The NPCA paint stewardship demonstration project: “Understanding the Retailer role in Canadian Paint Stewardship Programs” Product Stewardship Institute Conference Call December 13, 2007 by Mark Kurschner, President, Product Care Association Product Stewardship Solutions

2 Overview 1.The Canadian Extended Producer Responsibility (EPR) system and Product Care. 2.Paint Stewardship Program elements 3.How are retailers involved in Product Care and other EPR programs?

3 1. The Canadian EPR system and Product Care Regulatory background: EPR regulations: Provincial governments pass “extended product responsibility” regulations on a product by product basis, to shift “end of life” product cost from local government (taxpayer) to industry (consumer) Designated Products: EPR Regs currently exist in one or more provinces (see next slide) for: –Paint –Household hazardous waste –Tires –Used motor oil –Beverage containers –Electronic equipment –Pharmaceuticals –Paper and packaging Regulatory design: Regulations vary, but generally require “brandowners” / “first importers” to be part of an “approved program” (in BC and Quebec - or comply with “default program” requiring return to retail or “near retail”) Industry role: The industry role varies and can extend from partial financial responsibility to 100% financial and operations responsibility

4 Source: MGM Management and the Conference on Canadian Stewardship

5 In a nutshell: The government requires industry to manage the end of life product Industry forms associations (such as Product Care) to deliver the programs The association collect fees from its program members The association expends the fees on program delivery

6 Product Care is a “real life” example of paint (and other HHW - household hazardous waste) stewardship programs, in operation for 13 years. Product Care is a non profit organization formed by industry to develop and manage paint stewardship programs in Canada (and other products too). Product Care’s members include manufacturers, distributors and retailers, many based in the US. Product Care’s board is all industry: manufacturers and retailers Product Care has paint/HHW stewardship programs active in 3 provinces in Canada, and has several more in development (see next slide). Product Care also manages an electronics waste program. The Quebec paint program is operated by éco-peinture. Product Care is providing services to NPCA to help develop the MN paint project. About Product Care

7 Paint stewardship programs in Canada PCA 1994 PCA 2006 PCA Éco-peinture

8 Product Care BC Program - leftover paint - liquid paint volume collected annually (US gallons) BC Population: 4.3 million people BC Paint Sold million US gals (2.2 gals per capita) BC Paint Recovered 546,000 US gals (0.13 gals per capita) % recovered v sold5.7%

9 Key program management performance indicators: recovery volumes, program cost

10 collection system transportation processing/recycling communications risk management administration 2. Paint Stewardship program elements The following series of slides cover the following elements of a paint stewardship program:

11 collection system transportation processing/recycling communications risk management administration in BC program Product Care operates 100+ depot system – municipal and private sites also “infill” one day “events” in NS: province wide 70+ bottle depot system and some participating municipalities in SK: the province wide 70 bottle depot system is used (also manage electronics waste) in QC: over 1000 return sites, including retailers Collection system

12 collection system transportation processing/recycling communications risk management administration all programs use reusable collection bin systems pick up frequency varies from several times a week to several times a year. programs contract trucks to pick up full bins, drop off empty bins from depots must comply with federal Transportation of Dangerous Goods regns. database system used for tracking consolidation points used to reduce transportation costs and build full loads Transportation/Consolidation

13 collection system transportation processing/recycling communications risk management administration Sorting and bulking: In BC, Product Care manages central sorting bulking facility, in SK, NS, QC sorting/bulking contracted out Reuse: Product Care operates “ at depot ” and “ central paint exchange ” reuse programs in BC and SK Recycling solutions include paint reprocessing, latex in cement/concrete, solvent extraction, for asphalt use, fuel blending, metal and plastic recycling for containers R & D: two year latex paint in concrete study just completed Processing / Recycling

14 Tools include: consumer oriented web page, 800# hotline, municipal mailouts, calendars, point of sale material – brochures, stickers on cans point of return promotion (cross marketing) collection system transportation processing/recycling communications risk management administration Communications

15 collection system transportation processing/recycling communications risk management administration Objective: To protect program, brandowners, directors, consumers, the environment Tools: environmental impairment national insurance policy insurance reserve fund established development of good management practices, depot guidelines system wide manifest and tracking system due diligence reviews of depots, transporters and recyclers require certificates of disposal, only use reputable recyclers Environmental Risk Management

16 collection system transportation processing/recycling communications risk management administration program is funded by “ eco fees ” paid by members to the program based on unit sales in the jurisdiction Fees are per unit, e.g. $0.40 for 1 gallon paint multi jurisdiction approach provides administrative convenience for members (one stop, common product lists, single audit) Admin functions: Identify and recruit brandowners and first importers (“level playing field”) report non members to regulator for enforcement process of member reports and fee remittances maintain database of sales reports online reporting system member audits conducted to ensure correct reporting and remittances - level playing field Administration Fee rates: In BC, SK, NS, fees vary by container size: ml $0.10 quart $0.25 gallon $0.40 (BC,SK) $0.50 (NS) 5 gallon$1.00 aerosol $0.10 In QC program, fees are $0.25 per container for all sizes

17 3. How are retailers involved in Product Care programs? Possible Misconception: the government sets the fees Underlying regulations place obligation essentially on “brandowner” or “first importer” into the jurisdiction This can be a manufacturer, distributor, or a retailer Note: there is no mention of “fees” in most of the EPR regulations, instead, industry’s legal obligation is to deliver a program. Fees are a funding mechanism established and enforced by the industry program, based on units sold in the jurisdiction

18 Possible Misconception: all retailers must file reports / remit fees to the program Many retailers do not belong to the program, instead their suppliers do. The retailer “pays on purchase” from the supplier. Fees are typically “invoiced down”, “recovered up” the distribution chain. e.g. retailer pays fee and wholesale price on supplier invoice, recovers fee and retail price on sale to consumer. Often supplier and retailer “work it out” to determine who will join the program and report and pay the fees to the program. Note, in order to pay the correct amount of fees, the program member must know the final destination of the product, ie. the volume of sales in the jurisdiction. The program’s concern is that a fee is received for each unit of the designated product sold in the jurisdiction Some retailers prefer to be a program member and report and remit in order to: –Ensure compliance with regs and program –Improve cash flow (instead of paying fee to supplier at time of purchase, retailer collects fees from consumers, holds them until remittance)

19 Possible Misconception: all retailers must display visible, separate fee Canadian programs do not require fee to be visible or invisible on cash register receipt In Canadian programs, most retailers choose to show the eco- fee separately for a number of reasons: –Evidences program participation and compliance –Communicates existence of program to consumers –Allows regional/national pricing –In certain leases, avoids % rent

20 Example 1: Home Depot – not a program member Is not a member of any Product Care program, files no reports to Product Care. All Home Depot suppliers (e.g Behr Paint) are members of PCA programs Behr “ships to store” and knows Home Depot’s sales volume for their product in each jurisd. Behr charges volume based fee as line item on invoice to Home Depot Home Depot paint prices are “plus eco-fees” and eco-fee shown as separate “visible” line item on cash register tape Home Depot recovers fee from consumer at time of sale Home Depot makes program brochures available

21 Example 2: Wal-Mart – a program member Wal-Mart is a member of Product Care programs and files and remits monthly Most Wal-Mart paint suppliers, e.g CIL (ICI) Paint are in fact already members of Product Care programs, but in the case of sales to Wal-Mart, ICI Paint does not include the eco-fee as line item on invoice to Wal-Mart. Instead, Wal-Mart, as a member of Product Care, reports sales and remits fees directly to program(s) Wal-Mart paint prices are “plus eco-fees” and eco-fee shown as separate “visible” line item on cash register tape Wal-Mart recovers fee from consumer at time of sale Wal-Mart makes program brochures available

22 The Upside - provide an environmental solution to your customers In either scenario (retailer as program member, retailer not a program member), for minimal effort and essentially no cost, participation in a paint stewardship program sends the right environmental message to your retail customer. From a Product Care member website: “… we're proud to support this worthwhile program” Questions??

Mark Kurschner, Product Care Association x 201 Thank you!