Ontario grocery chains, restaurants form alliance to challenge GFL on privatized blue-box recycling regime

Globeandmail.com
July 28

A race to control Ontario’s new, privatized curbside blue-box recycling system is officially under way, as a bloc of 15 of the province’s largest waste producers -- including food giants, grocery chains and beverage bottlers -- has launched a not-for-profit aimed at shaping the new regime.

The group aims to counter a challenge posed by Vaughan, Ont.-based waste and recycling giant GFL Environmental Inc. GFL-T +2.09%increase
, which earlier this month unveiled its own bid to influence Ontario’s new “extended producer responsibility” system. The regime is set to hand control -- and the entire cost -- of curbside recycling to the private sector starting in 2023.

GFL, which also raised eyebrows with its purchase of an industrywide recycling data organization this month, has prompted concerns from competitors that it could end up controlling the new system, creating a conflict of interest in the awarding of new contracts for the collection of blue-box materials -- newsprint, cans, glass and plastic -- now handled by the province’s municipalities. GFL has said it has no intention of dominating the province’s new recycling system.

GFL eyes bigger role in Ontario recycling regime, but plan raises alarms for large producers of recyclable waste

The initiative launching Wednesday, called Circular Materials Ontario, is backed by grocery giants:
Costco Wholesale Canada Ltd.
Metro Inc.
Loblaw Cos. Ltd.
and Sobeys owner Empire Co. Ltd.

It is also supported by food producers
Kraft Heinz Canada
Nestlé Canada
Maple Leaf Foods Inc.
Lassonde Industries Inc.

and beverage makers:
PepsiCo Canada
Keurig Dr Pepper Canada
and Coca-Cola-owned Minute Maid Co. Canada Inc.

Fast-food giants:
McDonald’s Canada
and Restaurant Brands International (owner of Tim Hortons, Burger King and Popeyes)

Along with Procter & Gamble Canada and Clorox Co. of Canada Inc.

The new outfit is known as a PRO, or Producer Responsibility Organization, under Ontario’s new recycling regulations. Incorporated earlier this month, it was in the works for weeks before GFL announced its move. Under Ontario’s plan, companies that create waste are expected to join PROs, and will be forced to pay into the new system based on how much waste they produce.

Proponents of Circular Materials Ontario say they are united in the need for a new not-for-profit entity, led by waste producers, to help oversee the new system. They say the entity will also commit to competitive tendering for waste hauling and processing contracts.

Diane Brisebois, president and chief executive officer of the Retail Council of Canada, one of the industry associations behind the new entity, said GFL clearly has expertise, but should be considered one of several potential service providers. She dismissed the notion of signing onto a PRO controlled by a waste hauler. “It’s like the pupil telling the teacher how the class should be run,” she said.

Circular Materials Ontario is now hoping to sign up as many other companies as possible before a Nov. 1 deadline. That’s when PROs will be able to start to shaping Ontario’s new recycling system. Any PRO or coalition of PROs that represents producers accounting for two-thirds of the recyclables produced (by weight) in the province will be able to set rules for how the new system operates -- including how it hands out contracts to waste haulers.

The new entity’s backers could not say how much tonnage the group represented, but it is clearly substantial.

The new PRO is one of several expected to take part in the new process. In addition to GFL’s PRO, waste company Emterra Group also has its own PRO.

Michael Graydon, the CEO of Food, Health & Consumer Products of Canada, an industry association involved with Circular Materials Ontario, warns that signing on with a for-profit PRO owned by a waste company could force producers to pay more for hauling contracts over time.

“If the same entity negotiating with those haulers is owned by the hauler, there is a conflict of interest, I think, from our perspective,” Mr. Graydon said.

GFL, which launched its “vertically integrated” PRO, the Resource Recovery Alliance, earlier this month, also said it had acquired the Canadian Stewardship Services Alliance (CSSA), a data portal originally set up by an array of companies to track their recyclable waste and used in Ontario and across Canada.

Both moves raised alarms among some waste producers, who warned about a GFL-dominated recycling system and raised questions about the use of CSSA data. GFL’s potential economics of scale in the waste industry, and its acquisition of the CSSA platform that many producers already use, could give it an edge.

In a slide deck the company sent to waste producers in May to pitch its plans, obtained by The Globe and Mail, GFL says its five recycling hubs in Ontario can already handle half of the province’s recyclables.

But Patrick Dovigi, GFL’s chief executive, told The Globe and Mail earlier this month that he doesn’t intend to dominate the new recycling system. He said his PRO would be advised by a board of producer representatives and that any tendering would be competitive.

Other jurisdictions have also moved toward extended producer responsibility in recycling, including British Columbia, where GFL already plays a large role in the system, and in Europe. In Ontario, the blue-box recycling program is currently administered by more than 250 different municipalities, with industry paying half the costs and municipalities covering the rest.