- At least nine US states have only 0-5 years of remaining landfill capacity.
- There's more aluminum in landfills than there is left in the earth.
- American consumers dispose of approximately 133,000 computers every day.
- 130 million mobile phones were discarded in the US in 2005.
I raise this issue to highlight the business value that can be generated by taking products back when customers have finished using them.
Product take-back is part of the larger concept of Extended Producer Responsibility (EPR), where manufacturers are held responsible for the impacts of their products throughout their lifecycle. EPR has several business benefits that can provide a significant competitive advantage.
Why EPR is Good for Business
By establishing a product take-back program, a company builds a long-term relationship with a customer through a series of product purchases and returns. This process can be amplified by offering incentives for product returns, e.g. Apple's 10% discount on the purchase of a new iPod when an old one is returned. When a company secures multiple touch-points with customers, it can better learn about its customer's needs and design products or services accordingly.
EPR drives companies to design more modular products with fewer materials, less toxic materials, and increased ease of product disassembly for repair, remanufacturing, reuse, or recycling. These attributes are good for the bottom line and the environment, particularly when products are re-sold for additional revenue and kept out of landfills. According to Michael Dell, founder of Dell Computers, "Our first order of priority is reuse, then reuse in its component form, and then finally recycling and the reuse of those raw materials."
As raw materials become more expensive due to their scarcity, and fuel prices continue to rise, a company can secure steadier material flows through product returns. This decreased need for expensive virgin materials leads to reduced manufacturing costs, yielding an increased profit margin or decreased product price.
Why Companies Should Embrace EPR Now
For a company to survive in today's globally competitive market it has to maximize all available efficiencies and economies. Most of the benefits from Total Quality Management (TQM), Just-in-Time (JIT) manufacturing, and off-shoring of cheap labor have already been realized. Where, then, can a company turn to remain competitive? To EPR, which drives innovative technologies, business processes, and efficiency advantages. It is the next TQM.
Another factor that significantly raises the importance of EPR right now is legislation. The EU and Asia have pioneered EPR legislation with far reaching consequences. For example, US businesses that want to sell electronics in Europe must comply with their Waste Electrical and Electronic Equipment (WEEE) and
Restriction of Hazardous Substances (RoHS) directives. And, US companies are unfortunately missing their chance of shaping the discussion by their choice not to be involved.
According to Christine Kohl-Zaugg, an EHS Consultant with EORM, "Legislation addressing EPR is being introduced around the world at an astonishing rate. Even countries that do not yet have laws in place fully mandating product take-back and recycling, like China and several Latin American countries, have recently introduced legal frameworks that set the stage for such developments in the near future."
Since the US government refuses to enact national EPR legislation, individual states (e.g. California, Washington) and cities (e.g. Oakland, CA) are taking the lead. In addition, US industry, government, and environmental organizations are coming together to find solutions to the growing problem of waste, such as eBay’s Rethink initiative, which matches used electronics with new owners.
Who’s Doing What
Consider that products such as mercury thermometers, car batteries, motor oil, and glass and plastic bottles have been required to be taken back by producers for several years. More recently computers, monitors, and other electronics have been added to the list.
- HP: free inkjet/toner recycling, and a $50 coupon toward a new product when returning equipment from any manufacturer for a modest fee.
- Dell: free recycling of their products, with no requirement of new product purchase, or free recycling of any brand of computer/printer with the purchase of a Dell computer/printer.
- Apple: free iPod recycling, free computer/monitor recycling with the purchase of a new Mac, or product take-back without purchase for $30.
On the automotive front, Ford and GM require suppliers to indicate the chemical composition of their parts and to design more environmentally suitable substitutes where possible. And a European directive stipulates how vehicles manufactured in, or exported to, the EU must be handled at end-of-life.
To be clear, the challenges of EPR for a company are numerous, among them:
- Gaining cross-functional buy-in from management
- Educating employees to think differently at each product decision point
- Forming private and/or public partnerships to make product take-back logistics economical, which is generally the most expensive aspect of EPR
- Determining the chemical composition of products, requiring buy-in from suppliers
- Identifying non-toxic substitute materials, which are frequently less expensive (e.g. Herman Miller’s Mirra chair was 15% less expensive to produce.)
While not an easy process, EPR provides a robust framework for reducing product costs and increasing process efficiencies.
What You Can Do
If your company already has a product take-back program, in what areas can it be made more efficient? Are your products being designed with their entire lifecycle in mind, minimizing material use throughout? Can you partner with other organizations to maximize the effectiveness of your program? If your company is not familiar with EPR, identify internal advocates and begin the discussion. Point out the business benefits and trend toward increasing legislation. (Would you rather embrace EPR on your terms or the government’s?) Seek advice from companies that already have take-back programs. Design a pilot project and get buy-in from management. Communicate your successes and challenges.
EPR represents a tremendous opportunity for a company to develop a long-term relationship with customers, reduce manufacturing and waste expenses, reduce product liabilities, and gain greater control over raw materials. It offers a new platform for gaining an edge in an increasingly competitive global marketplace.
Steve Attinger is founder of Business Performance Innovators, a strategic management and sustainability consulting firm. He has more than 10 years experience in sustainable business strategies, product marketing, and training, and educates executives about the bottom line benefits of sustainability. He has spoken on this topic to numerous audiences, and currently leads a working group on Extended Producer Responsibility in the electronics sector. Steve was in the pioneer MBA graduating class of Presidio School of Management.
Mikal Greaves, a member of Steve's EPR working group, helped brainstorm the initial framework for this article. Mikal is a Silicon Valley based entrepreneur who is currently building sustainable businesses in the consumer electronics industry. He has extensive global experience in design and innovation, having led the strategic product consulting initiative with electronics giant Flextronics and the engineering group at the world-renowned creative services firm frogdesign.
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