Today's Green Electronics Value Chain: From legislation to demand, green strategies are under revision

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recycleitThe impact that environmentally friendly legislation and customer demand has had on our industry is significant.  Understanding new value opportunities brought about by existing and proposed legislation is key to realizing successful, secure, and profitable Green Tech strategies.

 

 

 


It's not always easy being green, even when it is mandated by law and demanded by customers.  Green Tech continues to be the challenge, and path to new opportunities, facing the semiconductor and electronics value chain, although greening the electronics industry is not a new proposition (see this early MarketWatch Quarterly report on Green Supply Chains).  The impact that environmentally friendly legislation and customer demand has had on our industry is significant.  From materials and research and development (R&D) to reverse logistics operations, the green value chain is part and parcel of today's successful business and market strategies.  Understanding new value opportunities brought about by existing and proposed legislation is key to realizing successful, secure, and profitable 'Green Tech' strategies.

The value of electronics recycling
Recycling and reverse logistics have increased in importance within companies and along the wider semiconductor and electronics value chain.   As margins continue to shrink and products reach end-of-life (EOL) more rapidly due to the increased pace of next generation technologies and architectures, the need to recapture additional return on investment (ROI) from the EOL products has increased.  As a result, the sophistication and scope of work conducted by reverse logistics partners has increased as well (see this 4Q10 article on reverse logistics from MarketWatch Quarterly).

Importantly, risks to both original equipment owners and to the secondary markets have been reduced because of the recognition that expertise is now required in the disposition of electronics assets.  Furthermore, original equipment owners are seeing increases in their ROI thanks to reverse logistics partners who actively leverage their distribution networks to find the best value and best disposition solution for the assets.  These critical value opportunities require professional laboratories with trained personnel to securely and permanently wipe all data from the hardware; properly and accurately test the hardware for remanufacture or resale as components; and then reputably re-market the hardware or components to ensure all anti-counterfeiting measures are upheld.

Multiple benefits arise from the proper and safe handling and recycling of electronics equipment (hardware). Namely, there is a dramatic reduction in what is called "backyard recycling," the illegal dumping and hazardous tear-down of electronics in the developing world (see here for one recent study by Yale University).  Having a certified reverse logistics partner disassemble and test the components is essential to good business practice, not only to ensure proper safeguarding and wiping of sensitive data on devices, but also to promote good human and environmental health practices and eliminate illegal dumping practices that contribute to counterfeiting in the semiconductor and electronics value chain (see here and here for two recent reports on anti-counterfeiting by MarketWatch Quarterly).

While the economic advantages to the increased ROI on properly handled and recycled electronics assets are obvious, the public relations aspects are no less important.  Today's consumer, whether individual or enterprise, has increased choices for electronics equipment.  These purchasers must also consider their own EOL moment for the devices they acquire.  Meaning, that the demand for safe, reliable, and environmentally aware reverse logistics options have moved up the list to be among the leading features considered during the purchase of electronics products, from household appliances and consumer electronics to corporate and industrial electronic equipment.  Why the increased awareness of what has been called "Green Tech?"  Certainly, the adoption by numerous countries of restrictions on hazardous substances and the restrictions on disposing of electronic waste has made Green Tech a necessary consideration today.

Legislating the green value chain: RoHS and WEEE updates
It has been almost a decade since the European Union (EU) introduced the Restriction of Hazardous Substances Directive (RoHS) and the Waste Electrical and Electronic Equipment Directive (WEEE) (see this informational site hosted by the EU).  Public comment and debate following the legislative introductions resulted in fine tuning of the directives, which were then passed into law in 2006 and adopted by participating countries as requirements for the import of electrical and electronic equipment (EEE) to the EU.  Amendments and modifications to the reporting and certification processes are ongoing (see here for the official EU update site, called 'the recast'). 

While beginning in the EU, RoHS and WEEE quickly moved to the global arena and have been adopted by many governments at the national and state/regional levels (see this early article from MarketWatch Quarterly on the global adoption and impact of RoHS and WEEE).  Over the years since the multinational adoption of iterations of RoHS and WEEE legislation, one trend is definitive: compliance with EU RoHS and WEEE are the de facto industry standards, particularly for trade within developed- and emerging-market economies (see here for one RoHS and WEEE compliance site).

EU RoHS recast
More recently, the EU has made amendments to the original RoHS legislation, known as the RoHS recast (see here for a US government sponsored site regarding RoHS recast information).  There are significant changes to RoHS that do have an impact on the semiconductor and electronics industry (see the Farnell industry impact review, "RoHS recast: an overview," available through this site).  The changes to RoHS center around widening the scope of coverage to toxic substances, components, products, and the processes (reporting, labeling and disposition) for the lifecycle handling of electrical and electronic equipment (EEE). 

The RoHS recast continues the original ban of seven toxic substances (allowing only for a minute percent of concentration), but now also includes a list of restricted substances to be reviewed for additional bans within the next three years.  The scope of what may come to fall under the restricted substances category is of concern across the industry because it may include the adoption of more narrowly defined regulations.  More specifically, the concern is that the RoHS recast may include and/or completely adopt the Registration, Evaluation, Authorisation and Restriction of Chemical (REACH) regulations, enacted in December 2006, which could restrict chemical content even in the manufacturing of components (see here for the original REACH text by the EU, and here for an example of industry concerns).

The most wide-reaching impact that will add to the requirements for the semiconductor and electronics value chain rests in the CE marking, necessary for product conformance for trade in the EU (see here for a full explanation).  With the RoHS recast, all value chain companies that handle EEE products are required to check and verify the CE marking. This is an increase in the burden and requirements that originally rested with "the producer," a designation that is now redefined to include "manufacturer," "importer," and "distributor," making all parties legally responsible for the declaration of conformity (see this and this, early industry reviews of the 2009 recast regarding CE marking).

Granted, at this point, many along the chain have braced for and adopted means for adhering to the RoHS recast, once it is passed and phased into effect by the EU Parliament.  What is critical to realize is the increasing stringency of the restrictions, not only in the manufacturing and production of electronic components and devices, but also in the increased responsibility for conformity to legislation along the entire semiconductor and electronics value chain.  Furthermore, the goal of these legislative acts, according to the governing bodies, is the reduction of EEE waste, with the idea that these restrictions not only reduce the hazard levels of what is produced, but also actively encourage the semiconductor and electronics value chain to promote the reuse and recycling of the products at end of (first) life.  This stated goal is the regulatory promotion of 'Green Tech.'

If we look at the wider public and commercial demands now made of the electronics companies and products that are being purchased, we see that the goals of RoHS and WEEE are having the desired effect, albeit slower paced than the EU Parliament had hoped.  One rather obvious exhibit of this public and corporate support occurred a year ago, when Sony-Ericsson, Dell, and HP collectively called on the EU to actually increase the number of banned substances (see this report from EETimes from May 2010).

China RoHS2
China RoHS was enacted in March 2007, and raised a number of concerns across the semiconductor and electronics value chain because manufacturers and distributors were uncertain how they would be able to adhere to the China RoHS Catalogue and the China Compulsory Certification (CCC).  The China RoHS Catalogue and the CCC are the listings of specific components that are restricted and/or banned and the proviso as to how these components and substances are to be labeled and handled (see this recent post commenting on the latest versions of China RoHS and CCC).  More recently, in July 2010, China drafted its second version of RoHS, 'China RoHS2' (see also here for an overview of the revisions). 

In response to the 2010 updates, in February 2011, the American National Standards Institute (ANSI) held roundtable discussions in Beijing, China to review the implications of the new China RoHS2 drafts on US-China trade (see this post and this portal from ANSI).  While the CCC lists that were due in 2009 have still not been completed, this new round of legislation raises the prospect that China may opt for a more EU-style approach to listing banned substances, not by device or component but by specific substances.  Certainly, following the EU-style approach would be more encompassing and restricting but also likely to be more efficacious to administer and monitor by government representative, and more transparent for the electronics supply chain to comply with.

WEEE
As introduced above, the Waste Electrical and Electronic Equipment Directive (WEEE), was introduced in concert with RoHS and implemented simultaneously (see here for the current WEEE legislation and here for the most recent press release by the EU).  WEEE is generally easy to grasp and less complicated than RoHS because at its core it is really a reduce-reuse-recycle program for anything electrical and electronic.  The impetus for the WEEE directive was simply how to tackle the amount of electronic waste in landfills and the toxicity problems from both these landfills and from the incineration of the increasing amounts of global electrical and electronic waste.

The WEEE directive requires that all electrical and electronic waste, from household to industrial and from photovoltaic to transportation devices, be sorted for appropriate recycling or reuse and that the remainder be prepared for proper and safe disposal.  The costs for these programs are borne by the producer of the electrical and electronic goods, a point which was not favored by the semiconductor or electronics industries, obviously.  However, at this time, much of the impact of these once new costs has been absorbed and is part of the cost of doing business in markets with WEEE legislation. 

Perhaps the most noteworthy and important result of the WEEE directive has been the increase in awareness and adoption of reverse logistics by purchasers (whether residential, commercial, or industrial) of electrical and electronic equipment (EEE), and, as a result, an increased sophistication of extracting value from assets in the reverse logistics chain (see this recent article from MarketWatch Quarterly on the value opportunities found in reverse logistics).

No longer a hidden business pillar, reverse logistics opportunities are gaining in importance as revenue streams along the semiconductor and electronics value chain.  The reasons are simple: end of life (EOL) hardware has value, and often greater value when broken down to the component level, rather than simply being sent for disposition as electronic scrap.  The reverse logistics chain for recycling and reusing electronics equipment does require expertise and professional knowledge, laboratories, and processes that can: (1) secure and safeguard the complete destruction of any residual data stored in memory devices; (2) receive the greatest return of value for the components through certified reverse logistics partners; and (3) ensure adherence to the legal and environmentally responsible destruction and disposition of residual hardware and components that cannot be resold after cleansing and wiping.

The importance and complexities of the reverse logistics chain have not gone unnoticed by the EU, the originating legislative committee.  To this end, the EU Parliament, on 3 February 2011, passed the first reading of the new WEEE texts, the 'recast' version of which is available through this official EU site and can be read as the original document here. This document discusses in detail the importance and awareness levels necessary for the safe application of WEEE; namely, the reuse and recycling of EEE.

The value in electronics recycling
Why do RoHS and WEEE legislation exist and continue to be adopted, ratified, and expanded (despite the cost to governments to implement and monitor)?  Simply put, the cascading amount of electronic waste and the environmental and health problems due to the toxicity of this waste were reaching levels that could no longer be ignored.

Now, in 2011, the recycling and reusing of most materials has become more commonplace and also a mark of good business and environmental strategies, both for marketing and for ROI.  While we obviously focus on the implications of legislation that impact our business processes, the market differentiation and new ROI opportunities that have come out of RoHS and WEEE should not be discounted.  To be sure, the legislation has added costs and complicated activities across our value chains, but these changes have also pushed us to find new opportunities from reverse logistics chains.  Asset disposition holds the opportunity to securely gain significant returns on EOL electronic equipment, whether as components or as assembled products.  The critical footnote to asset disposition is that, due to data sensitivity and illegal dumping, it is imperative that you partner with certified and professional reverse logistics companies.

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