E-Waste Generates Additional Revenues for Consumer Electronic Retailers

Presidio Graduate School’s Macroeconomics course for Spring 2012, is authoring a series of articles. The articles on this “micro-blog” reflect reactions and thoughts on news items, economic theory, and other issues as they pertain to the concept of sustainability.  Follow along here.

By Ayaka Emoto

The Consumer Electronics Association estimates that this year global spending on consumer electronics will surpass $1 trillion for the first time. For many, these electronics are seen as necessities to help us be productive and stay connected, which may explain why more consumers are now upgrading their “old” electronics every six to twelve months as opposed to every few years as in the past. As a result of our spending habits, our older unused electronics are either left to collect dust or are sent to the landfill.

Each year, approximately 2.5 million tons of electronic waste (e-waste) ends up in landfills, and according to the U.S. Environmental Protection Agency only 25 percent of this gets recycled. There is no question that e-waste is harmful to our environment. It contains toxic chemicals including lead, mercury, arsenic, and cadmium, which threaten and contaminate the water we drink and the air we breathe. As demand for consumer electronics continue to rise, more and more e-waste will be sent to our landfills, but thankfully various companies are now seeing e-waste as a business opportunity. This is where e-waste recyclers come in.

The significant increase in e-waste has resulted in a rise in e-waste recyclers. According to the Institute of Scrap Recycling Industries (ISRI), the U.S. e-waste recycling industry generates $5 billion in revenue each year, up from less than $1 billion in 2002. However, a recent study by ISRI revealed that the industry’s future growth is dependent on reducing the barriers for consumers to recycle their household electronics. Although U.S. households account for the largest percentage of electronics in the market, these households only make up approximately 26 percent of the electronics recycling market. This means that if e-waste recyclers want to continue to expand, the solution lies in making it more convenient and worthwhile for consumers to drop-off their unused electronics. This is where the retailers come in.

The good news is retailers like Best Buy are profiting from reducing barriers to consumer electronic take-back programs, which were initially expected to be uneconomical. In a recent article in GreenBiz.com, Best Buy’s Senior Director of Environmental Sustainability confirmed that its Trade-In Program, which launched back in 2007, is finally profitable but it took time to transform the potentially cost-intensive problem of collecting e-waste into a cost-effective operation. Best Buy has been able to generate two separate revenue streams: 1) Best Buy receives a percentage of the resold materials that have been recycled from the old electronics collected at retail stores – all done by the e-waste recyclers; and 2) Best Buy collects money from large consumer electronics manufacturers mostly as a result of state legislations that require these manufacturers to take responsibility for safe disposal of their products.

In a recent story in Adweek, John Shegerian, CEO of Electronic Recyclers International, which handles Best Buy’s e-waste recycling from the western states, added that, “40 [to] 60 million people have dropped off [their used] electronics and over 50 percent of those people bought something new.” This means that there could be a third revenue stream because customers who receive cash incentives from dropping off their unused electronics are more likely to spend money on other products as well. If we look at Best Buy as an example, we see that there is value in e-waste from a consumer electronics retailer point of view. So what about the manufacturers?

Currently 25 states have passed laws requiring electronic waste to be recycled, and 23 of which require the manufacturer to take responsibility for safe disposal of their products. With the growing number of states requiring manufacturers to be responsible for the end product, manufacturers now have added pressure to recycle e-waste. Therefore, there is an opportunity for retail stores like Best Buy, Staples, Target and Wal-Mart, which specifically already have consumer electronic takeback programs, to capitalize on this added pressure by reducing the barriers for consumers to drop-off their old electronics.

In a recent TriplePundit interview, CEO David Edmondson spoke about how eRecyclingCorps saved one manufacturer $150 million in the first 10.5 months simply by refurbishing used mobile phones and giving them to customers who lose their phones, which saves the company money from providing brand new phones. We can see here that manufacturers can save money by being responsible environmental stewards.

Of course, the overall goal is to inspire manufacturers to design more responsible products, as discussed by Chad Lander on TriplePundit. However, in the meantime, manufacturers can partner with retailers to help minimize e-waste, and retailers can see that consumer electronic takeback programs not only enhance customer service and brand value, but also create an opportunity for new revenue streams while protecting the environment. It’s a plus for e-waste recyclers, too, as they can expand their operations to include more household consumer electronics. Yes, there is a business solution to keeping e-waste from our landfills, making it a win-win for business and the environment.