Extended producer responsibility laws are reshaping how packaging waste is managed – and how companies design, use, and recover it. But success will depend on whether the systems around it can deliver.
Seven US states have now passed Extended Producer Responsibility (EPR) laws, changing the relationship between brands, retailers, and waste management. For example, by 2032, every package sold in California must be recyclable or compostable, plastic volumes must fall by 25%, and recycling rates for plastic packaging must reach 65% across individual categories. Non-compliance carries fines of up to $50,000 a day and, at worst, product bans.
Effective EPR schemes can bring broad benefits – easing pressure on municipal budgets and waste services, and creating new opportunities for domestic investment, innovation, and jobs across the recycling and materials value chain. But the benefits depend on infrastructure that, in most states, is not yet built.
Systemiq’s work advising companies and industry coalitions on EPR strategy has consistently surfaced the same pattern: even well-prepared companies face a gap between what regulations are designed to achieve and what the current system can deliver. EPR has become something bigger than a compliance exercise – three interconnected system constraints, in infrastructure, packaging decisions, and organizational alignment, mean that companies, governments, and civil society all have a stake in making it work.
1) Recycling systems need to scale
California’s law demands a 65% recycling rate for each packaging material category by 2032. This month, the Circular Action Alliance filed the state’s programme plan – a significant milestone marking the formal start of implementation. Yet CalRecycle’s own estimates, published for the first time in December 2025, show that most plastic categories fall well short of that threshold. Flexible and film plastics, among the most common materials found in California landfills, face the steepest climb. That gap cannot be closed only by redesigning packages. It is an infrastructure problem.
America’s recycling system currently captures just 21% of residential recyclables. Modernizing it would cost $36 to $43 billion, according to the EPA. And in key segments, capacity is contracting. Five US PET reclaimers have closed fully or partially since early 2025, a roughly 25% loss in domestic reclamation capacity. Recycled PET imports now account for a quarter of US supply. NAPCOR described the domestic rPET market in early 2025 as being at a “tipping point.”
Not all packaging formats can be made recyclable through mechanical recycling alone. Systemiq’s analysis in Transforming PET Packaging and Textiles in the United States found that advanced material-to-material molecular recycling could account for up to 40% of domestic PET recycling by 2040, and roughly half of projected recycling growth. The incentive system to build this technology will depend on the definition of “recyclable,” an active policy debate from Albany to Sacramento with clear infrastructure implications.
A company can redesign every package in its portfolio. But without taking an active role in ensuring collection, sorting and reprocessing infrastructure is resilient, compliance will fall short.
2) Packaging design changes are more constrained than they appear
EPR shifts financial responsibility for end-of-life packaging onto producers. That creates a direct incentive to redesign packaging, but without a single clear pathway. Companies facing rising fees have a few options: seek exemptions for specific formats, reduce and reuse, or switch from high-fee materials to lower-fee ones. Each has limitations that make the decision harder than it appears.
Paper-based packaging typically attracts lower EPR fees than plastic, but material costs are higher and many paper formats still require a plastic liner to meet food-safety or moisture-barrier requirements, which may not qualify as recyclable. Recycled content comes with a high cost premium and it can be challenging to source the right quality level.
Smart packaging shifts can give companies a competitive edge, but companies cannot redesign all their packaging. Ultimately, EPR is forcing companies to identify which packaging formats are most critical to their businesses, and to invest in building the recycling systems those formats depend on.
3) Packaging compliance requires new ways of organizing
Responding effectively to EPR is also an organizational challenge. The decisions that matter – which SKUs to reformulate, which materials to invest in, which markets to prioritise – require alignment across public affairs, procurement, sustainability, and legal. For most companies, that means treating packaging as a portfolio and investment decision, not a technical specification.
What this means for companies
A packaging strategy built around today’s EPR fees is a necessary first step. But the real exposure lies ahead, in two directions.
First, eco-modulation. Fee structures will increasingly reward or penalize based not just on material type, but on source reduction, recyclability, use of recycled content, and other performance metrics. The fees companies pay tomorrow will look different from the fees they pay today.
“EPR is moving recycling from good intentions to real investment. Voluntary commitments helped push the conversation forward, but they were never built to fund the system at the scale this moment demands. Eco-modulation connects the fees producers pay today to the recycling infrastructure the U.S. needs tomorrow. That link between smart policy design and market development is what makes EPR a true system-building tool, not just another compliance mechanism.”
Kate DavenportChief Impact Officer, The Recycling Partnership
Second, escalating restrictions. Outright bans may not arrive for every format, but legislators are serious about driving progress on hard-to-recycle materials – through escalating penalties, punitive EPR fees, and ultimately bans where recycling rates stagnate. Regulators, particularly in California, have signalled that producers demonstrating measurable progress can access extended timelines. That matters: where producers see no viable pathway, litigation follows – and that dynamic is already playing out. Companies that engage constructively have both a legal and a strategic interest in helping build the system.
This changing landscape increases the need for companies to develop comprehensive packaging strategies that mitigate risk and build competitive advantage. Often, the smartest packaging strategy is to build the recycling systems that their preferred formats depend on.
Companies have a range of options to support recycling systems. Options include signing long-term offtake agreements; joining industry coalitions that give recyclers the demand certainty to invest; financing collection and sorting infrastructure; and building partnerships across the value chain that align incentives between brands, converters, recyclers, and municipalities.
Companies that take a system-building approach reduce their own exposure and build the credibility to engage policymakers constructively – advocating for targets that are ambitious but achievable.
The momentum behind EPR legislation is here to stay. California’s programme plan is now filed. The rules are moving from legislation to implementation. Companies that have been waiting for certainty are running out of runway – but those that invest in the system now are best placed to shape what comes next.
By:
Dee Yang
Partner Lead North America
Email: [email protected]
Julia Koskella
Plastics & Packaging Co-Lead
Email: [email protected]
Our work on material circularity in the US includes advising companies and industry coalitions on EPR strategy, system-level analysis such as Breaking the Plastic Wave (2020) with The Pew Charitable Trusts, and mapping circularity pathways for the US PET system.
