Waste business ‘very vulnerable to corruption’

Euractiv 28-03-2014 17:28 7 min. read Content type: Euractiv is part of the Trust Project

SPECIAL REPORT / The waste management business is “very vulnerable” to corruption. More transparency will be needed throughout the chain if the European Union is serious about reaching its resource efficiency goals, according to experts.

Waste systems are operated by a myriad of different companies and organisations. But who does what, why and when, and for how much is a question on the lips of many involved in the business, whether public authorities or private companies.

With the European Commission set to review EU waste legislation in May, policymakers are working on how to improve the transparency of the economic system governing waste management.

The conviction is that more transparency will lead to a better functioning “circular economy”, in which waste management businesses and municipalities get more out of the materials that enter the economy, lowering the cost for consumers and on the environment. The EU has set a goal of ending landfilling by 2020 and recycling at least 50% of all household waste by 2020, but the Commission also plans to release further targets.

“We found that we lack knowledge and that there is a huge challenge in terms of transparency", said Olivier de Clercq, a member of the European Commission’s environment directorate, who was speaking at a EURACTIV conference in Brussels last week (18 March).

"When we go member state by member state, we have huge differences in terms of access to data,” said de Clercq, referring to Extended Producer Responsibility (EPR) schemes that have been implemented across Europe. EPR is a system of waste management in which companies are responsible for the products they put on the market throughout their entire life cycle.

Sector 'prone to corruption'

Currently, in many member states, companies that release products into the market pay into a Producer Responsibility Organisation (PRO), which takes on the responsibility for the product on their behalf. The PRO pays the municipality to collect the waste from consumers, as that is deemed a public service.

In a well-functioning EPR system, the municipality’s waste management costs are recovered almost entirely through the sale of the discarded materials, reducing the cost on taxpayers.

“In the countries where it is not functioning properly, the citizens are paying an additional fee to the municipality or the collection system is not working efficiently, which means recycling targets are not being met,” said Vanya Veras, the secretary general of Municipal Waste Europe.

The complexity of public procurement contracts and the streams of funding between companies, PROs, public officials and citizens mean that there are many avenues through which the money can disappear. In some countries, PROs receive payment from industry for the treatment of their waste but citizens are still being required to pay almost the full recovery costs, one source said.

That is one of a number of abuses to which officials have been alerted. The recent EU report on corruption says that waste management is one of sectors "most prone to corruption".

Referring to unspecified public procurement contracts, but which include those in the waste sector, the report says: “In a few Member States, control mechanisms have revealed cases in which officials used local government assets to conclude transactions with companies related to them … Most of the cases have concerned charges or allegations of illegal party funding, personal illicit enrichment, diversion of national or EU funds, favouritism and conflicts of interest.”

The report goes on to say: “In a few Member States, there were cases in which some organised crime leaders at municipality level establish their own political parties or infiltrated municipal councils to exert influence over local law enforcement or judiciary, and to rig public tenders.”

Taking eight EU member states as case studies, a report by the EU's anti-fraud office, OLAF, estimates the direct costs of corruption in public procurement in eight main sectors, including water and waste, at €1.4 to 2.2 billion in 2010. The other sectors included were road and rail, urban or utility construction, training, and research and development.

While in most regions, the level of corruption is a far-cry from Gomorrah, the Italian film released in 2008, which exposed the Napoli mafia’s relationship with waste management, the lack of transparency does mean the waste business is ripe for abuse.

“It is also clear that without increased transparency, the waste business is very vulnerable to corruption,” said Jori Ringman-Beck, the director of recycling, products and the environment at Cepi, the European paper recyclers’ association. Beck’s statement was corroborated by other sources, who added that corruption in the waste management sector was present across the majority of the European Union.

Officials can also rig their waste management statistics by including material imported for recycling into their statistics. Gaston Franco, a French MEP from the centre-right European People's Party, said in a written question to the Commission: “Eurostat recommends that waste imported for recycling should not be counted. However, some Member States improve their performance by doing so. This has the effect of overstating their recycling performance and masking the requirement to eliminate the non-recyclable residual tonnage.”

While German municipalities are often cited as examples of best practice, the country benefits, in particular, from favourable statistics, according to the FNADE, a French federation of industries involved in environmental treatment activities.

"You have the case of Germany where it’s not clear cut," one source said, adding that some municipalities were achieving higher results than their recycling targets despite PROs not paying for the entire treatment cost, "even though they are receiving money from industry".

"PROs are not paying, even though they are receiving money from industry, in the majority of municipalities, for a variety of justifications that they give," the source said. "I'm pretty sure that the German industry paying into the PROs is not aware that they are not paying for collection." The remaining costs must fall on the taxpayer, the source added.

Lost funding

The lack of effective waste management means that many regions end up landfilling or burning often quite toxic waste, leading to severe water- and airborne pollution. Citizens and companies also end up paying huge amounts for a system which does not work.

The average fees paid by producers to the organisations that treat waste from their products ranges from €14 to €200 per tonne for the same mix of packaging streams across the EU. Commission officials blame "inefficiency" in the waste management system.

“One of the conclusions is that the most costly systems are not necessarily the most effective and the contrary. You can have an efficient system with a low cost,” the Commission’s de Clercq said.

“So in terms of economic instruments [for waste management], we clearly want more guidance for the member states. We would like to increase the cost-effectiveness but also the enforcement, the transparency, the monitoring to ensure that the market is functioning well,” de Clercq added.

The Commission’s environment directorate estimates that the EU could create some 400,000 jobs by 2020 if waste management rules were properly enforced. Estimates also put the amount of money that could be saved from efficient re-use and recycling strategies in the tens of billions of euros.

Karl Falkenberg, the director general of the environment directorate, also puts the focus on fair competition amongst those in the waste management chain.

His speaking notes from the Brussels conference read: “Concerning this last point, notwithstanding the way competition takes place, a clear and stable framework is necessary in order to ensure fair competition, with sufficient control and equal rules for all, supported by enforcement measures (including sanctions) and transparency.”