TESCO is to remove council recycling banks from its supermarket car parks across South Yorkshire.
The same change is being implemented across the UK by the company - which is bringing in its own recycling contractor, DS Smith, instead.
The move, affecting Tesco sites including Infirmary Road and Abbeydale Road in Sheffield, has been criticised by the Local Government Association, as councils each make tens of thousands of pounds every year from selling materials collected.
In Sheffield, some of the waste collected at council banks is processed by charity Reclaim, which uses the income to provide jobs for disabled people.
Clyde Loakes, vice-chair of the association’s environment board, said: “This decision takes a valuable revenue stream away from councils which was used to reduce the cost to council taxpayers of dealing with municipal waste in each area.
“Since 2005 retailers have failed to reduce the amount of packaging they produce. As the market leader Tesco should demonstrate how it will help address these issues to reduce the annual £560m cost of landfill which falls on council taxpayers.”
Tesco insisted it would not profit from the move but would instead donate money raised from recycling to local community projects.
The firm said it decided to change its policy on recycling bins after “some councils told us they were worried that they would no longer be able to maintain their store recycling facilities”.
Tesco has not yet decided when the change will be implemented.
A spokeswoman said the switch would “boost efforts to meet the UK’s overall recycling targets by making recycling facilities in our stores more attractive, and reward customers through a donation to community projects”.