How the recast reshuffles WEEE, Mobius Listened to 14 Leading Producers
Are we(ee) being served?
These days, the WEEE (Waste Electrical and Electronic Equipment) generated in Europe amounts to approximately 10 million ton per year. Today the current collection target is only 2 million ton per year or 4 kg per person. There will be more WEEE generated in the future -12 million ton is expected in 2020 – and more and better collection will be necessary. The European Parliament approved a new WEEE directive, which will move forward the new and ambitious collection target. This new WEEE directive intends to increase the separate collection in Europe by 2020 to approximately 10 million ton per year representing 20 kg per person.
The member states should put these guidelines into laws, and have a policy margin whereby they can make their own accents.
This paper is the result of recent research done by MÖBIUS. In order to understand the producer’s vision and strategy on WEEE and the new WEEE directive, 14 leading companies have been interviewed.
MÖBIUS is a European research and consulting company and has more than 10 years of experience in WEEE and other waste flows throughout Europe.
Steven De Schrijver, PhD
Prof Hendrik Vanmaele, PhD
The new WEEE directive
The general conclusion: the producers accept their WEEE responsibility and contribute to the collection schemes in Europe. The creation of a ‘level playing field’ is crucial, whereby expenses are spread fairly across the entire sector.
Apart from this the new WEEE directive poses these questions:
- How wide does producer responsibility reach?
- Doorstep collection?
- What about the visible fee?
- Which collection target is imposed?
- Are the objectives realistic?
Producers become responsible
The new WEEE directive oversees only the producers, while there are other players in the chain. These other participants have no obligation to collect, recycle or report.
The producers see a shift of financial responsibility but have limited impact on the volumes collected, because the initiative to return the end-of-life appliances remains with the households.
Also the illegal transporting of WEEE is worrying the producers. Currently a large part of the WEEE generated does not end up in the prescribed collection channels. The producers can therefore not guarantee the correct recycling of this waste. They cannot monitor all these waste flows. After all they have no investigative powers. This is the prerogative of the European Member States.
The WEEE directive encourages the Member States to give the producers the complete responsibility for collecting WEEE, in other words also financing doorstep collection at households. It is quite obvious that this situation can have serious financial repercussions for the producers.
Whether this will be the miracle solution causing the collection level to rise is also questionable. Moreover ‘cherry pickers’ will selectively collect the higher value items, before the official collection occurs.
In general, the producers object to the idea of a doorstep collection. They expect an increase in cost of up to 30%. Nevertheless some producers indicate that they would be ready to develop this system when obliged by law.
What about the visible fee?
Should the unit fee covering the system cost be visible to the consumer? This is not yet clear.
The producers are, in any case, divided. Some see no need for this, others are in favor because in their view it stimulates the consumer to recycle devices via the right channels, instead of disposing it in the household waste.
Which collection target is imposed?
The point that causes the most discussions is the collection target that should be achieved.
Is the collection target based upon what the producers placed to the market (65% of the average weight placed on market in the three preceding years) or on the discarded volume (85% of the WEEE generated)? It is up to the individual Member States to make the choice which definition will be applied.
Per country there are great differences in the percentage that can be collected. This is due to the involvement of the consumer and the accessibility of the drop off points. This differs substantially from country to country.
The producers are still sharply divided.
Some point out the limitations that the ‘volume that one places on the market’ as a criterion entails. In rapidly developing countries this figure is relatively high in comparison with the WEEE collected, so 65% is unrealistically high, because these countries still have an unsaturated market. With a strong economic upturn the same phenomenon also occurs. The complexity to calculate WEEE generated on the other hand makes it hard to use in practice.
Are the objectives achievable anyway?
All producers state their doubts on the feasibility of the collection targets.
‘Traders’ search for the holes in the system
Traders are individuals or companies that purchase and trade WEEE independently.
Third parties, without involvement of the producers or the official collection schemes, collect more than half of the WEEE. What happens exactly to this WEEE is unknown.
We can assume that these traders focus on materials that are easy to isolate and have a high market value. This leaves the low or negative value WEEE to the official collection schemes.
One should not always think of unscrupulous companies. In Germany municipalities have the right to trade WEEE. In the practice these German municipalities retain the lucrative WEEE from their system and the producers are left with the less lucrative devices such as refrigerators.
In some Eastern European countries users dismantle the WEEE appliances to sell the positive value materials.
A particular problem arises when legislation varies from country to country. It directly leads to cross boundary flows between the EU member states.
One of the producers points out that the new WEEE directive could become a political theme, as various regions or states are tempted to take it even further than what the new WEEE directive stipulates. This can lead not only to political bidding, but the different regulations may and will also lead to a trade in WEEE flows between the regions.
When different countries (or regions) impose different targets, trading could develop between countries where the quotas are met and countries where this is not yet the case. This converts WEEE into merchandise. WEEE as a merchandise leads to speculation. All producers point out the danger of this speculation where a new type of company will collect WEEE, stock it and sell it to the highest bidder. This phenomenon does not contribute in any way to higher WEEE collection levels or to better recycling. It only leads to increased producer expenses.
- Some producers fear hidden taxes
- During economic crisis governments seek additional income. ‘Fines’, if the quotas are not met, are simply a disguised form of tax imposed on a specific sector.
- A loophole: buying
- Some producers predict their competitors will buy WEEE, as this might be cheaper than paying ‘fines’ to the government. But obviously this does not contribute to Europe’s recycling and environmental objectives.
- The economy has peaks and troughs
- The recast does not take market fluctuations sufficiently into account. In an economic crisis fewer devices are purchased, reducing the demand for raw materials and thus also decreasing the value of the recycled materials. This – during difficult times – adds even more pressure to the entire system.
- Reverse Logistics
- The producer’s trucks take new devices to the sales points and return with WEEE to the warehouse. This is already done on a small scale. The recast re-introduces this idea to the forefront. More producers seem inclined to elaborate this.
The current situation
The recast does not come out of thin air. The wheels of the WEEE sector are already turning, but it is still in full development. In our survey some points of attention came up on the collection schemes, which are clearly an issue for the majority of producer.
What type of collection scheme are the producers looking for?
In some countries only one system is in operation. This is considered undesirable by some producers, although others also see this as an advantage due to its simplicity.
In countries where multiple systems are active, all producers make their choice based on three criteria:
Comply with the legal minimum requirements
Have the lowest possible price
Be efficient and have environmentally friendly recycling methods
Other optional or additional services are assessed individually for their added value. But the producers perceive these extra services as expensive and with limited ROI. Some producers see an extended advertising campaign as an example of collection schemes being over financed. In their view awareness campaigns, should not be financed by the producers, but rather by the government.
One producer considers lobbying as extra service.
Some collection systems appear strikingly inexpensive, although these WEEE collection schemes are not the prime candidate for the top producers who were interviewed. The low price is suspected to be only possible by avoiding the legal requirements. Some producers are particularly sensitive to this. They fear a negative impact on their own image if their collection scheme would later appear to fail the prescribed regulations.
Who selects the collection scheme?
With a few exceptions all producers leave the selection of the WEEE collection scheme to their local branches. They know the national legislation and the local situation best.
Room for improvement at take-back schemes
The WEEE market is still young and clearly not mature. Multiple options are still open. Does one choose a nationwide scheme? Or go for a collection scheme spanning multiple countries? Or does one create a new scheme with colleagues?
Moreover, the market is in full development. Some schemes are already looking beyond national borders.
Most producers welcome more competition because there is some criticism about the current collection schemes.
- Too little flexibility
- Too little transparency
- The price is imposed
- Too cheap?
- Founding fathers prerogative
- Contract flexibility is generally considered to be a sensitive point. The renegotiation of the general conditions in the contract is only possible to a very limited extent.
- Transparency is a second sensitive point. Some systems only issue a general annual report, where there is no individual producer reporting. Some systems do not even issue a report. There is a great demand for specific information relevant to the particular producer. Nevertheless some producers make it clear they are not willing to accept a higher cost in exchange for this obvious service.
- Price dictation is a third issue. In most collection schemes price negotiations are unthinkable. A fairly common complaint relates to the missing link between fluctuations in raw material value and the cost invoiced to the producer. It would be highly appreciated and experienced as USP (unique selling point) by the producers if a system adjusts costs to the raw material market prices multiple times per year.
- Some systems appear to be too cheap. ‘Adhering to the legal requirements’ remains in some countries rather vague as the government does not enforce the law with the necessary inspections. The producers are in the open whether the system actually follows the prescribed statutory procedures. The extremely low prices that are charged by some Eastern European systems have one suspecting they have found ‘other’ solutions for the WEEE. A self-imposed standard is welcome, but it should be an open standard. Eastern Europe is a special problem child. There is very little transparency and the interrelationship with politics is quite strong.
- Founding Fathers state their place. A small set of producers founded many of the systems across Europe. Later entrants rarely have access to the information and control that the ‘founding fathers’ have. To become a member of the board they often need to be introduced by the current members (their competitors). This is an efficient weapon for the ‘founding fathers’ to monopolize information. In addition, suspicion lives on product fees being ‘subsidized’ by other product fees, which are thus kept artificially high.
An important nuance: this criticism is not shared by the ‘founding fathers’. The producers that participated in the creation of a system are much more positive.
Is urban mining becoming a trend?
Real mining is becoming more and more expensive due to scarcity. Urban mining, reusing materials from discarded end-of-life appliances, tends to be part of the answer. A minority of the producers says they have seen no benefits in the recovery of materials because they hardly use rare materials or because they do not manufacture in Europe, only assemble.
The majority of producers see ‘urban mining’ as an opportunity because specific materials have a high production price. Within this majority there are two tendencies:
Recycle their own brand materials, because it was produced according to very strict quality requirements.
Recycle per type of product or material, as materials within the sector are very similar there is no need to recycle per brand.
However all producers agree recovery and recycling have not yet reached their limits.
The technical possibilities to retrieve materials from the WEEE are far from exhausted. There is obviously also a cost involved.
Some producers indicate they would recycle more if the product designer would take into account even more the later recovery of parts and materials.
IPR has strong advocates
The majority of producers are strong advocates of IPR (Individual Producer Responsibility):
Top producers being globally active are surprised at the fragmented approach in Europe. They have a system in the United States and would like to share their approach, experiences and know-how within Europe, but legislation does not allow this.
These producers encourage the philosophy of ‘a few but manageable set of excellent partners’. Having the complete chain under their own control allows the required flexibility and one is less bound to conditions imposed by third parties.
Moreover, IPR is in the line of the new WEEE directive that places the responsibility with the individual producers.
With brand recognition each brand is registered separately at the collection or sorting and possibly even treated separately. Each producer has his opinion. Brand recognition is a step towards IPR, and fits in the philosophy of the new WEEE directive that puts the responsibility with the individual producer.
Only paying for your own brand. A great advantage of brand recognition is ‘paying only for your own WEEE’ becomes a possibility. For many producers this is an attractive idea, but then the collection scheme must be able and willing to make these price differences.
Additional information. Brand recognition provides extra data and information. The vast majority of producers would like to receive this personalized data, but very few of them are willing to pay for it. A small number of the producers see added value for some products (e.g. smartphones) but not for products with a longer lifecycle.
Recovery of specific materials. A minority of the producers wants to recycle materials with a very specific composition (some types of plastics or rare earth materials). This is an extra service the system can offer and where the relevant producers are prepared to pay for. An additional argument for ‘urban mining’ is the reduced dependence on raw materials exporting countries.
Future. As some materials become scarcer some producers have seen the recovery of specific materials increase over the last ten to fifteen years. Single producer owned collection schemes become feasible and even desirable, especially if rare earth materials are involved in their products. Thereby ‘own distribution network’ and ‘reverse logistics’ might be part of the solution. One can also offer compensation to the client who brings in his/her own old unit. That system however has limitations: the producer will only award the compensation if a client purchases a replacement device of his brand.
The least we can say: “A lot is changing in the WEEE world”. As it is still a fairly new business, the initial European WEEE directive is in force since 2003, the EU has now shifted into a higher gear with the new WEEE directive. Collection targets jump from a ‘modest’ 4 kg per inhabitant, towards a seemingly unreachable sky-high level of 20 kg per inhabitant by 2020. The consequences of these dazzling collection targets cannot be underestimated. The responsibility, and thus also the financing, to achieve these results, falls primarily onto the shoulders of the producers.
Have the lawmakers chosen the easy way out by aiming solely at the producers? It is clear the producers certainly do not control the complete return flow of goods. The recast might also result in some perverse side effects, creating price bidding trade markets for ‘collection’ certificates. A genuine fear exists it might induce a system of penalties, being a ‘covered tax’ system.
The collection schemes do not always provide the complete and full service requested or expected by the producers. Compliance is the producer’s number one priority, but do the governments put the necessary law enforcement in place? Producers are willing to pay a fair and necessary price, but they do expect to be treated as a customer and to experience the necessary flexibility and transparency from the collection schemes. This price should be in line with the market evolutions and open for discussion. IPR (individual producer responsibility) is heard more often and louder than a couple of years ago.
The new WEEE directive might be the catalyst for some producers to be in control of the complete chain and to question the role and definition of the current collective collection schemes. Understanding the producers and their needs is the elementary starting point for collection schemes. Translating this into a strategy that aligns with the envisioned growth scenario, is the proactive approach much awaited by the producers? The time is now to make a change.
MÖBIUS, a spin-off of the Ghent University, is an international authority in management consultancy. Our goal is to coach our clients to become the best in their class by making their strategy work. We help our clients to continuously adapt their organizations to changing realities and to continuously improve current operations. We focus on service companies, both in the public as the private sector, to realize audacious goals and on Industrial companies to bring supply chains to a higher level of efficiency and effectiveness.
We go to great lengths to hire and retain best-in-class people. The MÖBIUS team comprises high-level consultants with diverse academic backgrounds and domains of expertise.
In addition to active knowledge sharing, we share our company’s spirit of informal, dynamic and trustworthy collaboration with our clients, every step of the way.
Steven De Schrijver | Steven.DeSchrijver@mobius.eu
Hendrik Vanmaele | Hendrik.Vanmaele@mobius.eu
Peter Vanderschaeghe | Peter.Vanderschaeghe@mobius.eu
Lynn Cosyn | Lynn.Cosyn@mobius.eu