California’s new recycling laws could cripple unprepared businesses

California’s SB 54 (Plastic Pollution Prevention and Packaging Producer Responsibility Act) is among the most stringent Extended Producer Responsibility (EPR) policies globally.

While CalRecycle is still refining the final regulations, the statutory performance targets remain. [Editor's Update: CalRecycle Product Stewardship Branch Chief Karen Kayfetz has announced that CalRecycle processed all of the comments submitted during the 15-day comment period from Jan. 29 to Feb. 13, and on Thursday, March 29, CalRecycle submitted the proposed regulations to the Office of Administrative Law. OAL has 30 business days to complete its review and must make its determination by May 1, 2026.].

By Jan. 1, 2028, plastic covered material must meet a 30% recycling rate, rising to 40% by 2030 and 65% by 2032. While by Jan. 1, 2032, 100% of single-use packaging and single-use plastic food service ware sold into California must be recyclable or compostable, as determined by CalRecycle.

Noncompliance can trigger enforcement action and significant penalties (including daily penalties of up to $50,000), and for certain materials, such as expanded polystyrene (EPS) food service ware, can result in sales and distribution prohibitions.

CalRecycle has also published reporting guidance and annually updated covered material category lists to support producer reporting and recyclability determinations.

Products that continue to be sold into California could face escalating EPR fees, with charges eco-modulated based on recyclability and other criteria that CalRecycle and its Producer Responsibility Organization (PRO) are still finalizing: costs that, at scale, can be considerable.

Some elements are already in force. As of Jan. 1, 2025, EPS food service ware is prohibited from sale, distribution, or import in/into California unless producers can demonstrate that the material meets the required 25% statewide recycling rate - a threshold that CalRecycle has stated has not been met.

California retailers and foodservice operators that previously relied on EPS for hot and cold togo items are now being forced to adjust sourcing and packaging formats. With all this already happening, it’s little wonder that retailers and brands across the U.S. are racing to prepare.

Do you have the data?

At the heart of EPR compliance is data. Producers, such as retailers with private label brands, need accurate, defensible and auditable packaging data - from substrates and polymers to components such as labels, adhesives and inks.

By Jan. 1, 2032, producers must achieve a 25% reduction in plastic covered material by weight and plastic component count, measured against a 2023 baseline. Those without clean and comprehensive 2023 data will struggle to evidence compliance.

Many businesses are still relying on manual collection processes or proxy estimates to plug their data gaps, an approach that is unlikely to withstand regulatory scrutiny once reporting tightens and fees become payable.

Even those that began preparing years ago are discovering that their data isn’t robust enough and their systems may not cope. Do they understand the reporting threshold? Is their data consistent and auditable? Are they carrying unseen compliance risk?

Because SB 54 is designed to use eco-modulated fees, charges are expected to be structured to incentivize recyclable (and otherwise lower impact) packaging — though the detailed fee methodology is still being finalized through CalRecycle’s rule-making and PRO implementation.

Retailers that can prove higher levels of recyclable packaging will mitigate both risk and cost. While SB 54 includes exemptions and exclusions for certain categories (such as specified medical products and infant formula), and thresholds may limit obligations for the smallest entities, the vast majority of retailers and consumer brands selling into California will be affected.

What many will discover is that manually assessing packaging recyclability for each product, then navigating potentially lengthy review and approval cycles, simply doesn’t scale for fast-moving goods businesses with thousands of SKUs. Reporting across 90-plus "covered material categories" defined by CalRecycle demands a more specialist, technology-enabled approach.

This also isn’t limited to organizations with a physical California footprint. SB 54 applies to producers placing covered material into California commerce, including out-of-state and online sellers shipping to California’s consumers. If you have Californian customers, you are in its crosshairs.

Compliance, not just sustainability

The very real business risk associated with SB 54 (as well as other EPR policies across multiple U.S. states and global markets) is forcing retailers to rethink how they approach packaging recyclability. Sustainability leads remain involved, but they’re increasingly the end-users of the solution. EPR is a compliance issue, and the responsibility now often sits with the head of compliance.

Elevating the issue has led some retailers to focus on achieving base-line compliance. Others, however, see this legislation as a catalyst to rethink the entire packaging journey, from brand and design decisions through to materials, data and ongoing sustainability performance.

Rather than treating compliance as a reporting exercise at the end of the process, retailers are embedding it at the start of the brand and packaging development cycle, ensuring that packaging is designed to be compliant, recyclable and reportable from day one.

Step one is collecting the right data and submitting it on time. That means using a technology platform capable of delivering accurate, end-to-end packaging data that enables "right first time" packaging. Step two is reducing future fees. Retailers taking a longer-term view will use that better data to improve sustainability and drive costs down year on year, particularly as legislation tightens.

EPR compliance has already become a permanent workstream. It demands coordination across compliance, technology, procurement, packaging and sustainability – with all the complexity this entails. Packaging is no longer an operational consideration; it has become a matter of business transformation, requiring clarity, prioritization, and a delivery roadmap.

Given the sheer scale of reporting required, the financial and commercial penalties for failure, and the competitive upside of demonstrating credible sustainability to consumers, it is no surprise EPR is now at the top of the U.S. retail agenda.