Special Current.com.au Feature by Patrick Avenell
It was labelled an historic day for the electronics industry in Australia. On 15 May 2012, the first DHL Drop Zone was opened in Canberra. ACT Chief Minister Katy Gallagher cut the ribbon on the e-waste collection point while the top brass from DHL’s only client, Sony Australia, looked on proudly.
It had taken almost five years to progress from the policy development stage to the actual collection of end-of-life television and PC products. The result of this process, spearheaded by Product Stewardship Australia (PSA), was the National Television and Computer Recycling Scheme (the Scheme), legislated by the Federal Labor Government, and under the control of the Department of Sustainability, Environment, Water, Population and Communities (the Department).
Five years of planning has now been followed by the first year of the program — a year riddled with as much chaos as there has been recycling.
The legislation called for all televisions and PC products imported to be logged by weight, with the importer then liable to pay for an equal amount of recycling. Companies importing fewer than 5,000 TVs or computers were excused from the scheme — none of the well-known brands qualified for this exception.
Rather than applying an equal cost per kilo to all importers, then collecting the money to start recycling; the legislation mandated that pricing, collection and delivery for recycling be carried out by approved service providers, known as co-regulators. Only three such companies have been approved: DHL Supply Chain, E-Cycle Solutions (a subsidiary of QLS Logistics) and the Australian and New Zealand Recycling Platform (ANZRP; an industry body that grew out of PSA).
(E-Cycle Solutions was originally only approved to facilitate the recycling of Televisions. In mid-March 2013, it received final approval to also recycle PC products.)
Because all importers must join a co-regulator program, the competition to sign on members, commencing in early 2012, was gruelling.
“It was a mad sprint to sign up customers,” said DHL senior director, service logistics and envirosolutions, Peter Bruce. “It is exceptionally fierce — every importer can choose a co-regulatory arrangement and we have to present what the benefits of our system are over another one.
“These large technology companies make careful decisions based on all of the decisions available and they don’t make these decisions lightly — we had to really prove our worth.”
By the time the recycling program commenced on 1 July 2012, DHL had secured the membership of most major brand TV suppliers and some PC resellers, E-Cycle was chosen by most of the Tier 2 and Tier 3 Chinese TV brands and ANZRP had a very strong cache of PC manufacturers.
Having secured their clients for the first year of recycling, the three co-regulators were assigned targets based on the weight of products being imported. If a co-regulator’s clients account for 40 per cent of all imports, they must recycle 40 per cent; if you only have 15 per cent of the import weight, you must recycle 15 per cent — and so on.
The more weight your clients are importing, the more money you will collect to fund this. The recycling, however, is brand agnostic — just because Sony is a DHL client doesn’t mean ANZRP can’t recycle a Sony TV and count it towards its target.
Although DHL and E-Cycle are both running their schemes for profit — attempting to charge a competitive per kilo rate while still retaining a margin on its service costs — both are considerably cheaper than the not-for-profit ANZRP.
One TV supplier said it was quoted $1 per kilo by E-Cycle, $1.40 by DHL and between $1.41 and $1.71 per kilo by ANZRP. In addition, ANZRP charges an annual membership fee to its customers, ranging from $5,000 for very small members to $50,000 for the largest members.
This TV supplier — not a household name — was liable for around 200,000 kilograms of imports; that would cost $200,000 under E-Cycle, $280,000 by DHL and, using its minimum quote, $307,000 by ANZRP. This supplier chose E-Cycle simply because they were the cheapest, but other suppliers have been more judicious.
Hisense Australia was quoted different figures — E-Cycle’s offer to them was not the cheapest — but they chose them for holistic reasons.
“The biggest benefit we saw in going with E-Cycle was the flexibility it was providing in collecting televisions from retailers; that interactive level with our retail channel partners,” said Hisense national marketing manager Andre Iannuzzi.
E-Cycle declined to speak on the record, though internal documents seen by Current.com.au explain its collection model as: “We currently optimise three main options to collect the required amount of e-waste product — event collections, store collections and local council partnerships.”
The store collection facet of this model is significant: E-Cycle is already delivering new stock to retailers so it can leverage this contact to facilitate collections from stores, assuming consumers are effectively encouraged to return their end-of-life TVs and computers to a retailer.
“We were looking further than meeting our targets,” continued Iannuzzi. “For us it was a twofold challenge — meeting the targets and having a co-regulator that contributed back to our industry.
“Promoting the fact that consumers should recycle by bringing their TVs back to retailers increases foot traffic opportunities. We wanted to drive an increased benefit for our industry as a whole.”
The aforementioned annual costs mean the amount of money changing hands from the various importers to the service providers, mandated by federal legislation, is significant. The most recent public industry total figure is 106,000 tonnes (2007-08) — using DHL’s median figure, that means almost $150 million has been provided, exclusively by TV and PC importers, to fund the three programs.
Despite this incredible investment, the Scheme is well below target.
“Approximately 14,700 tonnes of waste televisions and computers had been recycled under the Scheme as of late February 2013, based on figures provided by the industry co-regulatory arrangements,” said a Departmental Spokesperson. “This is more than one-third of industry’s recycling target for 2012-13.”
After almost nine months of operation, the co-regulators, collectively, are not even halfway to meeting their targets. Even more damning, the target is not even formidable: only 30 per cent of the imported weight has to be recycled during the first year of the Scheme (this will rise to 80 per cent by 2021-22).
E-Cycle and DHL both told Current.com.au that they are “on track” to meet their targets. Internal company documents reveal E-Cycle is at 50 per cent of its target and, while DHL would not publicly disclose a figure, we understand them to be at a similar figure.
ANZRP, however, is not tracking as well. Although general manager Carmel Dollison would not reveal a percentage figure, she did say ANZRP “was doing pretty well” despite being “not bang on the number right yet”.
Every industry source we spoke to in researching this article said ANZRP was well below target. We put this to Dollison and told her of our intention to print that assertion. In response, she questioned the figures of E-Cycle and DHL.
“The challenge is you must collect the product and you must then recycle the product and there is a lot of discretion as to what you may be reporting,” Dollison said. “ANZRP differentiates itself on responsible recycling and we would only report recycled products. Collected product may be a very different number to recycled product.
“The first year has been challenging. As with any new Scheme, there is a lot of set-up and work behind the scenes to get the building blocks in place.”
Rather than focusing on the tonnage of waste collected, Dollison said ANZRP has been concentrating on establishing Collection Points, designated facilities where users can abandon their old products for recycling. In order to facilitate the collection of TVs and computers, the three co-regulators must establish a set target of Collection Points, based on the combined weight of their clients.
“You’ve got to assign all your sites and until you get your full number of sites you’re not collecting at the volume you might like to, that’s why you have a need to run events to top it up,” Dollison.
ANZRP’s 2012-13 target for Collection Points is 124. At the end of March, ANZRP had established 60 permanent Collection Points, known as Tech Collect sites. The legislation allows for co-regulators to hold one-off events — and these could be as brief as one day — which count towards the total figure. ANZRP has held 35 events during this period. Dollison further noted that new sites are coming online “all the time”.
A one-off event, however, is clearly not the same as a permanent collection site. Whether it’s an ANZRP Tech Collect site or one of DHL’s Drop Zones, these facilities are permanent waste collection points that can be visited at leisure to dispose of unwanted products.
An event requires the public to become aware of the collection and to act during a small time frame to have their product recycled. Bad weather has been cited as a reason for several events coming in well under expectation.
Yet both a permanent installation and an event are equally recognised as Collection Points. We asked the Department about this disparity.
“The scheme purposefully allows industry the flexibility to select the most appropriate type of collection service for a given situation,” said a Spokesperson. “Co-regulatory arrangements may provide free-of-charge take-back events, ongoing drop-off points, a mail back option, or a mix of these depending on which service is most suitable for a given area. Collection services must be delivered at least once a year in metropolitan and regional areas and biannually in remote areas.”
While ANZRP’s decision to focus on meeting Collection Site targets rather than actual recycling is one explanation for its shortfall, there are also several others.
“ANZRP is the largest arrangement so we obviously have a larger volume to collect than the other arrangements,” Dollison said, but the issues are far more nuanced than simply volumes.
Because its clients are overwhelmingly PC and printer importers, ANZRP is expected to collect and recycle more such products than the other two co-regulators. For example, DHL’s clients only account for 25 per cent of PC product waste so it is only recycling that amount. E-Cycle was not approved to recycling PC products, so ANZRP responsible for recycling 75 per cent of all computer waste.
But computers and TVs are not used or disposed of similarly. Traditionally, when a TV breaks, the user throws it in a skip or leaves it on the footpath. When a computer reaches end-of-life, however, users are much less cavalier. Having spent years entering their credit card details, reading sensitive documents and browsing who-knows-what on the internet, PC users are sensitive to the potential of security breaches. Secreting an end-of-life notebook on the top shelf of the cupboard or leaving it to collect dust in the garage is commonplace.
End-of-life computers that are retained in the home, therefore, while still counted in the target recycling figure, are not being made available for collection.
On top of this, millions of PCs imported to Australia are sold on lease to businesses. When these leases roll-over, many of these old PCs are returned to the supplier or reseller, refurbished and then exported to overseas regions.
The Scheme attempted to account for these two peculiarities, granting 10 per cent ‘leakage’ on the total weight imported. This figure is too conservative — one industry insider put leakage at closer to 40 per cent — meaning ANZRP is at a competitive disadvantage in achieving its targets.
A second problem ANZRP faces is inexperience. The reason it, DHL and E-Cycle are called ‘co-regulators’ instead of recyclers is because no recycling is actually done by these companies. Their role in this process is to collect used products from hundreds of locations and transport them to recycling plants around the country, which they pay to complete the process — it’s logistics, not recycling.
“DHL and E-Cycle are businesses that know how to run logistics — this recycling project is a logistics operation — we have the right structures in place, we know how to run the business, we know what’s required, we have the right drivers internally to make sure we get what’s required,” said Peter Bruce from DHL.
While ANZRP is feeling its way in logistics, with a board comprised of technology company executive staff, DHL is the world’s largest logistics company and E-Cycle’s parent company, QLS Logistics, has a nationwide presence dedicated to supply chain solutions. In addition to the institutional intelligence this brings to the operation, it also provides cost benefits to the importers.
“We work with the recyclers to find out how to minimise their costs,” said Bruce. “We say to recyclers, ‘What’s the best way to receive the product?’, and then we go to the collection points and say, ‘If we want to receive the product in this manner, because it will reduce our transport costs and it will reduce our recycling costs, are you able to do that?’
“We work through the whole supply chain and try to optimise the solution to achieve the lowest costs for all of the participants — we aren’t driving down price by turning around to recyclers and saying, ‘Lower your costs’ — we’re working with all of our partners to lower their costs through finding productivity improvements by all of the groups working together.”
Should ANZRP overcome its competitive disadvantages quickly, there is no real penalty for failing to meet the target — it would simply need to make up the shortfall in later years. Should these challenges become insurmountable, however, there are severe longterm penalties, as the Departmental Spokesperson explained.
“If a co-regulatory arrangement did not meet its recycling target in a given year, the shortfall would be added to its recycling target for the following financial year.
“The legislation underpinning the scheme also provides a number of options for enforcement of recycling target and reasonable access outcomes.
“Potential penalties for co-regulatory arrangements range from improvement notices (with civil penalties for failure to comply) to the cancellation of the co-regulatory arrangement’s approval to operate under the scheme.”
The best way to ramp up your recycling to make sure you don’t incur any penalties is to increase your funding. The only way to do that is the sign on more customers. With three months remaining in the first year of the Scheme, the co-regulators are all pounding the pavement resigning their current members and pitching to rivals.
“There is no doubt that this is a competitive landscape — you’d be silly to think anything else,” said Dollison. “A co-regulator arrangement is better if it has a larger number of members, because you’re operating in a country that is very big and you have to cover the whole country, so the more volume you have to collect than the more economical it is to operate.”
Now that E-Cycle is approved to recycle computers, this round of negotiations is expected to be even tougher. Once again, ANZRP is at a disadvantage, as Peter Bruce from DHL explained.
“In the third party logistics environment, we all have business development teams focused on winning new business,” he said. “We also have an operations area that is focused on running our operations — we don’t get distracted from doing one by doing the other, we have the solutions developed around that.”
While Bruce is managing DHL’s amusingly titled ‘Envirosolutions’ division, a separate and dedicated DHL department is managing its business development. In contrast, Dollison herself is flying around the country meeting with importers. Bruce suggested mature specialisation systems was one reason DHL can offer a cheaper rate to customers.
“We are able to provide a solution, make the returns that DHL requires us to make, and provide a lower cost solution,” he said. “It’s funny to say that someone is very good because they are a not-for-profit — they should be a lower cost and clearly they are not.”
When asked why the not-for-profit ANZRP is the most expensive, Dollison said:
“We are certainly competitive. When a member joins with ANZRP they can rest assured that we will meet all workplace health and safety and all environmental standards. Recycling responsibly does have a cost associated with it — ANZRP has gone to great lengths to ensure its recyclers are absolutely meeting the environmental standards.”
The industry won’t know exactly how any of the co-regulators have performed until later in 2013. While the co-regulators are required to report their progress quarterly, the Federal Government will only publish annual reports about the program.
As the financial year doesn’t end until 30 June 2013 and the co-regulators need time to finalise their reports and submit them, and then the Department has to collate the data, this report isn’t due for many months.
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