By SAP Insights
New tax regimes in Europe and the UK are designed to impose costs on companies that make, package, and ship products that contain plastics. The tax rules lower bills for enterprises that reduce the amount of plastic content they use in products and packaging.
Plastic taxes and extended producer responsibility fees—charges companies pay in certain countries based on the types of materials they use their packaging—can cost between 0.5% and 2% of product revenue, says Darren West, global head of circular economy solutions at SAP. “This becomes a significant global compliance problem for our customers,” West says. (See related article, “Dire Warning: Prepare For Plastic Legislation Or Face Financial Loss.”)
What can companies do to lower their plastic tax liability under these new and emerging rules? To start, here are three recommended actions:
First: collect data on plastic content
Most businesses gather some data related to environmental performance and waste, but they are likely to find gaps when examining their plastic content. Supply chain partners will hold some of this information, for example. Corporate leaders who prioritize addressing this data collection problem can boost the efforts of supply chain managers to get the right data.
Second: change product packaging – and even products – to reduce plastic use
This is the goal of plastic taxes: to get businesses to reduce and eliminate plastic. Adidas, the athletic wear company, is an example of a company that is using more recycled materials, including plastic waste recovered from beaches and biodegradable materials, in its efforts to produce zero-waste running shoes.
Ultimately a responsible design and production strategy can advance on this path. The data collection in step one is also a factor: by improving visibility into where plastics occur in production, and in packaging, decision-makers can examine alternatives to reduce expenses for materials and tax bills.
Third: watch the global plastic tax landscape
As with other regulatory compliance efforts, paying attention to new and changing rules is compulsory. Australia is examining new packaging standards, for example.
Companies with global sales are familiar with managing compliance rules in many jurisdictions, but plastic taxes represent a fresh wrinkle. Those that engage with their supply chain managers and product and packaging designers will be able to both understand their plastic tax liability and opportunities for lessening it.
