20th April 2023
Trudy Morris, Chief Executive, Caithness Chamber of Commerce. The Scottish Deposit Return Scheme, a heavy burden on business.
The new First Minister has faced a hefty in-tray of issues upon his appointment to office last month, and his commitment to “always having an open-door policy for our business communities” will be eagerly watched by many. Particularly, when recent findings published in the Scottish Chambers of Commerce Quarterly Economic Indicator, highlighted increased concern from businesses on current and future regulatory burdens including the deposit return scheme; short-term lets; alcohol advertising; tourism visitor levy and rent controls; to name but a few.
Recent announcements made by the First Minister to delay implementation of the Deposit Return Scheme (DRS) and readdress the excessive proposals to restrict the marketing of alcohol brands, are welcome news. This is a positive first step from government to addressing a constructive relationship with the business community, however, concerns rightly remain strong.
In its current format the new Scottish DRS legislation will now be implemented across Scotland on 1st March 2024 imposing significant compliance obligations on retailers, wholesalers, producers, and importers of drinks in Scotland in single-use glass, metal and PET plastic containers. The Scheme is an example of extended producer responsibility, whereby businesses are given significant responsibility, financially and physically, for the treatment and disposal of post-consumer products. The vast majority of businesses selling drinks will soon be legally required to also operate a return point where customers bring back their empty containers in return for their initial 20p deposit.
The Scottish Government hopes by incentivising positive behavioural change the DRS will improve recycling rates and reduce litter as well as helping to tackle climate change through carbon savings. As a nation, we currently recycle just half of all containers, the DRS’s ambition is to increase this to 90%. As recycling is more energy efficient than making new aluminium, glass or plastic, the DRS projects that it will reduce emissions by 4 million tonnes of CO2eq over the next 25 years.
At the beginning of March only 664 companies were reported to have registered for the scheme, these companies largely represent Scotland’s biggest drinks producers and are responsible for 95% of drinks sold in single-use containers in Scotland. However, covering only 16% of all producers selling drinks across the country, this has been widely criticised seeing the deadline for registration closing with fewer than one in five producers registered. It has been loudly voiced by the business community that, in its current form the Scheme is unworkable and is adding unnecessary cost pressures at a time when many businesses are struggling to survive in the face of rising cost pressures and high inflation, and many still in a position of fragile economic recovery post-pandemic. Calls to pause and redesign the scheme have until now been completely ignored, leaving many in the business community justifiably frustrated.
With the best of intentions, of course, we must work together to tackle the issues of recycling and waste and the business community is determined to play its part in driving sustainability, but the Scheme needs reworked otherwise the ‘can’ is simply kicked down the road for another 10 months.
For businesses producing alcohol, recognition from the First Minster of serious industry concerns regarding proposed marketing and advertising restrictions is also welcome news. Within the current proposals businesses could see a ban on branded merchandise, such as glassware, apparel, and accessories. These products are often the very things that many independent distilleries and breweries often rely on retailing in their shops and visitor centres and make up a crucial part of their revenue and visitor experience. Although admirable in its intentions to reduce negative impacts of alcohol on young people, this counterintuitive business measure would be sure to have a negative impact on Scottish Government’s own target to double the food and drink sector’s turnover by 2030. It is welcome to hear Government are committed to working together with industry and public healthcare stakeholders to establish a new set of proposals, which the First Minster himself expressed “made without undermining Scotland’s world class drinks industry or tourism sector”.
In the North Highlands, it’s clear the impact of legislative measures will be felt across the food, drink, retail and hospitality sectors. Businesses will be forced to spend time, money, energy and resources implementing huge operational changes to allow for the DRS. Working alongside Scottish Chambers of Commerce (SCC), Caithness Chamber of Commerce will be providing business case studies that illustrate the financial and operational impact that the Scottish DRS will have on firms in its current form and what changes they need to see to make it workable. This will be presented to the new cabinet secretary for the economy, Neil Gray MSP by SCC’s Chief Executive Liz Cameron.
As the First Minister signals a willingness to reset the relationship with business, we in turn stand as a Chamber network ready and willing to work constructively with the Scottish Government to support the development of a globally competitive and world leading economy for Scotland.
Business Perspective on the DRS by Simon Cottam, John O’Groats Brewery, Caithness Chamber of Commerce Business Member.
For many, the John O’Groats Brewery situated in the oldest surviving building in John O’Groats, the iconic “Last House”, is a characterful craft brewery selling locally made ales and an ideal pit-stop along the NC500 or John O’Groats trail. But for the team, our independent brewery represents a culmination of years of passion, experimentation, and hard graft.
We first set up our 4-barrel brewery in the Old Fire Station in John O’Groats in 2015, carefully crafting, perfecting, and developing our range of cask ales. Starting out by selling our bottles locally before keenly expanding our distribution through stockists across the North Highlands and on to the wider UK through our website. In 2019 we opened our visitor centre with a bar and brewery and have been an integral part of the John O’Groats experience for both visitors and locals ever since.
People flock to Caithness for the stunning scenery, dramatic coastline, and chance to observe some of the amazing wildlife of our land, skies, and shores. Visitors to the brewery are keen to hear stories of Jan de Groot and his travels across the Pentland Firth, whilst sampling our small batch ales drawn from unspoilt highland waters. Every drop of John O’Groats Brewery ale is crafted only in the village of John O’Groats using water from the local area, an area we not only call home but deeply respect and are keen to protect.
It goes without saying that in theory, we are in full support of the ethos of the Deposit Return Scheme, which aims to protect our environment and preserve the natural beauty of Scotland and tackle issues of recycling, litter, and landfill. However, in reality, the DRS represents a huge area of concern and an unprecedented burden for our business.
With an ever-decreasing time scale to implementation, there has been very little support financially, practically, or instructively to help businesses prepare for the scheme. And until recent announcements by the new First Minister, countless calls to Government for delay or adaptation to the scheme from business leaders and industry bodies have gone ignored. However, logistically we are still preparing to implement an unworkable scheme which has very little consideration for the impact on our business operations. It is extremely disheartening to see regulation driven through in this way.
Currently this blanket approach legislation will see the majority of drinks businesses soon forced to operate a return point within their premises. Businesses must be prepared to accept all types of drinks containers from milk bottles to cans and plastic bottles, provide a customer refund and safely and securely store recycling waste. For our business, running a visitor experience, busy production facility, shop and bar from a modest “but-an-ben” house dating back to the 1700’s, storage is already at a premium. Finding space to securely house unknown quantities of recycling and process returns is going to be a huge challenge for both ourselves in John O’Groats and no doubt for businesses across the North Highlands, not to mention our obvious concerns around hygiene and the significant health hazard. We are justifiably worried about the detrimental impact on the high level of customer experience we have created in our brewery and no less concerned about cash flow burdens and administrative implications surrounding the deposit refunds.
With regards to export of our products outside of Scotland to the wider UK, current guidelines mean our customers over the border will also be charged an extra 20p per bottle on sales of our beers, skewing the price of products within an already highly competitive marketplace. The small scale of our batch brewery makes it completely unworkable for us to distinguish between products designed for the Scottish or wider UK market. Furthermore, with no DRS scheme of their own, customers outside of Scotland will have no way to recoup these costs. For producers of spirits and higher sales value drinks these increased costs may be easier to digest, but the percentage increase on items such as bottled beer will be far more obvious to the consumer.
Current proposals to alcohol marketing and advertising restrictions adds further worry to our table, again well-intentioned but poorly thought-out policy risks further damaging the alcohol industry. It is welcome to see these sent back for review by the new First Minster as proposed ban on branded merchandise would indeed hit the revenue of our visitor centre hard and it’s indeed highly questionable whether this would have any effect on the government’s intended impact. We are exceptionally proud of our locally made ales which bring the unique flavours of John O’Groats Brewery to consumers in a considered and beautifully crafted product. We along with many in the brewing industry promote and support responsible alcohol consumption. Scotland has successfully marketed alcohol for decades and the industry supports over 160 brewers in Scotland generating sales of £380m a year and directly employing 1500 people. Future regulatory burdens are certain to have a negative impact on businesses, at a time when the cost-of-living crisis, energy prices, inflation and covid recovery are huge factors in difficult business conditions. We hope to see materialisation of dialogue and supportive action from the Scottish Government which is in serious danger of taking a sledgehammer to the industry. We would like to see an appropriate deposit return scheme implemented in Scotland which sets businesses and users up to thrive rather than fail.
Visit John O’Groats Brewery, in the iconic Last House in John O’Groats located in the heart of the village just yards from the famous John O’Groats signpost!
Find out more online www.johnogroatsbrewery.co.uk