FDs should take a little time to keep up with the stream of recycling directives emerging from the European Commission. While it’s tempting to think these don’t impact on anybody other than the specific industries at which they are aimed, that is not necessarily the case.
The EC’s Waste Electrical and Electronic Equipment directive (WEEE), which was due to be finalised in September, could be a pointer to the way in which recycling will steadily introduce a new cost layer for many companies.
On the face of it, the directive, which sets targets for recycling the equipment sold to private households and places the cost of recycling firmly with the manufacturer, should concern only firms making electrical equipment.
But a little-noticed paragraph in the directive proposal says the cost of financing recycling for organisations, such as companies and public authorities, will be covered “by agreements between the consumer and the producer”. Of course, the final directive may not stick to this formula, but, if it does, it’s not difficult to see that the average office has just acquired an unwelcome extra expense.
Claire Snow, director of the Industry Council for Electronic Equipment Recycling (ICER), points out that costs will involve more than just recycling the kit. There will also be administration overheads for managing the recycling process and a bill for ensuring there is sufficient documentation to keep regulatory authorities happy. “The owner company could be liable under duty of care regulations to dispose of the equipment correctly,” says Snow.
The Department of Trade and Industry has suggested that the cost to industry of meeting WEEE could be between £167m and £340m.
But Snow dismisses this figure as too low because it only covers the direct recycling costs and not the overheads. She declines to name her own figure until the final directive is published and the results of an ICER study of the impact of the directive is completed.
WEEE is likely to introduce a new layer of complexity in the purchase of IT kit. With most computer companies already having to cut prices to the bone, it’s likely they will want to pass the recycling cost on to the business buyer. The challenge for buyers will be to negotiate a more even split with the manufacturer.
Most importantly, FDs should note that WEEE marks a sea-change in recycling regulations. Until now, the general thrust of recycling has been to push the cost on to producers – as with the End-of-Life Vehicle directive (ELV), which forces car makers to bear the full cost of the treatment and recycling of all cars from 2007. (The directive applied to new cars from March 2002.)
However, WEEE suggests that business consumers may have to bear more recycling costs in the future. And legislation may spread to other areas.
For example, some firms already voluntarily recycle paper and cardboard waste along with other consumables such as printer cartridges. It’s probable that EC pressure will push more firms towards consumables recycling.
Alongside these general business recycling costs, a growing number of firms will find they have extra expenses as producers. Snow believes WEEE is likely to affect thousands of UK companies, although she won’t be able to provide a more precise number until the full scope of the directive is known.
For some manufacturers, these costs will mount up. Philips Electronics estimates the cost of recycling an average television set at £8. Recycling costs on a family car are currently in the £40 to £50 region, but will rise to around £100 when the ELV directive comes fully into force, says John Stanley of the Society of Motor Manufacturers and Traders. In the UK, two million cars reach the end of the road every year.
The other side of the coin is that recycling could also open up new business opportunities. For example, Waste Watch, a recycling information service, suggests a large proportion of old tyres could be granulated and turned into rubberised asphalt for resurfacing roads.
But most firms will feel the costs rather than the revenues of recycling.
Indeed, even the prospect of a revenue side to the balance sheet from reprocessed materials is retreating. Simple economics decrees that as the volume of supply rises, the price falls. A recent report from the Automotive Consortium on Recycling and Disposal notes: “Volatile prices affect all recycling industries, making the value of recycled materials and the economics of obtaining them uncertain.”
For the time being it looks as though the price of saving the planet will be a hit in the bottom line.