On February 9, 2012, the Ministry of the Environment (the “Ministry”) announced a number of changes relating to the Waste Diversion Act (the “Act”). These changes include regulatory amendments to government administered programs, proposed changes to the governance structure of Waste Diversion Ontario (“WDO”) and several review and reporting directives to WDO with respect to Stewardship Ontario, Industry Funding Organizations (“IFOs”), Industry Stewardship Plans (“ISPs”), and Incentive Programs.
It is the Ministry’s announced hope that these changes will contribute to:
- Ensuring Ontario’s waste diversion targets are met;
- Protecting the interests of consumers;
- Establishing clear, consistent guidelines for business to help divert the maximum amount of waste;
- Protecting municipalities from the burden of additional waste diversion costs; and
- Helping retailers understand their role and take responsibility for fair and accurate pricing.
Ontario’s waste diversion system encompasses a number of regulated programs which establish and implement proper procedures for handling products that are ready for recycling or final disposal. The ultimate goal of these programs is to reduce the amount of waste going into landfills and to ensure that hazardous wastes are handled in a manner that protects the environment. Their guiding principle is that the companies which originally produce or import products into Ontario (the “Stewards”) should have ‘cradle to grave responsibility’.
WDO is a not-for-profit, non-crown corporation created under the Act to develop, implement and oversee waste diversion programs, as explained above, in Ontario. IFOs are designated by WDO and are responsible for specific program development and delivery. There are currently three IFOs, including Stewardship Ontario, operating four waste diversion programs.
Changes to Regulation 542/06
Last week’s announcements included amendments to Ontario Regulation 542/06 (Municipal Hazardous or Special Waste) (“Reg. 542”). These amendments affect the Stewards of Municipal Hazardous Waste and Municipal Special Waste, which includes such waste as certain flammable, corrosive or toxic products, batteries, pharmaceuticals, and light bulbs or tubes, among other products.
Reg. 542 establishes the Municipal Hazardous or Special Waste Program (the “MHSWP”), which requires companies that generate certain types of waste: register and pay funds (“Stewardship Fees”) to designated IFOs, such as Stewardship Ontario, to support recycling and safe disposal programs for waste products and to file annual reports on the amount of Muncipal Hazardous or Municipal Special Waste produced. The MHSWP rolled out in two phases: the first phase, which dealt with Municipal Hazardous Waste, began on July 1, 2008. On July 1, 2010, phase II, which included Municipal Special Waste, went into effect and was immediately the subject of controversy: the ‘eco-fee’ issue. Several critics of the program noted that these programs bore no relation to the actual cost of waste diversion and were simply another form of taxation.
In an effort to ensure that Stewardship Ontario is able to fully recover its program costs from industry and is not supported by municipal tax dollars, the amendments to Reg. 542 change the way fees are calculated. Stewards will soon pay Stewardship Fees based on the actual costs of operating Stewardship Ontario’s programs and will be charged based on their reported market share. Stewardship Ontario will carry out these calculations and advise Stewards what they owe in writing at least 30 days before payment is due. Fees will be calculated, and paid, on a quarterly basis.
The amending regulation (Ontario Regulation 11/12), which provides the specific formula for calculating fees paid to Stewardship Ontario, can be viewed online here.
Review of Stewardship Ontario
The Reg. 542 announcement was accompanied by a letter from the Minister of Environment (the “Minister”) to WDO. This letter directed, among other items discussed below, that WDO undertake a review of Stewardship Ontario’s plan for implementing Reg. 542 and report on its accumulated deficit/surplus recovery plan by March 23, 2012.
Furthermore, the letter directs WDO to work with the other IFOs, Ontario Tire Stewardship and Ontario Electronics Stewardship, to adopt a similar approach in order to ensure all diversion program are fiscally sustainable without municipality-funded financial support. The implementation plans for these programs are also requested by the Minister over the next few months. The Minister’s letter is available online here.
Proposal for Changes to WDO’s Governance Structure
The Minister has also proposed changes to the operating agreement between the Ministry and WDO. Specifically, the Minister has set out a plan to reorganize the Board of Directors of WDO (the “Board”) as a skills-based Board. Currently, the Board is characterised as an interest-based board, drawing members from industry, environmental organizations and municipalities. This has given rise to apprehensions over the potential for real or apparent conflicts of interest. The Minister’s letter identifies the April, 2012 Annual General Meeting of WDO as the targeted date to begin appointing new members.
The proposed changes to the WDO governance structure, including the proposed appointment criteria and process, can be viewed online here.
Members of the public have until March 11, 2012 to comment on the proposal, which has been assigned EBR Registry number 011-3966. The ERB posting can be viewed online here.
Review of Industry Funding Organizations
Responding to significant industry criticism in respect of the near-monopoly position of IFOs within Ontario’s waste diversion system, the Minister’s letter also directs WDO to:
- Review and analyse all proposed IFO budgets;
- Regularly monitor actual expenditures to ensure that there are realistic and cost effective plans to achieve IFO performance targets, and the proper management of operating costs;
- Ensure the financial sustainability of the IFOs;
- Amend program agreements as necessary to achieve the foregoing;
- Take corrective action when required; and
- Report to the Ministry quarterly.
The Minister appears to be giving WDO a much stronger oversight role to avoid a recurrence of the ‘eco-fees’ fiasco.
Review of Industry Stewardship Plans and Incentive Programs
Under the Act, parties (usually industry associations) can submit ISPs for approval by WDO. If approved, ISP enable alternative waste diversion strategies operated outside of those programs managed by IFOs.
The Minister’s letter directs WDO to review its policies and procedures with respect to ISPs and to require regular monitoring, auditing and reporting of ISPs; WDO is to report to the Ministry on these matters and the proposed policies and procedures on ISPs no later than June 1, 2012. The letter also directs WDO to consult with the public before approving an ISP, and to consider the following factors:
- Whether the ISP achieves waste diversion targets that are similar or better than those of the associated waste diversion program;
- The fair operation of the plan in the marketplace; and
- Whether the plan ensures accessibility for consumers through its delivery of services.
Incentive Programs refer to payments to service providers by the IFOs. The Minister has also directed WDO to review the development and implementation of these Incentive Programs, in consultation with municipalities and other stakeholders in the waste diversion process in Ontario. The review process is intended to address whether Incentive Programs are fair and effective in supporting waste diversion targets, their impact on municipalities and diversion services, and alternative programs. The WDO is, once again, to report to the Minister in the next several months.
How will this affect my business?
Because the new approach to calculating Stewardship Fees allows them to be tailored to the specific product involved, it is possible that Stewards could pay either more or less than previously, depending on the type of waste they produce and their market share. If you currently pay Stewardship Fees, or believe you could be considered a Steward of a product that, when entering into the waste stream, would be considered Municipal Hazardous Waste or Municipal Special Waste under the Act, the changes to Reg. 542 will affect you.
Changes to WDO Board
The proposed changes to the WDO governance structure appear to dilute the voice of industry, environmental groups and municipalities on the Board, in favour of those with a background in financial and business management, public policy and consumer interest advocacy, among other areas. If your business currently participates in programs supervised by WDO or you are otherwise interested in Ontario’s waste diversion programs, you may want to comment on the proposed changes to WDO’s governance structure. Once again, this can be done up to March 11, 2012.
Review of IFOs, ISPs and Incentive Programs
The forthcoming reviews of the IFOs, ISPs and Incentive Programs may result in further significant changes to the waste diversion system in Ontario. Industry members should look for further updates.
Please consult your Davis lawyer for more information about how these changes will affect you and your associated legal options and/or obligations.