serco incentives report final

Authors:Alison HolmesJames Fulford

Clare Pitts-Tucker

February 2014

Investigating the Impact of Recycling Incentive SchemesSummary Report

This piece of work was commissioned by Serco for our customers and colleagues in Local Government. It is testament to their thirst for knowledge, professionalism and commitment that we decided to embark on this journey over 12 months ago.

The current financial climate for Local Government is challenging. And within this backdrop Local Government both wants and needs the information and evidence base to make good decisions.

With their £2m investment in the Reward and Recognition (R&R) fund the Government has provided funding for those authorities seeking to invest in and make the case for recycling incentives.

There has to date been no proper examination or scrutiny of their performance, nor debate as to their ability to contribute towards our local and national recycling goals.

Serco has no vested interests in the incentive schemes debate. We are not pro or anti and nor do we seek to support, judge or criticise government policy.

As a waste and streetscene services partner we share a common optimism with and support Local Authorities up and down the country who are investing in recycling incentives as a means to drive up recycling rates.

With the academic rigour and analysis of Eunomia and support from both CIWM and Defra in this report we seek to make sense of a complex picture in an objective, honest and transparent way.

This work sets out to answer some very simple questions. For the first time combining the evaluation of scheme impacts with public opinion data from Serco’s own public consultation programmes. The work also goes beyond these shores drawing on a broader body of learning and evidence about what does and doesn’t work elsewhere.

With this new report we are taking important ‘first steps’ in understanding the impacts of UK recycling incentive schemes.

We very much hope it is useful to all those in Local Government with whom we work and share a common commitment to furthering our collective knowledge and to making better and more informed decisions.

Mike Boult Robin DaviesManaging Director Development DirectorSerco Direct Services Serco Direct Services

About SercoSerco is a UK owned and based FTSE250 company. We work as a service partner and provider to Local Government delivering high performing public services helping them to improve efficiency, lower costs and deliver transformational change.

About EunomiaEunomia is an influential UK-based environmental consultancy with a focus on waste and energy issues. We provide advice and support to public and private sector clients, including helping local authorities to design, commission and manage high-performing waste collection services.

AcknowledgementsThis research relied on time and data from officers from Local Authorities and key individuals from Private Sector Organisations. Thank you for your assistance with this research.

DisclaimerEunomia Research & Consulting has taken due care in the preparation of this report to ensure that all facts and analysis presented are as accurate as possible within the scope of the project. However no guarantee is provided in respect of the information presented, and Eunomia Research & Consulting is not responsible for decisions or actions taken on the basis of the content of this report.

Our Journey

Investigating the Impact of Recycling Incentive SchemesSummary Report

Contents

Foreword 5

01 Introduction 6

02 Scope 7

03 Key Questions 8

04 Bringing it all together 17

4

As pressures build on Local Government to deliver ever more demanding targets against a backdrop of reducing budgets and austerity agendas this work will provide a valuable contribution to the discussion of opportunities to meet those two demands.

Government are looking for Councils to develop and implement incentives to encourage behaviour change particularly in the waste and recycling sectors. There are good examples and case studies of how this can be achieved, many of which are reviewed in this document.

In order to implement such initiatives Local Authorities need to understand the cost, impacts and benefits of incentives. The evaluation, analysis and results contained here will make a valuable contribution to the debate and go a long way to filling the information vacuum.

There is much for us to learn about incentives in this sector and at present we are only scratching the surface. We need objective reports like this to inform decision makers so that they can see the options and decide what is right for their residents and their particular circumstances.

I look forward to this piece of work having a significant effect on how we view and implement incentives in the future.

Chris MurphyDeputy Chief ExecutiveChartered Institution of Wastes Management

Foreword

Investigating the Impact of Recycling Incentive Schemes

5

CIWM welcomes this piece of research

commissioned by Serco and undertaken

by Eunomia, it is both timely and topical.

Eunomia Research and Consulting is pleased to have been given the opportunity by Serco to undertake new and detailed research looking at the costs and benefits of recycling incentive schemes with a view to presenting the most comprehensive possible set of evidence regarding their efficacy. This report summarises the findings of that detailed work.

We have over the last decade undertaken a number of studies, both at home and abroad, examining the impacts of policy options including both positive and negative incentives – rewards and charges – on landfill diversion and recycling performance. Other organisations have also contributed good work in this area. For this study we have built on this body of work and hope to make an important contribution in moving forward the incentives debate.

This important research could not come at a more critical time for UK Local Government which has seen deep cuts to its budget over successive Spending Rounds and UK recycling rates starting to plateau after a decade of consistent rises.

Now more than ever local government needs access to good information and evidence about the potential options available.

This work looks at:

■ The cost and benefits of the schemes that have been compared and evaluated;

■ The impacts of recycling incentives benchmarked against ‘Nearest Neighbours’1 to better understand whether the observed changes are attributable to the incentive scheme itself; and

■ Detailed and extensive resident preference and attitudinal data regarding incentives.

01 Introduction


6 1 The Chartered Institute of Public Finance and Accountancy (CIPFA) produce a ‘Nearest Neighbour’ model to “aid local

authorities in comparative and benchmarking exercises” (http://www.cipfastats.net/resources/nearestneighbours/)

The work draws on evidence obtained from over 30 different recycling incentives schemes operated by UK Local Authorities. These represent all UK schemes of which we are aware and which are not funded under Defra’s Recognition and Reward programme. Defra have separately commissioned Brook Lyndhurst to review the impacts of its own Reward and Recognition Fund. The interim report from that study was published on in December 2013 with the final report due in 2015.2

This work has adopted a similar evaluation framework as used by Brook Lyndhurst so that between the two reports, we have a comprehensive picture of the impact of incentive schemes and we believe the right evidence to allow local authorities to make more informed decisions and to consider the potential impacts of incentives alongside alternative policy options.

The schemes which we have reviewed include both those developed and operated by a number of external partners and providers as well as schemes developed by local authorities themselves.

The schemes vary in complexity from the very simple in which residents’ participation is automatic with tonnages aggregated and rewards shared across a given ward or neighbourhood, through to more complex schemes which involve active participation in registration and opting-in and where residents can earn points or vouchers.

They include personal incentive schemes where a householder directly benefits from their recycling behaviours and communal schemes where the benefits are pooled for wider community benefits or use.

We evaluated schemes across a wide ranging spectrum of costs from those costing less than £1.00 per participating household per annum to those costing in excess of £3.00 per household per annum.

The data available for the fullest analysis is limited for various reasons. A relatively small number of authorities offer incentives. In some cases where incentive schemes have been introduced,

the authority will have also made other changes to the waste and recycling service which means the effects of the scheme cannot be isolated from the effects of the service change, further limiting the sample size. In addition good comparator authorities need to be identified which haven’t introduced an incentive scheme but which have similar services (which have also not changed during the study period) and similar demographics. The authority running the trial will need to have invested some considerable effort in scheme or trial design and data collection.

For these reasons only five of the authorities we looked at have generated data which is sufficiently reliable to support proper analysis. The Defra/Brook Lyndhurst interim study focussed on eight schemes for the same reason. All of these issues mean that the analysis presented here is necessarily indicative rather than conclusive. Given that caveat, this analysis taken alongside the Defra analysis presents the most comprehensive possible picture of recycling reward scheme performance and summary of their likely value and impacts. The literature review presented in the full report tends also to support the picture that emerges from the data.

02 Scope


72 Brook Lyndhurst (2013); EV0530 Evaluation of the Waste Reward and Recognition Scheme: Emerging findings; Interim report to Defra, December 2013; https://www.gov.uk/household-reward-and-recognition-scheme-guidance-for-local-authorities

This research sets out to answer some the most important questions in relation to incentives schemes. These are:

1 What’s the likely impact on landfill diversion and recycling tonnage?

2 What do residents think about reward schemes?

3 Which types of scheme are most effective?

4 Are there other ways to achieve a more significant impact?

5 Do reward schemes provide good value for money?

Our findings in respect of each question are set out in the following sections.

1 What’s the likely impact of reward schemes on landfill diversion and recycling tonnage?

Across the incentive schemes for which detailed information was available we found:

■ Authorities with recycling incentive schemes recorded a very wide range of different outcomes with recycling yields rising by as much as 32% for one authority but falling by 15% for another at the opposite extreme. Within this wide variation there was on average an 8% increase in recycling performance.

■ Similarly wide ranges were seen in the change in tonnages of residual waste with an average 3% reduction.

■ There was wide variability in the performance of different schemes. Two of five schemes showed both increased recycling and reduced landfill.

The large variability in scheme performance is in keeping with previous work we have undertaken, which is discussed in more detail in the literature review presented in the full report. In some cases authorities recorded results which were contrary to the intention of the reward scheme, for example there are cases where authorities have seen both an increase in recycling and an increase in landfilled waste.

These possibly counter-intuitive outcomes underline that there are a large number of non-scheme related factors which affect the results of the study. Whilst we have attempted to account for these, for instance by working with data from authorities where services didn’t change when the reward scheme was introduced, background variation in waste data is still evident.

03 Key Questions


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To better understand the extent to which changes in recycling and waste arisings related to the reward scheme, we benchmarked the performance of authorities with schemes against the performance of ‘Nearest Neighbour’ authorities without reward schemes.

This drew into the research a further 27 authorities for which national waste data was analysed to establish disposal and recycling trends.

The authorities which were used for benchmarking had qualifying characteristics such as similar demographic profiles, similar services and had not significantly changed their collection arrangements in a way that might affect the results.

Based on the nearest neighbour analysis it is not possible to directly attribute the recorded results to the impact of the incentive schemes, in that;

■ Nearest neighbour analysis demonstrated that similar changes in recycling performance and landfill diversion were seen in 66% of the nearest neighbour areas.

This means that the results recorded in the incentive scheme areas were also being recorded in adjacent areas where no schemes were operating. This leads us to conclude;

■ Other external factors aside from the incentive schemes themselves are likely to contribute to the evaluated impact of the schemes.

■ It is not possible to build a reliable case for investment in recycling incentives schemes ‘alone’ as a route to achieve the results we have recorded.

Identifying these other external factors and their relative significance would require more research. These factors might include socio-economic trends, resident attitudes relating to purchasing and recycling and the spend weight and frequency of local authority communications.

These results support and underpin the rationale for this important piece of work and demonstrate that Local Authorities will want to very carefully consider the cost of the scheme versus the financial impact it is likely to achieve by developing a business case for investment.

Clearly, the case for investment in recycling incentives can only be made where the scheme costs are commensurate with the likely benefits. As discussed below, we have looked at schemes on the basis split into cost bands to identify where cost recovery is most likely.


Supporting the evaluation of the impacts of recycling incentive schemes on arisings, we have used customer attitudinal data provided by Serco from its unique Citizen First public consultation programme. This provides useful insights into how residents regard their own recycling behaviours and the likely impacts on those behaviours as a result of incentive schemes.

Survey data from a different group of five local authorities across a statistically robust sample of residents was analysed in relation to the likely impacts of incentive schemes. This showed:

■ 25% of residents say that recycling incentives would encourage them to recycle more with 75% suggesting they are already recycling as much as they can.

Clearly the attitudinal research shows that recycling incentives are likely to directly appeal to a relatively small proportion of the population, and as such, this may go some way to explaining the positive impacts and results where these have been achieved.

What is consistently clear from attitudinal work is that the UK as a nation has come a very long way in embracing recycling and that this journey has seen a significant improvement in UK’s recycling performance relative to its European neighbours over the last decade.

Attitudinal data continues to show that the vast majority of people now claim they are intrinsically motivated to do the right thing with regards to recycling without the need for financial rewards and incentives. This does not detract from the need for good and regular communications to encourage, prompt and remind residents to recycle, a point consistently reiterated by the majority of participants in this evaluation study.

This is supported by similar work undertaken by Serco with commercial waste customers which also shows that the majority of business customers are also generally prepared to recycle without cost reductions or discounts because put simply “it’s the right thing to do” and assuming it’s easy for them to do so and they have the space available at their premises.

This said recycling incentives may provide the necessary key to unlock a stubborn minority that are apathetic to environmental issues, are not motivated to recycle and who need some additional extrinsic motivation or reward to change their behaviours.

3 Which scheme types are most effective?

There are a variety of different types of reward schemes available to Local Authorities. Our analysis considered which of these were most likely to have positive impacts and found:

■ There was little difference in the overall preference between personal and communal incentive schemes with personal incentives being consistently marginally favoured as their preferred option.

■ Comprehensive range of marketing communication channels were used in all of the reviewed schemes and seem likely to be a pre-requisite for any scheme to be successful.

The attitudinal research showed that typically there was a broadly balanced picture of preference regarding individual and communal incentive schemes.

Given this result the additional investment required for some of the more expensive schemes needs to be carefully evaluated as part of a business case,

and specifically, where this involves major sunk investment in ICT, vehicle modification, chipping and bin weighing infrastructure.

As already mentioned, further work was undertaken to explore where any other factors were involved in the success of the different schemes we studied. Whilst the report does not set out to test the effectiveness of different marketing strategies and approaches we were pleased to see that all of the schemes we looked at were reliably supported by a comprehensive multi-channel marketing campaign.

From interviews we conducted, a number of local authority officers felt that reward schemes create a good opportunity for LAs to engage residents and to promote their services in a new and interesting way and that this wider promotional opportunity appears to exist regardless of the type of scheme being used.

Given these findings, LAs should carefully consider the level and availability of funding for marketing and the longevity of marketing communications work as part of their business case for recycling incentives.


This study sets out to evaluate incentive schemes alongside a number of different policy options and service changes that LAs may seek to consider. Whilst a comprehensive analysis of alternative options is outside the scope of this work we have sought to at least consider the relative impacts of incentives as set against some other options that are commonly used across the UK.

Our work looked at two separate analyses. The first of these was resident’s stated preference for certain types of service changes as reported in Serco’s extensive resident survey work. The second looks at the impacts of constraining the provision of residual waste capacity: a specific area that data analysis demonstrates is likely to have a significant impact.

Serco’s consultation programmes regularly test resident preference and the likely impacts of recycling incentives set against a number of different service changes and policy options that a local authority may consider.

Whilst survey responses need to be treated cautiously, residents report a number of other services changes that they believe will have a greater impact on their recycling behaviours.

■ Residents report that commingled recycling and wheeled bins will increase their willingness to recycle (where these don’t exist).

■ Better Marketing Communications and Incentives rank as less likely to encourage residents to recycle more with 9% and 5% respectively.

It is not our intention to discuss the relative merits of different collection systems which has been done extensively elsewhere, only to illustrate residents’ expectations regarding the likely impact of incentive schemes on changing their behaviour, relative to other service changes and promotional measures.

As well as looking at what service users say will affect their recycling behaviour, we are also able to look at the data to see how residents actually respond.

A number of authorities have limited or ‘squeezed’ the volume of waste which they collect from residents. This has been achieved either by shifting from larger to smaller wheeled bins or by limiting the number of sacks that will be collected. There are also cases where an authority moves from a sack-based system to providing a small wheeled bin. In this case, the attitudinal evidence above suggests that this may be popular with a significant proportion of the population.

We have looked at the impact on recycling tonnages where authorities have introduced ‘residual squeeze’ tonnages and show below the generally very positive impacts this policy has alongside the performance increase seen where incentives are introduced.

Clearly some of the changes discussed here have wider implications and will be more difficult for a Local Authority to introduce than an incentive scheme. Considerations around waste policy and strategy, political acceptability, demography, sunk costs and infrastructure and investment implications must all be accounted for.

■ Incentives can represent a relatively quick, low risk and low cost option available to LAs but by the same token are unlikely to achieve the extent of changes in behaviour and recycling performance as other potential policy options.

Pulling these two sets of analysis together, it is clear that Reward Schemes are not a panacea and must be considered within the context of a wider range of recycling policy options available to LAs.


One of the most important questions we set out to answer was whether incentive schemes justify their cost in terms of return on investment.

This question is even more important given the results of our work which shows that recycling incentives demonstrate wide ranging variability in cost and in the level of benefits they are likely to achieve.

As part of this analysis we have banded the cost of the different incentive schemes being evaluated into three cost bands low, medium and high in accordance with the scheme costs of operation per participating household. We did not secure good cost or arisings change data for schemes which cost less than £1/household/annum (the low cost category).

■ For medium cost schemes, costing £1.00-£2.00 per participating household, the costs of introducing such schemes come closest to being justified and recouped in diversion savings and recycling income.

■ For high cost schemes, costing >£2.00 per participating household the investment in incentives schemes is unlikely to be recouped in diversion schemes and recycling income.

In all cases the business case for investment assumes that the benefits are proportionate to tonnage impacts and the LA implementing the scheme can directly benefit from both diversion and recycling benefits. In reality this will not always be the case and collection authorities may not benefit financially from reduced residual arisings.

The chart to the right shows the range of costs and savings for schemes which fall into each of two bands: those which cost more than £2/household/ annum; and those which cost £1-£2/household/ annum.

Whilst we did not secure good cost or arisings change data for schemes which cost less than £1/household/annum we are of the view that these schemes, particularly towards the cheaper end may offer some prospect of being cost justified. Whilst for the cheapest schemes it may be possible to develop a business case for investment, for schemes costing more than this amount and based on the impacts of this study no such case can be made.

Within the body of the full report we provide further details on how the costs and benefits of the different schemes have been calculated. Costs and benefits will vary by area and region (depending on costs of disposal for example). Our analysis assumes average costs and savings based on WRAP’s annual gate fee survey and the Materials Pricing Report.
















9












Similar changes in recycling performance and landfill diversion were experienced in

66% nearest neighbour areas.



























































10












The attitudinal research shows that recycling incentives are likely to directly appeal to a relatively small proportion of the population.



























































11












There was a broadly balanced picture of preference regarding individual and

communal incentive schemes.




















Figure 1 With which type of incentive scheme are you likely to recycle more? (base: 1,000)

Personal46%

Don’t know12%

Communal42%


























12

Residents report a number of other service changes that they believe will have a greater impact on their recycling behaviours.
























































Figure 2 Which of the following would make you recycle more? (base: 700)











0

10

20

30

40

50

42% 41%

9%

5%3%

Commingledrecycling

Wheeled bins Incentives OtherClearer Info onwhat can be

recycled





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We have looked at the impact on recycling tonnages where authorities have introduced ‘residual squeeze’ tonnages

and show the generally very positive impacts.

-15.0

0.5

16.0

31.5

47.0

62.5

78.0

93.5

109.0

124.5

140.0


































































Figure 3 Impact of Different Initiatives on Recycling Tonnages

139%

-7%

30%

52%

127%

56%

10%8%

32%

5%8%

-15%-2%

75%

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14

Reward Schemes are not a panacea and must be considered within the context of a wider range of recycling policy options available to LAs.






































































15

Whilst for the cheapest schemes it may be possible to develop a business case for investment, for schemes costing more than this amount

and based on the impacts of this study no such case can be made.


































































Cost/Saving

Scheme cost>£2

Scheme cost£1–£2

Figure 4 Costs and Savings ranges of Reward Schemes, grouped by cost band

0 £1 £2 £3 £4 £5

Cost per household

Cost per household

Saving per household

Saving per household





16

There is strong evidence and a clear consensus that DRS schemes have very positive impacts on both recycling rates and levels of litter.

Other Incentive Schemes

The full report also looks in some detail at the evidence for various types of incentive scheme other than recycling rewards.

Deposit Refund Schemes (DRS) involve end consumers paying a small deposit at the point of purchase (for example on a beverage container). This deposit is refundable when the can or bottle (in this example) is returned to a collection point. There is strong evidence and a clear consensus that DRS schemes have very positive impacts on both recycling rates and levels of litter. A good case can be made that such schemes are cost justified although this continues to be widely debated.

Pay As You Throw schemes (PAYT) charge waste producers, be they businesses or individual householders, for the costs of waste collection in proportion to either the volume or the weight of the rubbish that they produce or the frequency with which it is collected.

There is strong and reliable evidence for the efficacy of PAYT schemes at dramatically increasing recycling rates from various countries. PAYT also has demonstrably positive financial and environmental impacts.

Introduction of fully functional DRS or PAYT would require strong political support and no major UK party has shown sufficient appetite for these potentially controversial and easily mis-represented schemes. There seems little prospect in the short term of any such scheme being introduced in England. In Scotland, however, pilot schemes aiming to test the impact of DRS have been run and the Scottish Environment Secretary has indicated that he finds the idea interesting.

Eunomia and Serco hope that this work is able to ‘move on’ the debate regarding recycling incentives schemes, the extent to which they work and their financial costs and benefits.

Reflecting on key findings

Whilst the evidence base is not sufficiently large to be treated as conclusive, this report, read alongside the interim Brook Lyndhurst study for Defra, presents the best possible assessment of the available evidence to date. As part of this evaluation study we have analysed all non-Defra funded schemes, to the greatest possible extent based on the available data, to determine the likely impacts of these schemes on landfill diversion and on recycling performance.

We have found that whilst reward schemes in some cases appear to be making a positive contribution to recycling performance, the results achieved are highly variable. Nearest Neighbour analysis shows that some of the apparent performance gains achieved in reward scheme areas are not attributable to the impact of the scheme but relate to other factors such as potentially changing patterns of consumption and disposal. The underlying drivers of patterns of waste and recycling arisings remain complicated and this continues to be an area which merits good and detailed research.

We have also looked at how incentives perform relative to other changes that Local Authorities might make either to their services or to the promotion of their services. We have found that these schemes should not be considered to be a panacea and where used should be used to augment and contribute towards the other policy and service options that are likely to deliver more significant impacts.

Finally, the available evidence appears to indicate that low cost schemes offer the best prospect of demonstrating a business case with scheme costs offset by the landfill savings and recycling benefits that the scheme creates.

Where Next

The work we present here builds on over ten years work in this area. As is clear to the authors and sponsors of this report, England appears to have lost its way in relation to national waste strategy and waste policy. The plateau in national recycling rates, after years of steady improvements, confirms the need for serious and radical policy solutions which will put England firmly back on course for 2020.

This view is shared by waste industry professionals, and the CIWM have sought to highlight and address this in their annual reports in both 2013 and again in 2014.

From Eunomia’s wide ranging expertise and body of work in this area drawn from both UK and abroad we believe it is now critical that the industry and Government engage in an open and honest debate on the best way to re-establish our positive momentum and direction towards 2020.

Within the scope of this debate needs to be policy options which rightly allocate the fair and true cost of waste disposal and treatment based on the amount of waste generated by households, institutions and businesses.

Our full report presents more detailed analysis regarding the costs and benefits of weight based residual charge systems, used more widely around the world. The results and the impacts of landfill diversion and recycling are clear, unambiguous and compelling.

Until this debate starts in earnest Britain’s recycling performance will continue to stagnate, increasingly lagging behind the aspirations of our government, our industry and of the communities served by these services.


17







04 Bringing it all together

Where Next








18

It is now critical that the industry and Government engage in an open and honest debate on the best way to re-establish our positive momentum and direction towards 2020.







Where Next













Where Next







For more information please contact:

UK&E Local & Regional Government Enterprise House, 11 Bartley Wood Business Park, Bartley Way, Hook RG27 9XBTel: +44 (0)1256 745900 Email: [email protected] www.serco.com

Eunomia Research & Consulting 37 Queen Square,

Bristol, BS1 4QSTel: +44 (0)117 917 2250

Email: [email protected] www.eunomia.co.uk

Printed on paper from well managedforests and other controlled sources.

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