September/October 1996
What’s in store for the scrap recycling industry, particularly on the regulatory and legislative fronts, 10 years down the road? Signs point to greater industry-government cooperation, environmentally focused business relationships, and more—much more.
By Kent Kiser
Kent Kiser is managing editor of Scrap.
Evan Koplin, vice president and general manager of Macon Iron & Paper Stock Co. Inc. (Macon, Ga.), has an 11-point list on his bulletin board that outlines what makes the “ideal” business.
Number 8 states, “The ideal business is relatively free of all kinds of government and industry regulation.”
Based on that criteria, the scrap recycling industry is far from ideal, for it is subject to a host of regulations and legislation, particularly on the environmental and occupational safety fronts. “This industry may have been free from a lot of government intervention in the past, but that’s not the case anymore,” Koplin says.
This trend toward increased regulation and legislation has left its mark on the industry in several telling ways. For instance, not only are recycling firms facing higher capital expenses for lobbying as well as compliance equipment and personnel, but the industry is experiencing increased consolidation to achieve economies of scale on compliance costs. In addition, many longtime recycling executives have decided to exit the industry because, as more than one has phrased it, “It just isn’t fun anymore.”
This trend has also had positive effects on the recycling industry, as Koplin concedes. “I can’t say the regulations we have now are all bad. There were certain things that needed to be corrected, and these compliance activities can also pay dividends.”
Good or bad, all agree that industry- focused regulations and legislation aren’t going away. If anything, the trend suggests that they are growing in importance.
Does that mean an even less “ideal” future for the scrap industry? Not necessarily. Here, a few scrap recycling and government experts look 10 years ahead to offer their best guesses about the industry’s next decade.
The Growing Cooperation Between Industry and Government Reviewing the past is an important step in predicting the future, and that means turning the clock back 20 years or so, to the roots of many of the environmental laws and regulations affecting how recyclers operate today.
In those days, regulations were written in “command-and-control” style—requiring operators to employ specific practices and technologies to achieve compliance. “In the 1970s, there was a need to turn around what was perceived as a rapidly deteriorating environmental problem, and the early statutes achieved that,” says Doug Costle, EPA administrator during the Carter administration.
In more recent years, the need for and popularity of command-and-control regulations has diminished, in part, because of a “sea change in industry’s fundamental attitude,” Costle says. “Companies seem more willing to find ways to improve the problem and set ambitious goals for themselves. You can find among a lot of companies the realization that this issue won’t go away—that steady improvements are
required.”
This, in turn, has encouraged government entities to re-examine their attitudes and look for more efficient, less burdensome ways to achieve environmental compliance. As Costle puts it, “There’s a continuing trend toward steady improvement in the means of getting the job done, more open-mindedness of ways to accomplish the job based on realistic assessments of what’s possible and practical.”
In recent years, the scrap industry has reaped a few concrete benefits from this more level-headed approach. This summer, for instance, the EPA issued a proposed rule that would remove “processed scrap metal” from its definition of solid waste, exempting it from regulation under RCRA. This much-heralded distinction is “a sign that the agency is trying to have a less-intrusive effect on secondary materials that are more product- or commodity-like,” says Paul Borst, an environmental protection specialist with the EPA’s office of solid waste (Arlington, Va.). “This reflects a general trend of trying to take into account economics and real-world risks associated with management of the material,” he adds, noting that the EPA is in the process of considering a similar exemption for unprocessed scrap such as home and prompt material.
More recently, processors scored another victory when the EPA opted not to include the scrap recycling industry on its list of industries subject to the reporting requirements of its toxic release inventory. “This stands in contrast to the bureaucratic stereotype of adding more regulations whenever possible,” says Tom Tyler, ReMA staff attorney. “Instead, the EPA considered comments from ReMA and decided it didn’t make sense to add these requirements to our industry.”
On the legislative side, a similar kind of common-sense cooperation is evident in the broad bipartisan support Congress has given the Superfund Recycling Equity Act of 1995, which would free legitimate recycling transactions from liability under the waste cleanup law. “Clearly, to any reasonable person, Congress never intended for recycled materials that get reused to be treated differently from virgin materials that get used,” says Al Swift, a former congressman from Washington, former chairman of the House subcommittee that has jurisdiction over RCRA and Superfund, and currently a consultant to ISRI. “In this regard,” he says, “ the scrap industry isn’t asking for special treatment but rather identical treatment.”
Though Superfund’s chances for reauthorization this year are “slim to none,” according to Swift, “eventually it has to be dealt with because, while it is back in line behind other national issues, it is the primary environmental issue.”
More Changes in the Works?
While these recent changes in the regulatory and legislative climate offer recyclers some encouragement about the future, the American public is likely to remain very sensitive to environmental issues, and this makes further reform of environmental policies a difficult proposition, Swift says.
Yet the need for change is clear. “We’re not doing the environment any good by insisting on maintaining laws that are ineffective,” he remarks. “At the same time, it’s hard to justify laws that protect the environment but are unnecessarily costly.” Thus, he believes, the direction government should be heading is to make environmental compliance easier, less expensive, and less bureaucratic without reducing the level of standards—a win-win for industry and the environment.
Getting to that point won’t be a cakewalk, however. First, it will require changes in the regulatory regime, some of which are extremely controversial, such as risk assessment, Swift notes.
Also, he asserts, there’s a “credibility problem for anyone who takes this on because the argument has been prostituted in the past by others who used the cover of easing compliance to push for lower standards.” The challenge, therefore, is to “bridge suspicion—environmentalists of industry, industry of environmentalists, and both of government,” he suggests. “Then you have to get reasonable people together and hash out compromises and see if you can make it work.”
His advice to scrap recyclers who would like to see this kind of future is to “get in gear, accept the standards, and insist on a much more efficient regulatory process. There’s no question in my mind it can be done if people will give and take a little.”
One Recycler’s Story
The recent history of Evan Koplin’s company puts these legislative and regulatory changes in perspective.
Like many scrap recyclers, Koplin didn’t feel the full force of environmental regulations until about 12 years ago. Back then, he recalls attending an industry meeting at which he was advised to start a file on Superfund because, he was told, “you’ll have to refer to it often.” And as bad fortune would have it, his company did indeed receive a crash course in Superfund 101 when it was named as a PRP—a potentially responsible party—at a contaminated battery-breaking site. “We learned a lot from that,” he says.
And that’s not the only regulatory challenge the firm has faced in the intervening years, Koplin says, noting that he has had to jump through equally difficult hoops in the areas of employee- and transportation-related issues such as workers’ compensation and traffic incidents. Bemoaning the “litigious nature of society,” Koplin notes that “businesses have to operate with the thought in the back of their minds of ‘If I take this action, am I opening myself up to a lawsuit?’”
Then there’s what Koplin describes as the biggest challenge facing his company and the rest of the recycling industry: “keeping up with all of the regulations in general, trying to stay on top of what they are and training employees on what they have to do to be in compliance with them.”
Until recently, Koplin and other company principals kept up with the details themselves, but that proved to be too much. As a result, the company hired a regulatory expert about a year ago to oversee all of its regulatory compliance activities.
While hiring a professional staffer was a departure for Koplin’s firm, that was hardly the first step the company had to take in response to regulatory pressures—and it won’t be its last.
Most notable in this regard is the environmental control plan Macon Iron & Paper Stock has developed for a new plant to replace its current location, which was devastated by tropical storm Alberto in July 1994. “What was a disaster is proving to be a good opportunity for us to get everything up to date with environmental regulations,” Koplin says. “It’s a great chance to start again with a clean slate.”
At its new, less-flood-susceptible location, the company intends to hard-surface the lion’s share of its operating areas, install oil/water separators, possibly cover its shear, and more. “We’re in the process of doing a lot of big things,” Koplin says.
All of this will cost “a bunch of money,” he admits, noting that “the initial, upfront cost of getting it done can be expensive. It definitely cuts into your profitability.” But the cost must be borne. “The reality is that you’re going to have to do these things to stay in business.”
The rigors of today’s regulations have also had an effect on the way he and other scrap recyclers conduct their day-to-day business and the way they’ll need to approach doing business in the coming years, Koplin notes. In particular, he observes, scrap generators and consumers are increasingly choosing to work only with scrap recyclers that can prove their operations are environmentally sound. “They want to do a review of your procedures of handling scrap,” he says. What this trend signifies is that “environmental savvy is becoming a selling point. It hasn’t previously been realized as an advantage, but now you can hold it out as an extra feather in your cap.”
In the same vein, Macon Iron & Paper Stock asks the same questions of some
of its consumers. In one recent instance, Koplin opted not to sell material to a company because he was concerned about the ways in which it was handling its aluminum dross. “Ten years ago, we didn’t think of that,” he remarks. “If they had the best price, we sold material to them. Now we have to think differently because we don’t want to set ourselves up to be a PRP at a Superfund site.”
As a more formal step, Koplin foresees his company applying international environmental operating standards—such as ISO 14000—to its operations sometime in the near future. “That will be important,” he says. “We’re going there. It’s on the list.”
Into the Future
When Koplin thinks about the challenges of operating under today’s regulations and legislation, he expresses frustration and anger—and very little optimism. “By every indication,” he states, “I see it getting worse in the next three to four years.”
Still, he points out, this very frustration could bring about a major shift in the future. “The frustration level among all businesses—not just scrap recyclers—crying for relief could reach such a point that some people finally wake up to the realities of what businesses have to put up with,” he says. “Guys, enough is enough here. Let’s look at the situation.”
Until that shift, the best recyclers can do is keep abreast of regulations coming down the pike and be in touch with their local, state, and congressional representatives, Koplin suggests. “You can’t wait until the problem arises to build a relationship. You have to have a relationship all the time.”
Scrap recyclers will face an uphill battle in the legislative and regulatory realm, however, because their concerns are very specialized—“esoteric,” as Swift puts it—and often take second place behind larger issues and larger constituents. “It’s not that the scrap industry has a hard sell of an unpopular idea, but rather that its idea has a hard time getting attention paid to it,” Swift says. Though he was one congressman who adopted the industry’s message that scrap is not waste and though that idea is “fairly readily accepted once you can get someone to focus on it,” the industry will have to continue to drive that message home “over and over and over again because my gut tells me it’s not likely to become a part of conventional wisdom.”
The key to gaining favorable regulatory and legislative changes in the future lies, as always, in effective lobbying. In Swift’s view, that means bringing solutions, not problems, to politicians and taking the calculated risk of not asking for more than you want. “I’ve always thought the smartest approach was to know what you want, be very tough about getting it, but be reasonable and understand that the best way to persuade someone to do what you want is to demonstrate it’s not going to be difficult to do,” he explains.
With recent changes in lobbying rules, it will have to be recyclers themselves, not ISRI’s lobbyists, who will be responsible for carrying out this strategy. “Under the new rules, the people who can get the quality time with members of Congress tend to be constituents,” Swift says. The key for scrap recyclers, therefore, is to rely on grass-roots lobbying in which individual recyclers present the industry’s problems as a constituent problem as opposed to a special-interest problem. “Most congressman make a very big distinction in that regard,” Swift says. “The people who have the best grass-roots programs are the people who will be best off in making their cases.”
Looking ahead, Swift expresses more optimism than Koplin about the potential for change in regulations and legislation affecting the industry. “I have a great deal of optimism that we will move toward more rational, effective, and cost-efficient environmental regulation. We simply have to get off the command-and-control approach and do something more effective in order to remain internationally competitive.”
To achieve that goal, however, “everybody has to stop playing the game of ‘I want it all my way,’” Swift states. Costle agrees, asserting that “a precondition for progress is to find a bipartisan coalition in the center—between the 40-yard lines—that respects the goals of existing statutes but proposes a better way of doing it and has the credibility to pull it off.”
While the situation may be improved, scrap recyclers must reconcile themselves with the idea that industry-related regulations and legislation won’t disappear. They’re “a part of business you have to deal with,” Koplin says, concluding, “These are the cards we’ve been dealt, and we have to play them.”
Want to Learn More?
For additional insight on the scrap industry’s future prospects, don’t miss ISRI’s business leaders roundtable, set for Sept. 25 at the Chicago Marriott O’Hare. Al Swift, Evan Koplin, and a regulatory expert will examine the legislative, regulatory, and operational issues that could define the scrap industry through 2006.
The program is free to registrants of ISRI’s plastic, copper, lead/zinc, or aluminum roundtables being held Sept. 25-26 in Chicago.
For program or registration information, contact ReMA at 202/737-1770 (fax, 202/626-0900). For hotel reservations, contact the Marriott at 312/693-4444 and request the special ReMA room rate of $123, single or double. •
What’s in store for the scrap recycling industry, particularly on the regulatory and legislative fronts, 10 years down the road? Signs point to greater industry-government cooperation, environmentally focused business relationships, and more—much more.