The Recycling Revolution

Jessica McCallin discusses the EU's latest producer responsibility initiative

If you think recycling just involves separating your newspapers, old wine bottles and baked bean tins once a week, think again. The European Union (EU) is slowly but steadily widening the concept to include every kind of product, and, further, putting the onus of recycling them on the company which manufacturers them.

This is not to say that it is asking newspapers to collect and recycle their old editions: the move is much more ambitious than that. In its sights are fridges, stereos and televisions. Electrical and electronic equipment is made of valuable resources, and the rate at which western societies use and replace it is creating serious disposal problems. Think fridge mountains and dumped cars. Further, many of the materials are toxic and, if not disposed of responsibly, pollute land and water, affecting human, animal and plant health.

Electronic waste is the fastest-growing form of rubbish across the western world and is likely to mount even more rapidly as consumers upgrade to the latest models of digital televisions and flat-screen computers. White goods and information technology make up the lion's share - 43% and 39% respectively - of all waste.

Enter the Waste Electrical and Electronic Equipment (WEEE) Directive, adopted by the European Commission last December. It aims to increase recycling and promote better design by placing financial responsibility for the disposal and recycling of electrical and electronic goods on manufacturers. Member states have until August 2004 to implement the directive, until September 2005 to have collection, treatment and financing systems in place, and until December 2006 to meet the first collection and treatment targets. Recycling targets range between 50% and 75% by product weight, depending on the type of goods.

The Directive is the latest in a line of 'producer responsibility' initiatives from the EU, aimed at making manufacturers consider the life-cycle of their products, the resources they use, and the waste they create. The first was the 1994 Packaging Waste Directive, which required companies with more than 50 tons of packaging a year to recover and recycle a set percentage of packaging waste. In 2000, the End-of-Life Vehicles (ELV) Directive was adopted, which required car makers to arrange for the collection, treatment and recycling of vehicles that had reached the end of their life. It sets recovery targets of 85% of ELVs by weight, with a minimum of 80% recycled, starting in 2006.

The Directive is nothing if not ambitious, and manufacturers will incur serious costs as they comply with it. In the UK, the Department of Trade and Industry estimates the Directive will cost £217m to £455m a year. Orgalime, a Brussels-based trade association for the European metals and electrics sector, estimates it will cost the EU, as a whole, over £2bn a year, although it adds that costs will probably decrease over time, as collection and recycling systems are developed and streamlined.

But the cost of compliance is likely to be the least of companies' worries. It is what comprises them that should be of greatest concern. The logistics of collecting and recycling so many large, complex goods will be formidable, and EU countries' recycling infrastructure is, to put it mildly, simply not up to the job. Some countries are more ahead than others. Germany, Holland, Sweden and Austria have been recycling some electronics for several years and have basic infrastructure in place. Countries like the UK, which still have not developed adequate door-step collections of basic household waste, have a very long way to go.

Nor is the technology to recycle certain products up to scratch. The technology needed to recycle the liquid crystal displays widely used in mobile phones does not exist. The technology to separate various types of plastics from each other is not ready either.

Who is responsible?
There is also the issue of which manufacturer takes responsibility for what. Consultations in each EU country have found that the preferred method is for each manufacturer to take responsibility only for its goods, but many products contain parts made by different companies. A television, for example, might be branded Toshiba but contain a Daewoo component. Which company is responsible?

The issue of responsibility takes a more serious turns when 'historic WEEE' is considered. The EU is not just going after future e-waste. Existing goods need to be dealt with as well.

"Companies are very concerned about how to quantify the costs of historic WEEE and share responsibility amongst producers," says Matthew Townsend, senior associate in Allen & Overy's environmental law group. "Many producers might go bankrupt. Will it then be up to the remaining solvent producers to pick up their historic WEEE bill?" Orgalime says dealing with historic WEEE will cost close to £40bn, spread over several years.

Historic WEEE has proved the most contentious part of the debate so far, and there are still no definite answers on how it will be paid for. To compound matters, it is up to each country to come up with its own system. This will probably lead to wildly varying regimes, thereby increasing the cost to those manufacturers who sell their products throughout the EU.

Search for solutions
A variety of risk transfer products are being considered. Straightforward insurance is unlikely to be available, but manufacturers could pay a recycling premium to a company prepared to do all the administration, collection, and recovery of the materials. Another suggestion is for manufacturers to open a locked bank account when they launch a product, containing enough money to deal with the product at the end of its life. Some kind of financial guarantee is likely to be needed, especially for small and medium-sized companies which will not be able to fund complex recycling plants.

Provisions will also need to be made for products made by non-EU countries which, with the exception of Japan and Canada, are not tackling product life-cycle issues. Non-EU products do not escape the legislation, and the onus is likely to be on the importing agent to prove there is enough money to deal with the recycling.

The devil of this Directive is definitely in the detail. Industry commentators say it will be nothing short of a nightmare to implement, especially if different countries go down very different routes. Serious amounts of consultation with industry still need to take place, and a massive investment in recycling infrastructure will have to be made.

But the concept behind the Directive and where it is leading should be clear. "Companies all need to start designing and producing goods with a view to recycling them at the end of their lives and, further, designing and producing goods made from recycled materials," says Helen Loose, partner at law firm Ashurt Morris Crisp. The ultimate aim of the WEEE Directive, and of the ELV and packaging Directives, is to encourage a conceptual shift in the way manufacturers and consumers interact. At the moment, industry is geared towards producing goods with a limited shelf life, so that consumers upgrade regularly. This will have to change.

At the very least, products will need to be made of easier-to-recycle materials and in easier-to-recycle ways. But some environmentalists are encouraging companies to go further than that. One suggestion is to shift business models from product to service. Rather than selling a TV, a company might lease it out instead. Then, when the customer wants an upgrade, the company can easily take back the old model and supply a new one. It would be one way of tracking products and of ensuring customer loyalty. Some serious creative thinking is needed.

Companies which do not manufacture electrical items need not think they are out of the loop for ever. Anthony Hobley, partner at law firm Baker & Mackenzie says: "The EU, under its Integrated Product Policy framework, is developing new directives which look at the life cycle of all products, including the energy and resources used to produce them. It's the next stage of the producer responsibility evolution."

If the EU has its way, all products will eventually be bought into the fold. It wants nothing less than a revolution in the way we produce and consume.

Jessica McCallin is a freelance journalist

IMPLEMENTATION PRINCIPLES
In June this year, following the launch of the first pan-European Recycling Platform (ERP) at the end of 2002, the four founding members, Braun, Electrolux, HP and Sony Europe, announced their recommendations for the implementation of the WEEE Directive into national legislation. The aim of these 'Principles for the Implementation of the EU Waste Electrical and Electronic Equipment Directive' is to ensure national legislation remains consistent with the EU directive and to secure economies of scale and operational efficiency.

The WEEE Directive will require producers of electronic products to finance the take-back, treatment and recycling of their products, from August 2005. The ERP's Principles of Implementation cover the aspects that are most relevant to secure optimisation, consistency and cost efficiency. The main pillars are: