Stephen Jamieson: 0:03

We're about to see a new wave of Extended Producer Responsibility regulation come through. That's essentially shifting the entire cost of the downstream waste system, which is typically handled by local authorities and shifting that into the, the production system and essentially saying, you know, to producers, every product you sell now has to contribute to the full domestic downstream waste flow. This is billions we're talking in terms of shift of incentive

Tom Raftery: 0:33

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Climate Confident podcast. The number one podcast, showcasing best practices in climate emission, reductions and removals. And I'm your host, Tom Raftery. Don't forget to click follow on this podcast in your podcast app of choice, to be sure you don't miss any episodes. Hi, everyone. Welcome to the Climate Confident podcast. My name is Tom Raftery. And with me on the show today, I have my special guest, Stephen. Stephen, welcome to the podcast. Would you like to introduce yourself?

Stephen Jamieson: 1:07

Sure. Good morning, Tom. Great to be here. I'm Stephen Jameson. I'm Global Head of Circular Economy Solutions at SAP.

Tom Raftery: 1:14

Cool. And I should say as well that this is a special episode of the podcast done in partnership with sap. So thanks for that. And also, I should say that, Steven, you've been on this podcast previously so people might know you, but I think one thing that strikes me when I speak to you, Steven, is that you have a very distinctive voice. And so for people listening, I want you to listen carefully to Steven's voice, because to me it sounds like a very famous actor. So listen to Stephen during the podcast and see if you can figure out who I'm thinking about. And then at the end of the podcast, we'll have our big reveal. That okay with you, Stephen?

Stephen Jamieson: 1:55

I feel I must put a silly accent on now to throw everybody off. Let's go for it.

Tom Raftery: 2:02

Great. Okay. Stephen, you mentioned in charge of circular economy and solutions in SAP. What's happening in that space right now? Because I feel there's a lot going on. There's a lot more notice being taken both at a, a, consumer level, but also possibly even more importantly at a regulatory level at things like plastics and packaging and things like that. So could you give us some kind of context and background to what's going on there?

Stephen Jamieson: 2:30

Yeah, well, I think it's fair to say that the circular economy topic in our customers and businesses around around the world are really seeing this topic coming into sharper and ever sharper focus. We started working on this five years ago and, you know, there were many progressive leading organizations doing a lot of good work at the time, but the majority were still really struggling to find the business case and really struggling to find the reasons why. And I think what we've seen over the last few years is a real acceleration and an alignment of, the policy innovations and interventions. The the, the, the sort of the focus, not just in a sort of market level, but across the European Union, across you know, even the United States now and also the UN level. And we're also seeing a real awareness in business that this is an opportunity for, for good business as well, and an opportunity to serve customers better delivery enhanced customer experience. And do that in a way that's actually better for the planet overall.

Tom Raftery: 3:41

Okay. And can you speak specifically to some of the kind of regulations that have been rolled out just to, you know, give people an idea of what kind of steps are being taken by governments?

Stephen Jamieson: 3:53

Yeah, I mean, this is really a kind of multi leveled approach at the moment. One of the most topical, I would say scenarios at the moment is, is around the, the, this space of plastics and packaging and here we've seen, you know, I'd say most of the, the policy activity in, in recent years. So we've seen a real focus on the topic of extended producer responsibility, and we've seen that manifest itself in, in really two ways. We've seen an evolution of what was, You know, it's not, it's not a new concept, extended Producer responsibility. We've been working with this for 20, 30 years in businesses, but there's a real change in intent, a real focus on utilizing this, this notion of, of, of embedding the costs of downstream processing into, you know, the core pricing of products essentially. And what we've seen in recent years is, is a real drive to drive that intent of the regulation in order to deliver circular outcomes. And embed that into business. So what does that look like? That looks like delivering what we call eco modulation. So putting the, the, the fees on a much more micro level and a more atomic level. So regulating individual polymers, individual problematic materials on one level. It's also about shifting the incentives. So in the UK, we're about to see a new wave of extended producer responsibility regulation come through. That's essentially shifting the entire cost of the downstream waste system, which is typically handled by, you know, local authorities and shifting that into the, into the production system and essentially saying, you know, to producers, every product you sell now has to contribute to the full domestic downstream waste flow. This is billions we're talking in terms of shift of incentive and, and it's, the burden will be heaviest on the most problematic materials. And then alongside that, we're seeing this sort of second part of the system, which is the sort of taxation incentive. So, perhaps more of it, more of a stick, which is really focusing on trying to drive the right incentives into the circular system itself. So looking at the content of recycled materials, for example and looking at the materials that are being imported. And so we've seen, the UK went live first early last year. We saw Spain go live at the beginning of this year. And we've seen a real, really dramatic impact as a result of that. Hundreds of businesses very suddenly having to drive this level of transparency on their operations, having to get to grips with the amount of materials that they're importing, that they're managing and, and, and having to respond accordingly to the uplifting fees, you know, the 480 euros a ton for virgin materials essentially that are coming into the Spanish market right now. So a real response by business. And then we're seeing at a sort of macro level, the United Nations plastics treaty which we had the INC2, which is the sort of the second convening of the United Nations bodies that are drafting and will now have the mandate to draft the, the, the regulation essentially, which will be published at the end of next year. And this is really focusing on the full system of plastics and really focusing on the outcome of eliminating plastic waste in the environment. So very overarching, wide ranging set of measures that we expect to come online going into next year. And many things in between, you know, we've seen the EU packaging directive, for example really sharpen its focus earlier this year. We, we see the relationship to things like C S R D in the European Union and the, the specific requirements on e ESRSE5. And we, it's, it's always a, it's alphabet soup, isn't it? and so, you know, it really is a sort of multifaceted sort of system approach to drive and change.

Tom Raftery: 7:54

Cool. And just to put some context behind it, Stephen, what's the problem? If we don't get this right, you know, what, what's the potential outcome?

Stephen Jamieson: 8:07

I mean, let's look at the big picture for a second. You know, we're talking about over a hundred gigatons of materials being extracted each year. That's essentially doubled since the year 2000. You know, in 2000, we as a society extracted 50 gigatons of materials. We're well over 100 now. And what's more is that is becoming more linear. When we started looking at this through the Circular Gap Report a little while ago, you know, we were sort of 9% circular, then it was 8. 6% circular. I think we're down to 7. 3% circular now, which means... Think about that, you know, 93 gigatons of materials where we're extracting each year and deliberately allowing to go into the natural environment. That that has so many impacts, you know, 90% of the world's biodiversity loss is due to the way that we're extracting raw materials and the way that we're, we're sort of mishandling this, this, this opportunity. 45% of the world's greenhouse gas emissions can be attributed to the way that we're managing materials. So across every aspect of this, there are huge implications, not just from a waste agenda, but this is a climate change story. It's also a human health story. You know, we're ingesting a credit card size amount of plastic in our diets each week. New research says that we're not just ingesting this, we're actually inhaling it. It's particles in the air today. And these are topics that are not being lost on regulators. These are topics that are being actively discussed in the formation of the new UN treaty. We, we could easily expect this to form a central part of, the treaties that will come in, come online the next couple of years. And it's you know, will have a significant business implication in terms of how we, how we address that.

Tom Raftery: 10:04

Okay. Obviously, key to implementing those regulations is metrics. How do we measure baseline? How do we measure to see that companies are compliant? You know, what's the whole measurement regime behind this?

Stephen Jamieson: 10:26

Yeah, well, this is, this is you know, one of those most interesting areas because I think the world in general in this space very much understands that, you know, what you, if you want to manage something, you have to measure it, you know, it's quite a simple equation that we in business have been working with for many years. And what we, what we see is a number of, of very helpful metric frameworks that have developed over the years. Some more focused on the inflows of materials, the inputs of materials, some more focused on the outputs of materials, some focused on, you know, the operational waste flows. But all, you know, aiming towards the common good of the big picture and system impact. But the reality is from a business standpoint, you're trying to manage things through multiple lenses at all times. You know, most leading organizations now have some kind of circularity goal in terms of the percentage of recycled materials, in terms of percentage of recyclability of your products and your packaging. And, you know, that's pretty common now that we see that across businesses of all shapes and sizes and industries. But what we what's interesting is that there's very often a decoupling of a business's stated goals, their measurement and analysis of how they're meeting those goals, and what's actually happening at an operational level. Because it's genuinely hard to couple those things together, understanding every piece of packaging that flows through your business in a, you know, dynamic ecosystem can be hard to manage. And so one of the things that we've been focusing very hard on as SAP is to really help you join those dots together, help to connect that operational flow with that big picture view, and be able to create that harmony across your organization. So that, you know, if you're managing a set of targets for the UK plastic pact, you can run that off a common data set. You know, the common data set that you can then apply to the Ellen MacArthur Foundation Global Commitment Reporting. Or to any of the other 13 plastic pacts around the world or indeed to pay your, you know, plastic tax obligations for Spain or UK or perhaps to model what's going to happen when the EPR regulations come online in North America. And this is a complex picture, right? We've got, you've got, you know, not just the question of how do you measure an individual material or an individual package. What's also in scope is understanding the logistics that have gone into that material, or that package, knowing what the production plant was that originally produced it, where that location was, potentially where that is intended to go in terms of destiny at end market, understanding the fate of that material so that you can start to understand the recyclability. All of these questions are ultimately dynamic on a given point in time, on a given day, in a given place. And, and so businesses needs to be able to have this holistic view. In order to be able to deliver upon their operational obligations and do that in a way that's consistent with you know, strategic goals.

Tom Raftery: 13:38

Yeah. Yeah. It's got to be very complicated, particularly in an environment where you have a significant proportion of your staff who are, for example, working from home. You know, that's got to be even tougher to manage, no?

Stephen Jamieson: 13:55

Yeah, well, you know, having a disperse workforce and you know, trying to manage complex regulations in many markets. I was speaking to a customer yesterday, you know, they've they're operating in pretty much every market in the world and they're trying to keep track of pretty much every regulation to do with this topic every location in the world. They're looking for help, you know, they're looking for ways of understanding how to simplify this and having a dispersed workforce brings an opportunity in terms of local know how, of course. And you know, but equally it needs to be coordinated.

Tom Raftery: 14:29

Okay. I mean, I see here in Spain I, I'm Irish. I like beer. So, in the last few months I've noticed that when you get a six pack of cans of beer, they're now no longer held together with plastic rings. They're now held together with cardboard. So they have cardboard that holds the cans together and you've got two holes in the middle of the cardboard and you can pick up the six cans or eight cans in some cases with a cardboard, stiff cardboard board, holding them in place. So that's a tangible change that I've seen here, and it's not just one manufacturer, I've seen it across several of them here. So, how are businesses in general responding? That's just one kind of example that I've seen, that I've noticed, but how are businesses in general responding to these changes in regulations, and also changes in consumer preferences, you've got to think.

Stephen Jamieson: 15:26

I'm really glad you picked a beverage example in Spain and Tom, because actually that's... One of our most we find out one of the most progressive parts of the ecosystem at the moment. We've had a very significant level of traction with our most advanced solutions in this space. SAP Responsible Design and Production. Really strong take up in the, in the beverage sector in Spain specifically. We've had Hijos Rivera. Pronounciation's probably wrong Not too bad, among others that are you know, utilizing SAP Responsible Design and Production today. Using that to understand their operational obligations in terms of plastic taxes, and actually themselves very progressive businesses and really trying to drive the cutting edge of innovation in terms of how to. Deliver sustainable products and materials to market. And you know, I think it isn't the case of saying that they're only able to do this because they've got SAP Responsible Design and Production. But it, it, it builds this picture of having, you know, operational control and an insight and understanding in what you're doing alongside the process of, of target setting, alongside the process of actual execution. And the, and the businesses that are most progressive for the ones that have the best handle on those three on those three aspects.

Tom Raftery: 16:42

So, what, what, Stephen, are the kind of main challenges that organizations are facing right now? And how is tech, you know, rising to meet those challenges?

Stephen Jamieson: 16:54

Yeah, I guess there's, there's a number of pieces to, to that, to that question. You know, clearly there's a, there's a central measurement challenge, right? As we, as we've discussed in terms of understanding the materials you are bringing in and having the knowledge and the confidence and the provenance of those materials. One of the big questions at the moment is understanding, you know, the recyclability, sorry, the recycled content of a particular material. It could be that you've got a contracted packaging provider. And getting absolute confidence in terms of the, the, the provenance of each material within a, within a contracted package can be quite, quite challenging. And so, particularly when, you know, you're talking about recycled content that may be going through multiple loops, essentially. And so, you know, getting into the, the, the details of that can, can prove to be challenging. So getting that kind of detailed system measurement is is clearly one major topic area. But then moreover, you know, I think the, the, the bigger system challenge, I'd say that, you know, if we, if you went to any given circularity conference in, in, in 2023, you know, the, the topic that's most often on the agenda is how do we scale reuse? You know, how do we move to a system where we're able to serve beverages and, and drinks and food items in a way that doesn't depend upon you know, uniquely produced package every single time. And you know, I think that what is fair to say is that there's some good progress, but there's absolutely no silver bullet yet, you know, producers retailers and businesses and innovators are bringing many solutions to the forefront. But you know, the, the reality is we need to bring together capital investment that relies on predictability of, of, flow, essentially, of, of business. We need to bring forward a scale of, of infrastructure that is able to to quote one of the CEOs of one of the large producers, you know, someone having those organizations that can do the washing up essentially. So once a a package has been returned, how does that get cleaned and then put into a place where it's fit for, you know, food production, food consumption once more, for example. And so, there are some legitimate challenges in terms of how that, that, that is done. But I think the ecosystem is clear that this can be solved and will be solved through a combination of effective policy instruments you know, effective alignment of the investment community as well as, you know, innovation and the initiative of businesses themselves. And I think we see the role of technology is really being the enabler across, across that ecosystem. So about being able to provide that transparency to the policy makers in order to be able to understand the most effective policies in a given location in order to be able to provide that insight to the investor community to understand the, the investment scenarios that actually work and leads to effective change as well as enabling business in, in, in terms of its, their own operations. You know, there are many areas that we can support directly today, you know, we can support businesses that are moving from a one business model that depends upon product sales essentially to one that is, is managing more of a service based model. And you know, through our own solutions through our S4 platform and our CX portfolio, we've got the abilities to, to serve those new innovative business models. And we see some bright spots of activity we've a great, great partner called El Gramo, who, who are born in, in South America. And, you know, they've been been brought to the market by serving essentially food by the gram. Hence El Gramo. And they are now innovating in the UK for example. They're able to provide you know, reuse systems and reuse services to some of the major, major supermarkets. And their ability to deliver that, you know, works with you know, through SAP solutions and by enabling businesses, both on the physical level, as well as on the technical level. So, you know, it really, it really does require you know, that, that focused approach.

Tom Raftery: 21:17

Okay. Have we lost that knowledge though? Because I remember as a kid. Going around collecting used drink bottles, Coca Cola bottles, typically, and, you know, returning them to a shop and getting 5p for each one I returned, you know, we were able to do it. 40, 50 years ago when I was young, what happened? Why has that all changed? I know we've shifted to plastic from glass, but you know, A, could we shift back? B, could we do it for plastic as well? You know, it used to be possible. It used to be possible.

Stephen Jamieson: 21:58

Indeed, and and some markets still do it, right? I mean, you know, look at some of the Scandinavian markets. I think Germany have still got a pretty effective DRS system in place. But I mean, certainly for UK, absolutely hopeless. You know, no effective deposit return yet. Despite much discussion you know, Scotland seemed to get closest and still, still not there but you know, did deposit return systems is, is technical name for what you're talking about are an effective policy instrument and are things that we do need to see more effectively implemented. I do have some hope that the EU packaging directive will provide much better harmony particularly across the European union on this topic. And so, you know, that, that has, you know, pretty significant goals in terms of you know, 100% recyclable and recycled content in, in, in, in materials and, and driving the reuse agenda by 2030 in Europe. So, you know, I, I would hope that deposit return becomes a more commonly accepted approach on the, on the ground and, and move away from just the discussion point in, in policy circles.

Tom Raftery: 23:10

Cool, cool. Do you have any customer examples you can speak to Stephen? I know you mentioned Gonzalez y Byass and Hijos de Ribera, but are there any more or could you go into more detail on those or speak to any others?

Stephen Jamieson: 23:26

Yeah, well, I mean, I think one of the, one of the other ones that are quite I think quite interesting right now is sort of large consumer goods company Henkel. They've been I'd say really driving the, the, the, the, some of the cutting edge around this bridge between policy and and, and technology implementation in, in recent in recent months and years, and you know, they were one of the first to respond to the the, the challenge set down by the Spanish regulators on the Spanish plastic packaging tax. And, you know, they, they managed to you get this sort of understood and integrated into their business in a really, you know, short period of time. I think it was, you know, less than three or four months that they were gone from, you know, initial sort of inquiry into, you know, live. And and submitting their, their obligations into the Spanish tax system. And so, you know, it just shows the kind of like the an organization of that size. You think the sheer breadth of products that they place into the Spanish market each year, the combination of different plastic materials that they have in their, in their packaging mix. And so it's no mean feat to be able to get that precisely understood and data terms precisely measured in terms of import flows and calculated in terms of tax obligations in such a short period of time. And so, you know, they've been a very good partner to work with as we've brought this capability into the marketplace, but it, it won't stop there. You know, they're, they're now moving on to the sort of wider European portfolio. They're now working on the UK obligations. And as we go forward, we're starting now to bring new capabilities into that mix. So not just looking at the calculation and the obligation at that, that level, but now starting to build in the sort of the scenario modeling and the analysis that allows you to say, well, if that's my obligation in, in France or in Spain, what do I do when, you know, the new EPR system comes online in California? How does that change my business? So, you know, we're starting to then bring those insights into that scenario modeling 's piece to really start changing business decision making and ultimately design decisions. Which is really the, the target here is, you know, 80% of, of sustainability impact is baked in at design time. And that's the that's the moment we all need to influence for all the measurements and all of the accuracy we can deliver in the world. If we're not changing a design decision then we're having no impact. So that, that's really where we're, we're going now.

Tom Raftery: 26:40

Okay. That's where we're going now. Where are we going next? What does the future hold for all this?

Stephen Jamieson: 26:47

Well, I think this is, this is, this is really, it comes back to my point around how we keep this alignment between policymaking, business execution and you know, the, the, let's say the public at large and what we've seen in, in the plastic packaging space is this sort of rapid alignment in certain markets. And that's allowed those markets to move forward to your point, you know, your favorite beer without the plastic wrappers around anymore. But what we're now needing to see is that scale up. And so we're starting to see the green shoots of that with the EU Packaging Directive. We're starting to see the macro aspects of that with the UN Treaty. We're now seeing, you know, a lot of really good work in North America. Some of which, a lot of which is you know, driven by their Inflation Reduction Act. And and so it's really how we now harness that momentum. Not just in the context of plastics and packaging, but then how we bring additional material types into scope. So how we repeat that for textiles. There's some you know, new news I guess in the European Commission that, you know, Extended Producer Responsibility for textiles is Is, is really now coming into their focus and, and will be mandated in the months and years ahead. We're now need to see the same for electronic components and batteries, and we have seen the advent of digital product passporting on the horizon. And so how, how to really align those, those pieces so that we can drive the acceleration that we we've, we know it's possible because we've seen it work now in, in, in, you know, markets like Spain and scaling that to a global context is almost the, the, the less hard part of the problem so from a system standpoint, naturally from a, on the ground and political standpoint is a different question. But, you know, we know from a technology standpoint that these things are good to go.

Tom Raftery: 28:45

Cool, cool. We're coming towards the end of the podcast now, Stephen. Is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to think about?

Stephen Jamieson: 28:59

No, and I think, I think the, at the end of the day, I always try and begin and end these things with the question, the point around impact and It's so easy to get lost in the the minutiae and the challenges of what we're doing day to day without, raising our head above the parapet and looking at what actually makes a difference. So, you know, I, my, my closing thought in all of these things is always you know, about how we can collaborate as a community to ultimately deliver, deliver upon global goals. You know, there's, there's little point creating solutions in one market or another if the, the, the consequences that, you know, a market outside of that finds a, some new low hanging fruit or area to differentiate and creates, you know, an equal and opposite problem. So, you know, that, that's one of the challenges that we're, we're, we're also looking at, you know, how do we balance this with the needs of, you know, communities in the global South, for example. How do we make sure that we don't simply focus on a European solution and then create you know, a small island problem in Southeast Asia? And so, you know, this is certainly a kind of key topic that we, you know, almost have to keep reminding ourselves to really focus on as well because it is important. This is a global solution.

Tom Raftery: 30:18

Okay. Stephen, if people would like to know more about yourself or any of the things we discussed in the podcast today, where would you have me direct them?

Stephen Jamieson: 30:28

You can generally find our landing zone on sap. com forward slash CE. Or if you'd like to share, send an email and go for circular economy at sap. com. And certainly me or one of the team will certainly respond. Phenomenal. Phenomenal.

Tom Raftery: 30:43

We said at the start, Stephen, that people listening should try and listen to your voice and try and figure out who it was you sounded like. So, it's not just me. You said on the prep call that it's not just me. You've had other people say it to you as well. So, for people listening, who is it, Stephen, that your voice sounds like?

Stephen Jamieson: 31:04

I'm not sure I can I'm not sure I can acknowledge this one, Tom, because it just, it seems so ridiculous to me. But you and others have said that it sounds a bit like Hugh Grant.

Tom Raftery: 31:19

I should ask you some questions about the Notting Hill movie that you starred in, but... All right, Stephen, that's been great.

Stephen Jamieson: 31:28

That was a long time ago.. Tom Raftery: Phenomenal Thanks a million for coming on the podcast today. Thanks, Tom. Great to catch up.

Tom Raftery: 31:38

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about the Climate Confident podcast, feel free to drop me an email to Tom raftery@outlook.com. Or message me on LinkedIn or Twitter. If you like the show, please, don't forget to click follow on it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.