E-Waste Disposal Legislation Equals Higher Profits

Newswise — One unfortunate outcome of the technology revolution has been finding appropriate methods for dealing with the collection, recycling, and recovery of all types of used electrical goods, from out-of-date printers to unsalvageable hard drives.

Typically, the collection of e-waste, as it is called, is not the responsibility of the companies who manufacture the products, and to date, few policymakers have championed legislation that would force companies to appropriately dispose of their e-waste.

However, new data from Scott Webster, professor of supply chain management in the Whitman School of Management at Syracuse University, finds that there may be an economic incentive for policymakers to begin more serious deliberation of legislation around the collection/disposal of e-waste.

"Relative to the option of no take-back laws, we found that the adoption of collective WEEE take-back legislation " that is, policies where the government coordinates the collection/disposal of returns and charges the manufacturers for the cost " can result in higher manufacturer and remanufacturer profits," Webster says.

WEEE take-back legislation is modeled after the European Law in 2003 that all but two of the European Union member states have since made into a legal framework.

Though some states in the U.S. are currently considering e-waste legislation, few states have enacted take-back laws, which require manufacturers to incur the costs of collection/disposal of e-waste. Maine has enacted the Extended Producer Responsibility Act (LD 1892) by which municipalities collect electronics and invoice the manufacturers of returned product for the cost of collection and transport to recyclers. Pending Minnesota bills such as HF 882 and SF 838 would make electronics manufacturers responsible for collection/disposal costs.

Webster's study, forthcoming in the Journal of Operations Management, and co-authored with Supriya Mitra, a recent graduate of the Ph.D. program at SU who is now with Tata Consulting Services in India, found that collective WEEE take-back is more economically advantageous than individual WEEE take-back, where the manufacturer instead of government has responsibility for the collection and disposal of its products.

"Policymakers interested in e-waste should consider that individual WEEE take-back carries the risk of the manufacturer forcing the remanufacturer out of business by charging the remanufacturer a high price for returned products," Webster says. "In general, individual WEEE take-back is best suited only to industries where remanufacturing by a firm other than the OEM [Original Equipment Manufacturer] is not especially desired or valued."

He continues: "Individual WEEE take-back may reduce the role of government in disposing of e-waste, but ultimately, collective WEEE take-back, more so than individual, leads to increased manufacturer and remanufacturer profitability, simultaneously spurring remanufacturing activity and reducing the tax burden on society."

Webster says that in settings where remanufacturing is not profitable and no take-back law is in effect, the enactment of collective WEEE take-back laws will sometimes create a structural change in the industry that results in the introduction of remanufactured goods.

"With the enactment of collective WEEE take-back, the manufacturer benefits from lower collection/disposal costs as remanufacturing volume increases, so there is an incentive for the manufacturer to allow the remanufacturer to profitably enter the market," says Webster.

When this occurs, the drawback is that, though there may be a reduced tax burden and an emergence of remanufacturing where none existed before, manufacturer profit will likely decrease and new product prices increase.

In future research, Webster and Mitra plan to examine industry performance under various conditions when mandatory take-back laws are not in effect in order to lend insight into such factors as the role and impact of government subsidies for remanufacturing.