Extended producer responsibility (EPR) regulations for packaging are proliferating globally, creating increasingly complex compliance requirements for consumer companies and those in adjacent industries. These laws—already in place in EU countries, India, Japan, Canada, and several US states, including California—require companies to pay fees based on the volume and type of packaging they put into the market. The cost implications and complexity of these requirements are likely to increase as other jurisdictions enact similar rules.
The So What
Approximately 20% of US economic activity is generated in states that have enacted packaging EPR laws, potentially rising to nearly 50% by 2030 based on current state legislative signals. Our analysis shows that consumer goods could see margin reductions of approximately 5%. Conversely, taking proactive steps can deliver sizable benefits. One consumer company recently identified more than $120 million in annual savings, while cutting its packaging volume per product in half.
Most EPR fees vary by the recyclability of the material in question. This is done to encourage the use of more recyclable materials like paperboard and aluminum and discourage the use of materials with limited recyclability like plastic films. The collected fees fund recycling collection and processing. C-suite leaders who prioritize packaging EPR can secure strategic advantages that could compound over the coming five to seven years, as compliance demands grow.
Packaging EPR governance falls awkwardly between sustainability, legal, finance, procurement, and product functions, none of which has the authority to make company-wide decisions on its own. With no clear owner, EPR-related decisions escalate to a C-suite unprepared for them, creating bottlenecks. An ad hoc approach to EPR regulations may introduce outsized risks:
- Overpayment of Fees. EPR fees are calculated on the volume and recyclability of packaging sold into a market. They are dynamic, tied to recycling system maturity and consumer behavior, and expected to rise for the foreseeable future. Fragmented packaging data and fast-approaching deadlines put companies at risk of overpaying.
- Supply Chain Volatility Due to Competition for Materials. Demand for recycled material is likely to outpace supply, and companies could soon compete for these resources across product categories and materials. For example, recycled PET is used in both the fashion industry and in consumer packaging. Similarly, food-grade recycled content could be in greater demand across food manufacturing, retail, and service.
- Insufficient Data for Compliance Reporting. In the US, compliance with EPR laws requires accurate information at the state level. Many companies either don’t track this information or do so using very rudimentary processes, such as manual spreadsheets.
- Limits on Market Access. Falling behind on packaging EPR compliance exposes companies to compounding fees and fines and, under several laws, jeopardizes market access.
With a proactive approach and coordination across business functions, leadership teams can transform the underlying economics of product and packaging design to reduce EPR fees, limit volatility, build stronger supplier relationships, and develop more innovative packaging solutions.
Now What
While some state-level legislation in the US faces ongoing legal challenges, compliance for most producers remains mandatory. Rather than simply trying to manage EPR-related fees as a cost of doing business, companies can take a more proactive, strategic approach to shape the system and rethink their own economics. Some solutions are relatively straightforward to implement; others require capital-intensive R&D. For that reason, EPR isn’t an issue that can be delegated to procurement or any other function alone. Companies need strong C-suite support to:
Invest in data. Conduct product lifecycle assessments to understand the full environmental footprint of products and packaging at the level of individual SKUs to pinpoint hot spots. State-level volume data is required, which may demand system upgrades and better internal communication.
Identify the recycling chokepoints. Recycling systems fail at key junctures—collecting, sorting, processing, converting—and the specific chokepoints vary by material. By understanding those nuances, companies can manage them more effectively, including measures like investing in take-back programs, signing long-term off-take deals for recycled content, or altering packaging specs based on the availability of materials.
Assess design changes. In the near term, consider measures to reduce the volume of EPR-liable packaging, such as reducing weight, simplifying components, incorporating more recycled content, and changing materials. Manufacturers have successfully reduced EPR exposure through packaging material and product format redesign, the latter often focusing on concentrated tablets and powders that can be packaged in paperboard. Beyond near-term compliance, forward-looking companies can use EPR requirements as a forcing factor to do the design-to-value work that can deliver broader benefits. Tear-down processes that lower the EPR bill are the same processes that can address other types of costs.
Strengthen the packaging ecosystem. Outside of their own organizations, companies can invest in collection efforts to help ensure recycling systems receive high-quality inputs. They can join with peers to amplify demand signals for recycled materials through public commitments, purchase orders, and joint R&D. Finally, they can more proactively engage with producer responsibility organizations (such as Circular Action Alliance in the US) that can shape overall policies and standardize actions across jurisdictions.
