Extended producer responsibility (EPR) - top 5 commercial considerations

New Extended Producer Responsibility (EPR) rules for packaging came into force on 1 January 2025. They will affect most businesses that sell packaged products in the UK, particularly brand owners of branded packaged products, and those who import branded products into the UK from overseas. See our previous article here for more detail on EPR generally.

Under the EPR rules, in-scope businesses will need to pay disposal fees to cover the local authority costs of recycling packaging. Fees will be based on the volume of household packaging supplied by those businesses in the previous calendar year by reference to the data they have reported to the environmental regulator. From 2026, EPR disposal fees will be 'eco-modulated' meaning the level of fees payable by a business will increase or decrease depending on the environmental impact and recyclability of the packaging supplied. Although the rules capture businesses along the packaging supply chain, in most circumstances it will be the brand owner (i.e. the owner of the brand that is displayed on the packaging) who will be directly responsible.

Aside from the direct legal and regulatory obligations on businesses under the new rules, EPR will also impact business's commercial contracts with others in the packaging supply chain. EPR will affect cost structures, reshape supply chain relationships, and require new levels of contractual precision and operational collaboration. Businesses should take proactive steps now to review their contracts, assess their risk exposure, and ensure their business is positioned to meet both current and evolving EPR obligations.

Below we breakdown the top 5 things to consider in your commercial contracting to address the impact of EPR: 

1. Build EPR into your RFPs: EPR may change the commercials behind existing relationships, e.g. between a brand and their packaging manufacturer, as brands are incentivised to work with manufacturers who are able to produce alternative and more sustainable packaging. Businesses should build EPR requirements into their RFPs and service specifications and only work with partners who can help them achieve their EPR and broader environmental objectives.

    

2. Apportion EPR fee liability in your contracts: The EPR regulations and guidance are complex and are not always clear on which entity is liable for EPR obligations. For example, the exact scope of the 'multi-branded' packaging rule remains unclear, and it can therefore be difficult to determine which brand owner is responsible for paying EPR fees for co-branded packaging. Parties should therefore agree up-front in the contract which of them will be responsible and will report the necessary data and pay the relevant fees to the regulator. This minimises the risk of future regulatory action and/or disputes between the parties. Reimbursement clauses, or indemnities, can also be used to apportion the financial liability for EPR fees between the parties in the contract – this is helpful if the party ultimately covering the costs is different from the party legally obligated to pay under the EPR regulations.

    

3. Collaborate with packaging manufacturers on more sustainable solutions: The new rules require businesses to understand the recyclability of their packaging and shift to more sustainable packaging solutions. However, they will need to work closely with packaging manufacturers to do so, and will often rely on manufacturers' expertise and advice in this area. Parties should therefore build obligations into their contracts requiring them to work collaboratively on packaging re-design and production, and packaging manufacturers should be incentivised to improve recyclability and ultimately reduce EPR fees.

    

4. Ensure your contracts can flex to future EPR changes: Requirements and fees under the EPR regulations will change as the recyclability and environmental impact of materials become more understood, and as the 'Recyclability Assessment Methodology' (RAM) evolves over time. Businesses must be able to flex their requirements accordingly, including to reflect eco-modulation of fee levels. Contracts across the packaging supply chain should allow for and provide a mechanism by which the parties can agree future changes.

    

5. Embed contractual controls around data reporting and quality reporting: Businesses will most likely need to rely on their contract partners for timely and up-to-date information to be able to meet their reporting obligations under the EPR rules. For example, brands will need data from their distributors and retailers on the number of products sold. Businesses should consider including audit rights and warranties from partners that the reporting is accurate and in compliance with EPR standards.