Why California’s New Plastics Law Could Affect Independent Businesses Nationwide

The new plastic reduction law in California might have consequences that extend well beyond the state's boundaries.

The Plastic Pollution Prevention and Packaging Producer Responsibility Act, which is also referred to as SB 54, mandates that companies selling particular single-use packaging and plastic products within the state should assume greater responsibility for the waste which these products generate.

The intention of the law is to reduce plastic pollution by asking producers to decrease the amount of unnecessary packaging, to use more recyclable or compostable materials, and to provide funding for improvements to the recycling and waste-management systems in California.

Although the aim of the law is to make producers more responsible for the waste resulting from single-use packaging, the costs of California complying with it will be passed down along the national supply chain.

Large manufacturers may have to spend more as they change packaging, pay into recycling programs, and follow new environmental rules. These companies might pass some of these costs to distributors, wholesalers, restaurants, and retailers.

For independent businesses such as restaurants, retailers, and manufacturers, even the tiniest rise in the cost of packaging and products can place extra pressure on their already narrow profit margins.

The fact that California is a large state leads firms that sell their products nationwide to choose a single packaging standard rather than separate systems for California and other states. Consequently, regulations established in one state can affect suppliers and businesses across the country.

According to a report from CalRecycle, the law could cost roughly $21 billion to implement over its first decade. The organization overseeing the program projects costs of up to $17.2 billion in just the first five years.

If those costs are passed through the supply chain, independent businesses and consumers nationwide could eventually feel the effects.

Independent businesses will ultimately have only a few choices: they can absorb higher costs, raise prices, or cut back on other spending. Although the law is intended to shift waste-management costs away from taxpayers, it remains unclear whether these expenses will ultimately be borne by small businesses and consumers.

As California proceeds with its plastic policy, it will serve as yet another example of how regulations in one state can have economic effects across the whole country.