Dirty Money
If Poland doesn't clean up its act, say commission representatives, hefty EU fines may be on the horizon.
Under EU requirements, this country must recycle a minimum of 25 percent of packaging waste created by the domestic market by 2007. According to government figures, Poland is meeting the targets very well. The problem is that what the figures represent may be largely fiction. Reliable figures for recycling, say many in the business, are, in many areas, impossible to find, due to the thousands of firms involved in the business, the lack of effective control and the many questionable practices going on.
According to the Ministry of the Environment's report on recycling for 2002, 2.5 million tons of packaging was released onto the domestic market, of which an average of 25 percent was recycled. However, because of the gray market and the fact that some firms are not required to provide data, in real terms the figure is reckoned at over 3 million tons, throwing the average figure of 25 percent into serious doubt.
Compilation of local government reports on recycling, meanwhile, puts the official figures even more at sea. It would seem, from the reports, that in some cases as much as 10 times more packaging was recycled than the amount actually released on to the market. Official overall recovery figures of 44 percent for paper and cardboard and 11.4 percent for plastics are doubted by many in the industry. And then there's the fact that the official figures of a recycled 6.5 percent of multi-material packaging are a physical impossibility. In 2002, Poland simply didn't have the technical facilities to recycle multi-materials.
Rife corruption makes waste packaging recovery decidedly marshy ground for potential investors, bogging down legitimate development in a potentially flourishing sector, according to Adam DeSola Pool, associate at Environmental Investment Partners, (EIP) a venture capital fund, which invests in CEE environmental businesses. He says, "We look at investments but we can't put the money down because there's just not enough transparency."
One major problem, according to non-profit organization Recal, which promotes the recycling of aluminum cans, and Rekopol, Poland's largest recovery organization, is the way that collection and recycling laws in Poland are constructed. In every EU country except Britain, packaging waste collection is restricted to non-profit making organizations. In Poland, however, as in Britain, waste recovery is open to commercial interests.
"Under Polish law, all that is necessary for a company to become an environmental waste recovery firm is joint stock status and a million zloty capital - oh, and the term 'recovery organization' in the name of the company," says Jacek Wodzisławski, president of Recal. "We lobbied for the inclusion of a provision that any recovery organization must be non-profit, but we weren't successful."
This is why, according to Recal and Poland's largest non-profit making organization, Rekopol, companies have mushroomed all over Poland, making money on 'environmental' waste collection and recycling. The number of companies in areas such as paper and plastic, which are easy to get hold of and the cheapest to process, is too big to control. And many, if not most, are involved in questinable practices. "They dump stuff, they burn stuff, they buy or procure false documents to prove that packaging has been recycled, when in fact what they've recycled is newspaper or just any kind of waste you can find on the streets," according to sources in the sector.
But that's only half the problem. Apparently it's also possible to run quite a profitable business in an entirely virtual kind of waste recovery. According to the law, a filler has a choice of three ways to fulfill his recycling responsibilities. He can take care of his own waste, contract with a recovery organization which will take care of his responsibility for him, or pay a fine.
For fillers who take this second option (in the case of the majority of domestic fillers) he has a choice of several organizations which can take this responsibility off his hands. On the market, there are credible commercial packaging disposal companies, less credible companies and even "virtual' recovery firms, which deal not so much in waste disposal as risk insurance.
"It's like this," says our source: "A so-called 'recovery firm' approaches a filler and says: 'A real recovery contract will cost you such and such. But if you pay me a smaller sum, I'll give you a piece of paper, which says that I did your recycling for you. I get the money, and you get security, because if the inspector ever comes, it's not you, but me that will have to pay the price."
It's a deal, says our source, which more often than not is profitable for both sides because, more often than not, the inspector never comes.
In Adam DeSola Pool's view, the problem is not that, unlike in most EU countries, Polish law allows recovery firms to operate on a commercial basis. The problem is that laws regarding standards of practice are, on the one hand, imperfect, and on the other, not enforced. He says, "Even if the current laws were enforced fairly there would be very good business opportunities in recycling, but as things stand now it's difficult, if not impossible, for honest companies to survive."
He goes on to explain that Environmental Investment Partners has frequently had to turn down recovery firms that approach EIP for funding, because any firm that acts in full compliance with the law will find itself unable to compete.
Against the many shady deals available on the market, it's difficult for even large non-profit institutions set up by international fillers, like Rekopol, to compete. In the present market situation, Rekopol is not necessarily cheaper than the other companies willing to take the responsibility for waste disposal off the shoulders of Polish companies.
Another issue is the mechanism for the distribution of state funding, which many see as both an instrument creating unfair competition within the sector, and a positive invitation to local government corruption. Funds distributed by the National Fund (NFOS) are passed on to regional Environmental Protection Funds (WFOS), who are responsible for handing on funds to local government for the promotion of recycling and creation of consumer segregation bins. Some regional Environmental Protection Funds, however, for example those from the Białystok, Gdańsk and Lower Silesia regions, have used funds as capital to set up their own commercial recovery organizations.
"Money intended for the gmina (local government) goes straight into commercial recovery companies owned by regional government officials, which not only deprives gminas of funds, but also creates unfair competition for independent recovery firms," say non-profit organizations. A member of one such organization goes on to add that, "and these commercial companies are invariably run by regional government cronies."
Polish Packaging Research and Development Center (COBRO) also suspects that regional governments use environmental funds, which are intended to fund local government segregation systems, to enrich their own private 'recovery' organizations.
"It's very possible that government-owned organizations like Doleko, (Lower Silesia) obtain state funds intended for the local government, in addition to the money they make commercially," confirms Hanna Żakowksa, head of the environmental department.
According to Janusz Płocica, president of Rekopol, Poland's lack of a strong, internalized, culture of environmental responsibility is another underlying reason for the multitude of cowboy practices. Rekopol, whose shareholder-clients include most of the biggest names in the packaged food and drink business, has no difficulty in gaining the support of big international concerns that have a reputation to support. But, he says, "Some firms in Poland are not over concerned about what really happens to their waste. Some think that the fine for not fulfilling their legal financial responsibility is just another kind of tax. And others are just not well informed enough to understand the available choices."
It's a view that is supported by Adam DeSola Pool, who says, "No rubbish is worthless. There's a market out there for almost everything. But so far only multi-nationals which respond to world-wide shareholders are prepared to pay the premium prices it costs."
Creating a culture of consumer rubbish collection, however, involves educational work with schools, co-operation with local government, not to mention laying out cash to set up publicly available segregation bins. This kind of work, though taken up as a matter of course by recovery organizations set up by international fillers such as Rekopol, obviously has few attractions for Poland's many small cowboy recovery firms which are in the business solely to make cash fast. Yet without a comprehensive and responsible culture of packaging segregation and recovery, says Janusz Płocica, meeting these kind of levels simply won't be possible.
According to the European Commission, there is no action that the Commission can take at present regarding dishonest practices in this country's recycling system, which it says is rather a matter for Polish criminal courts. Even once Poland becomes a member of the EU in May, Poland has the benefit of a transition period until 2007, during which any EU action on the matter will be restricted to warnings. After 2007, however, should the Commission find that the Directive is not correctly transposed, says the European Commission spokesperson, the Commission would use the instruments at its disposal to ensure correct implementation. "This could mean, for instance, taking legal action against Poland," the spokesperson adds.
Recent proceedings against Greece concerning a waste dump on Crete led to fines of z20,000 a day, resulting in a total sum as large as z5.5 billion. "And that was just for one dump on one island," says the EU commission spokesperson. "So you can imagine the amounts of money that might be involved in a case concerning illegal practices going on throughout an entire country."
Yet some in the sector think it probably won't come to that.
"It takes time to create a culture," says Włodisławski. "Most EU countries had teething problems in the beginning. In fact, all over Europe the systems vary and the whole sector is still in a more or less experimental stage."
Under EU requirements, this country must recycle a minimum of 25 percent of packaging waste created by the domestic market by 2007. According to government figures, Poland is meeting the targets very well. The problem is that what the figures represent may be largely fiction. Reliable figures for recycling, say many in the business, are, in many areas, impossible to find, due to the thousands of firms involved in the business, the lack of effective control and the many questionable practices going on.
According to the Ministry of the Environment's report on recycling for 2002, 2.5 million tons of packaging was released onto the domestic market, of which an average of 25 percent was recycled. However, because of the gray market and the fact that some firms are not required to provide data, in real terms the figure is reckoned at over 3 million tons, throwing the average figure of 25 percent into serious doubt.
Compilation of local government reports on recycling, meanwhile, puts the official figures even more at sea. It would seem, from the reports, that in some cases as much as 10 times more packaging was recycled than the amount actually released on to the market. Official overall recovery figures of 44 percent for paper and cardboard and 11.4 percent for plastics are doubted by many in the industry. And then there's the fact that the official figures of a recycled 6.5 percent of multi-material packaging are a physical impossibility. In 2002, Poland simply didn't have the technical facilities to recycle multi-materials.
Rife corruption makes waste packaging recovery decidedly marshy ground for potential investors, bogging down legitimate development in a potentially flourishing sector, according to Adam DeSola Pool, associate at Environmental Investment Partners, (EIP) a venture capital fund, which invests in CEE environmental businesses. He says, "We look at investments but we can't put the money down because there's just not enough transparency."
One major problem, according to non-profit organization Recal, which promotes the recycling of aluminum cans, and Rekopol, Poland's largest recovery organization, is the way that collection and recycling laws in Poland are constructed. In every EU country except Britain, packaging waste collection is restricted to non-profit making organizations. In Poland, however, as in Britain, waste recovery is open to commercial interests.
"Under Polish law, all that is necessary for a company to become an environmental waste recovery firm is joint stock status and a million zloty capital - oh, and the term 'recovery organization' in the name of the company," says Jacek Wodzisławski, president of Recal. "We lobbied for the inclusion of a provision that any recovery organization must be non-profit, but we weren't successful."
This is why, according to Recal and Poland's largest non-profit making organization, Rekopol, companies have mushroomed all over Poland, making money on 'environmental' waste collection and recycling. The number of companies in areas such as paper and plastic, which are easy to get hold of and the cheapest to process, is too big to control. And many, if not most, are involved in questinable practices. "They dump stuff, they burn stuff, they buy or procure false documents to prove that packaging has been recycled, when in fact what they've recycled is newspaper or just any kind of waste you can find on the streets," according to sources in the sector.
But that's only half the problem. Apparently it's also possible to run quite a profitable business in an entirely virtual kind of waste recovery. According to the law, a filler has a choice of three ways to fulfill his recycling responsibilities. He can take care of his own waste, contract with a recovery organization which will take care of his responsibility for him, or pay a fine.
For fillers who take this second option (in the case of the majority of domestic fillers) he has a choice of several organizations which can take this responsibility off his hands. On the market, there are credible commercial packaging disposal companies, less credible companies and even "virtual' recovery firms, which deal not so much in waste disposal as risk insurance.
"It's like this," says our source: "A so-called 'recovery firm' approaches a filler and says: 'A real recovery contract will cost you such and such. But if you pay me a smaller sum, I'll give you a piece of paper, which says that I did your recycling for you. I get the money, and you get security, because if the inspector ever comes, it's not you, but me that will have to pay the price."
It's a deal, says our source, which more often than not is profitable for both sides because, more often than not, the inspector never comes.
In Adam DeSola Pool's view, the problem is not that, unlike in most EU countries, Polish law allows recovery firms to operate on a commercial basis. The problem is that laws regarding standards of practice are, on the one hand, imperfect, and on the other, not enforced. He says, "Even if the current laws were enforced fairly there would be very good business opportunities in recycling, but as things stand now it's difficult, if not impossible, for honest companies to survive."
He goes on to explain that Environmental Investment Partners has frequently had to turn down recovery firms that approach EIP for funding, because any firm that acts in full compliance with the law will find itself unable to compete.
Against the many shady deals available on the market, it's difficult for even large non-profit institutions set up by international fillers, like Rekopol, to compete. In the present market situation, Rekopol is not necessarily cheaper than the other companies willing to take the responsibility for waste disposal off the shoulders of Polish companies.
Another issue is the mechanism for the distribution of state funding, which many see as both an instrument creating unfair competition within the sector, and a positive invitation to local government corruption. Funds distributed by the National Fund (NFOS) are passed on to regional Environmental Protection Funds (WFOS), who are responsible for handing on funds to local government for the promotion of recycling and creation of consumer segregation bins. Some regional Environmental Protection Funds, however, for example those from the Białystok, Gdańsk and Lower Silesia regions, have used funds as capital to set up their own commercial recovery organizations.
"Money intended for the gmina (local government) goes straight into commercial recovery companies owned by regional government officials, which not only deprives gminas of funds, but also creates unfair competition for independent recovery firms," say non-profit organizations. A member of one such organization goes on to add that, "and these commercial companies are invariably run by regional government cronies."
Polish Packaging Research and Development Center (COBRO) also suspects that regional governments use environmental funds, which are intended to fund local government segregation systems, to enrich their own private 'recovery' organizations.
"It's very possible that government-owned organizations like Doleko, (Lower Silesia) obtain state funds intended for the local government, in addition to the money they make commercially," confirms Hanna Żakowksa, head of the environmental department.
According to Janusz Płocica, president of Rekopol, Poland's lack of a strong, internalized, culture of environmental responsibility is another underlying reason for the multitude of cowboy practices. Rekopol, whose shareholder-clients include most of the biggest names in the packaged food and drink business, has no difficulty in gaining the support of big international concerns that have a reputation to support. But, he says, "Some firms in Poland are not over concerned about what really happens to their waste. Some think that the fine for not fulfilling their legal financial responsibility is just another kind of tax. And others are just not well informed enough to understand the available choices."
It's a view that is supported by Adam DeSola Pool, who says, "No rubbish is worthless. There's a market out there for almost everything. But so far only multi-nationals which respond to world-wide shareholders are prepared to pay the premium prices it costs."
Creating a culture of consumer rubbish collection, however, involves educational work with schools, co-operation with local government, not to mention laying out cash to set up publicly available segregation bins. This kind of work, though taken up as a matter of course by recovery organizations set up by international fillers such as Rekopol, obviously has few attractions for Poland's many small cowboy recovery firms which are in the business solely to make cash fast. Yet without a comprehensive and responsible culture of packaging segregation and recovery, says Janusz Płocica, meeting these kind of levels simply won't be possible.
According to the European Commission, there is no action that the Commission can take at present regarding dishonest practices in this country's recycling system, which it says is rather a matter for Polish criminal courts. Even once Poland becomes a member of the EU in May, Poland has the benefit of a transition period until 2007, during which any EU action on the matter will be restricted to warnings. After 2007, however, should the Commission find that the Directive is not correctly transposed, says the European Commission spokesperson, the Commission would use the instruments at its disposal to ensure correct implementation. "This could mean, for instance, taking legal action against Poland," the spokesperson adds.
Recent proceedings against Greece concerning a waste dump on Crete led to fines of z20,000 a day, resulting in a total sum as large as z5.5 billion. "And that was just for one dump on one island," says the EU commission spokesperson. "So you can imagine the amounts of money that might be involved in a case concerning illegal practices going on throughout an entire country."
Yet some in the sector think it probably won't come to that.
"It takes time to create a culture," says Włodisławski. "Most EU countries had teething problems in the beginning. In fact, all over Europe the systems vary and the whole sector is still in a more or less experimental stage."
