The Risks of High-Tech Trash

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ewaste risk management

In 2016, the world generated 44.7 million metric tons of e-waste, equivalent to almost 4,500 Eiffel Towers, according to the Global E-Waste Monitor 2017, a joint report produced by the United Nations University, the International Telecommunication Union and the International Solid Waste Association. This amount is expected to increase to 52.2 million metric tons by 2021. In the United States, the ­Environmental Protection Agency (EPA) has estimated that electronic waste is growing two to three times faster than any other waste stream.

So what is e-waste? According to the UN report, e-waste refers to a wide range of discarded electronic equipment and parts. This refuse falls into six primary categories:

  • Temperature exchange equipment such as refrigerators, freezers, air conditioners and heat pumps.
  • Screens and monitors, including televisions, laptops and tablets.
  • Fluorescent, high-intensity discharge and LED lamps.
  • Large equipment like washing machines, dryers, dishwashers, stoves, large printers and copiers, and photovoltaic panels.
  • Small equipment like vacuum cleaners, microwaves, toasters, electric kettles, electric shavers, scales, radios, video cameras, electronic toys, electrical tools and small medical devices.
  • Small IT and telecommunications equipment, including mobile phones, GPS devices, pocket calculators, routers, personal computers, printers and telephones.

As markets expand into developing countries, more and more people are adopting—and discarding—the latest technology. At the same time, product replacement cycles continue to shorten. As a result, the volume of e-waste generated is becoming an increasing problem worldwide. As regulators try to clamp down on the issue, manufacturers, retailers and end-users will need to understand how e-waste could impact their businesses and what they need to do to avoid potentially costly consequences.

Regulatory Penalties

Primary concerns regarding e-waste include health, safety and environmental risks. A typical desktop computer, for example, contains 57 grams of lead, 2.5 grams of barium, 0.01 grams of arsenic, 0.8 grams of antimony, and smaller amounts of other toxic metals. Cathode-ray tube (CRT) monitors, commonly used in older glass video displays, contain four pounds of lead. These and many more substances found in e-waste are either poisonous, carcinogenic or both, and can accumulate in soil, water and food.

Because of the harm that can come from the byproducts of e-waste, companies that improperly dispose of these products face substantial legal and regulatory penalties. In 2014, for example, AT&T was prosecuted and fined more than $50 million by authorities in California for illegally dumping e-waste. The company paid approximately $23.8 million in civil penalties, including $3 million that was to be used toward future enforcement actions. They were also required to pay another $28 million over five years to make process changes to prevent future violations. In 2011, Target paid $22.5 million to settle similar charges that it was illegally dumping electronics collected in California stores.

A Colorado enforcement involving the recycling firm Executive Recycling resulted in a smaller fine of $4.5 million, but this case also demonstrated the criminal risks associated with e-waste, as two of its executives were sentenced to federal prison time for illegally sending electronic waste to foreign countries, including China, after telling customers they would dispose of it in an environmentally-friendly manner.

There are a number of regulations around the world that govern e-waste disposal. The main international regulation is the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, a multilateral treaty aimed at curtailing environmentally and socially detrimental hazardous waste trading patterns. The convention has been signed by 186 countries. Because the convention must be transposed into law in the signatory countries, the penalties for violation are varied, ranging from a maximum fine of €760,000 ($940,000) in the Netherlands to 28 trillion pesos ($10 million) in Colombia. In the U.K., fines can range from a few hundred to tens of thousands of pounds, depending on the severity of the infraction. While the United Sates has signed the Basel Convention, it has not ratified it and therefore the treaty does not apply in the country.

Multinational companies also need to consider regional and national laws. In the EU, for example, e-waste management is regulated uniformly by WEEE Directive (2012/19/EU). The directive covers the collection, recycling and recovery of e-waste and results in a higher quantity of processed e-waste. The directive uses the principle of extended producer responsibility, which requires producers to “organize and/or finance the collection, treatment, and recycling of their products at end-of-life.” Even so, EU countries are struggling to meet the targets set by the directive. Since 2016, EU member-states have needed to collect 45% of the e-waste generated there, increasing to 65% by 2019, but official reports show that levels have stayed at about 37% over the past decade. Non-compliance with the directive can bring unlimited fines and jail sentences. For example, in the U.K. last October, Churngold Recycling Ltd. and two of its directors were fined £32,450 and given suspended sentences after a high court trial found them guilty of illegally disposing of thousands of tons of e-waste.

While the United States does not have national e-waste legislation, 25 states and the District of Columbia do have some form of producer responsibility and disposal laws for technology products. But little of this legislation covers the larger electronic devices. “A lot of company policy is driven by the policies in place in the various states,” said Jason Linnell, executive director at the National Center for Electronics Recycling. “And in most of those states, the manufacturers of covered devices, which include consumer electronics rather than white goods [major household equipment like stoves and refrigerators] and other appliances, have to deal with their e-waste obligations by setting up and paying for a certain amount of recycling to happen in the state. A lot of companies just do what they have to do to comply with those laws.”

Reduce, Reuse, Recycle

There are a number of ways companies can mitigate exposure to e-waste risk. Many organizations are trying to adapt older equipment so that it can be reused, rather than thrown away. Part of this effort includes a requirement for vendors and suppliers to refurbish and repair as much of their outdated electronics as possible. Breaking down products into their components and reusing them also reduces the need to track outdated and unusable products, reducing liability and risk from an environmental and regulatory standpoint. Companies are also being encouraged to redesign products to reduce the volume of materials (especially hazardous ones) used in manufacturing, and make it easier to recycle materials and extract heavy metals for reuse.

Recycling is generally considered to be the most effective way to reduce e-waste. Not only do recycling programs help shield organizations from the risks associated with improper disposal, but they come with a financial upside as well. According to the UN, the total value of all raw materials present in e-waste was estimated at approximately $67.3 billion in 2016. If companies could reclaim even a portion of these materials, they would both save money on raw materials and reduce their exposures to e-waste risk by reducing e-waste itself. For example, the EPA estimates that, for every million cellphones that are recycled, 35,000 pounds of copper, 772 pounds of silver, 75 pounds of gold and 33 pounds of palladium can be recovered.

Responsible disposal and safe recycling of products is covered by a large number of voluntary codes. Microsoft, for example, ensures that it “uses the services of directly contracted asset recovery and recycling partners, who must meet Microsoft’s specifications.” The specifications include a variety of certifications. The first set are recycling standards, including Sustainable Electronics Recycling International’s R2 (Responsible Recycling) Standard, the Recycling Industry Operating Standard, and e-Stewards, a standard set up by the Basel Action Network. The company also expects its internal staff, suppliers and contractors to abide by International Standardization for Organization (ISO) standards for environmental and quality management (ISO 14001 and ISO 9001), as well as the health and safety standard OHSAS 18001. In addition, Microsoft requires compliance with all applicable laws, including the Basel Treaty, U.S. Export Administration Regulations, and the International Traffic in Arms Regulations.

All of these actions are part of the company’s extended producer responsibility principle, which states:

  • Manufacturers shall be incentivized to improve the environmental design of their products and the environmental performance of supplying those products.
  • Products should achieve a high utilization rate.
  • Materials should be preserved through effective and environmentally-sound collection, treatment, reuse and recycling.

These principles apply throughout the product life-cycle from manufacturing to the return and end-of-life management process. Its Refurbished PC Program, for example, covers all types of consumer end-of-life electronics and facilitates refurbishment and reuse of old or discarded equipment.

Many U.S. states also implement extended producer responsibility rules, making manufacturers and retailers responsible for recycling at end-of-life. “These products are collected directly from consumers and will contain many different brands, product types and ages,” Linnell said. “They’re all going back to the same recyclers and the company is paying for a portion of the cost.”

Many companies choose to go above and beyond what state laws require. For example, a partnership between HP and Staples allows customers to take any HP product to Staples stores to be recycled. Dell has a similar partnership with certain Goodwill locations across the country.

While recycling is typically effective, Linnell said there are a number of potential risks related to improperly functioning recycling programs. “There’s a compliance risk and a cleanup cost risk in not having proper recycling programs,” he explained. “There have been a number of recyclers who have taken old CRTs but then had to abandon large stockpiles of them because the market is very challenging. There was one case in Kentucky where a CRT recycler was found to be burying the glass in a pit next to its warehouse, and the owner is now being charged with multiple crimes. If that was one of the vendors that you were using, then you could be at risk for some liability there.”

More than 700 electronics recycling facilities have been independently certified in the United States, but U.S. certifications do not apply if the product is shipped out of the country. Companies need to determine if the non-domestic recyclers that they contracted with are capable of handling the materials that they are being sent and are adopting industry best practices, such as those created by groups like the Responsible Business Alliance. Formerly known as the Electronic Industry Citizenship Coalition, the group was created by major electronics companies in 2004 and has developed industry-wide standards for social, environmental and ethical issues in the electronics supply chain, including reducing the use of resources and the generation of waste. Member companies not only comply with the code of conduct themselves but can require that the companies they work with adhere to it as well.

Even the most effective e-waste risk management policies can fail, however, so insurance is another way to mitigate the risk. Premises pollution liability insurance can provide coverage for environmental risks on a particular site, including remediation, if necessary. It also insures against liability arising from e-waste releases during transportation or from properly permitted third-party disposal sites. Policies can also be obtained that provide coverage for a company’s entire business operations, whether on their own premises or at third-party locations. Contractor’s pollution liability coverage can provide insurance for companies involved in e-waste risk management for environmental risks at sites owned by another entity. In addition, some insurers may be willing to pay for e-waste auditing, training or other risk management services as part of a comprehensive coverage program.

As public awareness of e-waste risk grows, companies also need to be aware that improper practices could tarnish their reputation. Photographs of a company’s products in a landfill or being picked apart by children at an e-waste dump in Africa or Asia, accompanied by news stories of massive fines or prison sentences for polluting the environment, can be damaging. “The most visible reputational risks for a company,” Linnell said, “can be that their brand becomes associated with not having a properly functioning recycling program, or it doesn’t have a program that has vetted downstream vendors, or you don’t know where the materials are ending up, or you just don’t have a program at all.”

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