Environment Agency warns about potential removal of incorrect PRNs and PERNs

Packaging Recovery Notes (PRNs) and Packaging Export Recovery Notes (PERNs) are created by reprocessors or exporters as evidence that they have recycled, or exported for recycling, one tonne of packaging waste in a specific material. This evidence is then generally purchased by compliance schemes on behalf of producers to cover their legal obligations, based on the amount of material they place on the market.

The potential for fraud has long been a concern in the PRN and PERN markets, highlighted by the Environmental Audit Committee (EAC) back in 2018, and the issue of transparency surrounding recycling evidence is one that Ecosurety has long campaigned about.

The EA has now indicated in a direct communication to reprocessors, exporters, packaging compliance schemes and packaging producers that in exceptional circumstances, for example if an operator is uncooperative in removing or rebalancing incorrect PRNs/PERNs, or the non-compliance is of a significant risk to the regime, that they may escalate their enforcement response to the cancellation of reprocessor or exporter accreditation and/or prosecution.

In such circumstances, from 1 July 2021 onwards, they reserve the right to remove and cancel incorrect PRNs/PERNs from the system themselves. This communication marks an important change in the Agency’s position on the role of schemes and what checks they are expected to perform beyond the usual due diligence of checking accreditation lists.

Positive impacts for Ecosurety members

As a compliance scheme, Ecosurety welcome this decision by the EA as we have been openly championing for more transparency in the PRN system for the past five years. This new EA position will act as a warning to any unscrupulous PRN traders, which may help to reduce any fraud in the system.

We have identified four positive impacts for Ecosurety members relating to this news:

1. A minimisation of risk of buying fraudulent PRN/PERNs
Ecosurety already goes beyond due diligence and does not solely rely on EA accreditations to choose the PRN traders to buy from. We have an extensive experience of the PRN market and we carefully maintain an updated list of reprocessors and traders we trust and are confident working with.

2. Ecosurety retains liability, not our members
Should any PRN we buy be deemed incorrect, Ecosurety would keep the liability of the purchase and none of our packaging members would hold any responsibility.

3. Ecosurety members hold no direct financial risk
Should any PRN we have purchased be deemed incorrect, Ecosurety would replace it at no cost for our packaging members. We would not charge our members to cover the costs of buying replacement PRNs.

4. Ecosurety members hold no reputational risk
As PRNs are bought for the total scheme obligations and are not formally allocated to specific members, there would not be any reputational risk for our members.

Be aware of potential new market dynamics

There is one potential risk from a market dynamic perspective that all packaging producers should be aware of - potential cancellation of PRNs would reduce supply in the market and could cause price spikes. Ecosurety will continue to mitigate such risks through our procurement strategies, as we would normally for any other market dynamic.

Clement Gaubert, head of operations at Ecosurety, commented "We already have supplier approval and supplier review processes in place that help to ensure the PRNs we procure for our members are legitimate, and these are continually reviewed."

"Essentially the EA announcement has mainly positive impacts on our packaging members, as there is no liability for them, but instead provides further reassurance about the quality of packaging evidence they buy from us."

"However, packaging producers must consider the new market dynamics risk, with potential price spikes in case of short PRN supply due to cancellation."

If you have any questions about this update from the Environment Agency, please contact your Ecosurety account manager directly, or if you are not yet a member please contact our team.

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