDR) which entered into force mid-2021, only briefly indicates in its preamble that Member States may implement provisions regarding re-use processes for single-use medical devices. Besides this indicational opening clause, the MDR only infrequently takes into account sustainability aspects, i.e. by stipulating that instructions should provide information on the appropriate processes for allowing reuse and information to identify when the device should no longer be reused (see MDR, Annex 1 Chapter 3 Point 23.4 (n)). Inter alia, it could have been implemented in the MDR that the sustainable use of resources is one of the test criteria within the conformity assessment procedure. Further, an obligation to recycle materials where possible could have been introduced without imposing such obligation in general. At the moment, the conflict of interests between environment protection purposes on the one hand and safety purposes and the other hand is often considered as the reason why this industry is not as accessible for sustainable solutions compared to others, e.g. because of potential risks that might arise by reusing potentially infectious items (as outlined e.g. in the Federal/state recommendations on current waste management  – Guidance on the disposal of waste from COVID-19 containment measures, March 2021). However, in order to meet the increasing awareness for environment protection and the requests for a sustainable use of resources of the population also in this area, the medical device industry might start thinking about mechanisms to introduce re-using, recycling or refurbishing high-quality materials (such as metals, plastic or electronic components) used in medical devices where possible. 

Authored by Christiane Alpers, Karolin Hiller, Daniela Troeppner, Dominika Wiesner, and Nicole Boeck.