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6 | Packaging: EPR and DRS key watch outs

What is happening?

Consumer brands and retailers are continuing to navigate a fast-evolving packaging regulatory landscape in the UK. New packaging regimes, such as packaging EPR (EPR) and the upcoming Deposit Return Scheme for single-use drinks containers (DRS), are introducing significant new costs for businesses in the sector, and are fast-turning sustainability from a voluntary initiative into a core part of business strategy. And with Defra soon set to publish its Circular Economy Growth Plan, further policy announcements, particularly around re-use, could impact the packaging landscape.

How might it impact your business?

EPR

The UK's new EPR regime came into force on 1 January 2025 and impacts most businesses that supply packaging in the UK, particularly brand owners of branded packaged products and those who import branded products into the UK from overseas. Under EPR, in-scope businesses must report packaging data to the environmental regulators every six months and pay new disposal fees to cover the local authority costs of recycling that packaging after use. For many businesses, these fees are significant (often into the £millions), with the UK Government formally estimating they will bring in £1.1bn in the first year of EPR alone.

From 2026, these fees are set to be 'eco-modulated' with level of fees payable increasing or decreasing depending on the environmental impact and recyclability of the packaging supplied. This is good news for consumer brands who can work to reduce their EPR fees over time by phasing in alternative and more sustainable packaging, such as switching from single-use plastic to cardboard, or minimising the total volume of packaging used. Early insight from packaging compliance schemes indicates that this material switching is already happening across the sector. All in-scope businesses must conduct recyclability assessments for household packaging and report it as 'red', 'amber' or 'green' in line with recent Government guidance. This data will be used to determine the eco-modulated fees payable to the scheme administrator PackUK.

Other latest EPR developments include the appointment of a new Producer Responsibility Organisation, UK Packaging PRO, on 1 April 2026 to give industry a greater voice in shaping the future direction of the EPR scheme, as well as continued enforcement activity from the UK environmental regulators. The Environment Agency continues to ramp up the size of its audit teams, with over 200 EA audits carried out in 2025 alone. Businesses that do not comply with EPR requirements risk criminal sanctions (including against directors) and uncapped financial penalties (with indicative estimates up to £3 million for the most serious breaches).

DRS

For drinks producers and grocery retailers, the new DRS for single-use plastic, aluminium and steel drinks containers (between 150ml and 3 litres) introduces significant new legal obligations. The new scheme will launch on 1 October 2027 in England, Scotland and Northern Ireland with a lot of upfront work now needed for industry to get ready. Producers will need to register with the scheme administrator, Exchange for Change (EfC), make labelling changes to relevant product lines and, in due course report data and pay fees to EfC based on the volume of in-scope drinks containers sold. Grocery retailers will be legally required to operate mandatory return points to enable consumers to return used containers. This will require upfront investment in machinery (such as reverse vending machines), in-store changes, staff training etc, as well as the ongoing costs of operating the return point. Retailers will be compensated for these costs via a handling payment paid by EfC.

In the first quarter of 2026, EfC has been busy defining some of the key operational aspects of the scheme and has published helpful guidance to help producers and retailers prepare for scheme launch. This includes: logo regulatory requirements and specifications, a material specification for drinks containers, and specifications for reverse vending machines.

On 26 March 2026, regulations came into force establishing a DRS in Wales. Whilst the Welsh scheme is aligned with the rest of the UK in respect of PET and cans, notably it will also apply to glass drinks containers (with a transitional period from 1 October 2027 until 30 September 2031 during which labelling and deposit requirements will not apply to glass drinks containers).

What action should you consider?

The packaging regulatory landscape is evolving at pace. In-house legal teams therefore play a crucial role in helping the business look around corners, advising on policy developments and industry consultations, and supporting the business to make the strategic, investment decisions needed to comply with its legal obligations.

EPR

As we move through 2026, businesses now have more visibility over their upcoming EPR exposure, with Defra recently publishing illustrative base fees for the year across each packaging type (final base fees are expected shortly). Businesses can use these illustrative fees, alongside Pack UK's fee modulation policy statement, to begin to map out their likely EPR fee exposure for the year and use this to guide internal discussions about packaging re-design.

Aside from the direct regulatory obligations, EPR will also impact business's commercial contracts across the packaging supply chain. In-house legal teams should check that EPR is properly baked into the business's tender processes and commercial agreements, to ensure that suppliers can help the business meet its EPR obligations and that risk/ liability for EPR fees is properly apportioned between commercial parties. For our analysis of the top 5 commercial considerations for EPR see our previous article.

DRS

Throughout 2026, the EfC will continue to consult on key aspects of the DRS scheme including producer fees and the retailer handling payments. Producers and retailers that are not already engaged in these processes should contact their relevant trade association for information on how to input. You can also sign up to receive updates directly from EfC here.

Whilst the regulatory and financial implications of EPR and DRS are significant, these new regimes are also creating unique opportunities for consumer brands to position themselves as real leaders in the sustainable packaging space The rise of refill challengers and premium brands, such as Fussy, Wild and Abel & Cole, and the recent spate of acquisitions in this space, show that having a credible sustainable packaging proposition can be good for business. By shifting to more recyclable or reusable packaging, brands can not only reduce their EPR fee exposure but also get increased traction with both consumers and investors.