Are You Registered? The New Blue Box Scheme and its Impact on Franchisors; An Overhaul of Ontario’s Blue Box System Shifts 100% of Costs on Producers of Packaging

Overview

Ontario is fundamentally restructuring its recycling system. Ontario’s municipalities set up the world’s first curbside recycling systems in Kitchener in 1981. Since 2002 producers of recyclable blue box materials have been required to fund up to 50% of municipal net operating costs. Now, 40 years after the initial conception of a curbside recycling system, Ontario is adopting an even more aggressive blue box program that will push 100% of the cost and physical administration of recycling eligible materials onto producers of those materials.

In 2016, the Government of Ontario created the Resource Productivity and Recovery Authority (the “Authority” or “RPRA”) to support Ontario’s transition to individual producer responsibility (“IPR”). On June 3, 2021, Ontario released the finalized O. Reg. 391/21: Blue Box (the “Regulation”) under the Resource Recovery and Circular Economy Act, 2016 (the “RRCEA”). Under the new Regulations, and enforced by the Authority, brand holders that produce eligible packaging (“Producers”) will be responsible for designing and fully funding the collection and end-of-life management of the blue box materials they supply to consumers in Ontario. At the option of Producers, they may partner with Producer Responsibility Organizations (“PROs”) to take on the collection, management, and administration of the program on behalf of Producers.

The guiding principle behind this initiative is that the parties responsible for deciding on packaging should be the ones responsible for the cost of recycling it after consumers throw it away.

This program will replace the current Stewardship Ontario Blue Box Program with the first group of blue box programs transferring the responsibility for the collection, management, and administration of recycling eligible packaging to Producers in July 2023. By December 2025, Producers will be fully responsible for providing blue box services across Ontario.

Franchisors face additional consideration when compared to other industries falling under these new Regulations. They should be mindful that any changes to their business that significantly impact franchisees, such as additional fees for administering the blue box program, must be disclosed in their Franchise Disclosure Document (“FDD”).

Who is a Producer of blue box materials?

A person or company is considered a Producer under the Regulations if they supply blue box materials (such as packaging, paper products, or packaging-like products) comprised of paper, glass, metal, or plastic, or a combination of these materials to consumers in Ontario (collectively, “eligible packaging”).

When there is a franchisor-franchisee relationship, the regulations provide that for the purposes of the blue box program, if the franchisor has franchisees that are resident in Ontario, then the franchisor will be considered the Producer and be required to uphold all obligations imposed by the Regulations.

More broadly, the hierarchy for determining who bears the responsibility as Producer is listed below in descending order;

• Firstly, the Canadian resident brand holder of a product (such as a person/company who owns or licenses a brand or who has rights to market a product under the brand) is responsible for the packaging they added to the product.
• Secondly, any resident of Ontario who imported the product into Ontario is responsible for the packaging they added to the product.
• Thirdly, where there is no brand holder that is a resident of Canada, or the importer is outside of Ontario, the retailer that sold the product to the consumer will be responsible for the cost of recycling the packaging.

It’s important to note that packaging materials that are not supplied to consumers (such as materials used to transport products to stores) are not captured by these Regulations.

If you are unsure of whether you are captured by these regulations, it may be helpful to contact RPRA at registry@rpra.ca or call 647-496-0530 or toll-free at 1-833-600-0530.

Who Needs to Register?

Any person or company who meets the definition of Producer must register with the Authority unless they fall under one of the two exemptions to registration under the Regulations. You are exempt from registering as a Producer if:

• Small Producers Exemption (s 73) – You have gross revenue of less than $2 million from all products and services. Producers that fall under this exemption must still maintain records for audit purposes, but do not need to report or pay.
• Minimum Requirements (s 42) – You generate less than all of the following weight amounts annually:
  • Paper – 9 tonnes
  • Rigid plastic (molded plastic, such as a food or product container) – 2 tonnes
  • Flexible plastic (unmolded plastic, such as a plastic bag, film, wrap, pouch, or laminate) – 2 tonnes
  • Glass – 1 tonne
  • Metal – 1 tonne
  • Beverage containers – 1 tonne

How to Register with the Authority and Due Date for Registration

Producers of blue box materials were obligated under the Regulations to register and report their 2020 supply data to the Authority by October 1, 2021. If Producers have not registered yet, Producers must complete this Registration Form and email it as an attachment to registry@rpra.ca as soon as possible.

For more information on the registration requirements and FAQs, you can refer to the RPRA website here. For more information on the process for completing the registration form, you can refer to the step-by-step instructions for the registration process provided by the Authority.

If you have further questions about the registration process or the regulation more generally, contact RPRA’s Compliance and Registry Team at registry@rpra.ca or call 647-496-0530 or toll-free at 1-833-600-0530.

Enforcement of the Regulations by the Authority

The Authority will be taking steps to ensure enforcement of the new regulations. Although not finalized, the Ontario government is consulting on monetary penalties for companies not complying with the Regulations.

Fees

To fund the administrative operation of the Authority, Producers of eligible packaging are required to submit fees based on the amount of eligible packaging they supplied to consumers. The 2021 fees (based on 2020 supply data) are

• a $75 flat fee for the first 50,000 kg of paper/packaging supplied, and
• an additional 38 cents for each additional kg supplied.

Do not submit your fees with the registration forms. After registering, Producers will receive an invoice from the Authority with their required fee amount.

What is a Producer Responsibility Organization?

Under the Regulations, 100% of the cost and administration for implementing recycling in Ontario is put onto Producers. A PRO is a third-party business established to contract with Producers to provide collection, management, and administrative service to Producers so they can meet their obligations under the Regulations, including:

• Representing a Producer for the purposes of rule creation
• Arranging, establishing, or operating a collection or management system
• Arranging, establishing, or operating a promotion and education system
• Preparing and submitting reports

One PRO will likely service many Producers and it is intended that, by pooling their efforts, costs of administrating the new system will be reduced for each Producer.

It is important to note that Producers are not required to sign up with a PRO. It is a business decision if a producer chooses to work with a PRO.

Takeaways for Franchisors

Large Franchisors with business models that produce eligible packaging are likely to fall under the Regulations as Producers. If not already registered, such Franchisors should immediately register with the RPRA.

Franchisors that qualify as Producers will also have to make decisions in the coming weeks and months about whether to contract with a PRO and, if so, which PRO they wish to partner with in order to meet their new obligations.

Finally, depending on the industry, many FDDs already contain a stewardship section that outlines the fees under the current Stewardship Ontario blue box system. If these new obligations on Franchisors significantly affect any aspect of the franchisee’s business such as additional fees or administrative burdens on the franchisee, then franchisors must update their FDDs accordingly.

Lauren Huxtable, Sotos LLP

Lauren Huxtable is an associate at Sotos LLP.  Her practice focuses on corporate and commercial law with an emphasis on franchising.