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Product Stewardship Bill 2011

CHAIR —Welcome. Thank you for coming to talk with us today. Mr Mahar is also appearing on behalf of the National Packaging Covenant Industry Association. The committee has received your submission as submission 1. Do you wish to make any amendments or alterations to your submission?

Mr Mahar —No.

CHAIR —Do you wish to make a brief opening statement before we go to questions?

Mr Mahar —I would like to read an opening statement and provide some background. The food and grocery manufacturing sector in Australia is currently operating in what could be described as a perfect storm: input costs, such as energy, packaging and commodity prices, are ever increasing; supermarkets, as you would probably be aware, are engaging in more aggressive competitive behaviour than we have seen for some time; and the regulatory pressures being placed on business by government is ever increasing. This, coupled with the impact of a strong Australian dollar, makes food and grocery imports much more attractive, further exacerbating the competitive pressure being placed on companies that manufacture in Australia. Companies that manufacture food and grocery products are constantly looking for ways to continue manufacturing here in Australia and it is getting harder and harder to justify. The $100 billion food and grocery sector in Australia is critically important to the economy and is particularly important to rural and regional communities, and we think it is important that we recognise this.

The Food and Grocery Council and its members are committed to actively managing waste streams as part of their overall commitment to secure a sustainable industry in Australia. One of the key issues of importance in terms of product stewardship for the food and grocery sector is packaging waste management. The AFGC view is while packaging is often maligned and has a sometimes negative image it plays a critical role in the supply chain in its ability to deliver safe, healthy, hygienic, high quality and affordable products to the consumer. It plays a significant part in reducing food waste and provides for a range of social issues such as quantity and portion control, and we are of the view that we definitely could not do without packaging.

Specifically in relation to the bill, we support the objective of the bill to reduce the impact that products and their packaging have on the environment and endorse the supply chain wide approach. While we support the intent of the bill, what we do not support is the introduction of primary legislation that paves the way for a myriad of regulations to be implemented for product stewardship schemes without an adequate and robust assessment process based on consideration of economic, environmental and social issues—that is, we favour a truly sustainable approach to policy development.

The AFGC view is that voluntary or co-regulatory arrangements should be pursued as a priority. An excellent example of a co-regulatory scheme is the Australian Packaging Covenant where industry and all levels of government have joined together to respond the issue of packaging waste across the entire supply chain. The Packaging Covenant is low-cost, flexible and provides industry with the ability to make improvements to packaging where it best suits them. Regulations made under any product stewardship scheme should not impose unnecessary costs on industry or act as a disincentive for investment in new technology or processes that improve the overall sustainability of the product.

A couple of quick key concerns in relation to the bill as outlined in our submission. We are of the view that the lack of an appropriate risk assessment process which would assist in the identification of priority products and/or materials subject to product stewardship schemes. While the product criteria included in the bill provides a checklist of issues to be satisfied before legislation would apply, what is lacking is detail on how a product or material will be assessed for its impact. It is our view that the criteria in the bill are too broad and the requirement to adopt only two criteria is an inadequate basis on which to determine appropriate regulatory action. The criteria currently proposed in the bill will pose an unnecessary level of ambiguity around products and potential schemes which could and would lead to a high level of uncertainty for business. The additional requirements of having to satisfy more than two criteria would provide more specific advice which could be incorporated into the regulatory impact analysis, thereby providing a more robust, equitable and credible process for the development of any product stewardship schemes. For the majority of product stewardship arrangements, AFGC supports voluntary schemes, under which organisations could voluntarily take action to responsibly manage products and/or co-regulatory schemes, involving a combination of industry action and supporting government regulation. That is our opening statement. I am happy to take questions or comments on our submission or opening remarks.

Senator FISHER —Can we ask for a copy of the opening statement.

CHAIR —Do you have it in a form that you can table?

Mr Mahar —Absolutely.

Senator FISHER —Thank you.

CHAIR —If we go to recommendation 1 in your submission, you say:

... provisions should be added to enable the scale and significance of the problem associated with a product or material to be rigorously assessed.

It seems to me this puts the onus on government to do the assessment. Why would it not be, if someone brings a product to the market, that they should say, ‘Look, this is the potential environmental impact of the packaging, of the product itself and of the makeup of the product.’ Why should we do that after it has come to market?

Mr Mahar —That is a fair question. My view on that one is that every product is going to have an impact. What we are proposing or suggesting is that we have a list of priority products so that we can start with the most intensive or the products that have the most impact and work our way through those rather than having an open policy suggesting product stewardship schemes could be implemented for anything. At the moment it is our view that it could be applied to anything. What we are proposing is: let us develop a process, agenda or scheme that identifies those products that should be prioritised for product stewardship schemes.

CHAIR —In recommendation 2 you say that a new clause should be added—

Ms Pickles —I would certainly agree with Tony’s comments that there needs to be an adequate framework under which you identify what risks are associated with the actual products. Otherwise, we could be dealing with the lowest-hanging fruit, merely on a whim. We are also emphasising that it is more for the co-regulatory and mandatory approaches. Voluntary approaches are a different arrangement. It is a process to seek accreditation. Through that accreditation process, these issues will be worked out. It is more on the co-regulatory and regulatory approaches that we have concerns that there is nothing to establish a framework. Where are we going to start?

Senator FISHER —A hierarchy of hits, I suppose.

Ms Pickles —Yes.

CHAIR —Why would you not start with the low-hanging fruit and make a start?

Mr Mahar —What are those low-hanging fruit?

CHAIR —I suppose the low-hanging fruit, as outlined in this bill, are the televisions and computers.

Ms Pickles —The television has been quite processed to get to the stage that it is at now.

Mr Mahar —I suppose what we are suggesting—while there might be some products like televisions, as you said—is a more defined process of identifying those priority products outside the ones that we have already got. The risk for us is that product stewardship schemes can be in implemented without any due process notwithstanding what is in the bill already. We think it could be strengthened.

CHAIR —Strengthening the bill is one thing but hasn’t there been a demonstrated failure in the stewardship of products up to this stage and that is why this bill has come on the scene?

Mr Mahar —Arguably, for a range of products, there has been a failure of stewardship. But for those products that are not identified, arguably, there has not been.

CHAIR —You basically said that every product has got some waste. That is self-evident but then you say in recommendation 2, about new clauses, that you have to prove ‘a demonstrated regulatory and/or market failure of the product’. What do you mean by a ‘market failure of the product’?

Mr Mahar —If there has been a demonstrated risk or impact of the products or the scheme itself, if those products result in damage or environmental harm, we can look at product stewardship schemes. But there has to be some assessment process to actually document that—a process of considering and examining those impacts and the products and the actual schemes that are, or are not, in place.

CHAIR —Are you saying that a product that damages the environment constitutes a market failure?

Mr Mahar —To the point that there is an impact, and there is not anything being done to consider that impact, then arguably there could be a market failure there—assuming that there is a demonstrated need for those products from government, the community or industry.

CHAIR —We might go to Senator Ludlam. Senator Ludlam is on Skype. This is the first time we have done this, so you a part of history here. Senator Ludlam is creating history.

Senator FISHER —Or we are guinea pigs; it could be either.

CHAIR —All I would say to Senator Ludlam is that he should have moved the two bottles of tequila!

Senator LUDLAM —Which I can assure you are just—

Senator FISHER —Is it daylight there in the west? It looks like it is.

Senator LUDLAM —Yes, it is only barely daylight. I am going to continue along the lines that the chair was pursuing. Your submission makes it pretty clear that you are not really of the view that regulatory or co-regulatory approaches are the most appropriate in most cases. You seem to be most keen on the voluntary schemes. Have I mischaracterised you there? If not, can you explain why you prefer that approach?

Mr Mahar —We certainly favour voluntary schemes as opposed to mandatory schemes, but we very much endorse and support the co-regulatory scheme that is the Australian Packaging Covenant. This scheme includes a safety net, or a free rider provision, for companies that do not sign up to what is effectively a voluntary scheme—that is, the packaging covenant—to have legislation applied to them. Where there is a need for co-regulatory requirements then we would certainly be in favour of those. And, as I say, we are a strong supporter of the packaging covenant, which is working well.

Senator LUDLAM —We will have to agree to disagree on how well that it is working—but that is probably another matter. Can you give us an example of a product scheme which you think would deserve a much more strictly regulated approach?

Ms Pickles —When we talk about the actual risk or hazard of the product itself, if we look at the current examples of asbestos waste and nuclear waste, there is a need for mandatory provisions in relation to what happens to that waste at the end of its useful life. I think the community would applaud that.

Senator LUDLAM —I certainly agree with that—and don’t get me started on nuclear waste! But that is not the kind of material that you and your membership are commonly handling. Let us bring us this back to supermarkets and those kinds of product streams. The membership that you are here to represent is extensive. Can you give us an example of any of those that you think deserve to be up at the end of the spectrum?

Mr Mahar —In terms of a mandatory scheme?

Senator LUDLAM —Yes.

Mr Mahar —Probably not. As I say, packaging is probably the key issue for the food and grocery manufacturing sector. We do not represent the retailers but we work closely with them on the covenant, and packaging obviously impacts on them. In terms of other priority waste—and I am not suggesting that mandatory measures apply to this—food waste is another issue for us. Again, that is probably at the community level rather than at the supermarket or manufacturing level. Other issues for us include waste water and other manufacturing wastes. Again, we would favour voluntary co-regulatory arrangements. I am not sure whether I would be able to identify any products in our sector that would require mandatory responses—if that is what you are asking.

Senator LUDLAM —Yes, I guess it is. Since you are so keen on voluntary and co-regulatory schemes, do you think we need a whole section of this draft bill devoted to mandatory schemes?

Mr Mahar —For our sector I am not able to say there are any products that we think need mandatory requirements.

Senator LUDLAM —Since you did get me started on nuclear waste, what about things like batteries and radioactive smoke detectors? What about materials that are commonly sold over the counter that do have some intractable properties and have a very low rate of recycling?

Mr Mahar —Again, our response would be that we should ask industry to implement voluntary arrangements and then look at co-regulatory schemes. Mandatory schemes should be a last resort if there is market failure or if there is no improvement in the recycling rate. But there is clear evidence of good performance from voluntary schemes and co-regulatory schemes.

Senator LUDLAM —Because we are dealing with an overlap of responsibilities between the state and territories the government is keen that a regulatory impact statement be undertaken before any major new category of material is incorporated into the scheme. Do you have a view on the amount of time that those processes take, or do you think we have got the balance about right at the moment?

Mr Mahar —Specifically for regulatory impact statements?

Senator LUDLAM —Yes. There are two that I am aware of. One is around e-waste, which is now coming to fruition after about seven years. The other one is container deposit legislation. I think people have lost track of how long that is taking. That has got us snowed under for the next couple of years. Do you think that the way the process is drafted at the moment is appropriate?

Mr Mahar —I think some of these issues are more complex than what some people would like us to believe. We favour a full and comprehensive review and analysis of the impacts. I appreciate that the container deposit issue has been dragging on for a while—and it is something that is close to our hearts—

Senator LUDLAM —So you support such a scheme?

Mr Mahar —No, you have misinterpreted me.

Senator FISHER —It is not akin life-support, in other words.

Senator LUDLAM —So fighting off and trying to defeat such a scheme is close to your heart?

Mr Mahar —Perhaps that is another way of saying it.

Ms Pickles —I think that providing alternatives and giving good consideration to the development of any policy is incumbent on all parties—government, industry and the community. Consideration of a range of options should deliver a better outcome than a unilateral approach going down one line.

Senator LUDLAM —Sorry, I did not mean to interrupt your colleague there. I will let him finish and then I will provide commentary.

Mr Mahar —As I say, the issues are quite complex. We support a complete and comprehensive examination and consideration of all the views, including economic, environmental and social. We support the government’s process at the moment. There have been a number of reviews and investigations but we would hope that they all consider all of the issues and that there is an adequate, comprehensive response following all of the relevant reviews.

Senator LUDLAM —You say that your industry is facing a perfect storm—and we are obviously very well aware of what is going on at the moment in terms of price wars, supplies being squeezed and so on. Is it true that schemes such as this can potentially increase costs for industry? Is there a reluctance coming through in your submission to move any faster than you are being forced to?

Mr Mahar —There is a risk of increased costs. However, I would argue that something like the packaging covenant is lower cost than some of the mandatory schemes that could be proposed. But they are working well, so cost is not necessarily the main driver. What we are interested in is equity and a whole of supply chain approach to the broader issue. The packaging covenant looks at all of packaging and involves everyone who needs to be involved. While people take pot shots at it—and I appreciate that it is not perfect—it is a good example of a low-cost, flexible arrangement that has a comprehensive approach.

Senator FISHER —You say in your opening statement that the product stewardship criteria are too broad. I presume you are talking about section 5 of the bill, which requires that only two of the product stewardship criteria be satisfied before the product can be made the subject of whatever the mandatory scheme may be. Let us take your marketplace for example. Criterion A requires that the products are in a national market, and criterion F says that ‘taking action to reduce those impacts will offer business opportunities that would make a contribution to the economy’. Those criteria are pretty open-ended. What would be the impact of applying just those two criteria to what your members supply on their shelves?

Mr Mahar —I totally agree. All of our products are sold in a national market. I would struggle to think of any products in Australia that are sold in just one state or one jurisdiction—there are probably a couple of them. It is our view that—

Senator FISHER —And, at the very least, someone would argue that taking action to reduce the impact of those products would offer business an opportunity that would make a contribution to the economy. And those businesses might not be your members either.

Mr Mahar —That is true. Criterion F is a good example, but there are a couple of others in that list. One of them requires that the consumer is willing to pay for action and the potential to increase conservation or recycling of materials. It is our view that that is quite vague. The breadth and leeway in some of those criteria is so broad that it opens the door for product stewardship schemes for a whole range of issues that do not necessarily take into account the impact of that scheme. It comes back to our opening point about the need for a risk assessment of the criteria.

Senator FISHER —You are saying that not only do you need just two of the criteria but each one is vague. The concept of the bill is that something can only be made the subject of a mandatory scheme if two or more of the product stewardship requirements are met and it is consistent with the objects of the act. An objective of the act is to reduce the impact of the products and the substances that they contain on the environment and health and safety. The objectives do not even say that that impact has to be a negative one. It is quite conceivable that there are things that actually have a positive impact on the environment, health and safety et cetera, yet it would seem that the object of this act is to reduce even that. In that context, is your concern about mandatory versus voluntary more related to your not knowing what you are up against?

Mr Mahar —Absolutely. While we agree with the objectives and the intent of the bill—and we support that—

Senator FISHER —Or what we think the intent of the bill is, given that the objectives are not all that clear.

Mr Mahar —Based on the broad interpretation. While we support that, our concern is that it leaves too much scope opportunity for secondary regulations to be made in relation to a range of products that are not necessarily compatible with product stewardship schemes or do not lend themselves to arrangements, mandatory or otherwise, that can be implemented under that bill. In our view the criteria currently in the bill are too broad, too wide and too numerous to allow any certainty for business.

Senator FISHER —Were you consulted by the government or any of its arms at any stage in the lead-up to this bill and, if so, when? And when did you first become aware of it?

Mr Mahar —We provided a submission to the consultation paper for product stewardship legislation. We drew on that for our submission for the bill. So we were consulted, and in our—

Senator FISHER —Was that a federal government thing?

Mr Mahar —Yes, it was in relation to the department of sustainability.

Senator FISHER —When was that?

Mr Mahar —In December last year.

Senator FISHER —So you have known this was coming since December last year, but that is all?

Mr Mahar —That is when we provided our initial submission.

Ms Pickles —We were aware that the government had been looking into this issue for some time. There had been discussions to various other fora, at which it came to our attention that the government was looking at national product stewardship legislation. It was a well known issue probably about six months before that as part of the National Waste Policy.

Senator FISHER —Are you satisfied with the consultation—

CHAIR —Sorry to interrupt, but we have run out of time. Thank you for your evidence.

[9.36 am]