Online retailers often complain about the high fees for packaging compliance.
And that is understandable. The fees imposed on e-commerce businesses by compliance schemes can be quite a burden, especially for small online shops. However, is this really caused by the fees charged for packaging waste recycling? And how high are these fees anyway? I want to explore the cost of packaging waste recycling this and give you some insights in the following paragraphs.
According to the German Federal Environmental Agency, fees for packaging recycling imposed on producers and (online-) retailers are far too low.
As the Environmental Agency writes in their report on packaging waste 2017, the fees for the licensing of packaging has had no significant influence on the reduction of packaging waste in Germany. Thus, the point of packaging licensing is being missed. Packaging licenses have their origin in the principle of ‘extended producer responsibility’ (short: EPR). This means that producers, but also online retailers, are made responsible to pay a weight-based fee for their packaging to incentivize the overall reduction of packaging material. However, the packaging licensing fees only make up an extremely low percentage of the product price. They therefore barely have an impact. In order to reach the desired effect, packaging licensing fees would need to be much higher, so that a reduction of packaging material leads to significant cost savings for e-commerce businesses.
Nevertheless, packaging licensing fees are especially high for small online retailers – why?
The problem lies in the fact that there are minimum fees. The administrative work for recycling compliance schemes would be tremendous, if small online retailers licensed just a few kilograms of packaging and payed only a few cents. Therefore, the fees for small quantities are relatively high. Many compliance schemes – also for packaging license abroad – charge minimum fees. This is especially expensive for online shops shipping small quantities EU-wide. In this case, they are obligated to pay the relatively high minimum fees in several countries, making the cost per kilogram for packaging licenses skyrocket. The result is a disadvantage of small online shops compared to bigger e-commerce retailers.
Same goes for the administrative work for online shops with EU-shipping
The workload for packaging licensing in all European countries should not be underestimated and is often criticized by online retailers. Although compliance schemes in some countries have minimum thresholds and exemptions for small online shops, or simplified data declarations for small packaging quantities, administrative work can hit especially small businesses without resources for personnel or consultants extra hard.
Conclusion: Good thought, bad implementation
The EU packaging waste directive does have a good basic approach by obligating online shops to license their packaging with compliance schemes and making them pay fees to reduce the quantity of packaging used and at the same time ensure the recycling of packaging waste. The implementation, which is different in each EU member state, however, could not be worse. It disadvantages small online shops which often can barely afford EU-wide shipping without breaking the recycling laws.
As long as there is no EU-wide solution, e.g. one shared compliance scheme, we try to reduce the cost and administrative work for e-commerce businesses as much as possible with our digitized ecosistant services. Since fees and price structures for packaging licensing differ a lot between countries, we inform you about estimated cost per country before you license your packaging. This way, you can still decide whether it is cheaper for you to join a compliance scheme or to stop shipping to certain countries. This way, you can also focus on markets with cheaper recycling systems and optimize your profit margin.
The long-term goal of the EU, however, should be to install one EU-wide recycling scheme. This would not put small e-commerce businesses at a disadvantage for selling EU-wide. The prices for packaging licenses could then be increased to actually reach the desired positive impact on the environment. At the same time the cost could be reduced for all online retailers which do not play in the same league as Amazon, Zalando or ASOS.
If you have further questions about packaging licensing in Germany or in Europe, do not hesitate to contact us. We are always happy to assist you.
You may also be interested in this blog post, where we show how your online shop can save money on the German packaging license: