Regulations: Consumers Walking the Tightrope

Decision makers at this scrap consuming firm say doing business under the new compliance laws is a precarious balancing act.

By Madelyn R. Callahan

Madelyn R. Callahan is a Washington, D. C., writer who specializes in business issues.

"Crippling" is how one scrap consumer's representatives describe the new environmental, safety', and hazard regulations for scrap recyclers.

Spokesmen for this company say the requirements are making it hard for scrap consumers to stay in business, much less do their jobs. So hard, in fact, that the company spokesmen, concerned about further difficulty in conducting their business, insisted on anonymity in return for telling their story about coping with regulations.

Ironically, current laws restricting scrap operations cast the waste managers themselves as part of the waste management problem, according to the firm. Its top executives say that balancing compliance expenditures, reduced productivity, and volatile markets atop fast-changing standards and increasingly tighter controls makes doing business precarious at best.

A foundry supplier, the company has a full processing system that consumed millions of pounds of scrap in 1988; it projects the same or a greater volume for 1989.

But according to one of the firm's top executives, it has "absolutely no intention of increasing capacity." His first concern is increased compliance spending. "It can mean going from a profitable situation to a break-even or unprofitable situation," he says.

To Buy or Not to Buy

According to the plant manager, fear of liability has limited the company's service to its customers. "We're adding to their woes. Because of Superfund we're backing away from certain grades and the by-products we used to be able to purchase."

The company's consumers, the foundries, also feel the impact. "Government regulation has caused us to eliminate many low-priced items and pushed us toward higher-priced materials," says a vice president. Increased raw material costs then boost the price the foundries must pay for the product.

That starts a chain reaction, according to another executive. "The more our consumer pays, the more his product costs in turn; eventually his product will be displaced from the marketplace by offshore competition that can make the product cheaper because it doesn't have to pay the premiums of these regulations. This tends to reduce the number of products our consumer can sell and we lose him--he goes out of business. The size of our market is reduced. Sooner or later, someone in our industry goes out of business," he says, adding that 25 years ago there were probably three times as many firms of his type as there are today.

The Labeling Nightmare

"Even trying to find out what's required of the company costs money," says another executive. Dealing with overlapping state and federal regulations and the various lists of hazardous materials can be time-consuming and frustrating, he says. "Which law should we follow? It gets very confusing at the company level. We go outside and hire consultants who are experts on ail these different laws."

And doing what's required necessitates more spending. The plant manager calls material safety data sheets (MSDSs) and the labeling program "a clumsy, costly system" that has "caused a nightmare" in the firm's processing departments because each material must have a different label and MSDS. At various stages of processing the material changes, necessitating a new label.

"When it's received it may be on one list of hazardous materials; then, as it's processed, the label will change because one [material] going in becomes part of another [material] going out.

"We've made a big investment in the struggle to ensure that everything is properly documented and labeled, which has reduced some of our managers to regulatory clerks."

The purchasing executive says he'd like to see dollar figures for the amount of money generated by the MSDS system. He says his company has approximately 350 MSDSs on file, but other companies he's talked with claim to have in excess of 3,000. "The system is expensive. It requires a lot of maintenance. Dollars are spent not only to produce the MSDS, which is a complete product analysis, but also to maintain and file information that's constantly changing and being updated." The system has already resulted in increased overtime payments and the creation of at least one new staff position.

Because these requirements have little relationship to operations or the materials handled, the expenditure to comply is a virtual throwaway. The company spokesmen feel they're following the rules at great expense, often with no real benefit.

Says the plant manager, "The system is so far removed from common sense, it's a shame to waste resources on a nonapplication."

Another executive agrees. "In many ways the system is academic. It involves identifying the chemical makeup of a [material] that will hurt you only if you drop it on your foot. In an industry dealing with volatile chemicals, that would make sense. But in an industry where you're handling inert metals in essentially inert forms, it's sort of going through the motions and making sure you re staying legal. But it certainly doesn't help the company. And we don't feel it enhances the quality of the environment for the employee. So we're spending a lot of time and effort just to meet a questionable standard."

The firm also began to question the expertise of state and local agencies, authorized by the Community Right-to-Know law to review its materials reports.

One executive says reporting to a county emergency management agency, for example, or a local fire department can be ineffective and frustrating. "The groups required by the state and federal government to review our reports are civil defense experts. Does the staff enforcing these requirements have the experience to understand what we're telling them about our materials and how we control and deal with them?"

He says the situation in which enforcers of the requirements are uninformed has a snowball effect. it starts at the top with the federal government and rolls downhill to the local level. "In a small community, I'm sure nobody over at the fire department has the expertise. I told them I have formaldehyde in our lab and they said, 'So does the undertaker down the street, so it can't be too bad.'"

Another Cost: Employee Morale

According to the plant manager, required changes have also set off a struggle between employees and management, resulting in the problem he calls "compliance morale." He requires employees to wear protective masks and garments. "You find yourself forcing a man to do what you think is good for him, against his will sometimes. It's the middle of the summer and he has to wear this mask and certain articles of protective clothing. The mask restricts his movement and makes it harder for him to do his job. That managerial struggle for compliance is hard on both employee and employer. It's resulted in some people being dismissed from the company." The twice-annual blood tests also spark employee gripes.

But such struggles are "a fact of life" in business, one company executive says. And the conflicts that arise from enforcing protective measures are worth the trouble--if those measures are reasonable. "We're not saying people should be exposed to danger. Some of the things we're doing now as a result of being required to do them are positive. There's real value in some of it. We don't challenge the wisdom of requiring the employee to wear a mask that filters out airborne particles. That's a simple, straightforward solution. But we severely challenge the wisdom of trying to make that man's whole environment filtered so he doesn't have to wear a mask. That's financial suicide.

"We're not shying away from ecological responsibilities, but we sure can't afford to be the experimental ground. It's a real-life situation for us."

In addition to several million dollars spent on air, water, and other environmental projects over the last several years, the consuming firm recently completed an expensive project for dust control purposes, and has other structural plans in place to ensure compliance with the regulations.

Possible Solutions

Says the plant manager, "As good as the Superfund concept is, there's a paranoia in the industry that you could be permitted and in compliance today and everything is fine, but then they change the regulations and you're in trouble for not being in compliance yesterday."

He believes that, like the automobile industry, the scrap industry should form a partnership with regulatory agencies to establish goals and reasonable deadlines for meeting the standards. A slow phase-in would eliminate surprise changes in the law and give companies sufficient time to plan their compliance expenditures and make changes. "Auto companies were told that in 10 years they'd be required to meet certain fleet mile-per-gallon targets. When the goals are spelled out, there's the ability to operate in the meantime," he says.

The spokesmen expect the regulations will be fine-tuned and made more rational, but they admit that this may be a long time coming. In the meantime they hope Congress and the public are aware of what's at stake. The plant manager recalls the consequences of excessive regulations that pushed companies handling batteries out of business one by one. "We started hearing horror stories about Joe Public illegally disposing of his battery. So instead of working with the recycling industry that minimizes hazards on the national scene, you had such waste being dumped over the landscape.

"The recycling industry is part of the answer, not part of the problem. I hope everyone will become aware of that very soon." •