Take-Back Legislation Sustainable Operations Prof. Gil Souza Environmental Legislation

The Evolution of Product Recovery Historical Approach New Paradigm Essentially none: dump or burn Most products designed to minimize materials, assembly and distribution – ignoring repair, reuse and disposal requirements Costs outweigh benefits, and customers unwilling to pay an additional “green fee” Customers and authorities demand manufacturers to reduce waste Pressure from NGOs triggered by environmental concern and rising disposal costs Legislative action Disposal bans Take-back requirements Environmental Legislation

Scope of This Presentation We will focus on environmental legislation regarding product take-back Manufacturers are responsible for environmentally responsible treatment of products that reach the end of their useful lives Extended Producer Responsibility (EPR) Other forms of environmental legislation exist: Pollution control (e.g., cap and trade) Landfill disposal bans (e.g., cathode ray tubes) Bans on certain materials (RoHS and REACH in Europe) REACH: Registration, Evaluation, Authorisation and Restriction of Chemicals EU regulation addressing the production and use of chemical substances and their potential impact on health and environment. Passed in 2007, with implementation over 10 years. In a sense, REACH is an extension of RoHS, which banned six substances from electronics products (lead, mercury, cadmium, Cr+6), and was passed in 2002. REACH has an authorization list that regulates the use of substances of very high concern (SVHC) (i.e., that is either mutagenic, or carcinogenic, or toxic for reproduction, or is persistent, bioaccumulative and toxic. The list is periodically updated and expanded. Currently , the SVHC list includes 144 substances. To sell or use these substances in Europe, producers (manufacturers, importers or retailers) must apply for authorization, which must include a chemical safety report about risks, as well as possible alternative substances or technologies. Environmental Legislation

Forms of EPR Legislation Advance Recycling Free (ARF) Fee collected from consumers upon sale of a new product; a portion of the fee is used to subsidize collectors and recyclers. Recycling and collection targets Manufacturers must collect used products (as a fraction of sales), and recycle a fraction of them. Unit-based fee Consumers are charged a fee for the cost of recycling. “Pay as you throw” Environmental Legislation

Example of Advanced Recycling Fee (ARF): California Consumers are charged a fee upon the purchase of any product that has a screen larger than 4 inches The fees depend on the size of the screen Applied to all transactions where CA sales tax apply, including Internet and catalog sales Local governments use part of the fee to subsidize collectors and recyclers, whereas 3% is kept by retailers Manufacturers must inform consumers of recycling opportunities and report sales volume and hazardous substances Environmental Legislation

Environmental Legislation Example of Recycling Target Legislation: WEEE (Waste Electric and Electronic Equipment) Directive in Europe Separate collection of all WEEE from municipal waste by municipalities at designated collection points Annual collection target (for a country): 65% of average weight of electrical and electronic equipment placed on the market in two preceding years Ten different categories of e-waste (see next); each category has a different recycling target Producers (manufacturer, importer or retailer) are physically and financially responsible for recycling They must have financial guarantees for future e-waste Must provide information for customers about recycling There are minimum recycling standards Environmental Legislation

WEEE Legislation (European Union): Collection and Recycling Targets Category Recycling Target Recovery Target Large household appliances 80% 85% IT & telecom 70% Electric and electronic tools, medical equipment, monitoring devices, control equipment 55% 75% Lamps Recycling target: % (in weight) of material recovery (from collection) Recovery target: % in weight of material and energy recovery (from collection)

Implementation: Collection and Recycling Organizations (CROs) The WEEE directive was implemented differently in each country CROs are the entities that perform the collection and recycling of used products, on behalf of the producers Most likely subcontract local collection and recycling to other specialized collection firms and/or recycling firms In Belgium and Switzerland, there is a single CRO Controlled by industry trade associations w/ government oversight All WEEE producers must pay a fee per kg recycled by the CRO WEEE weight assigned to each producer is a function of its sales Fee has (usually) little relationship with current recycling market cost In other EU countries, a producer can contract with another CRO that handles WEEE collection and recycling for other firms, for example ERP (European Recycling Platform) A producer could handle its own collection and recycling (presumably by outsourcing locally, in each country). Environmental Legislation

Environmental Legislation Issue 1: How is 65% Collection Target (Countrywide) Allocated to Producers? Each country creates a national registry, to identify producers, and volumes of new products they put in the market Then, each producer’s market share determines its financial obligation (under the single CRO per country system such as in Belgium) and/or physical obligation (weight that the producer must ensure to be recycled, by a CRO it contracts with). Many manufacturers (e.g., HP) lobby for a true IPR (Individual Producer Responsibility) system, where each manufacturer is only responsible for its own waste. Easier said than done: How does one producer sort only its own waste at municipal collection points? IPR was the intent of the WEEE in the original directive for products manufactured after 2005, but it was lost in translation. Environmental Legislation

Allocation: the German Case for IT and Telecom Products (ICT) The ideal case of IPR, where every manufacturer only collects its own waste works well if there are fewer, established manufacturers with steady market shares Example: appliances That is not the case with IT and Telecom (next) Thousands of manufacturers Constant industry evolution Convergence Environmental Legislation

The IT and Telecom World… Environmental Legislation

The Solution for Allocation of eWaste Proposed by German Manuf. Assoc. BITKOM: German association of IT and Telecom manufacturers They created a mechanism (registry) by which firms, municipalities and importers must register in a system (EAR), and keep up to date information EAR was funded by 130 manufacturers (130 million euro) EAR keeps track of collection, and designates which containers are to be collected by which firm and when Avoids “cherry picking” the most attractive waste and creates a level playing field Environmental Legislation

Environmental Legislation Source: Mario Tobias, BITKOM Environmental Legislation

Environmental Legislation Source: Mario Tobias, BITKOM Environmental Legislation

Issue 2: Does the WEEE Motivate “Greener” Products? The original intent of the WEEE was that each manufacturer should be responsible for its own waste (Individual Producer Responsibility) Being required to treat its own waste would result in better (greener) designs Collective systems in some countries with a single CRO (Belgium, Switzerland), however, do not provide incentives for green designs, as recovery costs are shared among manufacturers. Environmental Legislation

Another Example of Recycling Target Legislation: Maine and Washington Maine’s legislation in effect since Jan. 2006 Washington’s legislation in effect since Jan. 2009 Collection is setup by municipalities who pass collected waste on to one of 7 consolidators (ME) Similar to the WEEE legislation, except that ME and WA use the “return share” model Manufacturers pay for recycling cost based on respective share of products in waste stream, estimated statistically This is a step closer to Individual Producer Responsibility (IPR) that manufacturers prefer Environmental Legislation

Example of Unit-Based Fee Legislation: Japan (Enacted in 2001) Restricted to TV sets, cooling devices, washing machines, and air conditioners Consumers are charged a fee by the manufacturer upon disposal (fee collected by retailers); proceeds sent to manufacturers and used for covering recycling costs Each producer has control over the fate of its products: recycle, repair, remanufacture, etc Both producers and end users can track the fate of their products through an information system: the “manifest” system Through a “recycling bill”, the system identifies applicable collection points and recycling plants according to the brand and category of the product This allows for statistical data collection and traceability It allows manufacturers to get feedback on end-of-life issues related to its products by recycling plants (including proposals for design improvement, such as material composition, labeling, ease of disassembly Create incentives for greener designs! Environmental Legislation

Environmental Legislation Concluding Remarks Extended Producer Responsibility (EPR) legislation is a reality in many countries, and is spreading to other countries very fast, particularly e-waste Three basic forms: Advanced recycling fee: paid by consumers upon purchasing a new product; used to finance recycling (California) Collection and recycling targets (by producers): WEEE legislation in EU is the classical example, also ME and WA Unit-based fee: consumers pay upon disposing a product (Japan); proceeds sent to manufacturers to finance recycling Many US states are adopting EPR (different) forms of EPR legislation (burden for firms) – should EPA step in? Ideal features: Should induce “green” designs Should create a level playing field for manufacturers Environmental Legislation