Navigating The Real Mechanics Of Extended Producer Responsibility
Navigating the evolving regulations of Extended Producer Responsibility shouldn't feel like a guessing game.
Host Christine Yeager breaks down the hard numbers from Oregon's first six-month performance report and the massive, 350-page California program plan.
We look at the actual cash flowing from producers to local infrastructure, alongside the major gap between accrued and invoiced payments.
You'll learn what these early-stage rollout challenges mean for your brand's compliance strategy.’
We also cover the recent textile registration deadlines and what you must do next to prepare for incoming source reduction mandates.
It's time to turn regulatory friction into your ultimate operational advantage.
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Navigating The Real Mechanics Of Extended Producer Responsibility
Welcome back to the show. I am going to be honest, we are going to nerd out a little bit. I guess we nerd out most days, but if you tuned in to our season last season, we went deep into the Colorado program plan, and there has been a lot of new information that has come out from Circular Action Alliance. We are going to nerd out on a couple of those topics.
Most weeks, I try to keep the show at the altitude where any busy sustainability lead or packaging VP can listen on a commute and walk away with a couple of things that they can actually do. Every so often, these new documents or new insights that are coming related to EPR require a little bit of a deeper dive into the real mechanics of the system. This week, two of those are what I want to talk about.
The Shift From Plan To Performance
One is the first report from Circular Action Alliance about how the Oregon program is actually performing. We have seen program plans, but now this is what happened in the first six months of the program in Oregon. It is a full accounting of what a packaging EPR program in the United States actually did with producer money for six months. It is only half of the year, which is what the first program was, which is why everyone was surprised by the hike the following year.
Decoding The California Program Plan
The other document is the California program plan, which we now have a glimpse of. Not a glimpse, 350 pages worth of. It is a hefty document, but it is worth a read if this is important to you and also if this is important to your business. There is an opportunity to comment. It is wet cement. Things will change, but there is a lot of great information in there.
EPR Vocabulary: Accruals Vs. Invoices
A quick vocabulary check in the beginning. Accrual versus invoiced. An accrual is money in an organization that has been recognized, it owes, and set aside for such on the books. An invoice is a bill someone has actually submitted to get paid. They are not always the same number, and there are a lot of rules about when you can accrue certain items per which year. It is important to understand where the money is sitting in Oregon.
We have talked ad nauseam about these two items. PRO, producer responsibility organization, that is Circular Action Alliance in the United States for packaging. There is also now a PRO for textile EPR, which is Landbell USA. There is a responsible end market. This is, I like to say, the destination of EPR. EPR is trying to fund the pathway to a responsible end market so that there is actually a viable market value to the recycled material.
Oregon's law defines it very explicitly, and it is an important factor in who and what gets paid. Contamination rate. This is how much material is showing up in the recycling stream that you do not want to be there or that the system does not want to be there. It is a metric that EPR is being measured by. It needs to improve in certain states in order to meet the requirements. Generally, organizations or recyclers that are performing with a lower contamination rate have a higher financial benefit to the process.
The Textile EPR Compliance Wave
Source reduction. This is putting physically less packaging into the market, and it is measured against the 2023 baseline year. There is a source reduction requirement both for pounds collected and number of components sold. News roundup. A couple of things to share that have been happening. Textile EPR has taken its first deadline forward. On July 1st, producers were supposed to register with Landbell USA in compliance with the SB707 textile EPR law.
Moving from theory to practice: Oregon's first six-month report reveals the real numbers behind packaging EPR performance.
It is the first mandatory textile EPR deadline. If you sell clothing or accessories or shoes or home goods that are made of textiles, not including rugs, but like sheets, blankets, those companies that sell those should have registered with Landbell by July 1st. This is just the first milestone. You do not have to report anything. It just means you have to say, "I believe I am an obligated producer."
This should feel a little familiar to anyone who lived through packaging EPR. Packaging EPR also had a similar early registration deadline for some of the states before there were reporting requirements, before there were payment requirements, things like that. A quick note that I have mentioned before is that the American Apparel and Footwear Association has filed a petition challenging the selection of Landbell, but no decision has been made. There is a hearing on a preliminary injunction set for early August.
Now a couple of good news items. Producer money is physically on the street in Oregon. Producer money is physically on the street in Oregon and being invested into recycling in the state of Oregon. There are a few communities across Oregon. The Dalles, which is a town on the Columbia River, has been expanding its curbside recycling. There are new drop-off depots being placed across the state.
Some fee money has directly been spent in the state of Oregon to expand collection and recycling. It is starting to turn. The flywheel is starting to turn, which is good news. Textile recycling infrastructure is actually getting built. This is another good news item. We are seeing that even though EPR has not started yet, there is a lot of momentum in the textile recycling space, reuse and recycling space, that hopefully will get ahead of the requirements for textile EPR, which is reporting and program plan. I do not think it comes until 2030 or something like that.
The technology and infrastructure side is genuinely moving. There is a real momentum in textile-to-textile recycling. We are seeing partnerships forming at scale with fiber-to-fiber processing. Ireland is putting out a national roadmap for circular textiles that includes infrastructure and money behind it. I am flashing this as good news because one of the single biggest failure modes for textile EPR is a fee structure that collects money faster than there is anywhere responsible for the material to go.
Seeing some of these scalable technologies come in and infrastructure being built will hopefully be an early sign and an early signal that the program will be successful from a recycling standpoint. Another update is that individual source reduction plans for California were due August 1st. This is coming out after August 1st, so hopefully you have submitted them, or if not, you should notify CAA that you are working on it. This is basically each company having to put together a plan that says, "I plan to reduce my amount of plastic."
Virgin plastics sold into the state of California by X percent between now and 2032. Here are my year-over-year targets. This also includes how many components you are going to reduce as well. If you are just putting PCR in, that will only affect your percentage but will not affect the number of items that you are putting into the state. What exactly is an individual source reduction plan?
It is a forward-looking document where each producer maps out how they intend to hit the reduction trajectory over the coming years. It is also an enforceable agreement between CAA and the company saying that this is my plan. I plan to hold to this plan, and therefore CAA is going to measure me against this plan year over year. There is an opportunity for bonus and malice against this plan. The overall 25% reduction by 2032 is a collective producer responsibility organization-level target.
Do you know the difference between an EPR accrual and an invoice? Understanding this financial gap is key to navigating state compliance.
Oregon's 168 Million Dollar Reality Check
It is not a requirement for each company, but the collective, when added together, must reach that 25% target. August 1st is the deadline for this plan, and likely there will be a back and forth because time will tell how much that plan equates to in total at an industry level. That is a bit of news or current events happening in the EPR space. Now I want to dive into a little bit of the good, the bad, and the ugly of Oregon's first six months. Good news is the money is real, it is being audited, and it is moving. The Oregon program took in about $168 million in producer fees.
That is a lot of money that is earmarked for investing in the circular economy, recycling and improving recycling rates, creating responsible end markets, getting material to responsible end markets, things of this nature. That is a large chunk. It is higher than the 2025 six-month budget was. It is starting to flow. Payments are going to approved MRFs, collection facilities, things that process curbside material. All of EPR's budget really earmarks budget towards curbside material versus non-curbside recyclable material.
The investment strategies align to that as well. The money flowing to curbside processing facilities came in at about $19 million, which was tied to a specific tonnage, roughly 8,400 tons. Under just one of the fees, the local government got reimbursed for transportation, contamination programming, and system expansion. I do want to call out that the amount of money that went to the local government was much lower than the amount estimated to go to the local government, but we will get to more of that in a minute. Statewide, the program collected about 45,000 tons of material in the July to December window, indexed against a population of roughly 4.26 million. It is a baseline.
That is a lot more data than we had in previous years related to recycling pounds. A little bit of the bad is that there is a gap between what was set aside and what actually got claimed. I anticipate this is very uncomfortable for CAA and potentially uncomfortable for producers as well. The reality is some of this is a timing problem. Some of this is an education problem. The program accrued about $6.3 million, meaning they are expected to pay that out soon. This is money recognized as owed for the six-month liability.
At the time of the annual report, the amount actually claimed in the invoice was not that much. It was closer to $311. $6.3 million was set aside. $311 was actually drawn out. That is about $6 million in contamination reduction money that local governments were entitled to and have not yet claimed. The transportation line tells a softer version of the same story. Invoiced amounts came in well under what was accrued for both glass and the broader collection list. The report is pretty candid about these gaps and the fact that they exist.
At the end of the day, there is money sitting on the table that the system is entitled to and is not collecting. If you are a local government, if you are a service provider, or if you are a producer that is funding collection, be aware of what your options are. Producers' funding collection cannot go in and take any of that money right away, but they can request an exemption during January to March 31st next year. You can begin to prepare that any producer-paid collection is adequately funded.
The 25 Percent Contamination Crisis In Portland
A couple of comments about contamination. The Portland recycling stream had a contamination audit, and the total contamination rate was just under 25%. More than 22% was material that is flatly not accepted in the program. It is just a program. We should not even be recycling it. Most of that contamination is wish cycling. One of four things going into the recycling stream in the state's largest metro should not be there. That is a direct ongoing drag on every downstream cost in the system.
One aspect of this I want to call out is that we did not have this type of information. The audit was based on 554 samples, and of those, 544 came from Metro Portland, and only 10 came from the rest of the entire state. This report is very skewed directly towards what is happening in Portland. We still do not have the data on what is going on outside of that city. That means that there are still a lot of unknowns, even though this is more information than we had prior.
Oregon collected 168 million dollars in producer fees, but local governments have barely claimed their share. Why is this money sitting on the table?
The report is very honest about that. It says our data set outside one metro is too small to trust. They are being honest in a way that is respectable. I will say, hopefully we will see this change in 2026. As more people are aware of the funding availability and as tools and processes are stood up, because at the end of the day, only like 30% of what was available to be spent was actually spent. There is a big gap. Hopefully we see that gap close in 2026.
The other big topic, big bucket item I want to share is that the California program plan is available for anybody to read. 350 pages is long, but if you're a producer, I would really dig into the fee setting and how the fee setting methodology comes together. There are four key aspects of how the fees are allocated. I would say that it is much more complicated than any of the other states because California has this plastic pollution mitigation fund that needs to be allocated to plastic materials as well as this reuse investment requirement that also needs to be allocated to plastic materials in theory.
There is a fee associated with those items as well as an opportunity for a bonus if you are meeting or exceeding your source reduction plans. There are a lot of factors that go into ultimately what a producer will be paying at the end of the day. That is potentially worth commenting on if you are a producer. You have an opportunity to comment between now and August 14th.
Navigating California's Complex Fee-Setting Methodology
The program plan also goes deep into where they plan to invest as it relates to materials that are not considered recyclable, or at least scratches the surface there. Another key point is that there is a list of materials that are generally not recyclable or not fully compliant with recyclability, and the CAA is asking that the deadline for when they need to be considered recyclable be extended by 2 to 4 years, depending on the material.
If you're a producer that uses those materials or you are a responsible end market who produces that material in a recyclable manner, like you're selling the recycled material or if you are a supplier who produces that material in general, it will be important for you to take a look at those categories of material that are going to be flagged as in process to become compliant from a recyclability standpoint versus not planning to be compliant.
As much as fees are signals, that indicator will be a huge signal as to whether or not CAA or EPR is investing in making that material become recyclable and what that investment might look like. Good news is flexible film is flagged as something to work towards recyclability, but it is also flagged as something to delay the deadline against. This deadline is currently 2032. A few other areas to look at would be. If you are a recycler, then you should dive deep into how you're identified as being classified as able to receive reimbursement.
If you're a service provider or somebody who collects, sorts, or transports, you should dive into what the definition is that you need to meet in order to become flagged as available for reimbursement, as well as what all is being reimbursed. One thing that's unique to California is that they are reimbursing consulting costs for service providers who need a third-party consultant to help them complete the reporting requirements, for example. I would dive into what those are.
If something is not sitting right with your business model, make a dedicated comment on such. Those are the two big documents that are out there for review. There are a couple of things that comment periods have passed that you might consider looking at. I am recording this before August 4th, and I will call out that the Oregon National Association of Wholesalers has a trial that is kicking off on July 13th.
California's new EPR fee structure is the most complex in the nation. From mitigation funds to source reduction targets, here's what you need to track.
It would be in the past by the time this launches, but to keep tabs on what that progress might be. I will put a link for you in case that is of interest. At the end of the day, I think these documents and some of the news that I am sharing are continued examples of that forming stage of EPR. Since we always talk about change here, why embrace this messy middle? Reading a program's first six months' books and diving into the good, the bad, and the ugly of this is a great way to demystify this process and see what's really happening.
Also, we want to champion the progress, but as you can see with this program update, progress is imperfect, but it is still progress. The more you're armed with this information, the more you see the gaps, the more you can better inform back to the producer responsibility organization, whether it's in the packaging space or potentially use these lessons to inform the textile space. You might comment on the California program plan in response to some of the imperfect progress you're seeing in the Oregon program plan.
What are some practical tips for you to navigate this change? You might read these documents, although they are hefty. Maybe find the chapters that matter most to your business that are geared towards producers or recyclers, depending on who you are. Do sit with it a little bit. Spend a little bit of time digesting and forming your own opinion and point of view on the information.
When a number looks alarming, maybe ask about the sample size and some of the realistic barriers that might be playing into that number. Do not let the idea that it's operational now talk you out of reading carefully and critically what that operational definition means and what those details are starting to look like for those folks that are investing in changing the system. Thank you if you made it this far. Thanks for nerding out with me and reading the fine print with me. I hope you enjoyed the episode. Thank you.
Important Links
First Oregon community expands curbside recycling with EPR funding
Apparel retailer organization challenges SB 707 textile PRO selection
Plastic Pollution Prevention and Packaging Producer Responsibility Act SB 54