Completing the Operational Plan and Business Plan: guidance

This document intends to support the development of an application for the appointment of the Deposit Management Organisation (DMO) for the Deposit Return Scheme (DRS) in Wales. The applicant is asked to provide an Operational Plan and a Business Plan which will demonstrate the suitability of the organisation for operating as the DMO. This, in turn, will support the Welsh Government in assessing a DMO application.

To note, this is not an assessment framework but does give an outline of what detail the Welsh Government expects an applicant to provide. Candidates for the DMO position should closely consider the questions posed in this guidance when completing their Operational Plan and Business Plan elements of the application.

Section C (sub-section 6 to 19) of the Application Form pertain to the Operational Plan and is the applicant’s opportunity to demonstrate how it intends to deliver the scheme and meet the collection targets set in legislation.

While Section D (sub-section 20 to 24) relate to the Business Plan to enable evaluation of the credibility, viability and deliverability of the DRS in Wales from a financial perspective. The assumptions and calculations should be consistent with the information supplied in the other areas of the Application Form.

The following guidance provides details on the suggested information the applicant should be providing in their operational plan. As set out in the application form, please provide your answers in line with the headings provided.

• What arrangements does the applicant intend to make for ensuring material collected in Wales is recycled? Include how the applicant secures a market for the materials that are not purchased by producers for recycling.
• How will these arrangements incorporate the requirement for producers (including small producers) to have first refusal on this returned material?
• How does the applicant foresee UK DRSs working together to create reciprocal arrangements, for example for recycling where appropriate?
• What is the applicant’s proposed strategy for minimising any environmental impact arising from the operation of the scheme, e.g. transport emissions?
• What is the applicant’s proposed strategy to maximise closed loop container to container recycling, and readiness for reuse, rather than downcycling of the material for other uses?
• What is the applicant’s proposed strategy for material stewardship e.g. strategies for keeping material in Wales/UK?
• How will the applicant consider future proofing the scheme in line with further circular economy initiatives and pathway to reuse?
• Outline the applicants approach to evidencing the impact of the DRS on reducing littering within Wales.
• How will the applicant ensure that the scheme delivers opportunities for green growth for communities across Wales, including rural areas, young people, and those in more deprived regions?

The following guidance provides details on the suggested information the applicant should be providing in their operational plan:

• What timeframes does the applicant propose for the implementation of the registration system so that all scheme producers may register before 1 October 2027? The proposed timeframes must be consistent with the timelines provided in sections 20 Financial Management and business plan (Business planning and implementation timeline) and 26 Digital Solutions.
• How does the applicant propose to administer the registration system? What information will the applicant require from scheme producers during the registration process? How will producers apply for registration?
• How will the applicant ensure scheme producers are able to register with all UK DMOs as part of one registration process? How will the applicant work with other DMOs to ensure that there is a single registration system for all UK DRSs.
• How will the applicant ensure scheme producers are registered with the DMO, and work with Natural Resources Wales (NRW) on ensuring compliance with the regulations?
• What information will the applicant require scheme suppliers to submit concerning the supply of in-scope drinks containers they supply?
• How will the applicant work with NRW and local authority trading standards services to ensure that scheme producers accurately report the information the applicant requires them to supply?
• How will scheme producers apply to register low volume product lines and how will the applicant decide on those applications. How will the applicant manage, and audit registered low volume product lines?
• How would the applicant conduct internal reviews, to manage and resolve disputes in relation to producer registration and low volume products?
• How will the applicant provide an option for producers to cancel their registration?
• How will exempt low volume producers register with the scheme in Wales, if they voluntarily choose to opt in?
• How will the applicant manage scheme producer registration information to ensure the data is secure and that any personal data is processed by it in accordance with the UK GDPR and Data Protection laws?
• How will the applicant work with scheme producers to ensure:
  
  (i) they understand their responsibilities under the regulations and any instructions issued by the DMO
  (ii) they have the relevant information to register with the DMO before 1 October 2027
  (iii) they will be ready to submit the required information on the in-scope drinks containers they supply from 1 October 2027.

• How does the applicant intend to calculate producer fees, taking broader scheme financial costs and revenues into consideration?

This should include information on the principles for calculating producer fees, taking into account the costs of administering the DRS (including the NRW and Local Authority Trading Standards services teams costs) and the likely income received from other sources (unredeemed deposits and sale of recyclable materials). It should also include any plans for eco-modulation of the charges for different types of in-scope container (including the transition the reusable drinks containers), material sales revenue, and the allocation of unredeemed deposits.

• Will there be a process for the approval of producer fees including any involvement of independent auditors or a Supervisory Board?
• What expertise or external validation will be used in determining producer fees?
• How will the applicant consider the needs of smaller producers when setting producer fees?
• How will the applicant:
  (i) determine those appropriate to consult with and
  (ii) conduct the consultation
  (iii) share the outcome of the consultation with producers.
• How will the applicant conduct the internal reviews mechanism, to manage and resolve disputes in relation to producer registration fees?
• How could producer fees change over time taking into account the costs of administering the DRS (including NRW and Local Authority trading standards services teams Standards costs) and the likely income received from other sources (unredeemed deposits and revenue from material sales)?
• How will the applicant encourage transparency of calculation/methodology of setting producer fees whilst managing commercial confidentiality and data sharing protection?
• The applicant may have to make different payment arrangements in certain circumstances:
  -What options will be given to producers?
  -At what time or intervals and by what means will the applicant require payment of registration fees?
  -How will the applicant reconcile fees received against fees due from scheme producers?
  -How will the applicant deal with late or non-payment of fees?
• How will the applicant evidence to NRW that scheme producers have paid the required registration fees?

• How will the applicant ensure those that are required to register as mandatory return point operators can do so? This includes scheme retailers that operate mixed retail and on-sale premises.
• How will the applicant provide an exemption process for grocery retailers who operate a return point, in line with the criteria for both automatic and requested exemptions set out in the regulations and with consideration of collection targets?
• How will the applicant consider the use of centralised return hub locations?
• How will the applicant ensure that businesses and other organisations can apply to operate a return point on a voluntary basis?
• How will the applicant manage the return point network to ensure sufficient coverage for consumers in both urban and rural areas of Wales?
• How will the applicant ensure that the register of return point operators, DMO return points and return point exemptions is available to the public and kept updated?
• How would the applicant conduct the internal reviews mechanism, to manage and resolve disputes in relation to return points and return point exemptions? How will the applicant provide guidance for return point operators, including information on how they consider accessibility requirements for people with disabilities?
• How will the applicant consider locations or organisations not required by the regulations (such as local authorities or community centres) as possible return points? For example, in and around litter hotspot areas or in rural locations without a local return point.
• How will the applicant manage applications for return point exemptions, including:
  -the proposed manner and form of applications
  -the additional information to be included with applications
  -how the DMO will reach decisions on applications
  -how it will inform applicants of its decision.
• How will the applicant review the network, ensuring sufficient coverage of return points in terms of reasonable proximity for return points seeking an exemption and providing reasonable access to return points for consumers?
• How will the applicant undertake those reviews, and its proposals if the review identifies the need to increase, or the potential to decrease, the number of return points? This might include a description of how the DMO will gather evidence or information that would need to be considered in any such review.

• How will the applicant ensure those scheme retailers can register as a provider of take‑-back services if they choose to do so?
• How will the applicant manage applications for take-back services, including: the proposed manner and form of applications, the additional information to be included with applications, how the DMO will reach decisions on applications and how it will inform applicants of its decision?
• How will the applicant assess the take-back service authorisation information?
• How will the applicant work with providers of take-back services to ensure they provide or display the take-back service information?
• How will the applicant ensure that the register of those providing take-back services is available to the public and kept updated?
• How will the applicant work with takeback providers to ensure circularity of the containers collected?
• How would the applicant conduct internal reviews, to manage and resolve disputes decisions to refuse or revoke registration as a take-back service provider?

• How does the applicant intend to set the deposit level? This must include the proposed methodology the applicant will use to set the deposit level, including how it will consider the factors the regulations require it to have regard to.
• What is the applicant’s preferred deposit level(s)? What methodology has the applicant used to reach this deposit level? What financial modelling and modelling on collection targets has the applicant undertaken?
• How, and in what circumstances, would the applicant consider setting a different deposit level for different types of in-scope containers?
• How does the applicant propose to consult on the deposit level, including who the applicant proposes to consult?
• How will the applicant:
  (i) determine those affected by the deposit level
  (ii) identify those that should be consulted and
  (iii) conduct the consultation?
• How will the applicant consider the impact of the deposit level on consumers?
• How does the applicant intend to work with other DMOs to reach agreement on a single deposit level approach across the UK?
• Will any external expertise or validation be used in determining the deposit level?
• How will the applicant work with, and issue guidance to, return point operators with regards to the ways in which consumers can redeem their deposits (e.g. voucher format, cash, card, app based)?
• How will the applicant calculate the amount of deposit payable by each scheme supplier? What sources of evidence will it use? How will it validate and assure the data used for those calculations?
• How often will scheme suppliers be required to make payment of deposit to the applicant?
• How will the applicant incentivise prompt payment, or otherwise make it straightforward for scheme suppliers to make accurate and on-time payments?
• How will the applicant reconcile payments received with payments due from scheme suppliers?
• How will the applicant manage late and non‑-payment, or over-payments?
• What banking, treasury management and reporting systems does the applicant propose to have in place?
• How will the applicant work with scheme suppliers to ensure they accurately report containers placed on the market and correct repayment of corresponding deposits?
• What protocols will the applicant put in place to allow NRW to take enforcement action against scheme suppliers that fail to make payments of deposits?
• How will the applicant enable the charitable donation of consumer deposits from returned drinks containers, and support return point operators in administering the charitable donations? Consideration should be given to how this would include both national and local charitable causes. 

• How will retailer handling payments be calculated? What methodology and what types of evidence and data will be used? How will the relevant evidence and data be collected?
• Will the applicant have varying retailer handling payments? If so, on what basis does the applicant plan to set a different handling payment for different cases?
• How will the applicant consider the requirements of small retailers when formulating its retailer handling payments?
• What, if any, expertise or external validation will be used in determining the handling payments?
• How will the applicant:
  -determine those affected by the retailer handling fees
  -identify those that should be consulted
  -conduct the consultation
  -share the consultation outcomes.
• How frequently, or in what circumstances, does the applicant propose to review the handling payments? How will the applicant ensure that they review the handling payments at least once every three years?
• The DMO is expected to make regular and reliable payments to return point operators. How will the applicant make handling payments to return point operators and at what frequency? What information will the applicant include with the handling payments?
• How will the applicant conduct the internal review mechanism in relation to retailer handling payments?

• How does the applicant intend to use scheme logos, packaging logos and return codes in delivering the scheme?
• How does the applicant envisage return codes being used by return point infrastructure e.g. interacting with RVMs?
• How will the applicant determine the scheme return code requirements?
• How will the applicant take account of the likely impact of the scheme code requirements on scheme producers?
• How will the applicant consult on the scheme logo, scheme packaging logo and scheme return code requirements, including identifying those persons that represent those affected by the decision and any other appropriate persons and consulting with those affected by decisions on these issues?
• When making changes to the scheme logo, scheme packaging logo or return code requirements, how will the applicant take into account the likely impact on scheme producers? How will it ensure that it gives scheme producers sufficient notice of the change?

• How will the applicant determine the total amount of refunds paid by a scheme retailer in respect of refund items collected by the DMO from the scheme retailer?
• How will the applicant determine the number of returnable items (including those from other UK DRSs and overseas schemes) it collects or accepts from scheme collectors?
• How will the applicant determine the relevant return amount for each returnable item it collects or accepts from scheme collectors?
• The DMO is expected to make regular and reliable payments to scheme retailers and scheme collectors in respect of refunds and returnable items. How will the applicant make such payments to scheme retailers and at what frequency? What information will the applicant include with the payments?
• What processes will the applicant put in place with the other UK DMO to reconcile the refunds provided by each DMO in respect of in-scope containers from the other UK DRSs?

• What arrangements does the applicant propose to put in place to collect returned in-scope items from return point operators, on‑-sale or mixed retail premises, and take‑-back service operators?
• What arrangement does the applicant propose to put in place to accept returned in-scope items from take-back service operators?
• How does the applicant intend to put in place the necessary arrangements to collect or accept all returned in-scope containers?
• How will the applicant ensure that the collection arrangements it puts in place comply with any applicable Welsh waste management regulations?
• Does the applicant intend to use counting/sorting centres as part of the logistics operation? If so, how will these sites be established to support the counting and verification of returned in-scope containers for the scheme? How will containers returned via manual return points be counted and processed within the collection and logistics model?
• What data will the applicant provide return point operators, on-sale or mixed retail premises, and take-back service operators on collection rates?
• How will the applicant attempt to make the collections and logistics model as carbon efficient as possible? Will the use of existing infrastructure be considered, particularly considering the rurality of Wales?
• Does the applicant intend to put clear guidance/conditions in place with return point operators regarding waste collection and the quality of material returned to the DMO? This includes closed loop hospitality businesses. How will the applicant work with wholesalers and the wider supply chain to ensure accurate data collection? How will the applicant encourage producers to work with the supply chain for the same reason?
• How will the applicant consider seasonal variations in consumption and return rates and the corresponding impact on collection and logistics capacity and infrastructure?

Wales is already a high recycling nation; it is 2nd in the world. Therefore, the scope of material in Wales broader reflecting it is starting from a different baseline position. The DMO has the opportunity to be groundbreaking as this will be the first scheme of this type implemented in a nation already achieving high recycling rates. This necessitates the demonstration of how the scheme will support the move of materials further up the waste hierarchy as well as delivering high recycling rates.

In doing so, the DMO will support the delivery of the commitments in Beyond Recycling, Welsh Government’s circular economy strategy, and Net Zero Wales, Wales’s statutory emissions reduction plan.

As well ensuring it will be effective in helping to tackle the climate and nature emergency, by showing how the scheme will support the drinks industry to transition to reuse. It will also support the industry to improve resilience and competitiveness in a decarbonising global economy. As well as drawing on the learning from the known solutions which are being delivered successfully in countries across the world.

The applicant should consider how it meets the objectives of the Wellbeing of Future Generations Act and therefore consider addressing through its application to:

• Take account of the long term.
• Help to prevent problems occurring or getting worse.
• Take an integrated approach.
• Take a collaborative approach.
• Consider and involve people of all ages and diversity.

The Minimum Unit Pricing (MUP) policy is formally established in law in Wales by the Public Health (Minimum Price for Alcohol) (Wales) Act 2018, which aims to reduce alcohol-related harm by making alcohol less affordable, the policy targets the cheapest and strongest products.

Please consider the following questions when completing the application form:

• How will the DMO demonstrate its ability to manage operate and communicate in the Welsh language provisions? This includes how it will ensure that these contractors and suppliers meet language requirements?
• How will the applicant ensure the scheme will support the delivery of the Well-being of Future Generations Act?
• How will the DMO ensure that the scheme will be able to support a transition to reuse as well as high recycling?
• How will the DMO demonstrate compliance and consideration of the Minimum Unit Pricing for alcohol legislation in Wales?
• How will drinks containers be collected from closed loop hospitality venues in Wales? How will the number of containers from these venues be counted?
• How does the DMO plan to work with industry to future proof the scheme to deliver towards net zero, and support a pathway to reuse?

• How does the applicant intend to engage and collaborate with NRW, local authority trading standards services, from the time of appointment onwards?
• How will the applicant ensure that NRW and local authority trading standards services have access to appropriate data held on DMO‑-owned digital systems?
• How will the applicant work with NRW and local authority trading standards services to ensure unregistered producers are identified and brought into the scheme?
• How will the applicant work with NRW to address and escalate any non-compliance identified among registered parties?
• How will the applicant ensure that it fully understands the costs incurred by NRW and local authority trading standards services in carrying out their functions under the regulations, and that these costs are accurately reflected in the DMO’s financial forecasts and paid promptly?

• How would the applicant anticipate, mitigate and manage delivery risks as and when they might arise?
• Please share projected timelines, plans and risks for the various stages of delivery. This includes detailing when key scheme information will be made available to industry (e.g. RVM specifications), when key procurements will be made and when elements of the IT, collection, logistics and payments infrastructure will be delivered. The applicant should provide as detailed plans as possible setting out how it will establish the DRS in each nation to which its application relates.
• Will the applicant provide funding support to retailers for purchasing RVMs?
• What specification of RVM will the applicant recommend to return point operators, recognising the need to transition to reuse?
• How will the applicant work with retailers to ensure they:
  
  (i) understand their responsibilities under the regulations
  (ii) have the relevant information to establish the return point network, and
  (iii) will be ready for ‘go-live’ on 1 October 2027 including the installation of RVMs and return points where necessary.
• How will the applicant work with producers to ensure they:
  
  (i) understand their responsibilities under the regulations
  (ii) have the necessary information to implement the operational and administrative changes required for ‘go‑-live’ on 1 October 2027?
• How does the applicant propose to manage the transition period once the scheme goes live, where remaining non-DRS stock is sold alongside scheme items?
• The applicant needs to provide a communications plan that includes the needs of all key stakeholders, including consumers, retailers, producers and local authorities. How will the applicant include a clear communications plan towards key DRS stakeholders (consumers, producers, and retailers)? How will the applicant ensure all businesses within the supply chain are aware of their role in implementing and operating within the DRS, including their duties in complying with the scheme? How might the applicant work with local partners, including Local Authorities and the public, to raise awareness of DRS? How will the applicant ensure that guidance issued to businesses takes into consideration accessibility requirements or recommendations?
• How will the applicant work with retailers, specifically on their obligations? Including how the applicant will produce guidance and information to support retailers in meeting their obligations to only sell scheme articles from registered producers, and that they clearly display the deposit for consumers with information on how to get a refund.
• How will the applicant ensure consumers are aware of the launch of the scheme and what it means for them. This should include communications that provide information on:
  -How and where consumers can return in‑-scope containers.
  -Specific provisions which may impact on the return of a container, such as the retailer’s right to withhold a refund or refuse collection if a container is not returned in an acceptable condition.
• How the applicant will ensure communications are issued in different languages and formats including: delivering against Welsh language requirements and in minority languages spoken in the Wales, as well as audio, British Sign Language, Braille, and easy-to-read formats.

The Business Plan Template requires a Surplus & Deficit, Balance Sheet and Cashflow forecast that breaks down key income, operating and capital costs items. It must also show proposed financing inflows and outflows, as well as tax. It must be prepared in nominal terms. It also requires the applicant to document key assumptions underpinning each line item.

The outputs provided in the Business Plan Template must cover the period up to the scheme launch date (DMO set-up), together with a 7-year forecast from scheme launch onwards.

The assumptions provided by the applicant against each line item should cover:

• Inflation assumptions.
• Revenue (including assumptions on consumer behaviour, and policy on recognition of unredeemed deposits and material sales).
• Operating expenditure (including assumptions on the costs of key contracts, corporate overheads, costs of fraud; regulatory fees and fines, insurance).
• Capital expenditure (including a breakdown of key capital expenditure items, both upfront and any lifecycle renewal costs).
• Financing inflows and outflows (including drawdowns, repayments and financing costs).
• How any central costs (including financing if relevant) will be allocated to any subsidiaries responsible for delivering the DRS in Wales.
• Tax (e.g. Corporation Tax and VAT).

In setting out the risk register, the applicant may wish to consider financial risks such as the following:

• Delays to secondary legislation and scheme launch.
• Delays in obtaining financing, insurance and commercial agreements.
• Insolvency of key suppliers/financiers.
• Significant increase in containers returned, reducing unredeemed deposit levels.
• Decreases in material value compared to expectations.
• Decrease in volume of materials eligible for sale compared to expectations.
• Regulatory changes & penalties.
• Inflation and interest rate fluctuations. In describing these risks and mitigations, the applicant should include details of how they expect any additional capital/financing that may be needed will be secured.

Note that risks relating to fraud can be considered excluded from the scope of this question as these are already covered in Section D.

• If the applicant manages multiple schemes in the UK, they must be able to allocate finances by scheme regardless of the administering entity to accurately calculate and invoice producer fees and pay retailer handling fees for each DRS.
• It will need robust procedures for allocation and tracking of revenue and costs between legal entities (or between individual DRSs operated by a single entity) to ensure the Producer and return point handling fees are calculated in a manner that represents a fair reflection of the revenues and costs.

The applicant should set out its proposals in this regard, while also noting whether there are any other financial interdependencies between the separate legal entities (or the individual schemes) that may be relevant.

• We expect the applicant will secure insurance policies that are in line with statutory minimum requirements (such as in relation to employer liability insurance, vehicle insurance etc.), corporate best practice and market norms.
• The costs of insurance should be reflected in the forecasts provided in the applicant’s Business Plan.
• The applicant’s potential plans in respect of accounting policies on revenue recognition of unredeemed deposits.
• The applicant’s potential plans in respect of key tax assumptions and their impacts on its financial and cash flow modelling, including:
  
  (i) A summary of the applicant’s understanding of the UK VAT legislation applicable to deposit return schemes.
  (ii) Intentions in respect of the VAT treatment of unredeemed deposits, including a justification for said position (if relevant).
  (iii) The VAT treatment of all other financial flows in the system, including flows which are not outputs nor inputs of the DMO itself, as these assumptions will still impact the applicant’s financial and cash flow modelling.
• Confirmation of the applicant’s intention to register the DMO organisation for VAT with HMRC where necessary and/or beneficial in respect of recovery of input tax, or acknowledgement that this point will be given due consideration in future planning activities.
• If applicable, demonstration of any plans the applicant has to establish self-billing arrangements with producers and/or return point operators and awareness of the ongoing compliance obligations created by such arrangements or acknowledgement that this point will be given due consideration in future planning activities.

Alternatively, the applicant may wish to simply set out confirmation that it will give the above issues consideration in the future and/or the timeframes over which it plans to give the said issues consideration.

The information provided in this section should include details regarding the level of progress made in securing capital/financing commitments.

• The applicant should provide any third-party evidence of commitments it has secured. This could include Parent Company Guarantee letters; Intragroup financing commitment letters; Bank support letters; or signed heads of terms for financing facilities.

We would expect that as a minimum the applicant will have held discussions with the providers of relevant capital/financing and agreed heads of terms or similar. As well as details of proposed capital financing that the applicant expects to draw down, the applicant should also outline any proposals for contingent financial support from entities elsewhere within its wider group structure.

• The applicant should provide the financial statements for any entities that will provide capital/financing or contingent financial support. This will enable us to carry out an assessment of the financial position of such entities (which could include analysis of key financial ratios).
• The response should make clear whether the capital/financing will be provided for the DMO, or just at the group level. If the latter, it should make clear how the capital/financing and costs associated with this will be allocated to the scheme in Wales for the purposes of calculating Producer and Retail Handling fees.
• We expect that any capital/financing provided by entities within the applicant’s wider group structure should be in line with market rates (such that there is no excessive value extraction by these entities).

For guidance on Equality of access please review Section 25 in the application form.

A high-level architecture of the digital systems that will require development to implement the DRS, including, where the applicant has applied to be appointed DMO for more than one DRS, details of any systems required for the individual DRS.

• For each of the systems concerned, a high-level plan for its design, build, implementation and integration with the other systems, and testing. The applicant should note that certain systems, such as registrations, will need to be operational some time before 1 October 2027 to allow entities to register with the relevant DMO.
• Plans for procuring the internal and external expertise that the DMO will need to manage and undertake the development activity.
• Detail on where the development work will take place.
• Details of how the IT system will comply with any relevant legal requirements, such as financial and payment services regulation.
• A description of data security and management for the IT system and internal procedures (secure copies, security of data‑ transfers and data received from producers to DMO, security dataflow between DMO and return points, between DMO and regulator etc, onshore or offshore). Note however that any data should be UK hosted.
• Indications that the IT system will meet data protection law and consider meeting Central Digital and Data Office (CDDO) standards.
• Details of intended approach to customer support operation for businesses and consumers engaging with the IT system, including accessibility options, service tiering, etc.