Cancelling PRNs could ‘punish victims’

Compliance specialists have warned that in threatening to cancel ‘incorrect’ packaging recovery notes (PRNs), the Environment Agency could punish the “victim” rather than the “criminal”.

The Agency wrote to the packaging sector on Friday (23 April) to warn that in situations when PRNs are found to be ‘incorrect’ it will be able to cancel them from July 2021 (see letsrecycle.com story).

PRNs provide evidence that businesses need to prove they have met producer responsibility requirements

Compliance schemes broadly welcomed the sentiment but advised the Agency to be aware of who may suffer.

A compliance scheme manager who did not wish to be named told letsrecycle.com that if a PRN was issued illegally by a legitimate recycler, they would work to replace it because they would want to continue to be accredited. However, they said that if a PRN was issued illegally by a “rogue”, they would be unlikely to work to replace it and would leave the scheme or producer out of pocket.

This would increase the cost of compliance for producers, the compliance scheme manager said.

They added they believed it would be illegal for the Agency to cancel a PRN because the recycler did not ‘make good’, as the regulator does not have the explicit authority to cancel PRNs issued illegally under the packaging regulations.

They said most schemes and producers would not be able to afford to challenge a cancelled PRN and would have no choice but to buy more to replace them.

The compliance scheme manager said that when asked informally the Agency could not say how many reprocessors may be under investigation or how many PRNs it thought may have been issued fraudulently in the past.

‘Increased concerns’

When contacted by letsrecycle.com, an Environment Agency spokesperson said: “We have contacted customers to confirm that from 1 July 2021 we reserve the right to cancel PRNs/PERNs where we have evidence they have been issued incorrectly.

“This is due to increased concerns over the use of illegitimate PRNs/PERNs in the packaging industry, and will help to deter illegal activity, maintain a level playing field for legitimate operators and reduce the risk of harm to the environment and human health.”

Punishment

Angus Macpherson is managing director of PRN trading platform The Environment Exchange (t2e). He echoed the compliance scheme manager’s concerns and said: “Fraud in any system is unacceptable. Criminals should not benefit from their crimes. However, unless it can be shown that there has been collusion between the producer and the PRN issuer to defraud the system, the position that the Agency has recently communicated will punish the victim not the criminal.

Angus Macpherson is managing director of PRN trading platform t2e

“The position also undermines its own accreditation system. If producers cannot accept the validity of PRNs issued through the Agencies’ National Packaging Waste Database, then what system should they rely on? To raise concerns about potential fraud is vital, but only the Agencies are able to investigate this. To duplicate the accreditation checks carried out by the Agencies seems pointless. Early suspension of accreditation if the Agency is in doubt is a far more pragmatic solution to this problem than requesting all producers to duplicate their regulatory responsibilities.

“For t2e the delivery and settlement of all contracts is a requirement of operating a fair and orderly market. To achieve this t2e regularly checks publicly available sources on all its participants and suspends those that fail these checks. All sellers are required to deliver valid PRNs in settlement of t2e contracts. If subsequently the PRN is found to be invalid, not only would the seller be in breach of their contract, but also they would be liable to t2e’s disciplinary procedures, which not only require the seller to make good the contract but also could result in a fine and public disclosure.”

‘Put people and environment first’

However, the Environment Agency’s warning was welcomed by some in the packaging sector. David Honcoop is managing director of Clarity Environmental, a packaging compliance scheme operator and PRN trader.

David Honcoop is Clarity Environmental’s managing director and founder

He told letsrecycle.com: “The PRN system has long been criticised for a lack of transparency, with far too much opportunity for fraudulent activities. The absence of any quality indicators or standards has put buyers in an extremely vulnerable position, with recycling evidence being blindly bought by compliance schemes and direct registrants. Ultimately, we must take steps to put people and the environment first, and this requires us to work with the system and align with the regulatory efforts to ensure PRNs are traceable and legitimate.

“We are proud to be leading these efforts and have spent many months working on a safer, more informed way for businesses to comply with the packaging regulations that will provide a whole new level of clarity.”

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