Toronto Star

By Richard Warnica

A business feud has put the province's battery recycling program in jeopardy while Ford government sits on legislation that would allow the regulator to issue fines for non-compliance.

Picture this: a fraying bag stuffed with old batteries. There’s a few chunky 9-volts in there and a handful of lithium coins, all jingling in a sea of alkaline AAAs and AAs popped out from TV remotes and chirping toys.

In many Ontario basements, they’re as ubiquitous as hockey sticks and Christmas tree stands. But for most consumers, those batteries exist in a twilight zone of missing knowledge. Everyone knows they shouldn’t chuck them in the trash or drop them in the recycling bin, but not everyone is sure where, exactly, they are supposed to go.

“I talk to waste experts,” said Emily Alfred, a waste campaigner with the Toronto Environmental Alliance. “They don’t always know either.”

As big as that knowledge gap may be, though, the surprising reality is that over the past 11 years Ontario has quietly developed what many consider one of North America’s finest systems for gathering and recycling used batteries. In 2019, the last year for which full numbers are available, 54 per cent of household batteries sold in Ontario were collected for recycling. That’s about 52 times higher than the rate in 2006.

“We’ve developed a world-class program … in Ontario,” said Peter Hargreave, an environmental consultant

Until July 2020, Ontario had what many consider one of North America's best systems for recycling batteries

But many in the waste, recycling and environmental sectors now believe that program is in jeopardy. A caustic feud between the organization representing most battery producers and the province’s largest battery recycler, in Port Colborne, Ont., has severely damaged the existing system, critics say, shutting thousands of battery drop-off locations out of the Ontario program and pushing 30 employees at the Port Colborne plant out of work.

The increasingly personal clash is the culmination of a fight that has dragged on for more than a decade in Ontario. It features competing audits, lawsuits, lobbying, scrap yards, a spice warehouse, an OPP complaint and, so far, two unprecedented public notices from the provincial recycling regulator that battery producers in Ontario are out of compliance with the law.

“It’s a bit of a disaster,” said a senior industry source who was granted anonymity to speak frankly about a commercially sensitive topic.

For those who follow the waste and recycling industries, the battery issue has become something of a canary in the coal mine. They’re worried that if the provincial government doesn’t give the regulator what it needs to end this fight soon, it could set battery recycling back decades in Ontario and even undermine the integrity of the broader recycling system in the province.

“If you don’t give them tools, this whole recycling thing in Ontario is just going to fall apart,” the industry source said. “I would argue that on batteries, it already has.”

For now the provincial regulator in charge of recycling can’t even say where most of the used batteries being picked up in Ontario are actually going. One thing is for sure, though, they aren’t going to Port Colborne, which has the only plant in Ontario capable of recycling batteries at volume.

“It’s a great question,” said Jo-Anne St. Godard, executive director of the Circular Innovation Council (formerly the Recycling Council of Ontario.) “Follow the battery. Where does it go?”

Wayne Elliott, the founder of Port Colborne’s Marine Recycling Corporation, made his name scrapping ships off the Welland Canal. In 2015, Elliott’s company famously ferried Captain John’s Harbour Boat Restaurant from the base of Yonge St. in Toronto to its final home in his Port Colborne scrap yard. But for the last several decades, Elliott has had a side business recycling batteries under the brand name Raw Materials Company (RMC).

Consumer battery recycling can be a tricky business. Primary single-use batteries and rechargeable batteries (the ones you buy and insert, as opposed to the kind that come built in to a device) are considered household hazardous waste in many jurisdictions. Left in a landfill they can deteriorate over time and leach chemicals into the groundwater. But coming up with a system to collect used batteries from all those forgotten bags in basements is easier said than done.

Until about 11 years ago, Ontario was like most other North American jurisdictions when it came to battery recycling. It operated what was essentially a passive system for collecting used household batteries. Some municipalities had drop-off depots and there were programs in place to spread drop boxes to office buildings and hardware stores. But the results were pretty dismal. In 2009, Ontario recycled less than five per cent of the batteries sold in the province that year.

All of that began to change in 2011 when Ontario brought in what’s known as an incentive system for battery collection. What that meant is that Stewardship Ontario, the provincially mandated recycling agency at the time, started paying collectors, transporters and sorters to bring in eligible, recyclable batteries, and registered processors, like Elliott’s Raw Materials Company, to recycle them. To cash in on that system, Raw Materials built up a massive network of drop boxes, school battery drives, blue-bin programs and municipal partnerships to collect and recycle as many batteries as possible.

Battery manufacturers never liked the incentive system. According to multiple sources in the industry, and internal legal documents obtained by the Star, producers repeatedly argued to the government that a so-called “universal bounty” on batteries would drive up their costs and create incentives for recycling fraud. “There was a real effort by producers and industry groups to push back,” said Alfred, “because if we get a good system in one area, and it works, that will raise the bar for everyone.”

But the results of the new system were undeniable. In 2004, only about two per cent of consumer batteries in Canada were being recycled, according to a study by Environment Canada. By 2017, in Ontario, it was at 50 per cent.

“It’s the most comprehensive collection program in Canada and it’s taken us about 10 years to build,” said James Ewles, now president of Raw Materials. “We’re pretty proud of that track record.”

But in the summer of 2020, the rules governing battery recycling in Ontario changed, and that’s when the problems started. Today, Ewles and Elliott say, Raw Materials is facing possible closure. They’ve already been forced to lay off half of their 60 employees, and Ontario’s battery recycling system, they argue, is operating at a fraction of the rate it was 18 months ago. “They’re trying to ruin us,” Elliott said. “(They are) basically killing the program, because 80 per cent of the batteries now are not being collected.”

Raw Materials’ battery battle is tied into a broader change in the way Ontario manages and pays for recycling programs. Beginning in 2020, the province started moving away from systems run by provincial or municipal monopolies and toward what’s known as extended producer responsibility (EPR) programs, where the companies that make and market materials are responsible for setting up and paying for the programs that recycle them.

Battery producers have long argued behind the scenes that the battery recovery rates in Ontario — more than 50 per cent of eligible batteries sold in the province by weight before the transition began were being recycled — were implausible. And when the government finalized the rules for the EPR transition, producers were given a major concession.

Under the new producer stewardship system, battery producers aren’t required to even match the province’s 2017 performance on battery recycling until 2025. For the first two and a half years of the program, they don’t even have a hard target to hit. Instead, producers are required to “make good faith efforts and take reasonable steps” to reach a floor of 40 per cent, according to Wilson Lee, a spokesperson for the Resource Productivity and Recovery Authority (RPRA), the provincial regulator.

The battery recovery numbers for 2022 won’t be finalized until sometime next year. But Elliott believes, when they do come out, they’ll be the lowest Ontario has seen in years. That’s because Call2Recycle, the organization large battery producers rely on to manage their recycling responsibilities in Ontario, has stopped using RMC’s network for battery collection. “If nothing changes, I think we’ll stay at a dismal 20 per cent,” said Elliott. “That puts the clock back 20 years.”

When the EPR transition kicked in, Call2Recycle, a non-profit producer responsibility organization with ties to the world’s largest battery producers, including Energizer, Duracell and Panasonic, initially signed a battery collection and recycling contract with RMC. But last March, Call2Recycle killed that contract, alleging RMC couldn’t verify where millions of pounds of batteries it was claiming as eligible under the Ontario program were actually coming from.

“They’re saying that we brought batteries in from elsewhere, including the United States,” said Elliott. “That’s insane, because there’s quite a packet of paperwork that goes with every load over the border.”

(Joe Zenobio, the president of Call2Recycle, said his organization has never publicly or privately accused RMC of trucking in batteries from the U.S.)

In the months since, RMC has continued to bring in and recycle batteries, but without a contract from Call2Recycle, the company isn’t getting paid for most of that work. “It’s not sustainable. It can’t happen forever. It just can’t,” said Ewles. “We’ve laid off 30 (employees). We have 30 (left). And as time goes on, things get worse for us.”

Depending on who you ask, the battle between Call2Recycle and RMC is either a simple commercial dispute that started last year or a deeply personal feud that goes back more than a decade.

Under a contract it signed with Stewardship Ontario, Call2Recycle briefly dominated Ontario’s used-battery recycling program beginning in the summer of 2010. But after less than a year, in November 2010, Stewardship Ontario cancelled that contract.

According to a letter sent from Stewardship Ontario at the time, Call2Recycle had a collection network that was “more limited than expected,” had failed to deliver several hundred thousand kilograms of expected batteries, and had been counting ineligible batteries toward the Ontario program.

Internal legal documents obtained by the Star, meanwhile, show that RMC spent that year lobbying feverishly against Call2Recycle’s dominance of the program. That was at least in part because Call2Recycle had a contract with another battery recycler, Inmetco, in Pennsylvania.

Call2Recycle tried again, multiple times, to take over battery collection and recycling in the province. But in 2014, the regulator at the time, Waste Diversion Ontario, rejected their proposal (for what’s known as an industry stewardship plan) for the final time, following a heated lobbying campaign by RMC and local environmental groups.

Elliott believes the current dispute is a continuation of that fight. “We have a long history of calling them out,” he said. “And this is just revenge served cold.” But Zenobio thinks that’s absurd. He views this as purely a commercial dispute. “I’ve never had any issues with any suppliers in 25 years except RMC,” he told the Star. “There’s absolutely no personal component to this.”

Regardless, the inciting incident in the current fight came in late 2021. That’s when Call2Recycle hired BDO, a global accounting and assurance company, to perform a forensic audit on RMC and its collection contractors. The organization “suspected irregularities in terms of qualifying batteries being submitted,” by RMC, according to a fact sheet provided by a Call2Recycle spokesperson. Those suspicions, the organization says, were backed by the BDO audit.

According to Call2Recycle, the BDO investigators found evidence that RMC was counting batteries from outside of Ontario as eligible for the Ontario program, that some RMC batteries were being double counted, and that RMC could only verify the origins of about 18 per cent of the four million pounds of batteries it submitted to Call2Recycle in 2021. “We believe, ultimately, that there was misappropriation of funds from Call2Recycle and ultimately from our members and Ontario consumers,” Zenobio said.

In emails between the two parties provided to the Star by Call2Recycle, Zenobio further suggested that some of RMC’s contractors didn’t even appear to exist. One, Zenobio wrote, “is a spice company which I called and they had no idea of what I was talking about, and the second location is a condo in Scarborough.”

Call2Recycle has since sued RMC in civil court for breach of contract and filed a criminal complaint with the Ontario Provincial Police. (A spokesperson for the OPP said investigators were still reviewing that submission to determine if an investigation is warranted.)

“At the end of the day, our mandate on behalf of our members, as a not for profit, is to collect and recycle as many batteries as possible,” Zenobio said. “In respect to Ontario, we take all these responsibilities obviously very seriously. And a key component of this is ensuring that we can ascertain and ultimately report to the authority where all the batteries that were collected originated from and ultimately where they ended up.”

But for Ewles and Elliott, the BDO audit was a smokescreen. They believe Call2Recycle and the large producers it represents were unhappy with the size and scope of the collection system RMC had built up in Ontario. (“That’s unequivocally not true,” Zenobio said.)

Ewles and Elliott also maintain that they have never been allowed to see the full BDO audit. (David Gollom, a spokesperson for Call2Recycle, initially said RMC was furnished with the full report in January. He later clarified that any “findings BDO deemed appropriate to share” had been passed on.) What’s more, the portions they have seen, Ewles said, were deeply flawed.

After Call2Recycle raised concerns about one of RMC’s suppliers, a scrap metal yard in Markham, RMC hired its own third-party auditor to investigate. The results of that probe contradicted several of the main Call2Recycle claims, according to a copy supplied to the Star.

The metal yard, RMC’s auditor reported, didn’t fully understand what the BDO auditors wanted in terms of paperwork. “There may have been a language barrier that complicated the communication, as well as the BDO auditors not fully understanding the (b)attery, and (s)crap markets,” Cindy Coutts, an independent consultant, wrote in her report. Because of that misunderstanding “BDO conducted the audit solely based on … incomplete documents,” Coutts wrote.

Coutts conducted her own audit of both inbound batteries from the scrap yard to RMC and outbound batteries from RMC to Call2Recycle. “All shipments,” she wrote, “appear to be conforming batteries.”

As for the complaints about missing or non-existent suppliers, Coutts found that, in the case of the spice warehouse, the scrap yard simply had an old address on file. As for the condo in Scarborough, she wrote, the address was for a broker who did indeed work out of his condo in Scarborough.

BDO said it could not comment on client matters.

After Call2Recycle cancelled its contract with RMC, throwing the recycler’s entire business into jeopardy, RPRA, the provincial regulator, performed its own inspection of RMC’s Port Colborne operation. That probe “found no evidence of RMC improperly handling or reporting of batteries from outside of Ontario,” and no evidence that batteries had been double counted. “RPRA inspectors observed comprehensive quality assurance controls throughout RMC’s operations,” the agency wrote in a public notice published online and sent to battery producers on Oct. 6.

Zenobio said Call2Recycle was surprised and “disappointed” by the results of RPRA’s investigation. “Our detailed work suggests a different conclusion,” he said. As for the Coutts inspection, he responded in an email: “We are confident in the findings of our investigation and the audit of those findings conducted by BDO.”

For consumers, most of this doesn’t matter. It’s a fight over a program that cost producers all of $10 million in 2019 in an industry most people don’t think about, let alone understand. But there are serious issues at play.

Zenobio said Call2Recycle, which again represents the vast majority of battery producers and retailers in Ontario, including London Drugs, Dollarama and Save-On-Foods, now has about 2,200 battery collection sites in its network. In 2019, when RMC was the dominant player, there were more than 5,700 drop-off sites province-wide. Fewer drop-off spots, history suggests, means fewer batteries collected and more batteries going in the trash.

Zenobio said Call2Recycle has a “robust plan in place” to make sure Ontario reaches the thresholds set out in the provincial legislation (40 per cent collection rate next year, rising to 50 per cent by 2025, which is still below the 54 per cent the system was at in 2019.) But those rates are audited and enforced by RPRA, the regulator, and for the moment Zenobio, and Call2Recycle, don’t seem to agree with much of anything that RPRA has to say.

On Sept. 7, RPRA notified all battery producers relying on Call2Recycle that, based on Call2Recycle’s collection system, they were no longer in compliance with the regulation, which has strict rules on how many sites are required and where they need to be.

On Oct. 27, RPRA issued a second notification stating that Call2Recycle had submitted an updated list of collection sites to the regulator and that RPRA was now reviewing them. But, the notice said, even if RPRA accepts that list, producers would still be non-compliant because Call2Recycle has been sending its batteries to recyclers that aren’t registered with the regulator.

Zenobio, in short, disagrees. “We’ve provided responses to RPRA and we’re waiting for them to respond to our responses, but certainly from our perspective, we believe, again, we’re compliant with respect to the processor issue,” he said. “Not to get into details, but there is a threshold that is required before processors have to register.”

In a functioning system, when a regulator and regulated body disagree, there’s a set process in place to determine what happens next. But in Ontario, on recycling, that system is a work in progress.

Last fall, the Ontario government opened consultation on a regulation that would give RPRA the power to issue administrative fines. Many in the waste, recycling and environmental sectors believe that power is crucial. Without it, they say, the regulator doesn’t have the tools it needs to enforce recycling standards, not just on batteries, but on tires, e-waste and, beginning next summer, the entire provincial blue box system.

“It’s really important that RPRA exists, that it does its job well, but also that it has teeth,” St. Godard said. “Everybody (has to) understand that they have a bit of a hammer if things go sideways.”

The government’s consultation period on fines ended on Nov. 19, 2021. Since then, nothing. No finalized regulation. No power to fine. Instead, for now, RPRA has been left to send out warning letters that tell companies breaking the rules they might be subject to fines someday, if the government decides it’s a good idea.

“If regulations aren’t properly enforced, there’s not a level playing field,” said Hargreave, who recently served as the interim CEO of the Ontario Waste Management Association, which called on the Ford government to implement the regulation in October. “This is why waste companies are so interested in this right across the spectrum. Different types of recyclers are looking at this and saying, if there’s no teeth to address this issue, then there’s going to be no teeth to address anything else that’s happening.”

(Gary Wheeler, a spokesperson for the Ontario Ministry of Environment, Conservation and Parks, said the government is continuing to consider feedback received during consultation.)

RPRA does have some tools available. For one, it could name and shame individual companies that aren’t in compliance with the rules. It could also, in extreme cases, initiate prosecution.

There are also some in the industry who believe RPRA has taken a major step just by issuing notices of noncompliance. “Nothing gets your attention like a hanging in the morning,” said Maury Shnier, the founder and president of Mobius PRO, a producer responsibility organization looking to compete with Call2Recycle on batteries. “That’s what’s going to happen here. They are going to be sending the message to every other material stream: F- around and find out.”

The issue for RMC is that, if the battery dispute doesn’t get settled soon, their company could go out of business. And if that happens, the collection network Elliott and Ewles spent the last decade building up in Ontario will disappear.

“With them not counting our batteries, the province is back to levels before the program started 13 years ago,” Elliott said. “So Ontario went from being the best in the world to, well, like many other places where the so-called program is not working very well.”

This article was reposted from the Toronto Star https://www.thestar.com/business/2022/11/12/batteries-not-included.html This article first appeared in the Toronto Star on November 12 2022