Is There a Business Case for Product Take-Back?

 

There are many environmental and financial benefits to extended producer responsibility (EPR): the idea that a product’s manufacturers and retailers should assume responsibility for the environmental and social impacts of the product throughout its lifecycle, from sourcing the material and production to consumer use and disposal. EPR can result in more effective recycling programs and push manufacturers to create the product in a more environmentally and socially responsible way. This policy approach can also relieve governments and taxpayers from the costs of collecting and disposing of a product at the end of its useful life.

But what about EPR’s effect on the private sector – the companies making or selling the product? Can EPR – and taking responsibility for a product’s waste management, in particular – augment a company’s bottom-line, or is it always a loss leader?

The costs to operate a “take-back” program vary from product to product. Here we'll focus on electronics recycling.

The financial benefits a company can realize from running an e-cycling program depend on what types of electronic waste the company is collecting, said Barbara Kyle, national coordinator for the Electronics TakeBack Coalition.

“If you are taking back business e-waste – like desktops, laptops and servers – you can make money here,” Kyle said. “If it’s a manufacturer taking back consumer e-waste – especially if it’s mostly old CRT (cathode ray tube) TVs or monitors – it’s a loss leader.

"There are not a lot of options for what to do with the leaded glass in CRTs anymore – since people are not making new CRTs – and the [disposal] options are expensive ... If you are getting laptops and desktops, there is value there, to offset the negative value of other items like printers, TVs and various electronic peripherals, which are mostly just plastic and a low-value circuit board.”

Case study: Best Buy

Best Buy’s successful electronics recycling initiative makes an interesting case study to better understand the business benefits of electronics take-back programs. In 2009, the consumer electronics retailer launched a national take-back and recycling program for unwanted electronics, accepting e-waste like cell phones, digital cameras, computers and TVs every day in its stores. Best Buy also adopted a goal to collect 1 billion pounds of e-waste and large appliances through the program by the end of 2014, according to Scott Weislow, Best Buy’s senior director of environmental services.

The recycling initiative was such a success, Weislow said, that Best Buy met its target in June 2014 – six months ahead of schedule. In 2014 alone, the company collected approximately 125 million pounds of e-waste and 112 million pounds of large appliances like refrigerators.

“Today, we collect more than 409 pounds of e-waste and large appliances for recycling every minute our stores are open,” Weislow said. “We estimate average annual growth of the program in the 20 percent range.”

In September of last year, Best Buy announced a new goal: to collect an additional 2 billion pounds of e-waste by 2020, Weislow said.

So, does Best Buy’s flourishing e-cycling program benefit the retailer’s bottom line? While Weislow couldn’t disclose specifics, he made it sound like the company had found ways to make the initiative at least somewhat profitable.

“Without revealing too much of our ‘secret sauce’ around the program – or our operational details and performance – we always strive to maintain a strong financial profile for the program,” he said. “Through the years, we have evolved this program to minimize our operating costs and maximize performance.”

In an interview with GreenBiz in 2012, Leo Raudys, Best Buy’s former senior director of environmental sustainability, spoke more explicitly about the program’s financials: The company makes money from the electronics recycling program in two ways, according to Raudys: First, from its recycling partners that sell the materials recovered from the e-waste – plastic, gold, lead and nickel, for example. Best Buy also collects payments from big electronics brands that are required by a number of states to recycle a percentage of the electronics they sell every year. Some electronics makers pay Best Buy to manage their compliance with these EPR laws and meet their recycling quotas for them.

Over time, Best Buy was able to improve workflows and boost volumes for the take-back program, which lowered the costs of collecting and transporting the discarded electronics, Raudys said. Higher volumes of e-waste also allowed the company to earn more competitive rates from its recycling partners.

When the company announced the program in 2009, it required consumers wishing to drop off their e-waste to purchase a $10 store card, but Best Buy dropped that program fee in late 2011.

Best Buy isn’t counting on extra sales from customers who come into a store to recycle their old DVD player or iPhone: It’s too difficult to identify and quantify sales that were a direct result of the recycling policy, Raudys said.

As of 2012, Best Buy’s take-back program was self-subsidizing and “just barely” profitable, he told GreenBiz. If the costs of the program had stayed as high as the company initially estimated – $5 million to $10 million in the first year – Best Buy might have cancelled the initiative, he said.

But Raudys said the consumer electronics retail giant sees its e-cycling program as a service to its customers – an advantage to the company that Scott Weislow reiterated to 3p:

“The most important benefit, of course, is providing unparalleled expert service to our customers, and we know our customers consider recycling to be a valuable service,” he said.  “We hope that puts Best Buy on the ‘short list’ of companies they choose to patronize.”

Will new electronics designs jeopardize take-back programs?

But Barbara Kyle from the Electronics TakeBack Coalition pointed to a new trend in consumer electronics manufacturing that could threaten the financial viability of Best Buy’s and other electronics take-back programs.

“A lot of the new consumer electronics like tablets and smartphones are made in such a way that they are not economically recyclable,” she said.  “It costs more to take them apart to remove the battery than you can earn in commodities from recycling.

"This is a new trend; you used to always make money from phones. But smartphones and tablets have fewer high-value metals used inside – compared to 'feature' phones and laptops – and the designs (like gluing in batteries) increase the time it takes recyclers to take them apart.  The recyclers take them now because many of them have value for reuse – like for parts. But once those items are really ‘end of life,’ a recycler won’t want them.  So, unless manufacturers address this at the design phase, they will have to pay more and more for take-back programs.”

If we want Best Buy and other companies to continue or set up electronics recycling programs – providing both an important service to the environment and their customers – let’s hope retailers, manufacturers and recyclers resolve these issues.

Image credit: Best Buy