END-OF-LIFE REPORTING AND BEYOND

Transcription

1 END-OF-LIFE REPORTING AND BEYOND A challenge that keeps on growing Authors: David Perchard and Raphael Veit Sponsored by SAP AG

2 About Perchards Perchards monitor and assess legislative developments across the world relating to extended producer responsibility and eco-design for packaging, electrical and electronic equipment and batteries. The consultancy has been engaged by more than 360 companies or organisations based in 35 countries on every continent, and has carried out studies for the European Commission, the World Bank group and for government bodies in Australia, the Czech Republic, Ireland, Slovakia and the UK. About the Authors David Perchard is Managing Director of Perchards Ltd. He began his career with the Food Manufacturers Federation in the UK and then worked for eight years with Cadbury Schweppes before co-founding Perchards in He has been involved with waste management policy ever since the European Commission started taking an interest in the environmental impact of packaging in Raphael Veit first worked with Perchards in 1998 and currently manages Perchards WEEE and batteries consulting and information service, producing analytical reports on legislative developments and compliance markets in Europe and Asia. Prior to joining Perchards, Raphael worked on packaging policy issues at the Thai Ministry of Industry and the Asian Packaging Federation, after starting his career dealing with the 1991 German Packaging Ordinance at skin care company Beiersdorf AG. About SAP SAP is the world s leading provider of business software, offering applications and services that enable companies of all sizes and in more than 25 industries to become best-run businesses. With more than 105,000 customers in over 120 countries, the company is listed on several exchanges, including the Frankfurt stock exchange and NYSE, under the symbol SAP. For more information, visit 2

3 Table of Contents END-OF-LIFE REPORTING: A CHALLENGE THAT KEEPS ON GROWING...4 Macro forces on manufacturers, importers, retailers:...4 INTRODUCTION...5 OUTSIDE PRESSURES MOUNTING...6 Growing concerns: pollution, resource scarcity...6 END-OF-LIFE REGULATIONS GOING GLOBAL...7 Rapid proliferation of Extended Producer Responsibility legislation...7 Compliance is increasingly a competitive business...7 OVERVIEW OF END-OF-LIFE REGULATIONS...8 Packaging and Printed Materials...8 Europe...8 North America...10 Latin America...10 Asia-Pacific...11 Electronic Equipment and batteries...12 Europe...12 North America...14 Latin America...15 Asia-Pacific...15 SUSTAINABILITY, SOFT LAW AND RETAILER MANDATES...18 Packaging and sustainability scorecards...18 PRODUCT SAFETY AND STEWARDSHIP BEYOND RECYCLING...21 Restrictions on use of hazardous substances...21 Maintaining dossiers on product design...22 FURTHER ENVIRONMENTAL REPORTING...24 Consumer information carbon labelling...24 Other drivers for internal and external environmental reporting...24 END-OF-LIFE HAS BECOME A STRATEGIC ISSUE...25 Compliance management as central as possible, as local as necessary...25 WHY MANUAL SYSTEMS ARE NOT SUFFICIENT...26 THE ANSWER: A CENTRAL PROGRAMME, SUPPORTED BY AN INTEGRATED SYSTEM...27 Linking operations, products, finance and the supply chain...27 CONCLUSION INVEST IN YOUR FUTURE NOW

4 END-OF-LIFE REPORTING: A CHALLENGE THAT KEEPS ON GROWING EXECUTIVE SUMMARY This paper provides an overview of key global trends and regulations relating to packaging, electrical and electronic equipment and batteries. It lays out the challenges of compliance and consequences of non-compliance, and warns that the approach many companies are taking today will not scale with the rapid growth and increased complexity of regulations and industry or supply chain requirements. Finally, the paper addresses the benefits of best-in-class approaches to environmental management programmes and the systems needed to support them. Macro forces on manufacturers, importers, retailers: Worldwide proliferation of EPR legislation to all developed countries and almost all emerging economies. Increasing complexity of compliance as policy evolves from same-for-all compliance (quasi-taxation) to multiple competitive choices and individual producer responsibility. Retailer sustainability initiatives (mandates/scorecards) by Wal-Mart, Tesco etc. Tougher enforcement actions as EPR legislation comes of age. Consumer awareness of green issues and pressure from NGOs and investors. Challenges that make it particularly difficult for companies to manage the data needed to meet end-of-life regulatory requirements: No one size fits all requirements vary by region or member state, and between one product category and another; Determining who is responsible for paying fees can be difficult; Products are not always easy to categorise, and this classification (which may differ from country to country) may affect the data reporting and recycling requirements applicable. 4

5 INTRODUCTION Policies that shifted all or partial responsibility for end-of-life products to their producers were first implemented in Germany, Taiwan and South Korea in the late 1980s. This set in train a process which has added an entirely new dimension to companies data management requirements environmental reporting. Initially companies found themselves having to calculate the weight of the packaging they placed on each national market; then they had to do the same for a range of products such as electrical and electronic products and batteries; and now they are faced with growing demands for disclosure of a wide (and steadily widening) range of data relating to environmental sustainability. It s not simply a question of collating data and sending it off to whoever needs it in the countries where you operate: even within the European Union, there are different national rules on the allocation of legal responsibility between the various levels of the supply chain, different rules on funding responsibilities and on governing producer responsibility organisations. As a result, international companies have struggled to integrate environmental data in their central IT systems. And Extended Producer Responsibility is now spreading across the world. These different requirements can lead to a need to generate dozens of different declarations in various time frames. And reporting requirements as well as the cost structures for fee calculation may change over time, which results in more work needed to meet obligations. More often than not, major companies local subsidiaries collect data from various systems and report to national authorities through a set of spreadsheets. Even where this approach has worked reasonably well in the past, it is almost certain to break down as the requirement to report on the weights of packaging and products placed on the market is overlaid with further demands for environmental recordkeeping and reporting and in a growing number of jurisdictions. Ideally, all necessary information should be easily accessible and easy to link together in whatever way required. As the management of environmental data becomes more and more complex, it is evolving into a strategic rather than an operational issue. The overheads companies incur in calculating the data on which their producer responsibility fees are based often exceed the value of the fees themselves. And increasingly, combining environmental and operational data presents real commercial opportunities. A company with a state-of-the-art information retrieval system may be able to pursue opportunities for competitive advantage in integrating reverse logistics and data tracking. This holistic approach can provide new perspectives. For example, companies can use lifecycle analysis to identify environmental (and economic) weak points in the supply chain which need to be addressed; or can present key customers with data which will help them meet their own environmental goals. Companies are under increasing pressure to disclose data on the environmental performance of their products or of the company in general to customers, shareholders and the general public as well as to regulators. A company locked into rigid, issue-specific data management systems will not be able to respond flexibly to these challenges and opportunities, and will be left behind. 5

6 OUTSIDE PRESSURES MOUNTING Growing concerns: pollution, resource scarcity Over the last 30 years, the developed world has moved from waste disposal to waste management. Heavily polluting landfills and incinerators have been cleaned up, and end-of-life products have increasingly come to be regarded as a resource which can substitute for virgin materials. But the progress made has only added to the pressures on business. If recycling is the answer, why is there not more of it? Landfills in developed countries may for the most part be managed properly, but what about the products containing hazardous substances which are exported to the third world, either for dismantling in unsafe conditions or for dumping in uncontrolled landfills? And while the amount of waste generated continues to grow, public authorities are increasingly concerned about the cost of managing it and are seeking to transfer some or all of the cost to producers. Governments are responding with more and more legislation to divert refuse from landfills and increase the recycling of specific materials. And that means a rapid proliferation of end-of-life regulations, which producers, importers and distributors must respond to. Meanwhile there are questions about the sustainability of modern consumption patterns. Extraction of raw materials from a finite resource pool, combined with a forecast growth of world population from 6.9 billion today to 10 billion in 2050, drives scarcity and with that price volatility and risk. Prosperity is rising rapidly in China and elsewhere, and with that the consumption of materials but if the whole world consumed resources on the same scale as the average North American, we should need the resources of five Planet Earths to sustain us. Thus, WWF and other environmental organisations have been calling for one-planet living, which includes maximising energy-efficiency, minimising waste disposal, encouraging low-carbon modes of transport, using sustainable products, and using water more efficiently in buildings and products. The principles set out at are increasingly winning buy-in from mainstream opinion-formers who influence consumers, politicians and business people. Governments and supranational bodies such as the European Union are putting sustainability at the centre of their environmental policies, and leading companies are already way ahead in incorporating these principles into business practice. Business leaders recognise that if this is the way that society says it wants to go, and if regulators are going to drive policy that way through bans or (more likely) taxes and other economic instruments, securing first-mover advantage is essential. They also appreciate that people are not willing to sacrifice current living standards, so sustainability initiatives have to be calibrated carefully. For those decisions to be made, a great deal of complex information has to be gathered together and analysed. 6

7 END-OF-LIFE REGULATIONS GOING GLOBAL Rapid proliferation of Extended Producer Responsibility legislation Governments around the world have enacted legislation based to a greater or lesser extent on the Extended Producer Responsibility (EPR) principle. EPR is a strategy designed to promote the integration of the environmental costs associated with goods throughout their life cycles into the market price of the products. Companies in the supply chain either share the cost of meeting recycling targets with the public authorities, or else have to bear the full cost. The cost will either be absorbed within the chain or passed on to the final purchaser. EPR has spread from Western Europe and the developed countries of Asia to Australia, Israel, Latin America and some Canadian provinces and US states. More than 20 countries are currently preparing or implementing packaging, electronics and/or batteries regulations. In 2010, Maine became the first US state to pass a framework law on EPR, building on Canadian and US experience with productspecific laws. Producers of goods brought within the scope of Maine s product stewardship programmes will be responsible for establishing and financing collection and recycling. Similar Bills have been put forward in other US states. EoL Legislation in force * ** Asia-Pacific Electronics Packaging Europe, MEA Electronics Packaging Americas Electronics 5 13 Packaging Worldwide Electronics Packaging Compliance is increasingly a competitive business In recent years, national competition authorities in Europe have discouraged or prevented producers from forming monopolistic take-back cartels. In the 27 EU Member States alone, there are now over 160 compliance systems for electronics, about 100 for batteries and 135 for packaging, all charging different fees. For producers, competition in the compliance market has provided an opportunity to reduce take-back costs, but it has also made compliance more complex. Companies able to keep the cost-effectiveness of the various competing offerings under review will pay less than those that find it too expensive to review the alternatives once they have made a choice. * Eco-taxation, mandatory take-back, voluntary agreements involving data reporting (excluding returndeposit legislation) in force on at least one product category. Countries with multiple regional legislation (e.g. US, Canada) count as one country. ** Perchards forecast. 7

8 OVERVIEW OF END-OF-LIFE REGULATIONS Packaging and Printed Materials Europe The basic principle of European packaging law is that sufficient packaging waste must be collected from households and businesses to meet recycling targets laid down by law. Producers normally fund or partially fund separate collection and sorting of packaging waste through membership of a collective compliance organisation in each country. Across Europe, there are some 200 separate legal texts in force which transpose the EU Packaging and Packaging Waste Directive into national requirements. The Directive is binding on countries in the European Economic Area, the 27 EU Member States plus three members of the European Free Trade Association (but not Switzerland). There are similar regulations in countries aspiring to EU membership such as Bosnia and Herzegovina, Croatia, the Former Yugoslav Republic of Macedonia, Serbia and Turkey. The compliance organisations charge material-specific fees based on the weight of material placed on the national market. Thus, companies previously interested only in the number of SKUs shipped, now have to record the weight of each packaging material used for each product line, and multiply this by the number of sales. This is not easy when supply chains or distribution chains are complex the packaging around products, components or materials bought in from different suppliers may vary in weight or in the materials used, and the product manufacturer may not always know which country his products are destined for. Detailed requirements are different in every Member State, and so are the compliance organisations fee tariffs and categories. For example, some simply require companies to report on the weight of glass, metals, plastics, paper & board and wood which they have placed on the market. Composites are counted with the predominant material. Others have composites as a separate category (with different definitions of what is to be regarded as a composite), or have different fees for different polymers. In most of Europe, packaged goods producers and importers were identified as the most suitable stage in the chain to pay the fee, because only they know in which country a packaged product will be placed on the market. In the EU, packaged products circulate freely across national borders with minimal customs checks. A packaged product might cross several national borders between manufacture and final sale (large European manufacturers and distributors often have international distribution centres in countries other than where the product is manufactured or sold to the final consumer). But in Italy, and in Norway for some materials, packaging converters and importers of packaging and packaged goods pay; in Ireland and the UK fees are paid by raw material producers, packaging converters, packer/fillers and retailers, with importers paying for operations up the chain that took place abroad; and in the Czech Republic, any stage of the supply chain can pay. In most countries, the converter pays the fee for point-of-sale packaging, including foodservice packaging. 8

9 Even where brandholders are the main fee-payers, other arrangements are sometimes in place for specific situations. For example, the exporter may pay on behalf of the importer. Most compliance organisations permit producers in other EU countries to participate instead of local importers. This makes sense where a large international producer sells through one or more small distributors in each country. Some international brandholders choose this arrangement so that they know that all their products are compliant and because it is often more cost-effective to manage the complex task of compiling packaging data centrally. In some countries, the compliance organisations take responsibility for both household packaging waste and for packaging waste arising at commercial, industrial or institutional premises. In others, they are restricted to household packaging waste. Organisations that cover all packaging usually set higher fees for household packaging waste, but the demarcation is often blurred in practice and each system has its own ways of distinguishing between household and business packaging in its fee structure. Although these funding organisations were originally seen as a natural monopoly, some countries decided that there would be merit in introducing competition. Thus in Germany, and in most of the countries of Central and Eastern Europe, several compliance organisations compete on price and quality of service. Producers sometimes wish to monitor which organisations currently offer the best deal for their particular situation. This is not always easy to establish, as those organisations that publish standard fees review them at irregular intervals and varying levels of frequency, while in the countries where two or more such organisations are operating in competition, fees are often negotiated on a case-by-case basis. In 25 countries, the on-pack Green Dot" logo is used to denote that the packaging is part of a system that finances or part-finances recovery, sorting and recycling of sales packaging. There are Green Dot organisations in 22 EU Member States and in Croatia, Norway and Turkey. The Green Dot is a trademark managed by the umbrella organisation PRO Europe, and it is important to avoid infringing the trademark owner s rights. This can be a problem if products marked with the Green Dot find their way onto the market in countries where the producer does not pay into the national Green Dot organisation. This may be because the company has joined a competitor organisation, or because that particular organisation does not allow foreign companies to join and the producer failed to ensure that the importers of its products are in membership. In some Member States, it is possible to pay a licence fee which is entirely separate from the service provided by the Green Dot organisation. International companies distribution arrangements are often complex, and much depends on the exact nature of the relationships in each territory. When helping clients ensure that they are in compliance with producer responsibility and Green Dot trademark rules throughout Europe, we have found that some companies have no clearly accessible picture of their business relationships and that a lot of research is needed to determine who, if anybody, is taking responsibility in particular markets. 9

10 North America No US state has as yet introduced EPR requirements for packaging, other than mandatory deposits on beverage containers in ten states. For years there has been a vigorous debate as to whether more states should pass deposit laws or whether existing deposit laws should be repealed, but now there is a new question whether deposits should be replaced by EPR legislation on all packaging. A number of influential voices are arguing that it should. There is currently no national packaging legislation in Canada, but there are weightbased, material-specific producer responsibility fees on non-beverage consumer packaging and graphic paper in Manitoba, Ontario and Québec. The revenues are used to fund a certain percentage of the municipalities kerbside collection costs. Nine provinces Manitoba is the exception impose mandatory deposits on some or all beverage containers; Manitoba has a separate arrangement that affects only producers of non-alcoholic drinks consumed away from home. Things are about to change, with new requirements that will affect any company producing packaged goods for the Canadian market. In October 2010, the Canadian Council of Ministers of Environment (CCME) adopted an EPR Action Plan and Packaging Strategy, under which each jurisdiction must introduce Extended Producer Responsibility legislation and systems for packaging and other wastes within 6 years. The provinces EPR requirements should encourage take-back initiatives, with or without deposits, while the sparsely-populated territories will consider whether alternative measures would be more appropriate. The Packaging Strategy recommends weight-based material-specific and overall province or territory targets for percentage of packaging collected through the EPR programme; percentage of packaging diverted into reuse, recycling or composting; Jurisdictions are encouraged to set targets for other key performance indicators (KPIs), such as percentage weight of packaging materials put onto the market relative to sales of packaged products; percentage of packaging material that is recycled content; percentage of packaging material that is recyclable; percentage of packaging material that is compostable; the average relationship between weight or volume of a product and the weight of its packaging; the total amount of GhG emissions avoided through EPR. Latin America While some regional EPR legislation exists, producer responsibility legislation for packaging waste is at an early stage in South America. Argentina, Brazil and Costa Rica are the furthest advanced: they have framework legislation in place and are working on implementing rules that may come into force in the next 2-3 years. 10

11 In Latin America, like the US, legislation is generally brought forward by individual members of Congress, rather than through the government machine as in Europe. This makes the progress of legislation rather unpredictable and it is easy to be taken by surprise. Asia-Pacific Japan has producer responsibility for glass and PET bottles and for plastic and paper packaging. Metal and cardboard packaging remain outside the scope of the legislation as secondary markets for those materials function without intervention. Packaging users (fillers) and manufacturers importers of packaged goods qualify as both must register with and pay fees for volumes put on the market to the Japan Container and Package Recycling Association (JCPRA). JCPRA finances the recycling of packaging waste separately collected by the municipalities. Only a certain proportion of the packaging placed on the market is liable for payment of the fee, as the law aims to balance collection with existing recycling capacity in Japan. Every year the Government announces the tonnages to be collected by the municipalities and to be recycled, taking into account the tonnages of previous years and available indigenous recycling capacity. This recycling obligation is set for each type of packaging and for each product sector. A recycling coefficient is calculated by dividing the actual amount of packaging placed on the market by the specified recycling obligation. Each year, packaging users can deduct from their collective obligation any packaging they have collected themselves. Alternatively, they can be exempted from the fee if they secure approval to operate their own collection system. Legislation in South Korea covers paper, metal, glass and plastic packaging when used for food, drink, detergents, cosmetics, medicines, agricultural and marine farm products, butane gas, insecticides and electrical and electronic equipment. The Ministry of Environment specifies recycling targets. Obligated companies must comply through government approved individual or collective waste plans. In practice, they fulfill this obligation through six non-competing collective systems. In Taiwan, fillers (brand holders), packaging manufacturers and contract packers of mandatory recyclable packaging (essentially all packaging materials) must register and report sales volume to the authorities, but only fillers pay a recycling fee. The Australian Packaging Covenant is a voluntary agreement under which producers commit to reduce the environmental impact of their packaging and contribute to recycling. There are no quantified recycling targets or fees, but signatories must publish action plans setting out what they propose to do to contribute to the Covenant s goals and report annually on progress on KPIs such as packaging minimisation (with examples), optimisation of recyclability and recycled content, actions taken to reduce litter, provision of on-site recovery systems, and progress in implementing a Buy Recycled policy. 11

12 Non-signatories of the Covenant are legally required to assure the systematic collection and recovery of consumer packaging in which the brand owner s products are sold, and to report on the amount of packaging material they have placed on the market and how it was treated after use. Again, there are no set targets. The Singapore Packaging Agreement contains goals and KPIs closely aligned with those of the Australian Packaging Covenant. There are quantified recycling targets, but producers do not pay fees. OVERVIEW OF END-OF-LIFE REGULATIONS Electronic equipment and batteries Europe EU legislation covers most waste electrical and electronic equipment (WEEE). The WEEE Directive (2002/96/EC) sets an overall target for collection, and targets for reuse, recycling and recovery applicable to various categories of product. The Directive on batteries and accumulators (2006/66/EC) sets targets for collection and recycling of all types of battery. Producers must take financial responsibility for the collection, treatment, recovery and environmentally sound disposal of their own products in the case of WEEE from private households, usually from collection facilities onward. Financing can be executed through collective or individual financing schemes. Responsibility for financing the management of historical waste (products placed on the market before the WEEE rules became operative) are shared collectively by all producers existing at the time the costs arise, and are apportioned according to their market share by type of equipment. Producers are also responsible for the collection, treatment, recovery and environmentally sound disposal of most WEEE from non-household users, but in the case of waste from equipment placed on the market before the WEEE legislation became effective, the cost has to be met either by manufacturers of new replacement products or by the users of those products (each Member State decides). Where historical waste is not being directly replaced, the end-user bears the waste management costs. These rules have given rise to many complications. Firstly, it is not always clear into which product category certain products fall, and this classification can influence the recycling and recovery requirements applicable. Also, there is uncertainty about whether certain products should be regarded as being for private use or business-tobusiness use, and that affects both the targets and the financing regime. Every electrical and electronic item has to be reported in the country where it is put on the market, but national rules differ on who is responsible for that. In all Member States the local manufacturer or importer is considered to be the responsible producer. However, the definition of when a product is put on the market in intra- EU trade can often apply to several entities in the supply chain, including those in other Member States. In practice many Member States allow foreign entities to register instead of (or in conjunction with) the local importer. Thus, the question of whether the exporter or the importer assumes producer obligations often comes down to a business decision. 12

13 EU Member States have also taken different approaches as to when equipment should be regarded as put on their market in cases of intra-eu trade. In most Member States, it is when a financial transaction raising VAT first occurs that theoretically products are put on the national market and sales must be reported by the producer. Depending on whether the national register allows foreign producers located in another member state to register or not, the producer may be one of several players the manufacturer, distributor/ wholesaler or even the retailer. Distance sellers have special problems. EU Member States different interpretations of the definition of producer have ranged from distance sellers sometimes being required to register and report in both the home country and the buyer s country, to them being under no obligation to register or report in either. Member States have also taken different approaches with regard to reporting requirements what needs to be reported and how. Generally, units and net weights of products placed on the market must be reported by product type, but product categorisations, definitions of net weight and the frequency of reporting varies. In half of the EU Member States, the WEEE compliance organisations can register and report for their producer members in the national register. In the remainder, producers must do this individually. The requirement by some Member States to show the costs of WEEE management as a visible fee on invoices to clients and sometimes end-users has been another IT challenge to producers and the distribution chain. These visible fees were to expire by 2011 for some products and by 2013 for all products, but the practice continues in countries where it has been introduced (at great cost) and the recast WEEE Directive (which may be agreed by the end of 2011) is likely to allow its continuation. The collective responsibility of producers for waste from their products does not (except in France) allow individual producers to benefit financially from products designed for recyclability or long lifecycles. Some major electronics manufacturers have long supported the principle of Individual Producer Responsibility (IPR), which has been implemented for some products in Japan and is an option provided for in the WEEE Directive. So far, voluntary IPR programmes in Europe often have a negative cost and face administrative obstacles in many Member States. This may change, however. IPR programmes in combination with reverse logistic programmes are now proving to be a cost-effective complement to collective compliance. The introduction of re-use targets for whole appliances under the recast WEEE Directive will support this trend. Thus, leading manufacturers reporting systems will increasingly not only track data of materials put on the market, but also take-back and recycling volumes. Under the Battery Directive, a producer of electrical and electronic equipment is also regarded as a battery producer if he puts an appliance that contains batteries onto the market. He has to enrol in the national register of battery producers in each Member State and report battery volumes placed on the market separately from the weight of the product containing the batteries. About 150 collective battery systems or similar organisations currently exist in Europe to take over battery take-back obligations from producers. Fortunately, many member states also allow WEEE systems to assume the role of battery compliance systems. 13

14 North America US states have tended to focus on hazardous household waste fractions such as paint, batteries and electronics, but there are more than 60 EPR laws across the country in 32 states. They cover nine product categories auto switches, batteries, mobile phones, electronics, fluorescent lighting and mercury thermostats, as well as carpet, paint and pesticide containers. While there is no federal legislation on e-waste, in the past six years some form of end-of-life legislation has come into force for certain electronics in 25 states covering more than 66% of the population. In all states, the legislation is characterised by a limited scope (most include TVs, computers and selected consumer electronics). It thus affects only a limited number of producers per state, typically In most states waste from IT equipment is financed on a return share basis (where producers pay for equipment of their brands found in the waste stream), while waste TVs and any unbranded equipment are financed by market share. The financing and operational roles of producers differ widely. Some examples: California s e-waste programme, in force since 2005, requires consumers to pay an ewaste fee at the time of purchase. Retailers pass this on to the tax authorities who then subsidise approved recyclers. Producers have no role in WEEE management except for providing sales data (and extensive RoHS reporting). Under the Connecticut programme, in force since 2008, producers have only financing obligations. Organisational responsibility rests with municipalities who collect e-waste and arrange for its transportation to approved recyclers that invoice producers directly for waste from their brands. The state authority acts as a register and clearing house to finance unbranded products. Washington State created a new state authority, WMMFA, to implement its e- waste legislation. WMMFA s board consists of representatives of registered producers appointed by the state. While producers have the option of complying through individual plans, no such plans have been approved. A similar mechanism is in place in Oregon, which subcontracted NCER (the National Center for Electronics Recycling) to run its state programme. Producers with a return share of over 5% can run their own or joint, state-approved e-waste plans. Three such plans are currently approved, including MRM Recycling that is also active in several other states. Illinois has regulated many electronic items, including desktop computers, notebook computers, computer monitors, printers, televisions, mobile phones, computer cables, keyboards, stand alone fax machines, MP3 players, portable digital assistants (PDAs), video game consoles, video cassette recorder/players, video disk players. OEMs are held responsible for annual recycling goals and must report according to the Illinois Environmental Protection Agency Act. The State EPA monitors compliance and calculates the OEMs annual recycling targets based on a 3-tier per pound credit system. 14

15 OEMs receive an increased per pound credit toward their annual recycling goal. A 2-for-1 pound credit is given to OEMs that refurbish products and return them to the market for reuse. A 3-to-1 pound credit is given to OEMs that refurbish products and donate them to a primary or secondary public school or a not-forprofit organisation that serves low income children, families or the disabled. In most states there are numerous additional obligations, and there are often severe fines for non-compliance. Most of the Canadian provinces waste management initiatives have targeted hazardous wastes such as electronics, batteries and fluorescent lighting tubes, used oil, paints and solvents and pharmaceuticals, and also organics such as kitchen and garden waste. There is mandatory take-back of electronics in five provinces and draft take-back legislation in a sixth. Take-back is organised by federal and provincial programmes such as Electronics Product Stewardship Canada and Ontario Electronic Stewardship, which have weight- or unit-based fees. Meanwhile, there is an eco-tax in Alberta on certain electronics. The Canadian Council of Ministers of Environment s EPR Action Plan of 2009 commits the provinces to work towards establishing EPR programmes within six years for mercury-containing lamps and other mercury-containing products, electrical and electronic products, household hazardous and special wastes and automotive products. Non-EPR product stewardship programmes which were established before the adoption of the Action Plan will be reviewed within the same timescale. Specific products, including ozone-depleting substances, are to be incorporated into operational EPR programmes within eight years. As with packaging, CCME has identified a number of KPIs to measure progress. These include kg per capita captured or recovered; dollars per kg captured or recovered; percentage of waste captured; percentage of waste recovered; and greenhouse gas emissions avoided. Performance indicators may be adjusted to recognise specific factors relating to particular products and product categories. The implications for manufacturers are significant, and detailed review is strongly recommended. Latin America At provincial or state level, EPR legislation has already been implemented in São Paulo and Buenos Aires. At national level, Brazil, Costa Rica and Colombia are implementing national EPR framework legislation which will cover electronics waste. Argentina, Chile, Ecuador, Peru and Uruguay are currently drafting WEEE legislation. Asia-Pacific In contrast to WEEE legislation in Europe, end-of-life legislation on electronics in Asia often starts out by being applied to a few high volume products with potential for high environmental benefit, and the scope is then increased gradually. Small producers are often exempted. Governments often play a bigger role in implementation. 15

16 China s Circular Economy Promotion Law of 2008 requires the introduction of producer responsibility legislation for products and packaging included in a catalogue of articles subject to mandatory recycling. Packaging has not so far been designated. With effect from January 2011, producers of designated waste electronic products must pay fees into a WEEE fund to finance separate treatment. The designated products are TVs, fridges, washing machines, air conditioners and computers. The Chinese Authorities have announced that further details of the WEEE requirements, including the funding mechanism, are about to be published. In South Korea, producers of computers, printers, batteries, audio equipment, mobile phones, etc. are responsible for meeting collection targets based on their share of equipment put on the market. They must have an approved individual or collective waste management plan, and must report on volumes placed on the market and the take-back and recycling results achieved. Large producers typically comply collectively as well as individually to take advantage of the opportunities arising from existing return logistics. Producers in Taiwan must register, report sales volumes and pay recycling fees. Products currently subject to the obligations include TVs, washing machines, refrigerators, air-conditioners, laptops, monitors, PC casings, hard disks, mainboards, keyboards, power supplies, dry cell batteries, fluorescent lighting and fans. In Japan, producers of air conditioners, TVs, refrigerators, washing machines and clothes dryers must set up take-back points to which retailers deliver end-of-life appliances received from consumers. Producers above certain sales volumes must prepare individual waste plans approved by the Government. These include detailed reporting on material flows, including recycling rates, as well as the financing of the take-back operations. Producers take-back programmes are funded by recycling tickets which consumers must purchase when returning a product at end-of-life. The take-back of waste PCs and peripherals, notebooks, monitors and portable batteries from businesses and private households is regulated more lightly. Producers must offer to take back end-of-life equipment individually and (for equipment placed on the market after the enforcement dates) free of charge. Private end-users can return WEEE to the producer via Japan Post. Take-back arrangements with business end-users are flexible. Producers must report on the equipment taken back. Australia, India, Malaysia, Thailand and Vietnam are at various stages in the implementation of EPR instruments on all or selected electronics. In addition to complying with legal requirements, a number of businesses have responded to EPR through a variety of initiatives ranging from downstream take-back and educational consumer campaigns to upstream process redesign and integrated resource management approach. One of the best-known examples is Fuji Xerox, who developed an integrated resource recycling system in Japan to manage their discarded products and incorporate the use of recycled resources in its production process. Fuji has rolled out the concept throughout Asia-Pacific and beyond. 16

17 Recognising that EPR policies are focusing on electrical and electronic products, many technology firms have incorporated EPR in their product life-cycle management. Samsung has set a target of 25 per cent recycled plastic content in their total plastics use by 2025, and intend to maximise the use of post-consumer recycled plastics in preference to plastics from industrial sources. One of the strongest drivers motivating companies in Asia to embrace EPR principles is to anticipate the introduction of EPR regulations in markets currently lacking them. Companies can expect that environmental regulations in Asia will tighten with time and that EPR will become established within the foreseeable future. 17

18 SUSTAINABILITY, SOFT LAW AND RETAILER MANDATES Sustainable Consumption and Production, as the EU calls it, cannot be regulated in detail, so the EU and individual Member States are moving on to a complex mix of framework conditions for continuous environmental improvement of products throughout their lifecycle; wide-ranging environmental information requirements; and soft law, where implementation of public policy is driven through by the big retailers providing environmental information and through choice editing, where products deemed environmentally inferior are removed from the shelves. Meanwhile, more and more retailers and consumer goods manufacturers are seeing environmental sustainability as an issue which will help win competitive advantage, and are moving way ahead of the legislators in greening their supply chains. Packaging and sustainability scorecards Wal-Mart and its subsidiary Sam s Club have asked suppliers to submit information for its packaging scorecard. This is to enable the sustainability of suppliers' packaging to be assessed for factors such as greenhouse gas emissions from production, product to packaging ratio, cube utilisation, recycled content, innovation, the amount of renewable energy used in manufacturing the packaging, the recovery value of raw materials, and the emissions from transporting the packaging materials. Companies unable to demonstrate good progress in these respects risk being delisted. The scorecard has been extended to Canada and Mexico and further rollout to China and the rest of the world is ongoing. Beyond packaging, Wal-Mart has launched a Sustainability Index aimed at evaluating the sustainability of the entire supply chain. Suppliers are asked, for example, whether they are measuring their greenhouse gas emissions and if so, are they reported to the Carbon Disclosure Project, what emissions were in the most recent year they were measured, and whether publicly available greenhouse gas reduction targets have been set. There are also questions about solid waste, water use, raw materials sourcing and ethical production. Taking this further, Wal-Mart has provided the initial funding for a Sustainability Consortium. This involves collaboration between academics (the University of Arkansas and Arizona State University), suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products, from raw materials to disposal. Similarly, in 2007 the European retailer Tesco funded a new Sustainable Consumption Institute at the University of Manchester. Finally, Wal-Mart envisages translating the information stored in the Sustainability Index database into a simple tool that informs consumers about the sustainability of products. Announcing the Index at a Sustainability Milestone Meeting on 16 July 2009, Mike Duke, President and CEO of Wal-Mart, stressed that the last thing we want is a series of new, costly scorecards that add little value, with hundreds of iterations for hundreds of different retailers So, we will be working with all of you to develop the right information. We want to make sure the database focuses first on 18

19 the product categories where we can get the most value and benefit. And information that is proprietary will remain that way. With this ambitious programme, Wal-Mart has undoubtedly grabbed the attention of suppliers and has elevated supply-chain environmental management to a higher place in corporate thinking. Indeed, other companies have been creating their own scorecards focused on reducing packaging and greening the supply chain. For example, in May 2010 Procter and Gamble (P&G) launched a sustainability scorecard and rating process to measure year-on-year improvement in the environmental performance of its key suppliers. The scorecard assesses P&G suppliers environmental footprint by measuring energy use, water use, waste disposal and greenhouse gas emissions. The company says the scorecard is available for use by any organisation to help determine common supply chain evaluation processes across all industries. The aim is to enhance supply chain collaboration, measure and improve key environmental sustainability indicators, and encourage the sharing of ideas and capabilities to deliver more sustainable products and services for P&G s consumers. More than 20 of P&G s leading suppliers helped create the scorecard, and in the first year nearly 400 strategic suppliers were asked to send in their data. For 2011, the list of participating suppliers is being expanded to about 600. Suppliers are given a full year to prepare to report their data before the rating can adversely impact their supplier rating with P&G, but from then on, P&G will use the scorecard as part of its annual supplier performance measurement process. McDonalds is another of the growing number of companies that have launched scorecards. Its supplier environmental scorecard aims to raise environmental awareness and encourage more sustainable business practices, manufacturing processes and packaging efforts from its suppliers. The company's sustainable packaging scorecard measures suppliers performance in terms of reducing packaging waste and maximising recyclability and the use of recycled materials, as well as reducing greenhouse gas emissions. And IKEA s sustainability product score card will help steer the company towards selecting the best possible alternatives for its furnishing range within eleven sustainability criteria using less material in the product; using renewable material; using recycled material; using environmentally superior material; using separable and recyclable material; product quality; transport efficiency (number of products per container); energy-efficient production; renewable energy in production; raw material utilisation at suppliers; and product use (less use of energy and water, and less waste in customers homes). More and more companies in a wide variety of sectors are expecting their suppliers to have the answers to key environmental questions and to make them available. Many of the questions will be different, and the same questions may be formulated differently. 19

20 Responding to these questionnaires will be arduous for companies lacking a suitable data management system. But there is an upside P&G reports that of the scorecards it received in the first year, 40% offered at least one innovation idea. Some of these opportunities may not have been identified without the scorecard, and ultimately they should improve both the supplier s and the customer s bottom line as well as bringing environmental benefits. A common language for sustainability issues: The Consumer Goods Forum, a high-level group involving 650 key companies from 70 countries, has published a set of packaging sustainability indicators and metrics to facilitate informed debate between and within companies through use of a common language. The EU is also determined to push this process forward. In December 2010 the EU Member States asked the Commission to develop a common methodology on the quantitative assessment of environmental impacts of products, throughout their life-cycle, in order to support the assessment and labelling of products. 20

21 PRODUCT SAFETY AND STEWARDSHIP BEYOND RECYCLING The forces driving regulation and corporate disclosure on recycling and sustainability are causing companies to rethink the way they design, source, procure, produce, sell and deliver their materials, substances and products and this presents further data management challenges. Restrictions on use of hazardous substances Producers and distributors operating globally need to manage their inventories to ensure that products sold into markets where substance restrictions apply are fully compliant. They also need to keep abreast of legal and technical developments to ensure that substances which are essential to the functionality or safety of their products continue to be permitted or that a search for viable alternatives is initiated in good time. The EU imposes limits on the heavy metals content of packaging and packaging components, as do 19 US states. There are also EU limits on heavy metals in batteries and in electrical and electronic equipment. The Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (the RoHS Directive, 2002/95/EC) provides for temporary exemptions for certain applications, but these are regularly reviewed and deleted if possible. Producers need to ensure that they submit applications for any exemptions which can be justified, and that they keep track of the progress of exemption applications and of the reviews of existing exemptions. Around 15 non-eu countries have adopted regulations very similar to or based on the EU s RoHS Directive. Much more far-reaching is the EU s REACH Regulation, (EC) no. 1907/6006, which entered into force in The aim of REACH (the Registration, Evaluation, Authorisation and Restriction of Chemical substances) is to improve the protection of human health and the environment through better and earlier identification of the intrinsic properties of chemical substances. The benefits of the REACH system will come gradually, as more and more substances are brought within the scope of the Regulation over a period of eleven years but the costs will hit much earlier. Manufacturers and importers must gather information on the properties of their chemical substances, and register the information in a central database run by the European Chemicals Agency (ECHA). The most dangerous chemicals are to be progressively substituted when suitable alternatives have been identified. Not only the substances themselves, but also the intended uses have to be registered. Registration has to be supported by a standard set of data on that substance. If a substance/application has not been registered, the data on it will not be available and it can no longer be legally supplied. It is already too late to register substances supplied at 1000 tonnes per annum (tpa) or more; or those supplied at more than 100 tpa which are classified as very toxic to aquatic organisms; or substances supplied at more than 1 tpa which are classified as Category 1 or 2 carcinogens, mutagens or reproductive toxicants. These should have been registered by December The deadline for registering substances 21

22 supplied at between 1 tpa and 100 tpa or more is 1 June 2013, and substances supplied at 1 tpa or less must be registered by 1 June Companies which are downstream users of substances or preparations should inform their suppliers of how they use them, so that this identified use can be incorporated in the supplier s registration dossier and in their Safety Data Sheet. If suppliers receive too little support from downstream users to justify creating a registration dossier, they will not apply for registration and the substance will be lost. As lower-volume substances are brought within the scope of REACH, the cost of registration will be higher in relation to potential future sales, so the risk of production being discontinued will increase. Therefore, businesses must keep careful track of their inventories. Following adoption of the EU s REACH Regulation, countries outside the EU are in the process of establishing or upgrading their own chemicals management legislation. These include China, Japan, South Korea, Canada, the US, Mexico and Turkey. Maintaining dossiers on product design EU legislators have been developing rules on product design. Companies must be able to demonstrate that they comply. This means that records must be kept in a form in which they can be easily retrieved and sent to regulators, customers or distributors. All packaging placed on the market within the European Economic Area must comply with certain Essential Requirements. Packaging weight and volume should be minimised; noxious and other hazardous constituents of packaging should have minimum impact on the environment at end of life; and packaging should be suitable for material recycling, energy recovery or composting, or for reuse if reuse is intended. In some Member States, those placing packaged goods on the market must hold a copy of the declaration of conformity issued by the producer or importer of the packaging or packaging materials, and make it available to the enforcement authorities on request. Others require companies to submit technical documentation demonstrating compliance within a few weeks of receiving a request from the enforcement authorities. We hear that they are often unable to do this. Many companies protect themselves against possible prosecution by demanding written evidence that their suppliers are respecting the Essential Requirements retailers and importers demand evidence from suppliers of packaged goods, packers and fillers demand evidence from packaging suppliers, and packaging manufacturers demand evidence from component and raw materials suppliers. Companies may have to justify decisions on packaging design and procurement which were made a long time ago. The people who made those decisions may have left the company, and files may have been destroyed. Thus, companies need to set up internal procedures to ensure that the relevant evidence is available if the enforcement authorities ask for it. 22

23 Documentation certifying compliance also has to be maintained by companies whose products are caught by one of the implementing measures made under the EU Directive on Eco-design of Energy-related Products, 2009/125/EC. Implementing measures set out the eco-design requirements which must be met before certain products can be put on the market in the EU. The focus is on systematic integration of environmental aspects at a very early stage in the design phase. Implementing measures can be made for any product or component whose use has an impact on energy consumption, other than means of transport. Implementing measures so far cover household washing machines and dishwashers, refrigerators and freezers, televisions, simple set-top boxes, standby and off mode electric power consumption of household and office equipment, external power supplies, lighting products in the domestic and tertiary sectors, glandless standalone circulators and glandless circulators integrated into products and electric motors. Being considered under the work plan are air-conditioning and ventilation systems, electric and fossil-fuelled heating equipment, food preparation equipment, industrial and laboratory furnaces and ovens, machine tools, network, data processing and data storing equipment, sound and imaging equipment, transformers and water-using equipment. Before a product covered by implementing measures is placed on the market and/or put into service, the manufacturer or its authorised representative must assess its conformity with all relevant requirements and issue an EU declaration of conformity. If neither the manufacturer nor an authorised representative is established within the EU, the importer must ensure compliance, hold the declaration of conformity and the technical documentation and make them available for inspection on request. 23

24 FURTHER ENVIRONMENTAL REPORTING Consumer information carbon labelling A number of retail chains notably Casino and Leclerc in France and Boots and Tesco in the UK have experimented with carbon labelling some of their products, and one country has already made provision of consumer information on carbon footprint a legal requirement. France s Law 2010/788 the so-called Grenelle 2 law says that consumers must be informed via labelling, signs or similar means about the environmental impact of products and their packaging throughout their lifecycle. A one-year pilot scheme will begin in July 2011, after which a report will be submitted to Parliament on the results of the trial before detailed legal requirements are drafted. Where space allows, Casino carbon labels show the position of the product along a scale from low environmental impact on the left to high impact on the right: Many questions remain to be resolved on-pack labelling, or online or in-store information; a simple A-D rating like the energy label, or a numerical statement or statements? But whatever system is decided upon, companies will have to gather data on carbon footprint, water consumption, toxic emissions and use of natural resources. Other drivers for internal and external environmental reporting There are many doubts about the value of carbon labelling, but carbon footprinting has considerable value as a way of helping companies identify hot-spots where emissions are highest and where attention needs to be focused. This can be done by measuring the footprints of their own operations, where they can be sure of the comparability of the data. Which factories, processes and products have the lowest carbon footprint, and why? What can be done to bring everything up to the level of the best? Companies can also use their own data and secondary data from published sources to work out what stage or stages in the lifecycle are responsible for the majority of emissions. This calculation need not be precise, as the orders of magnitude will usually be clear. Major companies are increasingly expected to publish regular Corporate Social Responsibility (CSR), environmental or sustainability reports. Footprinting data can be pulled together from around the company to demonstrate the progress being made in resource-efficiency or emissions reduction. From their very different standpoints, environmental NGOs and investment managers make judgements on the basis of these reports or the absence of them and publicise their conclusions. For example, Greenpeace s Guide to Greener Electronics ranks 18 top electronics manufacturers. 24