Material Cost Differentiation (MCD) Methodology

The Material Cost Differentiation (MCD) project was initiated in 2017 to develop a new and better way to measure how packaging and paper product (PPP) materials impact the cost of recycling system activities. The new methodology will produce a critical input to fee setting and will replace today’s Activity Based Costing (ABC) for the Recycle BC, MMSW, MMSM and Stewardship Ontario programs.

The proposed move to MCD from ABC is driven by a number of factors including: ABC’s inability to satisfy steward priorities; ongoing challenges of regularly collecting data that is typically private and confidential; and the evolution of materials and recycling systems since ABC was created more than a decade ago. MCD will provide better and more reliable data for differentiating material cost impacts and calculating fees. MCD builds on the work of the Four-Step Fee Methodology principle that each material’s specific cost impact should continue to be a key input to setting fees.

Consultation on the MCD Methodology

On June 25, 2020, CSSA held a consultation with stakeholders on the MCD Methodology and its results.

Feedback was due by July 23, 2020. All feedback will be included in a consultation report and submitted to each of the Boards of Directors (Recycle BC, MMSW, MMSM, Stewardship Ontario). The Boards will consider the feedback when determining the approval status of the MCD Methodology. If approved, the intent is to utilize the Material Cost Index (MCI) when setting fees for 2021.

Steward Consultation Committee

Over the past two years a committee of stewards known as the Steward Consultation Committee (SCC) in conjunction with a steering committee of stewards, each a delegate from one of the four packaging and paper product stewardship boards supported by CSSA, developed the MCD Methodology and the principles upon which it is based.

Collectively, the SCC members represent all materials, as well as the interests and concerns of the wider steward community. The MCD Methodology was developed by the SCC in a series of workshops that began in 2018. In early January, 2020 the SCC completed its work and approved the MCD Methodology for consultation with the stakeholder community.

MCD Project Guiding Principles

1. Relativity counts.  The methodology must produce results that inform stewards about the relative cost impacts of the materials they supply into the marketplace.
2. All designated materials count. All designated materials of the packaging and printed paper programs should be considered when measuring cost impacts even when those materials are supplied and/or managed in small quantities because all materials are constituents of the recycling system.
3.  All material characteristics count. When differentiating the cost impacts of one material as compared to another, all of a material’s characteristics that can reasonably be measured, should be measured because each material’s characteristics can impact costs in different ways
4.  All activities count.  All activities necessary to prepare the material to be repurposed should be considered because the intention is that all materials supplied into the market should be repurposed.
5.  Value counts.  Commodity value attributed to a material must be consistent with the decisions applied when differentiating cost impacts.
6.  System design and operations count. The Material Cost Differentiation Methodology should be rooted in measurable recycling system activities, resource usage and cost drivers
7.  Emerging trends count. The Material Cost Differentiation Methodology will consider evolving recycling technologies and practices to ensure that the most current material management techniques inform measurements of cost impacts.
8The material mix counts.  The composition within material categories may differ according to the scope of each program and needs to be considered because such differences may result in different impacts on cost.

Project Updates

Material Cost Differentiation Matters Video