September/October 2013 Considering the potential value and volume of end-of-life electronics, processors of other commodities might wonder about entering this niche. Here’s the path four companies have taken into the not-so-simple world of electronics recycling.
By Theodore Fischer
As the U.S. economy continues its slow recovery and scrap-intensive sectors such as construction remain weak, recyclers of metals, paper, plastic, or tires might start casting a glance at the newest kid on the recycling block: electronics. They seem to have sound business reasons to do so. Electronic products contain valuable commodities—most notably precious metals, but also other nonferrous and ferrous metals and plastics—that might be familiar to them. Recycling 1 million cellphones can recover 75 pounds of gold, 772 pounds of silver, 33 pounds of palladium, and 35,274 pounds of copper, according to the Environmental Protection Agency (Washington, D.C.). Some processing can be done with equipment they already own or can easily and cheaply purchase. And existing clients might serve as a supply base—no matter what business customers are in, they undoubtedly use some sort of technology.
Further, there’s a significant and growing supply of electronics yet to be recycled. In 2011, U.S. residents produced 3.4 million tons of used electronics—items like computers, monitors, and telephones—and only 850,000 tons, or 25 percent, was collected for recycling. That’s 5 percent more than what was collected in 2010, according to the EPA, but the majority of this material still wound up in landfills or incinerators. U.S. residents dispose of 142,000 computers and more than 416,000 mobile devices every day, according to a 2010 EPA report. And for 2013, the Consumer Electronics Association (Washington, D.C.) projects U.S. sales of 127 million smartphones, 87 million tablets, and 26 million laptop computers. End-of-life electronics is “the most rapidly growing [scrap] stream in the world. The boom and push for new technology is never-ending, and it continues to drive the old technology into obsolescence, so there’s quite a rollover of material flow,” says Bob Erie, CEO and co-founder of E-World Recyclers (Vista, Calif.), an e-scrap processor with a nationwide network of independent partners, and E-World Online, which provides management tools for electronics take-back programs.
With those opportunities, it’s no wonder the electronics recycling sector is growing. According to a report by International Data Corp. (Framingham, Mass.), electronics recycling was a $5.2 billion industry in the United States in 2010, up from less than $1 billion in 2002. A more recent study by the U.S. International Trade Commission (Washington, D.C.) revealed that in 2011, U.S. electronics recyclers reported $20.6 billion in sales. Before you hang out your shingle as an electronics recycler, however, consider this caution Erie provides: Over the last two or three years, electronics recycling has “become much more regulated,” he says, “significantly more expensive to get involved with, and a little bit more difficult to maintain profitable sustainability.”
Recycling e-scrap isn’t just a yes-or-no decision, explains industry consultant Judy Ferraro, based in Lemont, Ill. Companies have to decide “who they want to be when they grow up” and develop a plan to get there. Recyclers could just collect material and outsource the processing; provide IT asset management; refurbish and resell or dismantle, which might require substantial additional space and more employees; shred; or any combination of the above. The decision hinges on what investment a company wants to make in equipment, staffing, compliance, and training to handle this new material, she says. “You have to decide what your core business is.” Buying electronics can be tricky, she adds: If you buy a computer tower, you don’t know until it’s dismantled what is or is not intact—any missing part inside the computer brings the value down. She warns scrap buyers and sellers, “It’s not the same as buying a drum of brass. It’s like buying a drum of brass, and you get to the bottom of it, and there’s aluminum. That would change everything.”
In addition to learning the value of materials and parts, e-scrap recyclers must know the hazards electronic products contain and how they will handle them. Items considered hazards include the leaded glass in cathode-ray tubes, mercury from compact fluorescent bulbs in flat-screen monitors and portable devices, various types of rechargeable batteries, and brominated flame retardants in electronics plastics. The cost of ensuring such hazards get either recycled or discarded in an environmentally sound manner is one reason it can be difficult for electronics recyclers to make a profit. Many facilities decide that charging their suppliers to accept some or all products is the only way they can cover those costs.
Add to that challenge the relatively new complication of electronics recycling laws that have been enacted in 25 states at last count. California has a system that charges electronics purchasers a point-of-sale fee designed to help subsidize the cost of recycling and managing the related hazards. The other 24 states have placed the burden of ensuring electronics get recycled on the products’ manufacturers—the extended-producer-responsibility approach. The states vary in what products their laws cover and whether they ban electronics from landfills. (Find information on individual state laws on the websites of the National Center for Electronics Recycling, www.electronicsrecycling.org/, and the State Environmental Resource Center, www.serconline.org/ewaste/stateactivity.html.)
Though the intent of such laws is to increase electronics recycling and reduce the volume of electronics going to landfills, Erie suggests that states with electronics recycling laws might be less attractive to prospective e-recyclers. The manufacturers in these states “are going to have [recycling] programs that have been running,” he says, “and you’re going to have a difficult time competing with those programs because they’ve already established their relationships with the various drop-off locations, and the various cities, counties, and municipalities.” In other words, once the manufacturers get involved in the recycling process, accessing the funds they allocate to pay for electronics recycling might become more difficult.
Reminiscing about the days before EPR laws, when scrap companies could simply set up a processing facility and charge a fee to anybody who wanted to “do the right thing with their material and keep it out of a landfill,” Erie insists that solid opportunities exist in the 25 states that lack such laws—for now. “But understand that while you might be able to charge the public today [to recycle their electronics], trends indicate that’s not going to be the case in a very short while,” he says. The states’ goals are to provide free and convenient recycling opportunities to residents. If a state EPR law goes into effect tomorrow, recyclers would need to be one of the manufacturer’s designated e-scrap processors in order to get paid by that company, and most new recyclers have not yet established those relationships, he says.
Despite the challenges, companies with experience in other parts of the scrap recycling industry have successfully added electronics to their mix. Here are four of their stories.
Success in Shredding
A 43-year-old scrap metal recycler, Acme Refining (Chicago) stumbled into electronics recycling in the 1990s, when founder Lou Baron started to tinker with the computers and other equipment that began turning up with the rest of the scrap metal. “Lou discovered there was a fair amount of metal involved, especially in the older machines—steel and aluminum, copper, all kinds of materials that traditional scrap recyclers would be handling,” says Roger Gusloff, Acme’s chief financial officer.
After Illinois passed an e-recycling law in 2008 that banned the landfilling of more than a dozen categories of electronic devices and made manufacturers responsible for meeting certain recycling goals, Acme started to take e-scrap more seriously. Last July, Acme’s electronics recycling unit in Galion, Ohio, unveiled a full-scale processing operation complete with a shredder; magnetic, eddy-current, and optical separation; an audit bench; and more. “We have full ability to remove and extract all things so that you end up with—for lack of a better example—a bucket of aluminum, a bucket of steel, a bucket of copper, and a bucket of plastic,” Gusloff says, emphasizing that the process allows Acme to move the material to proper downstream vendors and fulfill its no landfilling, no exporting vow. Its environmental management processes have achieved ISO 14001 certification, and the entire facility has achieved R2 certification.
Most of Acme’s e-scrap comes from its regular customers. “We can pick up their scrap metal, and we can pick up their electronics,” Gusloff says. “It helps them to be able to go to one source and know that we can ‘dispose of’—in their words—what they’re recycling. Everybody has a room full of old computers they want to get rid of; they can be confident that we’re going to handle the material correctly.” It also targets companies that are in the electronics business, such as original equipment manufacturers and companies that lease electronics, and it holds fund-raising electronics collection drives for Boy Scout troops and community groups. In terms of what it accepts, “we handle all of it,” Gusloff says. “We look at this from a consumer standpoint and also a commercial standpoint, so we get everything from printers to computers to modems to microwave ovens to vacuum cleaners and refrigerators. If it has a plug on it, it becomes electronics now.”
Gusloff warns that selling e-scrap is not for the faint of heart. “We [recycle] a lot of steel; the consumers are well-known, large companies who are making steel with it,” he says. “But it’s a lot different when you have so many different streams, and you need to make sure that each one is being handled correctly.” The biggest challenge, he says, is to create the infrastructure to control what you’re receiving and be accountable for where it goes. “You can say you have 1,000 pounds in and 1,000 pounds out, but you need to make sure that the 1,000 pounds as it leaves is not just going to places that are going to … throw it in a landfill somewhere,” he says. The company must be doing something right: In August, Highlight Networks, a Liverpool, N.Y.-based recycler, announced plans to purchase Acme Electronics Recycling in a deal expected to close this fall.
Diving Into Dismantling
Recycling electronics started out as a defensive maneuver for E.L. Harvey & Sons (Westborough, Mass.). Founded in 1911 as a cattle business, the company transitioned to recycling in the 1940s, specializing in paper. While paper remains the company’s mainstay, along with metals, it now recycles of a wide variety of materials, including electronics, for customers in Massachusetts, southern New Hampshire, and northern Rhode Island. When Massachusetts banned the landfilling of certain electronic products in 2000, and “our customers were generating them and didn’t know what to do, we said, ‘We don’t know what to do with them, either—but we’ll collect them,’” says Ben Harvey, the company’s president. “The basic reason is, we didn’t want somebody else to go in there and start to collect the electronic scrap, and then take our paper and other scrap materials. That was our selfish reason.”
E.L. Harvey’s suppliers are primarily manufacturers and office management firms retiring obsolete equipment. The original business model had these companies paying E.L. Harvey to pick up the equipment, and E.L. Harvey sometimes paid a downstream processor to do the recycling. “Now the market has changed a little bit on that,” Harvey says. The company still doesn’t purchase the used electronics from suppliers, but it’s discovered how to get more value from those products and minimize downstream processing costs. “Much like other scrap materials, you bring it back and find out what you have to do to add some value to it,” Harvey says.
For now, the only processing E.L. Harvey performs is dismantling by hand. “We take the computers apart and separate out the different commodities: the drives, motherboards, fans, [the] electrical component,” Harvey says. “When you break them down, it gives them more value than when you leave them all together in the unit itself.” Consequently, getting into e-scrap required a very minimal investment. “For the collection end, we had the trucks that were out there servicing the customer anyway,” Harvey says. “When we started to do the disassembly, we went to Home Depot and bought an electric screwdriver to take these things apart, and a big hammer.” The company trained two employees to perform the dismantling.
Although at the beginning the company had some problems finding downstream partners that would take the material and handle it correctly, Harvey believes it’s fairly easy for recyclers of other commodities to enter the e-scrap business. “It fits into what we in the scrap business do all the time,” he says. “Just do your homework, and make sure you have outlets [for the processed material] that are accessible. You don’t want to collect this material, have it in your warehouse, and find out that your closest outlet is Albuquerque.”
Starting With Equipment Expertise
The Hinsey family did not come to e-scrap from processing other materials. Mike Hinsey has been with equipment manufacturer Granutech-Saturn Systems (Grand Prairie, Texas) for 30 years and an ReMA member since ReMA began. Now Granutech’s international vice president of sales, Hinsey says he became interested in the potential of electronics recycling when the International Association of Electronics Recyclers voted to become part of ReMA in 2008. At the same time, his son, Chase, was looking to start his own business. The two reached out to fellow ReMA members Bob and Cindy Erie, CEO and president of E-World Recyclers, respectively, to get a better sense of the field. That hands-on look at E-World’s operation “was invaluable in terms of giving us insight to what we might be setting ourselves up for,” Mike says.
Chase researched the e-recycling market in North Texas, where the pair planned to open their business. He found that while other companies were processing electronics in the area, there was “still plenty of material to get your hands on, and I knew this was the business that I could take and run with,” he says. The two founded Innovative Electronics Recycling in Fort Worth in 2010. By January 2011, IER was up and running, with Chase and his wife, Amanda, in charge of day-to-day operations. They do some hand dismantling, but given Mike’s many years with Granutech, it should be no surprise that the company also shreds. As he puts it, “stay with what you know.”
Innovative Electronics will recycle anything with a plug or a battery, but the company has found a niche in dismantling and shredding printers, scanners, and copiers. The key to their success thus far has been securing large-volume suppliers who bring those products to their warehouse. When the business started, they had about one public collection event a month; they now take in about one-and-a-half truckloads a day. That volume has justified the Hinseys’ operating two heavy-duty Saturn shredders—one 150 hp, the other 200 hp—to process electronics, and additional forms of scrap, other area recyclers can’t handle.
For IER, profitability came only after time and a substantial initial investment, the Hinseys say. “If you think you’re going to jump in and start making money right away, it’s far from the truth,” Chase says. “We’ve had to invest in machinery … and we’ve had the opportunity to work with other people who were able to produce flow, and that’s the key. … Going out and finding the product is not difficult, but to find it in volume can be.” Don’t “underestimate the capital requirement this venture will take,” Mike adds. “If you think you can get by with a screwdriver, a work bench, and a small warehouse space, that’s nowhere near where you need to be.”
This young company is already thinking ahead. Electronic recyclers will likely start to see “more smartphones and tablets and fewer desktops and laptops, and I think it can have an impact on the business,” Mike says, because the smaller products contain less precious metals, by weight, than their larger counterparts. Chase adds that “as they make electronic devices more compact, recyclers will need more sophisticated separation technologies” to separate those metals.
One thing the Hinseys say they wish they’d done sooner is become certified electronics recyclers and built their business model around meeting those standards. They’re working on achieving R2/RIOS certification by the end of the year, which would show they meet both the Responsible Recycling (R2) Practices for Use in Accredited Certification Programs for Electronics Recyclers and the Recycling Industry Operating Standard™ for quality management, health and safety, and environmental compliance. (For more on certification, see “The Certification Question” on page 100.) For those interested in getting into electronics recycling, the Hinseys suggest talking with others in the business to get a sense of the industry and what it takes to make it viable. They also suggest meeting with potential downstream vendors to find out how they want material prepared and to plan your business strategy around that.
The Road of Reuse
California Metals (El Cajon, Calif.) was already handling electronics in 1984, when the founder of the firm died, recalls Josh Turchin, president. “My grandfather was confident that e-scrap would represent the biggest growth potential for our business.”
The company, now called One Earth Recycling at California Metals, supplements its traditional commercial scrap pickup service with three recycling depots in shopping centers that purchase bottles, cans, and scrap metal from the public and accept electronics without charge. It accepts all electronic products other than kitchen appliances and white goods. “We don’t consume or even shred anything,” Turchin says. Depending on market conditions and customer requirements, the company will refurbish and resell a product or its components or manually dismantle it to sell as scrap.
California Metals has four employees dedicated to handling e-scrap. With the exception of data-erasure stations, it has not needed to acquire any equipment to process electronics, Turchin says. “Most of the infrastructure required for the e-scrap business is borrowed from our core scrap metal recycling operation: forklifts, balers, alligator shears,” and other equipment, he says. It pledges not to landfill any material from its electronic scrap.
The company faces much more competition for electronics today than it did in the 1980s, Turchin says. “We have to constantly work to demonstrate to our clients our trustworthiness as custodians of their outdated electronics/IT inventories.” His advice to other scrap companies considering electronics processing: “Make sure to have the most qualified downstream outlets firmly in place for both reuse and recycling. Without assured responsible downstream treatment of collected streams, the front-end e-scrap business model cannot exist,” he says. “Also, for us, the economics of e-recycling depend on keenly paying attention to reuse potential across the material stream.”
Theodore Fischer is a writer based in Silver Spring, Md. Scrap editor Deirdre Bannon contributed to this story.
CRTs: Rules of the Road
Before you start collecting and processing electronics, know the law. “First and foremost, one should be familiar with federal, state, and local regulations on what’s required for permits, what one can recycle in the area, what you can’t recycle, [and] what is considered hazardous material,” says Al Chaney of Computer Recycling for Education (Madison, Ala.), which offers training in electronics recycling to nonprofit and for-profit organizations.
At the federal level, most important is the Environmental Protection Agency’s 2006 CRT rule. The rule states that cathode-ray tubes and their glass are hazardous waste unless they are stored, labeled, transported, and processed in a manner it specifies. Exporters of CRTs, either intact or broken, for reuse or recycling, must provide certain notifications to the EPA. CRT exports for recycling also must receive consent from the EPA for such shipments.
In 2012 the EPA proposed a revision to the rule’s export provisions. It proposes expanding the definition of “CRT exporter” to include any intermediaries arranging for the export. CRT exporters would have to submit annual reports documenting the number of CRTs they exported during the year. And the proposal would replace the current one-time notice required of recyclers that export CRTs for reuse with a notice that would cover a 12-month period or shorter. These exporters also would have to submit certification that the exported CRTs are fully functioning or capable of refurbishment. The EPA expects to finalize the rule revisions in early 2014. For more information, go to www.epa.gov/osw/hazard/recycling/electron.
The Certification Question
A significant challenge for e-scrap recyclers is ensuring they have good downstream partners who will handle scrap and hazardous materials according to the pertinent laws, regulations, and commercial agreements the recyclers have with their suppliers. One way recyclers can reassure their customers they’ve addressed this issue is by getting certified. Certification “is now commonplace, and if you don’t have [it], you simply are not even on the playing field,” says Bob Erie, CEO of E-World Recyclers (Vista, Calif.).
In the United States, certification programs include the Responsible Recycling (R2) standard from R2 Solutions (Boulder, Colo.); R2/RIOS, which combines the R2 standard with ISRI’s Recycling Industry Operating Standard™; and the e-Stewards program of the Basel Action Network (Seattle). Each sets forth requirements relating to the environmental, health and safety, and data-security aspects of electronics recycling. To achieve certification, companies typically need to implement certain policies and practices, provide required documentation, and get audited by an approved third-party auditor. Up-front and ongoing certification costs can vary based on several factors–number of employees, number of sites to be certified, and whether the recycler has already achieved ISO certification, for example–but Erie says the up-front price ranges from $20,000 to $50,000. For more information on certification, go to www.r2solutions.org, www.certifymerecycling.org, or e-stewards.org.