Handling Packaging: are you compliant?
The Environment Agency accepted its largest enforcement undertaking from a business for failing to comply with its regulatory obligations regarding financing the recovery and recycling of waste packaging.
Organic baby food business, HiPP UK Limited agreed to pay £415,000 by way of enforcement undertaking following a finding by the Environment Agency that it had failed to register as a producer of packaging and finance the recovery and recycling of waste packaging between 2004 and 2011 under the Producer Responsibility Obligations (Packaging Waste) Regulations 2007.
Why should I be concerned?
The producer responsibility, polluter pays set of regulations are often inadvertently overlooked by businesses. Deriving from EU legislation, a suite of regulations in the UK require producers of motor vehicles, anyone handing packaging and producers of batteries and electrical equipment to finance the recovery and recycling of the relevant products when they come to the end of their lives. We focus here on packaging.
The consequences of not complying are three fold. Firstly, it essentially means that the business in question is not "doing its bit" to help the UK meet its environmental targets, which in turn places the UK at risk of heavy fines from the EU. Secondly, there can be significant reputational damage for businesses that are found to be non-compliant. Thirdly, the potential fines can be significant.
I handle packaging: am I affected?
Any business that handles 50 tonnes of any kind of packaging material during a year and has a turnover of more than £2 million in its last audited accounts is caught by the legislation. If you are caught by the legislation, you are required to finance the recovery and recycling of a proportion of the packaging waste that arises during the course of a year. This is usually undertaken by joining a compliance scheme, of which there are a number in the UK.
What if I don't comply?
If a business caught by the legislation does not comply then it is committing a criminal offence and is liable to prosecution. Red Bull was hit with a £270,000 fine in 2009 following prosecution in the Crown Court for not complying with the legislation.
In 2010, the Government introduced enforcement undertakings an alternative to prosecution. The Environment Agency can invite businesses that it has reasonable cause to suspect have committed an environmental offence to propose a legally binding voluntary agreement. Since introduction, the vast majority of enforcement undertakings relate to offences under the packaging regulations. The undertaking generally involves payment of an amount equivalent to that saved by not complying with the legislation. The payment is made to an environmental charity of the payer's choice. HiPP made its £415,000 payment to the Bumblebee Conservation Trust, the Woodland Trust and the Yorkshire Dales Millennium Trust.
Going down the enforcement undertaking route allows the infringing business to avoid the expense and negative press coverage of a criminal prosecution and the consequences that subsequently arise in terms of increased insurance premiums and being locked out of public procurement tendering processes. However, it should be noted that the Environment Agency publishes the names of those that have given enforcement undertakings. Also the amounts accepted by the Environment Agency as settlement of enforcement undertakings tend to be higher than the fines that would have been paid had the business in question been fined in the Courts.
I think I have a problem: what should I do now?
The Environment Agency has the discretion as to whether an enforcement undertaking should be accepted or not. Guidance and standard forms have been published to help put together an appropriate offer of an enforcement undertaking if an offence has been committed. However, it is crucial to get the terms of the offer and the negotiation strategy right first time when dealing with the Environment Agency in order to maximise the chances of the enforcement undertaking being accepted.
The Environment Agency has a team dedicated to looking for businesses that should be compliant with the legislation but aren't. So any business that suspects that it is in breach of the legislation should take action now.
For more information, contact James Geary.