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Ontario Blue Box Update: GFL acquisition of CSSA and new PROs established

In June, the Ontario government released the final Blue Box regulation, which sets out the framework to transition to producer responsibility, and transfer the full operational and financial management of the Ontario Blue Box program to producers – the businesses that make and sell obligated materials into the Ontario marketplace – with implementation beginning in July 2023.

Chart of Transition to Full Producer Responsibility
Source: Ontario Ministry of the Environment, Conservation and Parks

Since the release of the regulation, there has been lots of news that PPEC has been monitoring, summarized below.

GFL acquires CSSA and forms new Blue Box PRO

On July 6, GFL Environmental Inc., a North American waste management services company, announced it acquired the Canadian Stewardship Services Alliance (CSSA), and formed the Resource Recovery Alliance (RRA), in response to the Ontario government’s shift to full producer responsibility for the Ontario Blue Box program.

CSSA was established to provide management and administrative services to obligated producers, and Producer Responsibility Organizations (PROs), providing support for provincial recycling programs across Canada, including Ontario’s Blue Box program, currently operated by Stewardship Ontario.

GFL’s RRA will become a new PRO for the Ontario Blue Box program. In an article in Recycling Product News, GFL’s Patrick Dovigi talks producer responsibility and the Ontario Blue Box transition, he said that “The end goal of RRA in Ontario is, number one, to work collaboratively with all producers. Number two, it is to meet or exceed the recycling diversion targets set by the province in the most efficient and cost-effective way. With our experience, from collection to processing, we think we can be a value-added partner, not only to our PRO, but for other PROs and whoever else is involved.”

In the Globe and Mail’s article “GFL eyes bigger role in Ontario recycling regime, but plan raises alarms for large producers of recyclable waste,” GFL also said “the new initiative will help it expand in the United States, where jurisdictions are also considering switching to EPR.” Most recently, Maine signed legislation establishing EPR (extended producer responsibility) for packaging, the first bill of its kind to become law in the U.S.

The acquisition of CSSA is subject to closing conditions and is expected to close in the third quarter of 2021.

Response to GFL announcement: concerns over competition and data

There are some concerns that GFL “could end up with an unfair advantage under the new rules,” given their size.

Under the new regulation, a PRO or group of PROs that has two-thirds of the producers of recyclables signed up, as measured by weight, can set the rules for the next iteration of the Ontario Blue Box program. Some are concerned that if GFL reaches that threshold, the recycling system would be managed by one large waste management company.

GFL is the fourth largest diversified environmental services company in North America with more than 11,500 employees. GFL’s recent earnings results show a 32% increase in second quarter revenue, with an estimated revenue of over $5 billion expected for 2021.

GFL’s CEO said it’s not GFL’s intention for their new PRO will dominate the system, and he expects that multiple PROs will work together. It’s also expected that RRA will form a board “that would oversee the competitive awarding of contracts,” and that “contracts for future curbside collection or processing of the province’s recyclables would still be subject to competition.” GFL performs a similar role for BC’s EPR program.

Stewardship Ontario responded to the GFL/CSSA announcement saying it is examining the acquisition announcement. Regarding concerns over protection of data, Stewardship Ontario’s response states that “CSSA has provided Stewardship Ontario with written assurance that, following the transaction, all Stewardship Ontario data will be held in confidence within RRA; will be used solely for the purposes of providing services under the current CSSA-Stewardship Ontario Services Agreement; and will not be accessible to GFL.” Stewardship Ontario will also consider if additional measures are needed to protect confidential data.

Industry forms a new Blue Box PRO: Circular Materials

On July 28, a group of 15 food, beverage and consumer products manufacturers, retailers and restaurants launched Circular Materials, a new, national, not-for-profit PRO to offer compliance services to companies obligated under EPR regulations in Canada.

The companies that founded Circular Materials include Costco Wholesale Canada Ltd., Empire Company, Kraft-Heinz Canada, Keurig Dr Pepper Canada, Lassonde Industries Inc., Loblaw Companies Limited, Maple Leaf Foods, McDonald’s Restaurants of Canada Limited, Metro Inc., The Minute Maid Company Canada Inc., Nestlé Canada, PepsiCo Canada, Procter & Gamble Inc., Restaurant Brands International, and The Clorox Company of Canada Inc.

And while Circular Materials is a national organization, in Ontario it will operate as Circular Materials Ontario. They plan to represent producers’ collective interests, with the goal of ensuring that the blue box collection system operates with fair cost allocation, an open and competitive procurement process, and producer-led governance.

In addition to Circular Materials and RRA, waste company Emterra Group also has its own PRO called Ryse Solutions Inc. Registered Blue Box PROs will be listed on RPRA’s website.

It will take some time to understand the implications of the GFL/CSSA deal, including transferring assets producers have invested in over the years, to a for-profit company; or how a waste management company PRO will compete with a producer-led PRO, and the difference in their approach and business model, but PPEC will be monitoring this closely.

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Rachel Kagan

Executive Director Paper & Paperboard Packaging Environmental Council (PPEC)

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