Producer responsibility is a principle increasingly being adopted for funding WEEE management in many parts of the world. But who exactly is the producer? In the US, for instance, the producer is identified via the brand label, but even so, it’s not just a simple matter of doing a count.
 It is not possible to trace the manufacturers of ’white box’ units, but they still need to be recycled. photo: National Center for Electronics Recycling |
Nike’s swoosh; McDonald’s Golden Arches; the three-second ‘Intel Inside’ chimes. All three examples conjure up images, emotions and connotations that companies have carefully planned and orchestrated. Corporations perceive their brands as valuable commodities, in some cases more valuable than the product or services that the company sells. But for electronic products at end-of-life, the intense focus on brand identity is turning out to have an unintended consequence: it is also a financial liability.
Why would brands come up in a discussion about waste management? Brand ownership has become a critical component of two state-level electronics recycling management systems in the US, which rely on ‘producer responsibility’. In such systems - which were pioneered in Europe but are now spreading globally - the original manufacturer or producer is responsible for financing all or part of the costs associated with the product’s recycling and disposal. In most but not all cases, financial responsibility is based on company’s share of the waste stream. These ‘return shares’ for individual companies are commonly determined by counting brands returned in the collection systems followed by assignment of those brands to the responsible company.
Because of the complex arrangements between contract manufacturers, suppliers and distributors, identifying the actual producer (or manufacturer) can be difficult and is sometimes not possible. Brand identification, however, utilizes readily visible information and is therefore easier to implement and track. But with some governments now mandating producer recycling responsibility, the effort to build a trusted and desirable brand, affix it to a product, and complete a sale will lead to future costs when that product is finally returned for recycling in five, 10, or even 20 years. And these additional costs must be accounted for when planning future business development and associated infrastructure.
Orphans and unknowns
Examining current data on return shares leads to several interesting observations. For one, many brands returned today were made by companies that are no longer around. These products are usually referred to as ‘orphans’ in electronics recycling programmes, and the number of brands that fall into this category is only now becoming clear.
Another observation is that a significant percentage of returned products have no brand at all - and therefore classified as ‘unknown’ in return share studies. In fact, ‘unknown’ ranks higher than any identified brand of desktop computer returned in household collection programmes in most studies reviewed by the National Center for Electronics Recycling (NCER). Many of these units are likely made by ‘white box’ manufacturers who for many years assembled and sold unbranded desktop computers using off-the-shelf components.
Both unknown and orphan brands must still be recycled under producer responsibility systems, and it is up to policymakers and system designers to decide how to apportion these costs - often to existing manufacturers.
Defining the terms
Because orphan and white box products factor so heavily into these systems, it is critical to have clear definitions and criteria for these designations. Orphan products have been defined in state legislation in the US as a device for which its manufacturer cannot be identified or is no longer in business and has no successor in interest. The critical component to this definition is whether the brand/company has a ‘successor in interest’. As state governments in the US are discovering, the process for determining which company should be responsible for an individual brand - particularly some of the smaller market brands - can be lengthy and complicated.
For many years, white box companies have represented a significant portion of computer market. During recent years, estimates by market research firm IDC and others place white box sales in the 25%-35% range for desktops and just under 10% for laptops. Because the brand is not the main selling point for these systems, these builders would many times use off-the-shelf components and computer housings with a customized brand label or without a brand label altogether - hence the name ‘white box’. When the name on a brand label provides the basis for assigning responsibility under mandatory recycling systems, the difficulty in tracking brand name to producer could cause many of these products to be misclassified as orphans.
Taken together, poor identification or misclassification of orphan and white box products leads to an uneven playing field for manufacturers and brand owners attempting to comply with returns-based producer responsibility recycling mandates. In the US, the National Center for Electronics Recycling and state governments in Maine, Maryland and Washington are working towards identifying and classifying brands of computers, laptops, monitors and televisions to implement legislated programmes and ensure that covered companies are complying with those rules.
Emerging US electronics recycling systems
How are the issues of brand identification and orphan products playing out in the electronics recycling systems in the US? California has a law that creates an advanced recycling fee (ARF) of US$6, $8 or $10 that is paid by the consumer at the point of sale. The California law has no provision for orphan or unidentifiable products due to the fact that funds collected for recycling are used for all returned, covered electronic devices regardless of the original producer. However, white box manufacturers are affected by a provision requiring all covered products to have a brand label.
Similarly, the Maine programme covers TVs, computer monitors and laptop computers under a law passed in 2004. Under Maine’s approach, however, the funding for the system is shared between product manufacturers and local governments. Local governments collect from Maine households (waste electronics generated by businesses are not covered), and deliver the collected products to a state-approved ‘consolidator’. These consolidators count the number of brands from each manufacturer, and then send each manufacturer a bill for the amount that their brands represent, plus an additional amount for orphan products. In Maine, a white box manufacturer would be responsible for any of its laptops that are returned to the designated consolidators. Maine no longer allows the sale of a covered device unless a visible, permanent label clearly identifying the manufacturer of that device is affixed to it. This labelling requirement also applies to desktop computers even though manufacturers are not currently responsible for funding the recycling of these products.
The Maryland law was passed in 2005 and it sets up a five-year pilot programme for recycling desktop computers, laptops and computer monitors. Under the programme, manufacturers of these products must register with the State and pay an annual fee of $5000. If the manufacturer implements a take-back programme, the fee is reduced to $500 after the first year. There is no provision or need to identify brands or orphan products under this system. Like California and Maine, manufacturers of covered products are required to label the product with the manufacturer’s name or the manufacturer’s brand label.
Washington State is the most recent state to legislate a producer responsibility system for recycling electronics. Like Maine, the law would require manufacturers to finance the recycling of their products returned, and thus requires brand, manufacturer and orphan identification. The legislation places restrictions on the ability of white box manufacturers to employ a recycling programme independent of the ‘standard plan’ established for most producers of covered electronics.
What the research on brand data reveals
There are four major electronics collection studies in the US where brands have been counted:
• Florida Electronics Brand Distribution Study (ongoing)
• Hennepin County ‘Consumer Electronics Brand Tally’ (2004, Minnesota)
• Good Guys Electronics Take-back Pilot Project (2004, Washington State)
• Staples Reverse Distribution Pilot (2004, New England states).
 Brand identification is not a simple process for the many desktop computers that are either unbranded or whose brand owner no longer exists |
While some programmes have tallied brands for different electronic devices, the main products surveyed are televisions, monitors, desktop and laptop computers. The number of reported units varied substantially across different programmes, with Hennepin County providing the largest sample size and the Staples Pilot the smallest. For example, by the time of the February 2006 update, Hennepin County reported 12,827 monitor units with attributable brands, Florida 7850 and Staples 1090.
Something very interesting becomes clear upon examining these data - not every brand comes in at the same percentage in each location. For example, across the three programmes reporting monitor data, the largest single returned brand of monitors was Apple, representing 4.9% in the Florida programme, 11.6% in Hennepin County, and 18.8% in the Staples Pilot. These data seem to indicate that Apple has had historically stronger sales in the Northeast region than in Florida. However, the return share represented here is higher than Apple’s market share in the US. Except for the large percentage of ‘unknown’ in the desktop category, the top brands in each of the four product categories are well known brands (see Table 1).
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These data show the implications for Dell’s recent announcement that it is launching a free service to recycle any Dell product on a worldwide basis. If a system were in place to collect all of the desktop computers, laptop computers and monitors, Dell would collect the largest number of laptops of any competitor, but not desktops or monitors due the Hewlett Packard’s combined share for the HP and Compaq brands (16.3% of desktops and 11.1% of monitors).
Calculations matter
It is also important to know the assumptions behind any return share calculation. Is the percentage based on the number of units returned in a particular product category, or the weight? Are the percentages just for one product category, or are units or weight combined across product categories? These distinctions can have a great impact on how large each company’s share is, and therefore its financial obligation in specific states.
Table 1 was calculated using a methodology developed by the NCER that averages the return shares of each brand - within a product type such as laptops - calculated for each collection programme. This was done to minimize regional differences that could be exacerbated by a single, large sample. The NCER data set also includes all reported brands, including those considered by Maine as misidentified or orphan brands - which lowers the percentages for all identified, established brands. In the Maine programme, return share estimates were developed adding unit counts across programmes. Which method produces the more accurate reflection of a company return share is a matter of debate.
Brand recording is great, but how do you find the manufacturer?
Recording brand information is a seemingly simple task. Search the front of the product and record the name as it appears. However, data entry errors can and do occur, and there are several instances where the actual brand of the product may not be identifiable or obvious. For example, for many years some companies have ‘branded’ different technologies used across different whole product brands. This is not the overall brand of the product, but it has been recorded as such in several studies. Sony’s ‘Trinitron’ brand is a good example. The Trinitron technology has been licensed to other manufacturers for use in their branded products, and therefore may appear on certain televisions, but Sony would not be held responsible for all products bearing the Trinitron label.
Once a list of brands is scrubbed for accuracy, the next step for certain state regulators is finding the actual manufacturer. In the case of the state of Maine, as of June 2006, 278 brands have been registered by 123 manufacturers. There are several hundred other brands that have yet to be identified as belonging to any particular manufacturer or officially designated an orphan. The process for identifying manufacturers is relatively straightforward, but can lead to some dead-ends. In Maine, the Department of Environmental Protection (DEP) uses available data and reference sources with information on brand history and ownership. If the DEP finds evidence that the most recent responsible manufacturer went out of business with no successor in interest, the brand is deemed an orphan. Orphan determination is fundamentally a regulatory task and therefore best suited for a government agency.
It should also be noted that the hundreds of brands yet to be identified collectively represent only a fraction of total returns (e.g., <10% of total televisions), with most of these smaller brands yielding an individual return share well below 1%. For example, there are 24 different television brands that constitute approximately 86% of all returned televisions. The remaining 412 brands each have a return share below 1%, with most of them well below 1%. For monitors, the impact is greater in that there are only 16 brands with more than a 1% return share, and these 16 brands represent approximately 73% of all returned monitors. That means that there are 658 brands under 1% each, but that represent 27% of returns collectively.
Challenges for the future
Tracking brand responsibilities for all historic/returned products is a challenge as this information is not readily available for all brands. Improved brand/producer identification procedures are required to bring producers of smaller quantities of products into financing systems similar to Maine’s and Washington’s. In the US at least, the data on which to base brand return share and orphan share are limited in both quantity and geographic coverage. These limited data suggest that regional variations in product returns for individual brands may be commonplace. Thus, small changes in source data and the methodology for developing a particular brand’s return share can produce significant variations in a manufacturers’ financial responsibility in returns-based electronics recycling systems.
The implications of brand counting and producer responsibility do not stop at the manufacturer. In the US and globally, governments are pushing to separate these products from the municipal solid waste stream, and use non-government revenue to pay for their recycling. In the near future, those companies in the waste management industry who wish to handle used electronics for recycling may need to add brand counting or even physical sorting to their capabilities. Those who can record this information and carry out these functions in the most accurate manner at the least cost will be the ones manufacturers seek out to fulfil their producer responsibility obligations.
Jason Linnell is Executive Director, National Center for Electronics Recycling, US.
e-mail: jlinnell@electronicsrecycling.org
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Some frequently asked questions
How do you identify the brand?
• Usually visible on the outside of the product, but other markings can be misleading.
What if no brand label is apparent?
• The product may be an ‘unknown’ brand that would be financed just like an orphan product under a producer responsibility system.
How are orphans handled?
• First, a regulatory body must decide which brands are indeed orphans, and which brands have a responsible manufacturer. Once the official orphan brands have been counted, current manufacturers usually finance their recycling based on their return share.
