11 Nov 2021

All links in a supply chain affected by NSW's product stewardship laws to reduce plastic and move to a circular economy

By Nick Thomas, Cloe Jolly and Samuel Mursa

NSW will soon have its own product stewardship law, with tough regulatory requirements, if the Plastic Reduction and Circular Economy Bill 2021 is passed by the NSW Parliament.

NSW Government is making good on its commitment to reduce plastic waste and develop a circular economy, with the introduction into NSW Parliament of the Plastic Reduction and Circular Economy Bill 2021 in late October.

The Bill has passed the Legislative Assembly and is currently being debated in the Legislative Council.

It would impose, initially, a ban on lightweight plastic bags, then several other single-use plastic items. It would also allow for the imposition of product stewardship requirements and targets, require specific action by industry participants to address these, and enable strong enforcement actions (including requirements for financial assurances in some situations).

NSW's plans in context: policy developments to curb plastic waste in the State and across Australia

It's widely acknowledged that plastic, while an incredibly useful material and an integral part of modern society, has led to a range of environmental, economic and health issues. Among the many alarming statistics available, the Second Reading Speech for the Bill notes estimates that eight million tonnes of plastic leak into the world's oceans every year, plastic packaging and single-use plastic items make up 60 per cent of all litter in NSW, a piece of plastic can remain in our environment for hundreds, or even thousands, of years, and yet only about 10% of plastics in NSW are currently recycled.

The Bill gives effect to key reforms outlined in the NSW Waste and Sustainable Materials Strategy 2041 and the NSW Plastics Action Plan, released in June 2021, and implements key findings of the NSW "Cleaning Up Our Act: Redirecting the Future of Plastic in NSW" discussion paper.

All Australian States and Territories have agreed to phase out single-use plastic items by 2025 as part of the National Waste Action Plan and all Australian States and Territories have already introduced bans on the use of lightweight plastic bags. Legislative action has been taken in Queensland, South Australiaand the ACT to ban other single-use plastics. A circular economy Bill has been introduced into Victorian Parliament and Victoria has committed to ban single-use plastics by February 2023. Western Australia also recently unveiled a plan to ban single-use plastic items, progressively to 2023. Tasmania and the Northern Territory have not yet committed to ban other single-use plastics.

The NSW Bill is consistent with similar approaches taken in other Australian States and Territories in limiting the sale, supply or distribution of single-use and other non-desirable plastics. However, the NSW Bill goes further in respect of promoting the continual development of a circular economy.

Most of the substantive requirements for the Bill's plastic reduction and circular economy initiatives will be driven by regulations, which are yet to be drafted.

Prohibited items

Part 2 of the Bill establishes a prohibition scheme for prescribed items.

A "prohibited plastic item" is an item which is:

  • "unnecessary" or "problematic" for environmental, human health or economic reasons, and
  • prescribed by the regulations or specified in Schedule 1 Part 1 of the Bill (which currently prescribes a range of single-use plastic items).

To reduce uncertainty about the application of these criteria, the Minister would be empowers to deem items to meet one or both of these criteria, by notice published in the Gazette.

Other "prohibited items" include those which do not comply with a "design standard" prescribed by the regulations or specified in Schedule 1 Part 2 of the Bill (which currently prescribes "rinse-off personal care products" such as shampoos, soaps and toothpaste which contain microbeads).

Design standards can cover a range of factors, such as an item's composition (eg. a minimum amount of recycled material, or exclusion of specified materials), the way in which an item must be designed, constructed, manufactured or packaged (eg. to facilitate re-use or recycling), and independent testing of an item.

It will be an offence for a person to "supply" a prohibited item to another person, while carrying on a business. The concept of "supply" is very broadly defined.

Product stewardship requirements

Product stewardship scheme components

Part 3 of the Bill establishes a product stewardship scheme. The regulations may prescribe "regulated products" for a stewardship scheme, and then:

  • prescribe product stewardship requirements on a broad spectrum of possible matters, such as:
  • the use or re-use of recycled or other materials which will minimise the environmental or resource impact of a product’s creation;
  • the ability of a product to be recycled, composted, repaired, processed, re-processed or re-used;
  • the reduction in material used in a product; and
  • the design of a product;
  • the maintenance, sharing, repair, refurbishment or upgrade of a product;
  • the longevity of a product; or
  • the reduction of impact or potential impact of a product or its life cycle on resource management or waste management; and
  • specify a target for a product stewardship requirement (eg. a percentage).

The Minister may also specify targets, or vary targets in the regulations (if the regulations allow it), by order in the Gazette.

A potentially wide definition of "brand owner"

The Bill then provides for the imposition of a product stewardship scheme on the "brand owner" for each regulated product. The concept of a "brand owner" is similar to that used in the Australian Packaging Covenant, though the Bill introduces more flexibility into the concept, and allows for exemptions, via the regulations.

Essentially, a "brand owner" is:

  • the owner of the "product name" (including trade mark, brand name or trade name) under which the product is supplied in NSW; and
  • if the regulations so provide -
  • a person who is a licensee of a product name under which the product is supplied in NSW;
  • a person who is a franchisee under a business arrangement that allows the person to supply the product in NSW; and
  • a person who first supplies the product in Australia.

The brand owner of a product may be taken to be the brand owner of the packaging material of the product as well.

Key requirements

Once a product stewardship requirement (including a target) is prescribed for a regulated product, the brand owner must comply with the requirement, unless the brand owner has an approved action plan for that requirement and is complying with the action plan (see below).

If required by the regulations, the brand owner for a regulated product must:

  • prepare a series of records in relation to the regulated product as required by the regulations, and must then retain those records for at least 6 years, make the records available to the EPA, and (if the EPA requires it) arrange an audit of the records; and
  • provide annual reports to the EPA, within 3 months of the end of each financial year.

The EPA may publish certain information in relation to a brand owner on the EPA's website, in what appears to be a public performance record for brand owners.

Action plans

If required by the regulations, the brand owner for a regulated product must prepare an action plan which:

  • sets out how the brand owner intends to comply with the product stewardship requirements and targets, and the related requirements as outlined above; and
  • may also include indirect actions intended to offset adverse environmental impacts generally or specifically in connection with the regulated product,

and submit it to the EPA for review. If the EPA decides to approve an action plan, it may impose conditions on the action plan.

The brand owner must hold an approved action plan in order for the regulated product to be supplied, whether or not the brand owner is supplying the regulated product.

The EPA is given specific power to require a financial assurance for the actions in the action plan, if satisfied a financial assurance is justified, having regard to matters such as:

  • the degree of risk of environmental harm, harm to human health or waste management impacts associated with the brand owner's activities to which the product stewardship requirements and targets apply; or
  • the brand owner's financial capacity of the to meet the relevant product stewardship requirements and targets; or
  • the brand owner's environmental record.

Given the potential scope of an action plan under the Bill, a financial assurance could be a significant imposition. The Bill allows an appeal the NSW Land and Environment Court on the merits of a condition requiring a financial assurance.

The EPA has a variety of powers in relation to an action plan after approving it, including – for example – vary or revoke conditions of the action plan, impose new conditions, withdraw its approval of the action plan; direct the brand owner to review, update or amend an approved action plan, and direct the brand owner to obtain an independent audit of the action plan.

Offences and enforcement

The Bill creates various offences for non-compliance with its provisions, and sets maximum penalties in excess of $400,000 (for a corporation) for some offences. In addition, the maximum penalties for some offences are doubled if the offender is the manufacturer or producer of the relevant item or supplies the relevant item which carrying on a business as a wholesaler or distributor.

The Bill also gives the EPA broad investigation and enforcement powers, including powers to issue compliance notes in relation to the supply of a prohibited item to the supplier and to the occupier of premises at which the supply is occurring.

The Bill includes strong offence provisions for false or misleading statements, which are intended to prevent greenwashing.

Consultation, transition and implementation of the product stewardship scheme

The Bill, if enacted, could dramatically affect the life cycle of a wide range of products in NSW, and the behaviours of those involved in the life cycle. It represents a giant leap in environmental management. The extent to which it represents a leap forward will depend on the regulations and implementation.

The Bill would commence once it's received the Governor's assent, which is usually soon after it is passed by Parliament.

However, in recognition of the significant burden which prohibition and product stewardship action under the Bill would have, the Bill requires:

  • at least 8 weeks' public consultation on a proposed regulation;
  • a 6 month lead-in for a regulation which imposes a prohibition on a plastic item or a design standard; and
  • a 12 month lead-in for a regulation which prescribes a regulated product.

Consistent with this approach, the Bill states that:

  • the prohibition on lightweight plastic bags will commence on the first day of the month which is a whole 6 months after the date of assent; and
  • the prohibitions on various other single use plastic items and plastic microbeads, which currently appear in Schedule 1 of the Bill, will commence on 1 November 2022 (about 12 months after the Bill was introduced into Parliament).

The plastics reduction requirements which are already baked into the Bill will have significant effect on various supply chains.  However, the Bill provides a vehicle for stewardship, and life cycle sustainability, across a wide range of products and services, which could affect every sector in the economy.

Businesses should start (or, given many business' progress in recent years, continue) interrogating supply chains to identify opportunities for more sustainable lifecycles for their product send services, and closely monitor the administration of the Bill once it becomes law to see which sector will be affected next. 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.