Making circularity the rational choice: why EPR legislation will decide the business case for flexible packaging

In the flexible packaging end-of-life chain, organisations take decisions that make sense for their own business: a collector keeps down the cost of handling low-value and contaminated material; a sorter targets the fractions that pay; a recycler builds new capacity only when it can see feedstock, revenue and demand for its output several years ahead; and a brand owner pays Extended Producer Responsibility (EPR) fees and redesigns its packaging in the expectation that both will lead to better circularity and compliance.

The problem, which is repeatedly flagged in our country visits and workshops, is that these individually rational decisions, taken together, may not add up to a circular system. The whole is not greater than the sum of its parts. This leads to a gap between ambition and reality.

EPR is often treated as a cost or even misconstrued as a tax. In fact, it is a strategic instrument that can help close this gap. The design of the EPR system under which Producer Responsibility Organisations (PROs) operate and the national and European legislation supporting it will be a deciding factor in whether flexible packaging meets the Packaging and Packaging Waste Regulation (PPWR) targets.

The size of the gap

We need to connect and deliver circular outcomes at scale: collection and sorting must deliver suitable feedstock; recycling processes must produce consistent material qualities for which there is a demand; and end markets must be able to use the resulting post-consumer recyclate (PCR) at viable prices. And the whole system needs to increase recycling volumes.

With current performance across the system, reaching the 55% PPWR recycled-at-scale threshold that flexible packaging must meet from 2035 will require roughly 80% of the flexible plastic packaging placed on the market to be separately collected based on analysis by CEFLEX. Once collected, an estimated 10 million tonnes of targeted recycling capacity across a number of pathways will be needed to process the collected material in the quantities and qualities needed for the material to be used again.

CEFLEX modelling predicts that PCR produced from polyolefin-based flexible packaging will need to rise from about 1.5 million tonnes a year in 2025 to 5.9 million tonnes by 2035 to deliver recycled content and find sizable and sustainable end market applications for the increased amounts of material flowing through the system.

What is EPR for?

EPR is designed to cover the full net costs of separate collection, sorting and recycling. It gives the system two economic levers: fee modulation, which rewards packaging designed for sorting and recycling, and funding for the operations needed to meet the targets, including those that cost more than the recycled material is worth.

In practice, each part of the value chain needs enough funding to cover the cost of handling flexible packaging if it is to be collected, sorted and recycled.

EPR should also reward better performance. Collectors need reasons to increase capture and reduce contamination. Sorters need incentives to recover more types of recyclable material and improve output quality. Recyclers need reliable feedstock and enough certainty over costs and revenues to invest in capacity and produce PCR that meets recycled content targets and market requirements.

Funding arrangements should cover the full net costs of a system that delivers these improvements, not only the costs of the system as it stands.

Funding the system, and fixing it

Producers pay EPR fees for flexible plastic packaging across Europe, and the amounts vary widely. In some countries they are sufficient to cover the full net costs. In many others, they are too low to cover the cost of diverting household flexible packaging from residual waste, which is often where it ends up. It is clear that funding levels will need to increase.

But money alone will not mend an EPR system that is not working for flexibles. What fees deliver depends on how the system is organised. In many Member States, producers are legally and financially responsible for meeting recycling targets, yet they have limited influence over the related strategy, material flows, infrastructure planning or spending decisions.

CEFLEX’s country analysis also identifies key differences in how sorting infrastructure is organised. In Belgium, Germany and Italy, PROs have greater control over sorting arrangements, and these systems feature fewer, larger and more automated plants.

In France, Spain and Portugal, where municipalities contract the sorting of separately collected waste, sorting plants are smaller and more numerous, meaning they can lack the scale to make sorting flexible packaging commercially viable.

In much of central and eastern Europe, many smaller, manually operated plants remain, often without a clear route towards the capacity and performance future legal targets will require. These differences reflect several factors, including national legislation, collection arrangements, historical investment and market structures. Governance is not the only explanation.

However, these comparisons raise an important question: who has the responsibility and authority to ensure that sorting infrastructure delivers the recovery rates, material quality and capacity that recycling targets require?

Responsibility and the ability to act need to go together. Whatever the national arrangements, where PROs are responsible for meeting a target, they also need the ability to make the changes required to meet it.

Both are needed: repairing the system where it fails household flexible packaging, and funding that reflects the real cost of collecting, sorting and recycling it.

What the Circular Economy Act should aim to achieve

The European Commission’s forthcoming proposal for a Circular Economy Act provides an opportunity to bring responsibility, funding, incentives and control into line. CEFLEX’s position, which has been the basis for targeted meetings and exchanges since mid-2026, sets out three priorities:

1. Give producers organisational as well as financial responsibility

Producers should carry organisational, as well as financial, responsibility in every Member State. This does not require PROs to own or operate infrastructure. It does require sufficient contractual control over material flows and treatment requirements to ensure that collection, sorting and recycling delivers the performance needed.

With clearer responsibility, PROs could specify collection and sorting requirements, reward higher recovery rates and better material quality, and support the development of recycling capacity that meets future needs.

2. Give PROs greater control over separately collected recyclables

CEFLEX proposes that PROs should own recyclables once they are separately collected, so that they have the authority to decide how material is treated, set recovery and output-quality requirements, and plan the infrastructure needed to meet the targets. Ownership would help at two stages.

Firstly, after collection, PROs could send material to fewer, larger sorting facilities. Larger plants bring economies of scale, which can help keep EPR fees down, and handle enough material to justify investment in the automated sorting equipment needed to meet PPWR targets.

Secondly after sorting, PROs could offer recyclers longer-term supply contracts, giving them more certainty to invest. They could also agree supply arrangements that support emerging recycling technologies, which can struggle to secure feedstock in a market driven mainly by price.

For flexible packaging, where a sizeable amount of recycling capacity still has to be built, investment depends on access to enough suitable feedstock over many years; without that certainty, even technically viable projects can struggle to attract funding.

Any change would need to take account of existing municipal responsibilities, waste management contracts and national market arrangements. The aim is for the organisation’s responsible for recycling results to have a say in the decisions that determine them.

3. Establish common EU requirements and national multi-annual plans

EU minimum requirements should apply to every PRO, including those operated by the state. Member States, working with PROs, should also develop multi-annual plans that identify infrastructure and performance gaps, set interim targets and establish the actions needed to close them.

These plans should address separate collection coverage and capture rates, sorting capacity and recovery performance, feedstock quality, recycling capacity and the markets needed for recycled materials. They should also provide a basis for monitoring progress and taking corrective action before targets are missed.

National systems have different starting points and will need different implementation pathways. Common EU requirements should ensure that these variable approaches deliver comparable outcomes. The objective is to run systems towards the 2030 and 2035 obligations, rather than make decisions primarily based on the following year’s costs.

Enforcing the rules that already exist and national legislation

Not all of this depends on new legislation. Article 8a of the Waste Framework Directive already sets requirements for EPR schemes, including transparent costs and appropriate coverage of waste management services. Yet implementation remains uneven across the EU.

The Commission’s 2027 Early Warning Reports offer an opportunity to identify where Member States risk missing their targets and recommend specific corrective measures. CEFLEX has called for practical requirements, including contamination thresholds in collection contracts, sorting centres that recover packaging designed for recycling, and clear recovery and material-quality targets.

Enforcement is fundamental to the business case. Companies need confidence that legal obligations will translate into real demand for separate collection, sorting and recycling services, and ultimately for recycled materials. If mandatory requirements are not consistently implemented, monitored and enforced, they become optional in practice. This increases investment risks and can delay decisions on the capacity Europe needs to meet its targets.

A case made across the value chain

CEFLEX is not alone in making this case as we continuously work with stakeholders, inside and out of the consortium. We support the joint position coordinated by EUROPEN and signed by organisations representing packaging, materials, brands, retail and manufacturing.

The position calls for a harmonised EU EPR framework, producer-led governance, greater transparency, ring-fenced EPR funds and stronger separate collection.

It is significant that sectors with such different commercial interests can agree. This demonstrates that the need for clearer responsibility, more effective funding and improved recycling performance extends beyond any single part of the packaging value chain. It also provides policymakers with an insight into what the companies paying for EPR expect in return.

Where policy meets practice

CEFLEX’s implementation work is examining these same questions at national level, with nine in-depth country analyses completed, seven more under way and twenty countries targeted in all.

Our implementation framework functions on three levels: deepening the exchange of expertise and knowledge with leading countries; providing detail to the roadmap for progress on flexibles in countries striving for improvements; and delivering pilots, hands-on advocacy and action in Member States needing more support.

For example, our work in Romania, Czechia and Greece is helping identify where existing arrangements limit separate collection, sorting and recycling performance, and what changes would allow operators to improve. The answers differ between countries, but the underlying questions are the same: who is responsible, who can act, and what incentives will make improvement commercially viable?

Most systems need to increase separate collection and reduce contamination. Others need to tackle free riding, improve sorting performance, establish more reliable feedstock specifications or develop recycling capacity and markets for the resulting PCR.

These challenges cannot be addressed independently. Increasing separate collection without improving sorting may produce more material that recyclers cannot use economically. Expanding recycling capacity without reliable feedstock or viable end markets creates investment risks.

Our national implementation work helps identify which interventions are needed, who can deliver them and what changes in governance or funding would make them possible.

The EU framework has an important role in enabling those decisions

PPWR has set the targets. Decisions on EPR in the Circular Economy Act and national systems over the next two years will help determine whether the organisations responsible for meeting them have the authority, resources and incentives to deliver.

We must ask ourselves today whether the system gives each organisation a sound business reason to improve collection, sorting and recycling performance, and whether those improvements can make the circular economy Europe needs tomorrow more than the sum of its parts.