LOOPED IN with Carl Warkentin

Regulating the Future of Fashion: The Impact of California’s Textile EPR on the U.S. with Rachel Kibbe from American Circular Textiels

• Carl Warkentin • Season 1 • Episode 9

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How do you build a circular textile system in a country that lacks the infrastructure to collect, sort, or recycle at scale?

In this deep dive conversation, Carl is joined by Rachel Kibbe, founder of American Circular Textiles and Circular Services Group, to unpack the complexities of Extended Producer Responsibility (EPR) in the U.S. and draw sharp comparisons with Europe’s more established systems.

Together, they explore:

  • The current white spots in U.S. textile collection and why Europe’s 20+ year head start matters
  • How the California SB707 EPR bill could redefine circularity—if implemented with the right incentives
  • Fee structures, eco-modulation, and the need to finance not just design, but also infrastructure
  • The risk of monopolization in Producer Responsibility Organizations (PROs) and what it means for innovation
  • Why voluntary, collaborative blueprints—like the one Carl is helping pilot in Germany—could shape future regulation

This is not just another podcast on sustainability. It’s a rare, behind-the-scenes dialogue between two people on the front lines of system change—blending entrepreneurial urgency with deep policy knowledge.

If you’re working in fashion, waste management, policy, or investing in circular solutions, this episode will challenge your assumptions and offer a grounded roadmap for what real circularity looks like at scale.

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Carl:

Welcome to looped in, the number one podcast about circular economy and regenerative business models, we bring behind the scenes conversations with investors, founders and corporate leaders into the spotlight, exploring how to scale impact, build profitable business models and redesign our economy for a better future. So let's get started with today's guest our economy for a better future. So let's get started with today's guest. Today, I'm joined by someone who's been pushing the boundaries of circularity in the US textile space for years Rachel Kibbe. She's the founder and CEO of Circular Services Group, where she's advising some of the biggest names in fashion on sustainability and policy. Through CSG,

Carl:

She also founded American Circular Textiles, which is one of the few coalitions really driving policy for circular textiles in the US, bridging industry and government. Rachel has worked with everyone from ThredUp to H&M, Cirque, Trove and even supported a federal policy proposal that just got written into a bipartisan bill with 14 billion US dollars in incentives. Rachel, I'm really excited to dive into your journey today, the gaps you see in the market and what you believe needs to happen to make circularity actually scalable in the US. So welcome to the show.

Rachel:

Thanks for having me, Carl.

Carl:

Rachel, how did you get started in all this? What's your background in fashion or circularity? What made you want to start your own advisory firm and specialize in regulation?

Rachel:

It's a really good question and I wish I had a short answer and I should probably work on a short answer and I'll try, but it really was a winding process. I, in my late twenties, I ended up going to a design school at Parsons in New York city. Moving from Ohio, where I'm to New York City to study fashion design, I'd always had a passion for apparel and what fashion represents and thought that to study design would be foundational for figuring out how that fit into my life. And it turns out that design really wasn't my passion, but like how things are made is. And when I graduated, I ended up starting an online store and this was like in 2011 that I ran for seven years.

Rachel:

This is very early, sort of like early Shopify days. A lot of the major brands weren't even selling online yet. So for me, I thought you know, I'm going to capture this new opportunity of being able to stand up a store on my own through Shopify, cheaply and quickly, and what I wanted to do and what I did was find designers many of whom the initial designers were ones I knew in New York City who were designing using like materials that they were very conscious about, whether they were organic or even zero waste. Some were upcycling, but they weren't talking about it because there was still a huge stigma around like what sustainability meant in fashion. It was not cool, it was very not commercial, and so it was about telling the stories that these items that were, like a lot of them were very fashion forward, they were beautiful, they were luxury, they were innovative, they were just great stories to tell the designers had really. They were innovative, they were, um, just great stories to tell this. The designers had really interesting stories themselves, and so I was giving them a platform to talk about this, um concept of sustainable fashion.

Rachel:

Um, I got more and more interested in, like the end of life what we call end of life as I, that that journey progressed, what we call end of life as that journey progressed, and I ended up, long story long, selling that company to a large scale used clothing collector that hadn't really created a brand yet. They were sort of putting together a bunch of companies that they had purchased into one umbrella, and so we put everything under my IP and I was in the large scale municipal clothing collection world for a number of years, which is like how do you put bins in parking lots? How do you work with municipalities to figure out how to collect clothes in a cost-effective, ideally profitable way? And who do you sell those clothes to Like? Who's the next owner, whether it's thrift stores or export?

Rachel:

And obviously you know where I'm headed with this is there's like a lot of moral, existential, financial question marks around that entire industry and yet there's no other solution. And still today, you could argue, we really don't have large scale recycling infrastructure yet. So I moved on from that and consulted businesses for a number of years, like retailers, on their circularity programs, on their excess inventory and returns, how not to incinerate them. What are other options? Figuring out, there's this whole big pile of goods, whether it's the clothes in our closets that we no longer want or in our warehousing houses that are returns or excess inventory Like. What do we do besides like throwing them out or exporting them? And so finally, as part of this work, launched American Circular Textiles, which is a policy coalition we started with about I don't know six to eight companies we're now over 30. And we work on public policy education and guidance around our industry and what we need to scale to lawmakers at the federal and state level.

Carl:

Wow, that's a beautiful journey and I can totally relate to what you've been saying. Funnily enough, I have actually a pretty similar background. I built several footwear companies and I got so excited about the end of life because I realized, no matter how sustainable your product is, it can only be truly sustainable if it's circular. And then you need to, you know, control the end of life, the reverse logistics, the collection, sorting, recycling. And I got so excited about it that I then also built a non-profit initiative called circular republic where we build these new ecosystems right because out of the blue as a shoe, you know, brand. I was not sitting anymore only with my Italian shoemakers and designers. I was sitting down with chemical companies to come up with circular materials and with logistic companies to think about reverse logistics, and you know. So it's actually got very much the same. The same way, like you did, how do you experience the collection in the us at the moment?

Rachel:

I guess I don't have anything to compare it to outside of the us. Um, uh, and I thank you for sharing that story about your experience. I do see so many parallels and it's. It's funny because and this connects to answering your question is like suddenly you were in all these different industries in which you are not an expert and I still I'm not a scientist, I'm not a material scientist, I have learned public policy baptism by fire, and so you sort of find yourself in all these rooms where you have to be continuously a novice and maybe always a novice, because what you just described.

Rachel:

There's so many different aspects of this. You can never be an expert in all of them and so even use clothing collection. I was in it for a number of years. I don't claim to be an operations expert, although I had significant experience in operations and what I learned around that industry specific to used clothing collection, which is probably quite different than Europe, is the United States is so large, and when you're talking about collecting clothes at the municipal level, which means a local level or the city or town level I'm not sure how it is in Europe, but you're then dealing with the personalities, culture and politics of each different area or region and they all have different perspectives on whether or not they want clothing collection in their town, because it's ultimately becomes a bit of a waste issue and where you have waste you have, like, people will dump products that don't belong in that waste stream around, like if you have a clothing bin or no, in a parking lot, you're going to get TVs and mattresses and things you're not supposed to get and it becomes your responsibility because the U? S is so large and covers so much territory and right now most vehicles are still not electric, it's it's gas and it's emissions and expensive and um, running trucks is dangerous and really challenging and logistics, routes are complicated and depend on a coordinated orchestra of things going right that generally don't always all go right in terms of timing and the function of the machinery. That is, you know, like the not getting flat tires, not, you know, there were several occasions where I remember there were trucks that hit the top of a bridge and sliced off the top of the truck. That happens, it's an accident, it's really dangerous, it's really expensive, it's really bad that and this is all part of the large scale used clothing collection business or any sort of waste management business when you're running trucks and trying to collect things from communities.

Rachel:

So you face, you know you have to be agile and have a lot of expertise in policy, meaning, like, how do you approach towns and cities and get these collection sites in them? And you have to work with them and you also have to work with businesses where those collection sites might be placed. You have to have incredible operations, you have to have the capital to fund the logistics and infrastructure to handle all of this and then you have to have customers, which is largely and this is the most politicized part and the most visible part, because there's been a lot of news and rightly so about sort of where are things end up? But you need markets to purchase that product, to justify the collection, the cost of collection, and I imagine it's the same all across the world.

Rachel:

But I always say that the us, when you're talking about like, you're talking about like, national epr, um, uh, in the us, like the amount of territory you have to cover to collect, you know, uh, all of the nation's clothes, and then where does it go? Um, we're talking about a big, a big challenge, uh, right, expensive challenge right, yeah, I, I totally agree.

Carl:

Before we go into the whole epr scheme, uh, especially also now uh, the the epr scheme coming up in California that I'm sure you can share a lot of information about let's talk about exactly that infrastructure, because I'm from Europe and in Europe, all over Europe, we do have, since 20 plus years, since 20 plus years, a huge infrastructure around collection and sorting of textiles, not so much recycling. I think this is where we all, at the same level, certain technologies are still being developed and now put at scale. I think germany is, at least in europe and I think globally, one of the countries that collects the highest rates. I think 70 or 80 percent of of old textiles are being collected in germany, mostly on the street. So we have bins on the street. We have uh take back programs at companies like h&m, you know you bring your old clothes, you get like a discount when you buy more clothes, um, and the old business model was that the collecting companies, they pay money to put out the, the collection bins, or they pay money to h&m in order to get these clothes and then they would sort them manually.

Carl:

Even nowadays they would sort them manually and try to sell most of it to the global south, which is obviously questionable if that's sustainable, because a lot of it ends up in landfill. And the margin and where they make their money is with like the 10% of the real like cream stuff that they how they call it that's like around 10% of everything they collect and they can sell that for a lot of money within Europe at a high margin. And around 40%, or 20 to 40%, they would have to incinerate and that costs them money. So the incineration is a cost center. Selling it to the global south is more or less, you know, a little profit I would say it used to be at least and all their money they would make with the 10% of this really high-end clothes that they could sell.

Carl:

Now this business model changed entirely. In Europe they would collect, still pay for the collection. Then the sorting became very expensive because it's done manually. The high-end clothes decreased from 10% to, let's say, 1% or 2%, because everybody would sell their good products themselves.

Carl:

Because everybody would sell their good products themselves, you know, on peer-to-peer platforms, because they get money for it and in, like the global south, that market closed because they get new products from china cheaper than used products from europe, so that that's why a lot of these collection and sorting companies would go bankrupt these days, and obviously a huge solution can be a new market, which is recycling, and, of course, by the help of the epr scheme, right? So, and now I'm wondering how this whole situation will be transferred to the us? Right, because, because there we still it feels like to me, we still have a bit more of a white spot when it comes to collection. It's not like all over the US or in one state a certain percent is being collected. So how do you imagine this? You know, how can we transfer the whole system of collection and sorting and recycling in the US?

Rachel:

I mean, you're asking the million dollar question, right, and what you described is similar but different to the US, and I think it depends on the business model, because there's various business models around election and sorting every uh, I'm sure in Europe as, but in the U S um, uh, I think the bulk of clothes that are collected um on a municipal level I'm not talking about more like very specific donation programs, but like the bin um, most of them really, uh, most of them really, they're not incinerated here because the financial value is finding someone to buy them without touching them, right, but someone's going to sort through and often that sortation is done. It can be done here in the US and a portion of it may not be resellable, but most of it is at diminishing returns, right, and generally it's then sold to our neighbors in South and Central America who then sort it again and onwards. It's very much like the front end of the supply chain where you're manufacturing. It's global. Every step of the way is trying to extract value and margin. The cream which we call credential here in the US is the most valuable and it has been disrupted by people selling the Patagonia from their closets on their own, but I think that may be also not overstated. It certainly has an impact on these. You know large scale secondary market, but it's also grown up in parallel to just like higher and higher volumes of lower and lower quality products being placed on the market on the market.

Rachel:

And then we get to. Your question is like how do you see this changing in the US? Or how do we create systems that actually, textile to textile, recycle the product we collect, so that we aren't just burdening other countries with the amount of clothing we'll collect through EPR schemes and that is. Those are all policy sort of questions we're looking at. I think the most blunt instrument right now is EPR. There's very there's a lot of different ways to look at how to manage textile waste because you're up led with EPR, the U? S is following Um and so I think that's going to be one tool in the toolbox on how to handle all of this um date by state um policy, especially when you're considering something that works regionally already and there are businesses who are doing large-scale used clothing collection all over the United States and have been doing so for decades. Epr will disrupt that because it's now going to regulate how those businesses. It's not just regulating producers and saying that they now have to pay for the reuse, recycling and repair of their product. It's also regulating, and I always tell my members this. They're also getting regulated because the whole system is fundamentally going to change and we don't know how it's going to change until the rules are written.

Rachel:

I'm not sure how the policy process is in Europe, but how it is here is you pass an EPR bill at a state level we are seeing it in packaging and then the industry has to come together and write rules and say this is how we're going to achieve those regulations and submit them to the equivalent of an EPA or a Department of Ecology or some regulatory body that the state has in place to interact with industry in this way. And so there's going to be a lot of different incentives at the table as these rules get written. Obviously, producers some of them really want to see these programs work. Others just want the fees to be as low as possible, and so how I view EPR working is not really the most important thing. It's how do we ensure that the right actors are at the table so we can provide feedback, so the results of these regulations are function rather than actually stepping backwards, because the fact of the matter is we have these collection systems in place and they are profitable, but diminishingly so and barely, and what they need is public policy support, not necessarily restructuring, that just works for, let's say, producers who are now required to pay fees to support them. The best case scenario is that EPR creates more collection points. It facilitates the actual logistics of collection trucks, mailback. It supports existing programs that retailers already have in place, like take-back programs, resale and repair.

Rachel:

We really are looking at how to ensure that these state-level policies, these state-level regulations, account for those things in statute, but when it comes down to it, it's a financial question.

Rachel:

How are these funds going to be dispersed once they're collected from the producers, and who are they going to go to?

Rachel:

And will they support and enable the good parts, the existing parts, the parts that are needed of the system, that are working, or are we going to go a bit backwards and not to say going backwards is always bad, because sometimes you do need to unwind a few things to create a better system, but there's no one person who can tell you a perfect way for this to occur, because we just don't know.

Rachel:

And I think we've been looking at Europe and Europe. I think you sort of learn by mistakes and we can learn from Europe. We've seen some successes and some challenges there that we're taking notes from, but there's an additional layer of just the reality and the culture of a policy environment in every state and each state has a different policy environment. So our organization is really looking also at the federal opportunity for creating financing for these state-level policies, because they're going to be expensive and I don't think there's any way that one state-level EPR program can cover the costs of what it's embarking on, because we're talking about entirely new selection, reuse, resell, recycling systems, workforce development, sortation system flows, all of that, and what you need is long-term patient capital, because that's a whole, like it's parts of an entirely new manufacturing industry that we don't have here and arguably don't really exist yet. So that's a very long-winded question to say I don't know and I don't have the answer, but we have some policy ideas that could help support it.

Carl:

Wow, yeah, I mean a lot to be done and I am aware that you're already very active in the in the space also with american circular textiles. I follow your work now for a bit over a year now. Can you maybe share with us how, what role did you play in the whole setup for the epr scheme in california and and take us through a bit like, where does that stand at the moment and what chances do you see through that EPR scheme?

Rachel:

Yeah, so we provided feedback to a number of working groups on the bill. We weren't so much engaged on the regulatory or the lawmaker side like in terms of formal sort of advocacy work going to lawmakers. We were providing technical feedback on the bill to stakeholders, both invited by Senator Newman's office. They invited us into working groups to provide technical feedback. The sponsor invited us into working groups to provide technical feedback. The sponsor invited us into working groups to provide technical feedback and we also worked with other trade associations and chambers of commerce to provide technical feedback from an industry perspective. So there was a bill introduced. It was the kind of outlining concept of what it is today, but over a two-year period it changed drastically. It's almost unrecognizable in terms of language and that's how policies often sort of evolve is there's a policy introduced and then there's many architects who come in and provide feedback from industry and that's one of the things that we saw that was missing in the original bill. From day one. We had a few things that we saw were missing, that we went to these working groups, including Newman's office, by invitation and said, hey, we'd really like to see reuse emphasized more in this bill, because this is a little modeled on packaging and battery bills which go straight to recycling more often. But because reuse is such an integral part of apparel and footwear, like it's a part of the system, we really need to emphasize it. So we provided that educational feedback. We also saw that like the collection points were just physical collection points, we said, hey, like mailback is a big thing, especially when you're talking about US with such a large geographic area and lots of rural areas where it might not be cost effective to have physical bins. We really wanted like mailback. We also provided guidance that we wanted to make sure that you know the programs run already in partnership between retailers and circular service providers were accounted for, right, that those wouldn't be undermined. So that's now in the bill.

Rachel:

There's still some open questions around the definition of recycling and how that will be whether or not advanced or chemical recycling will be allowed. In the beginning we asked, we advised that you know, hey, let's use Europe's definition in the waste directive. Ultimately that didn't happen. So there's still some question marks around whether what types of recycling technologies will be allowed, permitted in the bill, which has become a bit of a politicized issue here in the US, become a bit of a politicized issue here in the US, and there was just we really wanted to see a needs assessment, meaning like a year or two long period where there would be time to say, hey, what collection points are in the state? What would we need to accomplish? The regulations in this bill. So that is now in the bill.

Rachel:

There was also what else? There was just a lot of like things, just and not to say like these things are going to make it successful 100%. But it was from our perspective, because our organization represents retailers, resale, rental, clothing collection, nonprofit thrift stores, repair, recyclers. There was just a lot of expertise in the room to say here's a bill, what do you think about it? What would you like to see ultimately, what would help your business or what hurts your business in this bill? And so we could provide a lot of educational feedback and technical expertise. At the federal level, we also provide similar types of feedback, but we're working on different types of policies right now.

Carl:

Thank you so much for your work in this area. I know how important it is so in Europe. Obviously, we do have already on European level the law that we will have EPR schemes as well. Every country can define their own EPR laws. We already have, since many years, epr scheme in France. We do have now in several other countries as well, epr schemes.

Carl:

So we have a lot to learn from you know EPR schemes already in place in the textile industry, but also from other industries like you mentioned packaging where we can learn from, and I say in that way because I think there's a lot to be improved still when we now have the chance to set up new EPR schemes for the textile industry. I happen to do it in Germany. I personally focus more on the business side than on the regulatory side, but I'm supporting to bring the first blueprint on a voluntary basis with quite some brands and producers on a voluntary basis, an EPR scheme into place that will start by the end of this year. So this shall be then a blueprint for the government as well to decide on how exactly should this EPR scheme look like, and so I know the devil is in the detail, that's really interesting.

Rachel:

You're essentially creating this voluntary blueprint, even though the EPR is required, which could provide. We just put out a national blueprint. It's we spent a few years writing it, thinking it through. It's just our idea of how something would work in a perfect world and then you can take that. It sounds like you're taking that.

Rachel:

They can take that as feedback, like they can take some of the elements into account yeah, so it's not necessarily like a bill you're writing, but it's a it's guidelines for what you would like to see as they write policy exactly so.

Carl:

so I, basically, with my non-profit, I bring together, um, all players in the entire value chain, similar bit like you do, from waste management, like collection, sorting, recycling, and the producers, retailers, reuse, like re-commerce, brands, et cetera.

Carl:

So, and the idea is, with all of these together to figure out how can this look like so that we do the best for the environment, but that every person in the room also has a business model in the end, because, you know, sustainability and circular economy can only fly if there's also a viable business plan behind. And the idea is that we come up with an EPR scheme on a voluntary basis where producers voluntarily start paying a fee by the end of the year. That fee later on should be, um, you know how do you say, like it will be calculated against the fee that will they will have to pay in the future, right, right, so if they now voluntarily pay already, that will be deducted later on when it's mandatory, so they will not have to pay earlier or they have to pay earlier. But it's like kind of an investment in the future, interesting.

Rachel:

Oh, I have so many questions. Maybe we can do this.

Carl:

We should have a separate.

Rachel:

Yeah, let's have a separate this is the nerdy part of my brain just let's get out a spreadsheet that I love this yes okay, cool because you're creating me. Sorry, I'll just leave it at this. You're creating the environment where you can actually. This is the intention of a needs assessment which is essentially like how does this work in practicality and what does it cost, and how do we figure that out without penalizing everyone?

Carl:

because the whole point is we don't know exactly and, um, nobody knows, and we have to, you know, get going and and I'm, as an impatient person that I am, and more entrepreneurial driven, I think like let's just do it and let's, you know, figure it out while we're doing it, on this pilot phase basically and there was also an interesting report written by systemic it's a sustainable, you know, consulting firm and they were hired by the industry from the producer side, like brands like actrix financed it, but also the, the waste management industry, like into zero, financed it.

Carl:

To figure out how high yeah, like, how high does this um epr fee need to be in order for polyester recycling to to make it a viable business model? Um, especially polyester, because it's, I, I think, the most challenging one, not from a technical point of view, but from a financial point of view, and it's actually quite high. And last week, two weeks ago I don't know when we will air this, but like end of May we had a circular public festival where I had all of the stakeholders on stage and we had a great panel discussion about it. So this EPR fee will need to be quite significant in order to make sense to work. On the other hand, we need to incentivize the producers to produce in a sustainable way, maybe install, take back programs so that they can decrease that fee that they will need to pay because they contribute in other ways. How yeah?

Rachel:

you bring up a really interesting point which I forgot to mention In the original SB707, there wasn't direct mention of eco-modulation, and what you're talking about is sort of eco-modulation, or maybe it is eco-modulation which is like how do you incentivize the design of better products for sustainability and circularity through these fee structures? And part of our blueprint is also thinking about how do you incentivize the infrastructure piece, because I see eco-modulation the focus is really on the front end because that's what brands know and can control. But as our group has thought about this, we're thinking like, can control, but as our group has thought about this, we're thinking like, well, there also has to be an incentivization for like the reverse logistics systems and management. So part of our paper contemplates that and I can share it with you and we can have our nerdy conversation later. But it's really interesting how you're thinking about this.

Carl:

Yeah, I mean I personally think we have to have a holistic view on it. But I totally agree with you. And for everybody who's not too much into that topic yet, I mean we have these two schemes right, like we have the eco-modulation, where it's all about how do we design products, and then we have the whole logistics part, the infrastructure part about collection, sorting, recycling, and obviously in the the perfect world they will be totally intertwined and connected. Um, but at least they should influence each other, right?

Rachel:

because you're talking about supply, demand and design and they all should ultimately under epr if it's actually regulating that all those things work together. But unless you have the financial orchestration where they're all incentivized to work better together, then it's just separate pieces having competing priorities. All those things have to work together. It's a supply, demand and design. Because these laws essentially if anyone's new to EPR or not as much of a nerd as we are essentially it's saying you must now design for circularity and somehow collect and reuse and recycle all these things. But we haven't really defined how you do that in in this in statute. But like not, you must design for circularity, you will be rewarded, your fees will go down and so what that means big, open question exactly and and uh, I mean it's super complex.

Carl:

Let us and I love I mean we're gonna have a separate, very nerdy conversation about this. Uh, I can't wait. Uh, it's the that has been, so far, I think, one of the most interactive sessions I have had on this podcast. I love it. Um, but let's, let's circle back a bit and and zoom a bit. The EPR scheme in California. I think it's really significant because it will be, hopefully, a blueprint for the rest of the US as well and many other regulation to come. Take us through, like the high level things Like when is this EPR scheme coming, when is it going to be activated and how do you imagine this the world to look like once?

Rachel:

you know, everything is set in place Right. So in Europe there's a similar sort of cadence in EPR, which is an EPR, law is passed and then the industry or someone has to stand up what's called a producer responsibility organization, which is an entirely new, in this case of SV7, an entirely new organization that's a nonprofit. In this case, the board is governed by producers only of various products, shapes, sizes. They should be sort of like it shouldn't just be like one type of producer, it should be um various, various kinds of producers, um various sizes, and they they are on the board of this uh producer responsibility organization and their job will be to um intake all the fees, um uh find all the contracts, uh to reuse and recycle all their product. All producers will have to sign up through their program. But before that so in this case we'll back up it's 2026.

Rachel:

Whoever wants to be the PRO or start the PRO needs to apply to the state of California, their CalRecycle, their sort of department of ecology of the state of California, their CalRecycle, their sort of Department of Ecology, and they will work with CalRecycle if they are chosen. So it's a competitive process. Who will be the PRO? So right now, up until 2026, we don't know who the PRO is. Once CalRecycle selects who the PRO is um, they will have then have a year to conduct a needs assessment, which is what I wasn't mentioning before, which is like to figure out what is um, what the capacity is in in the state of california to reuse and recycle um product, uh, how many collection points will be needed, what are, are the costs All of that? And then they have to submit a plan. I think it's in 2027 or 2028. I have to look at all of this was at the top of my mind about a month ago and it's all escaped. So they'll have a year, so 2026, they're selected, by 2027, they have to submit a plan.

Rachel:

I think a couple months later CalRecycle will approve or reject the plan. So it's very procedural right. There's a lot of things that need to happen for, ultimately, systems to start to be built, because the state of California right now, with packaging I believe the governor just rejected the plan that they submitted, so they have to go back to the drawing board. So this is another sort of policy process that is very much outside of the hands of the industry. The industry is truly getting regulated and they are going to have to come up with a plan by 2027 to say this is how we're going to comply with it and CalRecycle approval, rejects.

Rachel:

The governor could approve or reject and that will have an effect on the timeline, but ultimately, I believe by 2030 is when fees will absolutely have to be collected. So the industry is supposed to sign up to the PRO as soon as they can, but the fees aren't collected. I don't believe and I don't think you can get fined until 2030, but I might be wrong. I have to like look at the whole timeline of things, but that's 2020, 2028 to 2030 are gonna be the most like critical areas. I think you have to like sign up, you can start getting fined and that's really go time. So that's like feels like a long time away, but it's actually a very short timeline and there's so much that has to happen during that time, and so it's going to be very interesting to see how this rolls out no-transcript.

Carl:

How does it then look like? The pro collects the fee and organizes the whole collection, sorting, recycling, so will that pro be responsible in order to install that infrastructure?

Rachel:

well, they, much like municipalities, they contract private sector to do it for them, right? So there's going to be competitive bids to be like, the preferred collector or, ideally, a number of collectors. What I'd like to see is that everyone who is a collector, or resale or repair, or you know, and is in good standing, um, and is a good actor, can facilitate their role in the circular economy for the PRO. But generally, what we see in these types of um, these types of structures, is that some some are preferred over others. It's easier to manage fewer organizations, right, and so that's the major concern among circular service providers is like where, how is this going to impact me? How does this benefit me? Will I be chosen? Will my contract? Will I win a contract? Um, and so, um, yeah, I think the types of companies we've seen in packaging, uh, that have run the PRO, are, are, are, are like big and known American entities and companies that have a huge American presence, whether it is in market size or in brand recognition, recognition, and it does tend to be, you said, monopolistic, and that is, on the one hand.

Rachel:

There's pros and cons to that. We saw packaging. I think there was a number of PROs, but now there's just one, and it's a very hard, expensive endeavor, as we said, like I don't think until 2030, they have to fund themselves prior to collecting fees for years. So there has to be by definition, they have to be companies that um have, um, uh, a big sway in the market already, which has pros and cons, because that not everyone has that capacity to be able to fund something like this Um, uh.

Rachel:

And so then you have there's an element of control, and I think that there's there's nervousness right now around that um, on behalf of everyone, I'm like what will be my role and how will this impact me? And, um, this kind of goes back to my point is like I don't know whether we're still the jury's still out on if EPR is going to accomplish the goals it sets out to. When you have legacy forces controlling the very body that's going to have to report to the state whose interests are actually accounted for, are we really going to transition? Can the legacy systems transition themselves? That's an open question.

Carl:

Very good open question. As a producer in California or a company that puts products on the market, I will need to pay a certain fee to the pro and the pro is then organizing for me the whole collection, sorting and recycling of the products. Is that pr also then deciding how high that fee should be?

Rachel:

um, in collaboration with the state of california. So that's part of the plan, right, like they submit, this is what we're going to pay to make this happen and that will be approved or denied. But yes, like the PRO. Ultimately, like sets the fees.

Carl:

I love it. I think you are in a very exciting time and also, with American circular textiles, um, in a great position to really influence, uh, this in an in an impeccable way, and so I make this podcast a bit of a like interactive podcast, which means our listeners can, you know, come up with questions and so on, and I'm sure there will be questions, um, especially as we proceed in latest next year when there is a PRO selected, how things will develop and what that means for brands, etc. So I think we will definitely have a follow up conversation around this and I'm really excited about it. Thank you so much.

Rachel:

Yeah, I mean, I think that's really exciting and I would love to do that. And our goal as an organization because we've had the same questions about like, what is our role in this? How do we best serve the greater purpose of this, especially since we are working in so many different areas of policy, even outside of EPR and what our goal is and we'll have to have a conversation about what that looks like next year is to be able to be sort of a neutral party who provides really good educational, technical feedback on what's actually going to work for the industry and whether or not it's it's it's it's taken into account. We don't have control over Um. It's a huge process that involves many.

Rachel:

Like I said, even with the bill, there were many architects of that bill Um we don't ultimately have, we aren't the PRO, we don't have the final say um. The state of California has this final say really Um, and so we we just um offer ourselves up to provide, you know, feedback from a technical perspective on like as we did with the bill um on this. This is, this is what we think we need for this to uh, at the very least, um support our businesses and not harm them.

Carl:

Thank you so much, rachel, for clarifying what you do and how you do it and also generally for your work. It's really impressive. I'm really grateful that we had this conversation today about this. I hope it was not too nerdy for some of our listeners, but I think for some of them and that's exactly the purpose of this podcast to go a bit deeper than certain reports you can read or certain panel discussions you can follow on conferences. So thank you so much for going that deep today in this topic with me.

Rachel:

Thank you for such great questions and you know, it's rare to have an opportunity where I can really be as nerdy as I was and I just really appreciate it.

Carl:

Thanks, Rachel.

Rachel:

Awesome Carl Thanks.