Deep dive: Extended Producer Responsibility (EPR) -- Where the value pools are and who captures them

The United Kingdom's extended producer responsibility (EPR) scheme for packaging is one of the most consequential waste-management reforms in recent history. Beginning in April 2025, the revised system transfers the full cost of collecting, sorting and recycling household packaging from local authorities to the companies that place packaging on the market. Large producers with turnover above GBP 2 million and more than 50 tonnes of packaging must pay per-tonne disposal fees based on the amount and type of packaging supplied, while smaller producers (turnover above GBP 1 million and between 25 and 50 tonnes) are subject to reporting obligations. By internalising the true cost of packaging waste, the policy aims to encourage eco-design, reduce unnecessary materials, and build domestic recycling capacity.

This change is more than just a compliance burden; it opens up new value pools across the packaging and recycling value chain. The government estimates that shifting disposal costs to producers will redirect about GBP 1.2 billion each year from public budgets to waste management companies and local authorities, supporting roughly 25 000 jobs and unlocking more than GBP 10 billion in private and public investment in recycling infrastructure over the next decade. Modulated fees beginning in 2026 will reward packaging rated green under the Recyclability Assessment Methodology and penalise poorly recyclable materials with up to a two-fold fee increase. For investors, this framework creates incentives for packaging redesign, data services, reuse systems and recycling infrastructure. The following sections unpack how the scheme works, where the economic opportunities lie, and how to evaluate potential winners.

Why It Matters

Waste costs are shifting upstream

Under the previous producer responsibility system, businesses paid only around ten percent of the cost of managing packaging waste and relied on purchasing packaging recovery notes (PRNs) to demonstrate compliance. Taxpayers funded the remaining disposal costs, and there were few incentives to design for recyclability. The House of Commons Environmental Audit Committee noted in 2017 that producers covered roughly 10 % of costs while taxpayers paid the rest. In the revised scheme, producers bear the full cost of household packaging waste. Local authorities still run collection and recycling services, but their budgets are funded through payments from producers via the new scheme administrator, PackUK. Moving the cost upstream is expected to create a market signal that encourages companies to minimise packaging and switch to materials that are easier to recycle.

Jobs and investment in recycling

PackUK and the UK's waste-management industry project that the new scheme will support roughly 25 000 jobs and stimulate more than GBP 10 billion in investment in recycling capability over the coming decade. These figures reflect the scale of infrastructure upgrades required to handle the additional material flows. Domestic recycling capacity must expand to process more plastics, glass and paper within the UK rather than relying on exports. Investors who back recycling plants, compostable packaging production or reuse services stand to benefit from the surge in demand.

A growing circular economy value pool

EPR is part of a broader shift toward circular business models that prioritise resource efficiency and waste reduction. According to a McKinsey analysis, shifting consumer goods to circular models could unlock a value pool of up to EUR 500 billion for European companies by 2030. Extended producer responsibility is a regulatory lever that accelerates this transition by making disposal costs transparent and by rewarding businesses that design for reuse and recyclability. As more countries adopt EPR schemes, companies that master packaging design, data management and high-quality recycling will find expanding markets.

How the UK EPR Scheme Works

Producer categories and obligations

The scheme applies to any organisation that imports or supplies packaging in the UK and meets specific size thresholds. Businesses must collect and report packaging data if they have an annual turnover of at least GBP 1 million and supply more than 25 tonnes of packaging in a year. Producers are divided into two categories:

Large producers: Companies with turnover above GBP 2 million and placing more than 50 tonnes of packaging on the UK market. They must submit detailed packaging data biannually and pay disposal fees based on the weight and type of household packaging they supply. Fees will be invoiced starting in October 2025.
Small producers: Companies with turnover above GBP 1 million but below GBP 2 million and placing more than 25 tonnes and up to 50 tonnes of packaging. They are required to register and report packaging data but are exempt from direct fees.

To comply, producers must create a packaging data account on the government's portal, report nation data by December 1 of each year and, for large producers, pay invoices calculated from reported tonnages. Failure to register or submit accurate data can result in penalties, and high fees may accumulate if volumes are underestimated.

Fee structure and modulation

In the first year (2025-2026) producers will pay flat base fees per tonne of material. For example, the Commons Library research briefing notes that the base fee for plastic packaging is GBP 423 per tonne and GBP 192 per tonne for glass. These rates are based on average handling and recycling costs. Starting from the second year (2026-2027), fees will be modulated using a red-amber-green rating system derived from the Recyclability Assessment Methodology (RAM). Packaging rated green (highly recyclable) will incur decreasing fees, whereas red-rated (poorly recyclable) materials could face modulation factors of up to 2x the base rate. Producers of medical packaging will be granted special provisions due to regulatory constraints on material choice.

Funding flows and local authority incentives

PackUK collects fees from producers and transfers funds to local authorities to cover the full cost of household packaging waste management. The government estimates that the shift from local authority budgets to producer funding amounts to around GBP 1.2 billion per year. Local authorities are expected to use these payments to improve recycling services and infrastructure, and PackUK can reduce funding if there is evidence of misallocation. By linking funding to performance, the scheme encourages local councils to invest in effective recycling systems.

Emerging Value Pools

Extended producer responsibility creates a range of economic opportunities across the packaging value chain. Investors should watch the following value pools:

Packaging redesign and material innovation

Modulated fees give companies a direct financial incentive to reduce packaging weight and switch to materials that score high on the recyclability scale. Packaging converters and material suppliers who develop mono-material pouches, recyclable paper composites or compostable plastics can capture higher demand. Companies that provide right-sizing solutions, such as automated box cutters and AI-enabled packing software, help businesses reduce volumes and thus fees. For instance, fashion retailers have redesigned premium boxes using recyclable cardboard and vegetable-based inks to avoid high modulated fees. These design changes not only reduce disposal charges but also enhance brand reputation.

Data and compliance services

The reporting obligations require precise tracking of packaging volumes, materials, and nation data. Many companies, especially retailers with complex supply chains, lack systems to consolidate packaging data across warehouses and suppliers. This need has spawned a market for third-party data platforms and compliance consultants. A high-street fashion retailer responded by implementing a centralised data collection system integrated with its enterprise resource planning (ERP) software, allowing accurate fee forecasting and supplier transparency. Investors should look at software vendors and consultancies specialising in EPR compliance, carbon accounting and ESG reporting.

Recycling and reprocessing infrastructure

The fee revenues collected through EPR will help finance a substantial expansion of recycling infrastructure. Investments are needed to increase domestic capacity for sorting, washing and reprocessing plastics, glass and paper. The policy's long-term success depends on the availability of high-quality recycled feedstock for packaging manufacturers. Companies that develop advanced recycling technologies, such as chemical depolymerisation of mixed plastics or closed-loop systems for food-grade plastics, will gain a competitive edge. The government has indicated that fees will be modulated to reward packaging that feeds into closed-loop systems, creating an additional incentive for producers to partner with high-quality recyclers.

Reuse and refill systems

EPR encourages companies to move away from single-use packaging altogether. Some retailers are piloting reusable packaging systems where consumers return packaging for cleaning and reuse. A sustainable fashion startup launched reusable garment bags for online orders, incentivising customers to return packaging via a pre-paid system. Although upfront costs are higher, reuse models reduce the total volume of packaging placed on the market, lowering long-term EPR liabilities. Investors can explore opportunities in reusable container logistics, reverse logistics services and digital platforms that manage deposits and returns.

Producer responsibility organisations and compliance schemes

Under the new regime, producers can join compliance schemes or producer responsibility organisations (PROs) that manage reporting and fee payments on their behalf. These organisations pool members' packaging data, purchase evidence from recyclers, and distribute costs. In countries like Germany and Canada, PROs have evolved into sophisticated organisations that invest in recycling infrastructure and innovation. In the UK, a single producer responsibility organisation is expected to be appointed by March 2026. Early entrants to the PRO market may capture a large share of member fees and gain influence over future policy design. Investors should evaluate the governance model, transparency and performance of these organisations.

What's Working and What Isn't

What's working

Early adoption and packaging audits. Companies that conduct comprehensive packaging audits ahead of fee modulation have been able to redesign packaging to minimise charges. A luxury fashion house discovered that laminated boxes and metallic finishes would attract high fees and replaced them with recyclable cardboard. This proactive approach aligns sustainability goals with cost savings.
Data integration and supplier engagement. Businesses that invest in centralised data systems can accurately report packaging volumes and forecast fees. A national high-street fashion chain renegotiated supplier contracts to require detailed packaging data and used a third-party data aggregator to validate inputs. Such transparency reduces reporting errors and ensures accurate billing.
Reuse pilots. Early pilots for reusable packaging show promise in reducing EPR liabilities and meeting consumer demand for sustainable options. By tracking reuse rates and integrating the data into nation submissions, companies can lower the total tonnage reported, thereby reducing fees.
Investment signalling. The government's commitment to job creation and infrastructure investment signals long-term support for the recycling sector. This policy clarity reduces regulatory risk and encourages private capital to flow into circular economy ventures.

What isn't working

Cost uncertainty and small-producer burdens. Although small producers are exempt from fees, the administrative burden of reporting remains significant. Many small brands struggle to collect packaging data from suppliers and fear penalties for non-compliance. The complexity of packaging definitions and nation data requirements can be confusing.
Fee calculation complexity. Businesses have expressed concern that the modulation methodology may penalise heavier materials regardless of their recyclability. For example, metal and glass industry associations argue that fees do not adequately reflect the high recyclability of their materials. The government plans to review the scheme by December 2028, but until then uncertainty may discourage investment in certain sectors.
Consumer price impacts. There are worries that producers will pass fees on to consumers in the form of higher prices. While the government expects the impact on inflation to be minimal, some producers may struggle to absorb costs, especially if modulation factors reach 2x or more.
Lack of harmonisation. Producers that operate across multiple jurisdictions face different EPR rules and reporting formats. Without standardisation, companies must manage multiple compliance systems, which increases costs and reduces the efficiency of scaling sustainable packaging solutions. Investors should favour platforms that can harmonise data across markets.

Case Studies: Who's Capturing Value

Luxury fashion brand. A luxury fashion house performed a packaging audit and realised that its premium boxes with laminated finishes and metallic inks would incur the highest fees. By switching to mono-material cardboard and vegetable-based inks, the company reduced its EPR liabilities while reinforcing its sustainability credentials. The redesign also simplified recycling for consumers and improved the brand's circularity metrics.

High-street retailer. A national retailer operating hundreds of stores faced challenges tracking packaging volumes from diverse suppliers. By integrating its ERP system with a centralised packaging data platform, the retailer created a live dashboard of packaging tonnage, materials and recyclability. The firm renegotiated supplier contracts to mandate packaging data disclosure and implemented fee forecasting models. This investment in data infrastructure allows the retailer to budget for future EPR fees and identify materials that need redesign.

Circular fashion startup. An emerging fashion brand launched a reusable garment bag programme for online orders, offering discounts to customers who return the bags. The company recorded reuse rates and deducted the returned packaging from its reported tonnage. Although initial costs were higher, the scheme reduced the volume of new packaging needed and built customer loyalty.

Mid-sized luxury brand. A mid-sized luxury brand replaced multi-material garment bags with mono-material low-density polyethylene (LDPE) alternatives that are easier to recycle and attract lower fees. The firm also engaged a third-party compliance service to automate data collection across warehouses, reducing administrative overhead.

Third-party data provider. A compliance technology company specialising in packaging data aggregation has seen rapid growth. By offering secure data capture, supplier portals and automated reporting to the government portal, the firm helps producers meet their obligations and minimise errors. Its revenues are tied to the number of producers served, and the upcoming expansion of EPR to other product categories could multiply its addressable market.

Framework for Evaluating EPR Value Pools

Investors seeking to capitalise on the transition to extended producer responsibility can use the following framework to assess opportunities:

Map the regulatory landscape. Understand the scope of EPR obligations (producer categories, reporting requirements and fee structures) in each jurisdiction. Evaluate how modulation factors will evolve and what materials are likely to become more or less favourable.
Identify actors in the value chain. Beyond producers, look at packaging converters, material innovators, recycling and reprocessing companies, reuse logistics providers, data and compliance service providers, and producer responsibility organisations. Determine which actors are poised to capture a larger share of fees or cost savings.
Assess incentive levers. Fees are modulated by recyclability and weight. Companies that reduce packaging mass, switch to mono-materials or incorporate recycled content can lower liabilities. Evaluate whether potential investments are aligned with these levers and have technology or IP that offers a competitive advantage.
Evaluate scalability and risk. Consider the total addressable market, growth rates and barriers to entry. Assess regulatory risk (e.g., changes in fee rates or definitions), technology risk (e.g., viability of novel recycling technologies) and consumer acceptance (e.g., adoption of reusable packaging). Look for companies with strong partnerships, data transparency and track records of compliance.
Check alignment with broader circular economy trends. EPR sits within a larger shift toward circularity. Investments should align with other drivers such as consumer demand for sustainable products, corporate commitments to net-zero, and emerging digital product passport requirements. Evaluate whether an investment can cross-pollinate value between packaging EPR and other sectors, such as battery passports or textile recycling.

Action Checklist

Audit your packaging portfolio. Quantify volumes and materials, identify poor recyclability and opportunities for weight reduction.
Develop a data strategy. Invest in systems to collect, validate and report packaging data across supply chains. Integrate packaging data into enterprise systems for real-time monitoring.
Redesign for recyclability and reuse. Switch to mono-materials, adopt recyclable composites and explore reusable packaging models. Engage packaging suppliers early to co-develop solutions.
Engage with recyclers and reuse logistics. Partner with domestic recyclers and reuse service providers to ensure packaging can be captured and processed locally. Consider equity stakes in advanced recycling or reuse ventures.
Evaluate membership in compliance schemes. Assess producer responsibility organisations and compliance schemes based on governance, cost structure and added services such as design guidance. Early involvement can influence future fee modulation criteria.
Monitor policy evolution. Keep abreast of PackUK announcements, fee schedules and consultations. Participate in industry forums to shape future modulation and ensure policies reflect material science realities.

FAQ

Q: How does extended producer responsibility differ from a deposit return scheme?

A: EPR requires producers to fund the full cost of managing packaging waste through fees based on the amount and type of packaging they place on the market. A deposit return scheme (DRS) charges consumers a small deposit on beverage containers, which is refunded when the container is returned. While both policies aim to increase recycling, EPR covers a broader range of packaging materials and makes producers financially responsible, whereas DRS incentivises consumers to return specific items.

Q: What determines whether packaging is classified as household or non-household?

A: Household packaging refers to packaging disposed of by households or in street bins and includes items like beverage bottles, food wrappers and online shopping boxes. Non-household packaging is discarded by businesses in commercial settings. Under the UK scheme, only household packaging incurs disposal fees. Producers must assess whether the packaging they supply is likely to be discarded by households.

Q: Can fees be avoided by outsourcing packaging to suppliers?

A: No. Under the EPR regulations, the legal responsibility for packaging data and disposal fees lies with the producer -- typically the brand owner or retailer placing goods on the UK market. Even if packaging decisions are made upstream by suppliers, the producer must register, report data and pay fees. Contracts with suppliers should specify data sharing obligations to ensure accurate reporting.

Q: When will modulated fees start to apply?

A: Flat base fees apply in the first year of the scheme (2025-2026). Modulated fees, using the red-amber-green recyclability rating, will apply from the 2026-2027 assessment year. The modulation factors will start at 1.2x the base fee and increase to 1.6x and 2.0x in subsequent years.

Q: Are there plans to expand EPR beyond packaging?

A: Yes. EPR frameworks are being considered for other product categories such as electronics, textiles, tyres and batteries. Lessons learned from packaging EPR will inform the design of these schemes. Investors should monitor policy developments to anticipate future value pools in other sectors.

Sources

UK House of Commons Library Research Briefing, Packaging Extended Producer Responsibility, 13 January 2026.
UK Department for Environment, Food & Rural Affairs and PackUK, Extended producer responsibility for packaging: Who is affected and what to do and related guidance.
PackUK news release, Extended producer responsibility for packaging announcements (June 2025).
Browne Jacobson, UK Extended Producer Responsibility for Packaging: Implications for fashion retailers (August 2025).
McKinsey & Company, What is circularity? (June 2024).

Deep dive: Extended Producer Responsibility (EPR) — Where the value pools are and who captures them