Right now, the model of resource use is take-make-waste. Companies take from the environment and make products. Consumers use those products and then throw them away. It is a linear process, one that is well established and thus simple, with many of the major system challenges worked out to allow for basic functionality. Whoever is holding the product is responsible for that phase of its use. Of course, there are flaws. It is an inefficient use of resources. It does not account for the externalities that last beyond the particular phase or acknowledge the different amounts of power that exist between those involved in the process. Our current product end of life practices are leading to loss of valuable land and habitat, as well as negative impacts on waterways and soil health. The concept of circularity is a potential answer to this model of resource use where we shift to a use-borrow-return. And circularity in action sometimes looks like extended producer responsibility.

Extended producer responsibility is a legislative response to the negative environmental externalities from creation of a product. In this model, manufacturers are financially responsible for the environmental management of a product throughout its lifecycle, including when used by consumers and at disposal. As manufacturers theoretically have the most power over product design, they should be able to create circular products with designs for longevity, easy recyclability, and an intended, regenerative return to the environment. This would hopefully take pressure off of consumers and municipal governments to manage waste for which they are not prepared, as well as minimizing or eliminating the externalities that come from the manufacturing process itself.

The actual implementation of extended producer responsibility is naturally more complicated than just a theory. There are a few pathways that have been developed. The first is for products to be directly returned by the consumer to manufacturer. Second, companies pay another organization to manage the impacts of product life cycle phases. Third, companies pay the government an amount dependent on calculated externalities, and then the government pays for the environmental cleanup. Some form of all of these pathways exists for specific industries due to regulatory or consumer pressure.

If this sounds terrifyingly complicated to you, you are not alone. For the manufacturer to truly be held responsible for all environmental impact in the product lifecycle, a huge system change would have to occur. The thing is, this was true of much of our current setup as well. It took time and experimentation to know how to properly manage waste as we currently do. Companies are very good at getting products to consumers. It would be a challenge to get those products back, but I do believe that the combined talents of everyone in the supply chain would make it possible. Furthermore, as companies take on the cost of environmental impact, they are incentivized to create products that have less impact from day one. Product design can change, as can the systems that manage the product life cycle. Still, there are reasonable questions. How is responsibility for externalities decided? What about cross-border production? Are existing products grandfathered in? What about existing and past externalities? How is this different from a carbon tax or C-BAM? Any legislation that properly introduces extended producer responsibility will account for these questions, but there are plenty of things that we don’t know we don’t know. We will only discover the roadblocks by actually going down the road.

Any company that sees extended producer responsibility legislation on the horizon should identify what that responsibility would look like in practice. A bill would have to lay out a pathway for managing externalities or specify which government agency would set up that pathway. No matter how it will proceed, here are a few things to make sure you are riding the wave with ease. First, make sure you know what your environmental impact is. Second, incorporate those impacts into your financial reporting. Third, design your products to eliminate negative impact. When you are already thinking ahead of regulation, you are insulating yourself from unexpected pressure, and, in this case, you have the added bonus of making the world more sustainable through your business.