How to involve informal collectors in EPR regulations

Extended Producer Responsibility (EPR) regulations are reshaping global waste management. While approximately 40 countries have implemented EPR, significantly increasing waste management budgets, a stark disparity exists. About 150 countries, many low-income, lack EPR and rely heavily on an estimated 20 million informal waste pickers.

KOLEKT has identified 21 critical decision points that governments must address to optimise EPR regulations and expedite implementation by at least five years.

This article highlights the critical role of these informal collectors, the challenges they face, and the necessity of integrating them into effective EPR frameworks.

Decision Point 18: How to involve informal collectors

EPR Regulations and Waste Management Funding:

EPR regulations, which mandate producers to take responsibility for the end-of-life management of their products, have led to substantial budget increases for waste management in implementing countries. These budgets enable improved infrastructure and collection services, contrasting sharply with the conditions in nations without EPR. However, the implementation of EPR is inconsistent, sometimes voluntary, sometimes even occurring as a patchwork regulation at the state level, and these regulations frequently overlook the crucial role of informal waste collectors.

Global Waste Management Disparities:

In countries without EPR, informal waste pickers are the backbone of recyclable material collection. More than 60% of recyclable materials in these countries are collected by them. Basically without informal collectors there is no collection of valuables, limited sorting and no recycling industry. For example, Indonesia alone has approximately 1.3 million informal waste pickers. In fact there is approximately one waste picker for every 250 citizens in Latin America, Africa and Asia. These individuals operate outside formal structures, facing numerous challenges, including lack of recognition, economic vulnerability, and sometimes, government persecution.

Challenges of Waste Management in Developing Nations:

Since EPR regulations first started in Germany in 1990, and then spread across Europe, often the legal texts are extremely Europe-centric. For example the regulations will assume out-of-context things like Deposit Return Schemes; trickle down payments from recycler to collector; VAT charges for collectors; and that formalising informal collectors is a good thing. Or they simply ignore informal collectors altogether. Attempts to copy-paste these standardised, often Europe-centric, EPR models without considering the local context have proven ineffective. For example the city of Cairo awarded a waste collection contract for the city to a Spanish waste collection company. This caused outrage and sabotage by informal collectors who had lost their source of income. The Spanish contractor eventually pulled out. This highlights the importance of understanding and integrating existing systems.

Informal Collectors' Concerns:

Informal collectors often resist formalisation due to concerns about losing autonomy and facing higher income taxes. Additionally, many, particularly minorities, fear government persecution. For example, reports indicate instances of persecution in Eastern Europe, Indonesia, Egypt and even in the EU Greece and Romania.

EPR Regulations and Informal Waste Collectors: A VAT Compliance Challenge:

A significant hurdle is VAT compliance. Informal collectors, unable to issue VAT receipts, face difficulties interacting with recyclers. EPR regulations, which frequently focus on recyclers, expect recyclers to report all their purchase receipts - when the downstream purchases of feedstock material is normally an informal business run by family businesses or independent collectors. Even if these collectors would be able to provide VAT invoices, then they aren’t able to offset the VAT to a rubbish bin, a sidewalk, a landfill or a household. Additionally the government should be double taxing VAT before and after the recycler, just do it one. This oversight creates a compliance gap and hinders the efficient flow of materials.

EPR Subsidy Inefficiency in Recycling:

Current EPR subsidies often benefit large sorting stations (MRFs) and recyclers, failing to trickle down to the initial collectors. This system can discourage the collection of low-value materials, as collectors lack financial incentives to pick up laminates, beverage cartons, textiles, glass, etc. This means that the EPR Fees paid will end up incentivising the collection of high value materials that were already collected prior to the EPR regulation - the low hanging fruit like PET, HDPE, aluminium, white paper, and cardboard, will keep being collected like before - while the wrappers, sachets and diapers keep lining the streets, gutters and rivers.

Mobile Payment System for Waste Recycling:

To address the financial inclusion of informal collectors, a mobile payment system utilising facial recognition for account creation can be implemented. Our Kolekt App is such a technology. This system facilitates payments across the supply chain, directly to collectors and can bypass the middlemen, ensuring fair compensation for the most vulnerable.

Fair Income Calculation for Informal Waste Collectors:

EPR regulations must establish a methodology for calculating fair income for collectors. A living wage, often defined as 120% of the minimum wage, should serve as a benchmark. For example, if a collector earns $0.10 per kilo and collects 1000 kilos monthly, their income is probably below a living wage. An incentive increase to 15 cents per kilo could address this gap.

Implementing a 5-cent incentive, alongside a 10-cent market price, would require a $0.50 transfer per kilo to collectors. This incentive structure ensures collectors receive a fair share of the value chain. This direct transfer to collectors, bypassing or leapfrogging the recyclers and aggregators, will require mobile technology like the Kolekt App.

Waste Picker Inclusion in EPR Regulations:

To ensure the success of EPR, regulations must include waste pickers, avoiding forced formalisation. Tax exemptions, particularly VAT, are crucial due to their inability to offset VAT. Incentives from EPR fees should reach informal collectors through technology and a ‘leapfrog’ approach, guaranteeing a living wage.

Concrete Examples and Data:

Global Waste Pickers: Approximately 20 million waste pickers operate in the 150 countries lacking EPR regulations. 1 waste picker per 250 citizens in Latin America, Asia and Africa.

60% of the world’s recyclable materials are said to be collected by waste pickers, in emerging markets this percentage is much higher.

Living Wage as a rule of thumb can be defined as 120% of the minimum wage.

Current Income: Informal collectors may earn as low as $50 per ton of collected waste, which could be far below minimum wage.

Suggested Incentive: Pay an incentive directly to waste collectors over and above the market price. This will require mobile technology and payment systems.

Conclusion:

EPR regulations hold immense potential to improve waste management globally. It will help us transition to the circular economy. However, their success hinges on integrating informal waste collectors into the system. Ignoring their role leads to inefficiencies and exacerbates existing inequalities. By implementing fair compensation mechanisms, leveraging technology, and adapting regulations to local contexts, policymakers can ensure that EPR benefits all stakeholders, including the most vulnerable.