The clock is ticking on what Circularity Scotland chief David Harris has described as “one of the most significant infrastructure projects ever introduced in the UK”, yet the foundations of this country’s forthcoming deposit return scheme (DRS) appear anything but solid.

Those outside the retail, hospitality and drinks manufacturing sectors may only be vaguely aware of DRS, but it will directly impact every person living in this country when it comes into force on August 16. The amount handed over for a jug of milk, a bottle of cola, a can of lager, or a bottle of wine – any beverage in a single-use container from a size of 50ml up to three litres – will increase overnight by 20p that can only be recovered after the empty container is returned to a collection point operated under the scheme.

The laudable aim is to cut down on the amount of plastic, metal and glass going to landfill and incineration. About half of all drinks containers in Scotland are currently recycled; it is thought the DRS could increase this to 90 per cent in its third full year in operation – a total of about two billion drinks containers annually.

Yet industry is fraught with concern about the cost, structure, and lack of clarity around the scheme which was originally set to go live in July of last year but was postponed in the wake of the pandemic. This anxiety is shared by David Whiteford, chairman and co-founder of Highland Coast Hotels, who when speaking recently to The Herald described the consequential issues of a “supposedly enlightened concept which has not been properly thought through”.

HeraldScotland: David Whiteford, Highland Coast HotelsDavid Whiteford, Highland Coast Hotels (Image: Highland Coast Hotels)

“Everybody I speak to says they weren’t consulted, it’s just been landed upon them,” he declared.

It’s a fairly damning claim given the amount of time that has elapsed since the regulations were first passed by the Scottish Parliament in May 2020. Zero Waste Scotland, which was tasked by the Scottish Government to advise on designing the scheme, for its part claims that it received industry advice via its implementation advisory group.

Nonetheless, questions still abound as the March 1 deadline looms for drinks producers to register with the scheme. One significant source of tension is whether all those 20p deposits will be subject to VAT. The Scottish Government maintains that value-added tax should not be applied to deposits, but discussions with HMRC are ongoing.

Following last week’s announcement that DRS programmes in England, Wales and Northern Ireland will not be implemented until October 2025, the chief executive of the British Beer and Pub Association said the VAT decision is now a “matter of urgency” in Scotland.

READ MORE: Deposit return scheme Scotland: campaigners call for action

“Businesses are unable to fully cost and plan for the impact of DRS without this detail,” Emma McClarkin said. “The complex nature of DRS means the operational challenge is extremely large and it is crucial that further information is provided as we move ever closer to the implementation date in Scotland if the scheme is to operate effectively and efficiently.”

A further bone of contention is the amount of the handling fee meant to make the scheme “cost neutral” for retailers, nearly all of whom will be required to accept returns and repay deposits if they sell drinks that are consumed off their premises.

Circularity Scotland has proposed that smaller retailers who manually take back containers receive 2.69p per item to cover labour and storage costs. For automated returns through reverse vending machines the proposed fee is 3.55p for the first 8,000 containers, and 1.35p for each additional container.

But this is being challenged by Lanarkshire grocer Abdul Majid, who took part in a trail of the flagship programme and is concerned that the fees will not cover his costs, possibly forcing him out of business. Supported by the Scottish Grocers’ Federation, Mr Majid has raised proceedings in the Court of Session with the first substantive hearing set for March 30.

READ MORE: Grocer takes Scottish Government to court over Deposit Return Scheme

In any event, drinks manufacturers will from August be required to report the number of containers they place on the Scottish market and track their products with specialised labels.

Producers say the cost of this will be significant, and there is little doubt that will be passed down from manufacturer to wholesaler to retailer, and then to consumer. Returned containers must be whole with the barcode legible, meaning any damage will leave either consumers or retailers out of pocket.

Keeping storage bins secure prior to collection could also pose headaches for retailers and hospitality venues, as these bins will now all have a value that could attract criminal attention. Initial indications from insurance brokers suggest this is not a risk they are currently inclined to cover.

Stephen Montgomery of the Scottish Hospitality Group has also highlighted the potential damage from cross-border trade during the lag time between implementation in this country and England, where it has also been confirmed that unlike Scotland, glass containers will not be part of the deposit return scheme. The lack of a unified approach – Scotland and Wales will include glass, England and Northern Ireland will not – will add to the complications of organisations operating across the whole of the UK.

HeraldScotland: Stephen Montgomery, Scottish Hospitality Group Stephen Montgomery, Scottish Hospitality Group

How all of this will play out in the real world is yet to be seen. Mr Whiteford is particularly concerned about the impact on Scotland’s many remote and island communities, which are where Highland Coast operates its expanding chain of “independent-spirited” hotels.

“We want to use as many local producers as we can – some are microbreweries that have bottles and cans, and it seems to me no one has really thought through the impact of this deposit return scheme [on them],” he said. “No one is saying it’s a bad idea, it’s just an ill-thought-through concept.

"The costs to the small producer are going to be proportionately much, much higher. So here we are trying to encourage remote and rural value-added businesses in food and drink, and then again hitting them with a supposedly enlightened concept which has not been properly though through, so I think they really need to delay that and consult more fully on it.”