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Industry's most significant and stringent environmental policy is imminent for European Union member states and thus for manufacturers selling into the EU. Many logistics and supply-chain executives have cocked an ear at the curious acronym, but few fully understand its broad implications and fewer still have launched initiatives to address it. With the first regulatory milestone going into effect Aug. 13, 2005, the EU's Waste Electrical and Electronics Equipment (WEEE) directive sets standards across a variety of industries from home appliances to mobile phones to computer products, holding the manufacturer ultimately accountable for recovering products and recycling up to 75 percent of the material content by weight.
Far from a token green initiative, the directive substantively addresses a very real problem, with electrical and electronic equipment being the fastest-growing waste stream in the EU. Gartner Group estimates that 220 million PCs will be replaced between 2004 and 2005. In the U.S., the National Safety Council estimates that by 2007 around 500 million computers will need to be disposed. With millions of tons of non-biodegradable electronics being discarded annually, warning sirens are being triggered. Environmentalists and regulators alike are alarmed that hazardous toxins such as cadmium and lead will seep into the air, soil and groundwater, producing health risks to people.
Although the WEEE directive has jurisdiction only in the EU (including the 10 new member states that joined the EU in May 2004), Japan has had similar legislation in effect since 2000 and China's is likewise imminent. Markets with controlled take-back will account for 60 percent or more of global sales for many electronics and telecommunications companies by mid-2005. Already many states, Maine, Massachusetts and California among them, have begun restricting or charging fees for electronic waste dumping. Not surprisingly, many multi-nationals have strategic intent to implement IT systems and audit and reporting tools necessary to manage compliance processes in anticipation of similar regional legislation and to maintain process standardization worldwide. Recognizing the marketing value of well-publicized environmental policies, some companies aren't waiting for legislation. In 2003, HP and Dell each proactively recycled more than 100 million pounds of unwanted computer products globally.
Whether the groundswell to green is regulated or market driven, supply-chain management is fast becoming a cradle-to-grave endeavor. Shoshanah Cohen, a director in management consultancy PRTM's global supply-chain practice notes that "organizations have long recognized the importance of including reverse logistics processes within the context of their overall supply chain. Now we're seeing an expansion to the scope of the service supply chain to include product recovery management as well." Companies without a plan in place will end up directing significant un-budgeted sums to national collective take-back schemes. Noncompliance will mean penalties or worse, lost sales.
Looming on the compliance horizon alongside the WEEE directive is the Restriction of Certain Hazardous Substances, or ROHS. Although these directives both stem from broad-reaching pan-European environmental regulation, they are distinct and in effect address opposite ends of the supply chain. ROHS is focused on the reduction and restriction of named hazardous substances in components with prescribed limits for lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBBs) and polybrominated diphenyl ethers (PBDEs) . WEEE, by contrast, regulates the end-of-life process and how products being replaced by both commercial and personal end users must be collected, treated, re-used or recycled. Nevertheless, both directives have much in common: regulatory milestones are interwoven, IT implications are significant and taken together there can be synergy, so a holistic management approach is recommended.
The WEEE directive defines, prescribes actions, and sets regulatory milestones for collection, treatment, recovery and financing for discarded electrical and electronic equipment across 10 product categories ranging from IT and telecommunications equipment, large and small appliances, and tools to toys and leisure equipment.
A distinction is made between commercial and household WEEE, with small office/home office use included in the household category. Manufacturers are able to work directly with their commercial users to define take-back programs, and the financing for collection can be shared with or relegated to the commercial account. For household users the manufacturer can develop their own collection system, such as Dell's door-to-door pick up system, or they can elect to join a collective system sponsored by a municipality, a distributor or retailer, or a consortium of manufacturers. Either way, the end user must be able to dispose of the unit(s) free of charge, and the manufacturer is responsible for tapping into the collection scheme at the appropriate point to claim its products for treatment.
Product re-use-the re-sale or re-use of whole appliances for their original intended function-is to be given priority over recycling. Although product re-sold is not considered in the initial collection target of 4 kg per person per year, re-use data is to be captured from program inception. Significant revisions to collection targets will be made on or before Dec. 31, 2008, incorporating the first two years' collection data. At that time targets for re-use will be included, and it is expected that the broader target will be based on a percentage of the amount of electrical and electronic equipment sold.
Treatment must be carried out by licensed recyclers. Recycling processes for all controlled substances, components and materials (such as batteries, CRTs, LCDs, mercury-containing components, PC boards used in mobile phones and those greater than 10cm2, etc.) are specified. Treatment facility premises must be compliant with standards ensuring safe treatment of hazardous materials, such as non-permeable flooring preventing leakage into groundwater.
Recovery targets by product category are set at two levels. Take for example a 10-pound laptop computer. As a member of the IT and Telecommunications category, the laptop must have 75 percent of its product weight, or 7.5 pounds, recycled, and 65 percent, or 6.5 pounds, of its constituent materials (plastic, precious metals, fiber, etc) must be recycled into re-usable form. No more than 10 percent can go into energy-producing waste, such as power-generating incineration.
Manufacturers must make financial provision for collection, treatment and recovery programs. This can be done by establishing an individual company program, by joining a collective program, by establishing a blocked bank account, or in the near future, by purchasing recycling insurance. Most companies in the IT sector tend to favor individual programs, due to the frequency of product turnover and hence high residual value of recovered products.
Products sold prior to Aug. 13, 2005 are classified as "historic waste." Manufacturers must collectively and proportionately cover take-back costs for all products on the market. After this date manufacturers are responsible for product collection, treatment and recovery of their own products as noted in the directive.
Information and Notification
Manufacturers are responsible for communicating recycling information on a variety of levels:
• To consumers, information at the product level. All products must be marked with the universal "do not trash" symbol (a crossed-out wheelie bin).
• To consumers, information on recycling options.
• To recyclers, information on the disassembly of their products, the re-usable and recyclable material content, and the location of hazardous substances.
Compliance reporting will include information on product sold into each member state as well as product recovered and recycled. Although the timeline may suggest a reprieve with the first reporting results not due until mid-2008, that report consists of data for the years 2005 and 2006-so data collection requirements are imminent.
The spirit of regulation is always an opportunity: the Sarbanes-Oxley regulation, for example, ensures shareholders of public companies that their investments are safe from accounting fraud; WEEE regulation protects the environment from the growing exposure to millions of tons of hazardous waste. Maybe so, says PRTM's Cohen, "but many supply-chain executives see WEEE more as a threat to their cost structure. The bigger threat, however, is in the cost of non-compliance." Like Sarbanes-Oxley, the cost of procrastination with WEEE compliance will exact a penalty in increased implementation costs. Taking a proactive approach to WEEE will maximize the opportunity and eliminate any threat of non-compliance penalties. Becoming a recognized leader in re-use and re-sale shows environmental and social stewardship and will offset program costs. Creative, customer-friendly take-back programs likewise reflect positively, and efficient program management will keep costs and headcount under control. The key, according to Cohen? "Get informed and get moving."
Alan Scroope is founder, CEO and CTO of Fremont, Calif.-based WCT, which provides hosted software and services for global asset management, including shortage sourcing, product refurbishment, re-marketing, integrated reverse logistics, asset recovery management and environmental compliance network management solutions. See www.wctbid.com for more information.
Anne Patterson's career spans manufacturing, logistics and IT for such companies as Hewlett-Packard, NeXT and 3Com. She is vice president of client delivery and strategic alliances.
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