Producer responsibility and the Ontario blue box transition: a conversation with GFL’s Patrick Dovigi
At the beginning of July, Vaughan, Ontario-based GFL Environmental announced the formation of the Resource Recovery Alliance (RRA), a producer responsibility organization (PRO) that will operate within the framework of Ontario's newly introduced extended producer responsibility (EPR) regulations surrounding the provincial Blue Box residential recyclables collection program.
The new regulatory landscape, to be phased in between 2023 and 2025, sets lofty diversion targets for residential recyclables and will require product and packaging producers to operate and fully finance the provincial program. The new diversion targets, which are set to come into force fully by 2026 across Ontario, include 80 percent for paper, 75 percent for glass and beverage containers, 67 percent for metal, and 50 percent for rigid plastics.
As one of its first actions, the RRA entered into an agreement to purchase the assets of the Canadian Stewardship Services Alliance (CSSA), a national, not-for-profit organization set up to provide support services for packaging and printed paper stewardship organizations across the country, with years of EPR experience and extensive data collection and reporting capabilities.
Through RRA, GFL says producers in Ontario will have the option of partnering with an environmental services partner that can leverage economies of scale and efficiencies, extensive experience with EPR, as well as the most relevant industry data, positioning them to meet their responsibilities under the revised and consolidated Blue Box Program.
Becoming a PRO
According to GFL founder and CEO Patrick Dovigi, forming the RRA in Ontario and adding producer responsibility organization (PRO) to their diverse portfolio of businesses was driven by several factors. Mainly, producers must now alter the way they design products and packaging and will be required to fund an entire system for its collection and processing. Those producers are looking for guidance and options. As a PRO, GFL will consult companies on how to best spend dollars to recover the products and packaging they produce, and will simultaneously help them drive recycling diversion numbers significantly higher than what they currently are - all at a lower cost.
"The formation of the RRA is really a means to get a seat at the table and to pass on intellectual property to the broader organization, particularly around collection and processing, and to provide smaller producers and some larger producers, with alternatives," says Dovigi.
"Producers are looking for another opportunity, another option for them to think about or participate in, with respect to establishing an EPR-based program for their goods and packaging. They want to sign up with an organization that has experience and understanding of how collection works, and how processing recyclables works. What we are thinking about is creating a holistic environment for every one of the producers, big and small."
The establishment of a PRO by one of the largest waste management firms in Canada has some in the industry postulating that this could jeopardize a truly competitive marketplace, but Dovigi disagrees.
"I don't think it's a concern because at the end of the day any one of us as operators can sign up to be a PRO, and the cards are fully in the producer's hands. They have the ability to sign up with whoever they want, for as long or for as short a period of time as they want. I would say it's now more competitive, and the producers are the ones that are fully in control because they can decide which PRO to go with. If my service offering isn't good, they have the luxury to go in and deal with whoever they want to deal with, or whatever other PRO that exists out there. For our competitors, they have the ability to become a PRO too. You don't have to sign up much volume."
To become a producer responsibility organization the requirement is to have a certain number of producers sign up, which represent the type of product, and which together are handling a minimum of 5 percent of the overall volume for that product group.
"It's not as if we became the only PRO in the province, or we are the only successful bidder, and so have created a monopoly. At the end of the day, it's open. I think that's the way the province dictated this program, which is a little bit different than B.C. In Ontario, they just rolled it out as if it was an open market. The rules are the same for everyone. As a PRO we can show them what we can offer. If they like it, they sign up. If they don't, they have the ability to go wherever they want and do whatever they want with their packaging."
According to Dovigi, this is definitely not the first time a major waste management firm has used this model for the development of EPR. In Europe especially, there are similar models to the one used in B.C. and the one now in Ontario, and there are a number of operating companies that are managing an entire EPR program from cradle to grave.
"This is not new, where a collector would actually be a PRO as well," he says. "Our anticipation is that given where we are as a company, and how we got to this point, there will be a number of producers that sign up with the RRA Alliance."
He adds that a number of producers have already signed up and many have expressed interest. Under their model, they would form a board and have governance attached to it, and it would provide a voice for producers to express how they think the program and the dollars should be spent.
"We can pass on our knowledge of what it would take to actually do the collection and processing, and about how many people we would need to bring in to do it, and what are the costs involved. We have the front end figured out."
CSSA assets provide missing piece of compliance puzzle
With respect to GFL's purchase of Canadian Stewardship Services Alliance (CSSA) assets, expected to finalize by the end of 2021, Dovigi explains that it will provide the ability to offer producers a fully vertically integrated solution that will keep them compliant in the most cost efficient and effective way possible.
Dovigi describes it as an acquisition of the organization's data collection and reporting capabilities, regulatory compliance software, and its people that understand EPR and its challenges.
"For us, it is about being able to offer to producers a fully vertically integrated solution that number one will keep them compliant, and number two, with our knowledge and intellectual property, keep them compliant in the most cost efficient and effective way possible."
He continues, "You can say all the right things, but then you actually have to go and do it, execute it, roll it out. Good human talent on all sides of the equation is going to lead to the best results, particularly when people have been there and done it before. All of that put together, we think, adds a great opportunity for all of us."
The end game in Ontario
The end goal of RRA in Ontario for GFL, according to Dovigi, is number one, to work collaboratively with all producers, and secondly, to meet or exceed the recycling diversion targets set by the province.
With GFL's experience, from collection to processing, he says they can be a value-added partner, not only to their PRO, but for other PROs and whoever else is involved. He also stresses that their services are not exclusive to their PRO, and that they are more than willing to work with any others formed in order to make the program work as smoothly and efficiently as possible for everyone in Ontario.
"Maybe it comes down to where we can all figure it out and work together, and there becomes only one PRO," he says. "That's potentially an option, and if everybody is represented, then there's no feeling of someone trying to corner a specific part of the market, which is not the intention."
He continues, "The consumer is paying anyway, and whether they're paying through their municipal taxes, we're already processing that material in a lot of markets. From our perspective, with EPR it's not that the consumer is paying more, it's just they're paying differently. Today they pay property taxes, tomorrow they're going to be paying a price-per-pound of packaging on the goods that they buy."
He emphasizes that there are opportunities to change the actual packaging, when cost is transferred to the producer and the consumer, and away from the municipality. And while getting a wide range of people thinking along the same lines is a challenge, at the end of the day, this is a regulatory issue and it is an exercise in procurement. Companies need to be compliant and meet lofty targets set by regulators, but also do it in a cost-effective way so it does not significantly drive up the cost of goods. And it must be done collaboratively.
"We think we have the ticket to be able to do that," says Dovigi. "The only way this works is if it's done collaboratively. All of us are going to have to work well together. I don't think anyone can do this on an individual basis, particularly on the collection side. Because these are very complicated collection contracts, particularly when I think about Toronto, Hamilton, Richmond Hill and Markham, Ontario, some of the larger communities, where the last thing we want is to put on double the trucks to collect the same amount of recycling."
He says for large municipal contracts, generally they are tendering those out 12 to 18 months in advance. "Particularly with COVID, and the delays to get equipment and other delays, there's a lot that has to happen in a relatively quick period of time. We're all going to have to get together really quickly to make this work and make it smooth, because the last thing we want to do is start by initially leaving recyclables at people's doorsteps."
He continues, "On the processing side it is about achieving the diversion goals the provincial government has set for 2023. They're high targets, the bar is high. It is doable, but it's only going to happen if we're all working together. We think it's possible."
EPR is the way of the future
According to Dovigi, advancing the recycling industry through EPR is synonymous with their company name: Green For Life (GFL). Since the founding of the company they have taken a big interest in building diversion programs, whether it be for C&D, food or municipal waste, or contaminated soil.
"As our recycling businesses have evolved over the last number of years, particularly from 2017 to 2018, with a continued focus on Extended Producer Responsibility, coupled with the fact that China wasn't receiving recyclable material from North American markets anymore, we decided to really jump into recycling with two feet. That started initially with the Canada Fibers transaction."
As an established collector of municipal as well as industrial and commercial recyclables, GFL's growth in recycling also includes new and upgraded MRFs around North America, and has led to a deep-rooted involvement with extended producer responsibility, initially in British Columbia.
Ontario has now chosen a different path. While the B.C. system for curbside residential EPR is overseen and managed by one organization: Recycle BC, Ontario has gone with more of an open market model, which allows for the formation of as many PROs as possible. Dovigi says there is a demand for PRO options in Ontario, and so far, the main options presented, outside of the RRA, involve programs run by some of the larger grocers, for example.
Given the goal of achieving a vision of a holistic environment that is, in the end, beneficial to everyone in the system, when comparing the systems in B.C. and in Ontario, they do have different complexities. He says the B.C. model is more complicated out of the gate, because Recycle BC is responsible for the entire province as one entity, but it is an interesting model and does work well.
"Because of our experience in the industry and knowing all the players, we were able to help facilitate the B.C. transition to EPR relatively quickly and find out the appropriate players in the appropriate areas, and we determined where it would make the most sense to move volume from an economic perspective. We like the B.C. system because there's one boss. RecycleBC is sitting on top, and if everybody can put their differences aside, the way to make the program as efficient as possible is to get everybody at the table."
He emphasizes also that whatever the model, extended producer responsibility is here to stay, is gaining traction, and by 2026, predicts that it's going to be used across Canada, with the U.S. not far behind.
"From our perspective, EPR is the way of the future. The reality is it's going to become a national issue and it's going to become a North American issue. We think if we can get a leg up from an experience perspective, and learn all of the different alternatives and options there are, it will position us as a company very favourably as these programs continue to roll out."
In the U.S., GFL currently has operations in Maryland, which has announced the adoption of EPR legislation. "It's going to be slower, but it's going to come," he says. "We think it's going to come fast and furious when people actually figure it out. The millennials are of a different view today than the baby boomer generation. There is a much higher focus today on ESG (environment and social governance) type initiatives, and EPR development falls squarely in the middle of that. That's what we're excited for."
While Dovigi is very optimistic about the future success of Ontario's revised curbside collection program, he also agrees that as the new EPR-based program is rolled out in Ontario for residential recyclables, it is no doubt going to be a challenging shift.
"There's going to be a lot of different heads at the table with a lot of different ideas," he says. "Our view is the only way this works is if it's done collaboratively. Our hope is that everybody will work together, but it's too early to know how it's actually going to get rolled out. The reality is, 2023 is not that far away."