BVRio reverse logistics credits mechanism in Brazil

WASTE MANAGEMENT AND THE INDUSTRIAL SECTOR IN BRAZIL

Brazil produces about 67 million tonnes of solid waste per year (Abrelpe 2012), and only about 1% is recycled (Atlas Waste). It is estimated that the value of wasted recyclable materials in Brazil amounts to more than US$ 3 billion a year (IPEA 2010). Waste management is one of the most challenging tasks facing municipal governments (Governo de Sao Paulo, 2013). Less than 3% of all household waste in Brazil is segregated (IPEA 2013) and segregated collection of waste is only available in 14% of municipalities (CEMPRE 2013).

The National Solid Waste Legislation (PNRS), announced in 2010, aims to create solutions to the challenge of solid waste generation and disposal in Brazil. The law creates the concept of shared responsibilities for the collection and disposal of solid waste generated by a range of industrial and commercial sectors. These legal obligations apply to producers, importers, retailers and distributors from seven industrial sectors (tyres, lubricating oils, batteries, pesticides, fluorescent lamps, electric and electronic products) and packaging in general (which may involve different sectors and approaches).

Producers and importers of these products need to ensure that they are appropriately disposed of at the end of their lifetime. This requires the development of systems for the collection, recycling, re-use or environmentally appropriate disposal of such products (referred to as the ‘reverse logistics’ of the original supply chain associated with these products). These obligations are creating challenges among the sectors directly affected by the legislation, some of which are a great distance along the supply and consumption chain from the final waste generated from the products originally sold.

The consumer goods industry is pre-occupied with the difficulties and costs associated with developing and operating ‘reverse logistics’ systems to collect the residues derived from their products. Given the disaggregated nature of waste generation, the collection and recycling of consumer goods packaging is particularly challenging.

Companies are working on alternative arrangements to meet their obligations. In most cases, this has been done through sector associations, such as CEMPREAbividro and Reciclanip. In other cases, it involves independent waste pickers.

THE ROLE OF WASTE PICKERS (CATADORES)

While companies and the public sector try to devise ways to meet the objectives of the PNRS, Brazil currently has more than 800,000 independent waste pickers known as Catadores, a low income group who make a living by collecting recyclable materials in the streets, rubbish dumps and landfills of Brazil. The Catadores are important actors in this waste management chain and should be a part of the solution (MNCR).

The needs of private companies, the public sector and independent Catadores can be met if implementation of the PNRS legislation involves both the producers of waste and those involved in its collection, disposal and recycling. This can be accomplished by allowing those obliged to pay for the reverse logistics of their products (i.e. the industrial and retailing sectors) to ‘subcontract’ certain activities to those currently involved in collection and disposal (i.e. the cooperatives of Catadores).

Recognizing this reality, the Solid Waste Legislation emphasizes the need for the involvement of Catadores in any policy to address the solid waste challenges posed to the various industrial sectors affected by the law. At the same time, the involvement of Catadores in this activity has potential to contribute to the social and economic inclusion of this large group in the production cycle.

In order to contribute to their empowerment and improve their welfare, over the last 15 years the Brazilian government has promoted the organization of Catadores into cooperatives and networks that support their economic development, through a series of government-led programmes, such as Programa Pró-Catador and Cataforte. Today, there are more than 1100 waste pickers’ cooperatives throughout Brazil (SNISE 2014).

Historically, waste picker cooperatives either operate independently or enter into contracts with municipal agencies or companies for waste sorting. The terms of these contracts are often established by the counterpart organizations and are not always advantageous to the cooperatives (IPEA 2013). This problem is exacerbated by cooperatives’ lack of working capital. Most individual waste pickers need to be paid for the waste collected on a daily basis, and as a result, cooperatives cannot accumulate enough recyclable materials to justify the freight costs to sell them to recycling facilities. Instead, they sell their materials to intermediaries, at a lower price, in order to generate cash flow.

BVRIO’S REVERSE LOGISTICS CREDIT SYSTEM

Early in 2013, BVRio signed a collaboration agreement with the National Association of Catadores to develop a system to support the remuneration of Catadores for the environmental services derived from the reverse logistics and recycling that they provide to companies, the government and society as a whole.

Based on the factors and circumstances described in the previous sections, BVRio in collaboration with the National Association of Catadores, developed a system of Reverse Logistics Credits to assist companies to meet their obligations under the law while rewarding Catadores for their role.

Reverse Logistics Credits are certificates which confirm that reverse logistics services were provided to ensure that a certain amount of waste was responsibly disposed of. These credits are issued and sold by cooperatives of Catadores and purchased by producers and/or importers who need to comply with the solid waste legislation. Through the purchase of credits, companies effectively subcontract cooperatives of Catadores to provide reverse logistics services.

For the companies, the credits provide an efficient and cost-effective solution to legal compliance. For the Catadores, the sale of credits provides an additional source of revenue, adding value to their activities and resulting in an important social impact.

Environmentally, the additional value generated by the sale of credits makes it worthwhile for Catadores to collect waste materials with lower raw material value, widening the range of products collected beyond the current high value products, such as aluminum cans.

The sale of Reverse Logistics Credits does not affect the ability of the Catadores to sell the physical material to be recycled. Reverse Logistics Credits only represent the environmental service provided by Catadores, i.e. the collection, screening, and direction of solid waste to recycling and re-utilization in the productive cycle – in other words, the service of reverse logistics. In this way, in addition to the revenue generated through the sale of recyclable materials, Catadores can also sell Reverse Logistics Credits to the companies that need this service to comply with the requirements of the National Solid Waste Legislation.

The system is in operation since 2013 and an initial survey of results was conducted involving 30 waste picker cooperatives and 1000 individual waste pickers that participated in the first year. These cooperatives recovered and sent for recycling ca. 1600 tonnes of solid waste during that year. The income from the sale of Reverse Logistics Credits increased the revenue of these cooperatives by 30%, providing an important social impact additional to the environmental impact of reducing pollution.

This effective and socially-inclusive circular economy mechanism paved the way for the creation of the 3R Initiative, the Circular Action Hub, and the Circular Credits Mechanism, an international version of the Reverse Logistics Credit system.

ADDITIONAL INFORMATION:

Reverse Logistics Credits – A social and environmental innovation to address urban waste and recycling. BVRio 2015. www.bvrio.org/publicacoes

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