ASKING THE TOUGH QUESTIONS ON CERTIFICATION

Reprinted from
NEWS
ASKING THE TOUGH QUESTIONS ON CERTIFICATION
In the drive to bring order to an emerging, evolving, but still largely unregulated, business sector, manufacturers with
take-back systems are turning to private certification and audit programs. What questions should processors be asking,
and are these programs the answer to the industry’s persistent problems?
BY RANDY MICHAEL MOTT
T
he problem with e-scrap is a paucity of knowledge about
the vendors and widespread proliferation of waste through
a maze of third-parties, sometimes ending in unsatisfactory
handling and disposal. The European Commission, in the most
highly regulated scheme for waste electronics and electrical
equipment (WEEE) in the world, estimates that more than half
of the material in its jurisdiction is not properly handled. But,
even comprehensive regulatory programs do not necessarily
provide OEMs with a guarantee that they will not face future
problems.
For instance, after 30 years, the Resource Conservation and
Recovery Act (RCRA) hazardous waste management program in
the U.S. has improved waste management, but it has not prevented
facilities from becoming either Superfund sites or matters for local
enforcement and cleanup. In such actions, the generator of the
spent material managed at the site oftentimes becomes the party
responsible for paying the cost to clean up. It’s wrong to assume
that attaining a level of certification absolves a firm of responsibility
for their material and site management.
Businesses dealing with processors of WEEE and e-scrap are
largely left to fend for themselves, and that can involve supplychain audits and reviews, voluntary certification programs, or working through collective organizations – current private standards and
certification programs include R2, RIOS, and e-Stewards, among
others, and WEEELABEX in the European Union. Their common
30 ESN | September 2010
element is to create some set of standards for electronic waste recycling and materials recovery. Still, despite a wide-ranging discussion and prolific media coverage, many of the complex questions
surrounding these programs remain unaddressed.
Should I be worried about
antitrust?
WEEELABEX is a voluntary program being adopted by the group
of EU collectives responsible for the overwhelming majority of
take-back collections of member states. However, these efforts
have encountered an unforeseen obstacle – early efforts to make an
approved list of certified facilities mandatory for the various collectives have run into issues over their anti-competitive effects under
EU competition law.
Similar obstacles could emerge for the e-Stewards standard.
The Basel Action Network standard is attempting to create an
approved list of vendors that have met certification standards, and
their OEM members will be obligated to exclusively use these certified facilities. It is unclear how such an approach will be viewed
under antitrust laws in the U.S. and other relevant jurisdictions,
particularly if the e-Stewards program captures an appreciable market share in any particular region.
Additionally, the WEEELABEX effort is through collectives,
which are often government-sponsored and do not have the com-
mercial fee structure. Restricting certification to those who pay a fee also adds
another element of legal uncertainty over
antitrust compliance for any certification
body using that model.
In its 2006 antitrust report, the European Commission warned about possible
exclusive arrangements for recycling and its
likely antitrust problems (see also Decision
2001/463 [2001] OJ L166/1 and Decision
2001/837 [2001] OJ L391/1 discussing
implications of the “green Dot” system, ultimately approved by the European Court
of Justice). In the U.S., associations are
very careful to avoid any collective discussion and/or decision-making concerning
recommended vendors/suppliers, let alone
imposing a requirement on members to
only use approved vendors. While the author cannot offer legal advice on the issue,
certainly any firm should check with competent antitrust counsel before agreeing to
participate in an exclusive e-scrap recycling
vendor certification program.
How objective is
certification?
The objectivity of certification programs
can be problematic. Who exactly is the
customer of the certification? If the
reviewed facility is responsible for paying
a larger fraction of the certification body’s
operating expenses, do the certified facilities truly represent the certification body’s
customers? Where vendors are required to
pay for auditing to establish certification
and/or any fees to attain/maintain their
certification, at minimum, the average
reasonable individual might call into question the rigor and integrity of the process.
Further, are the fees based upon gross or
net revenues? If gross, the facility’s operating bottom line will be significantly and
adversely impacted, whereas net will afford
the facility some flexibility and budgetary protection if their operating expenses
outpace their revenues. Such a fee, based
upon gross revenues, could indeed accelerate a facility’s financial instability in hard
times.
Another question raised relates to
the collection of fees: Might such a feegenerating scheme allow for or, indeed,
promote the certification of borderline or
questionably-conforming facilities? If the
certifying body depends on facilities for
revenue, such a certification body then
may have a vested interest in keeping organizations certified. The fees also exacerbate
the aforementioned antitrust issues, as if
the vendors are paying to have access to the
market of sponsors.
What’s different about
the audit route?
Unlike certification programs, the auditand-review approach assumes that the
electronics manufacturers or e-scrap takeback programs have their own criteria which
necessarily evolve over time and can include
their own subjective, as well as objective,
items. Facility review teams collect comprehensive information about the vendor in
sufficient detail to be used in their evaluation process. CHWMEG, for example,
uses a streamlined and thoughtfully-derived
904-item questionnaire. The questionnaire
represents the key information concerning
suppliers as defined/required by its members. Sponsors of a review are free to use
any information contained in the CHWMEG report against their own established
criteria, and are free to make their own decisions about the acceptability and their own
use of the facility. This avoids the fundamental issue created by “someone else’s list
of approved facilities” or “facilities certified
by some other party.”
The disadvantage of this approach is
that it requires work by the manufacturer or
take-back program. They have to establish
their own criteria and evaluation process
and make their own decision. On the other
hand, over the past 20 years, many if not
most best-in-class international companies
have developed their corporate policies and
criteria, and that list is growing. And, of
course, even a local plant or regional unit of
the company can have its own criteria under
the audit-and-review approach. The system
is intended to simply provide the raw factual
information for evaluation and decisionmaking.
A corresponding advantage, however,
is that the approach is dynamic. Criteria
and acceptability factors are constantly
changing, and should be reflected in any
individual supplier approval process as well.
The CHWMEG questionnaire changes
every year based on observations from “just
completed” reviews, input from members,
input from CHWMEG’s world-class facility
review contractors, and even suggestions
received from reviewed facilities. This also
allows for much more information to be collected and considered than in a limited standardized checklist. The CHWMEG process
could even be used by a member company
to verify the information as claimed by the
facility itself, or as assumed to be the case
based upon the facility’s certification status.
Another consideration is the dynamics
of the supplier’s situation and standing. The
frequency of gathering supplier information
lies in the eyes of the individual customer.
The CHWMEG model allows facilities
to be reviewed as frequently as members
deem it necessary, allowing facility changes
and improvements to be recognized and
reflected in current CHWMEG facility
review reports. Certification programs may
presume the life of the facility’s approval or
otherwise force a frequency for reconsideration. That could result in a certified facility,
which has experienced legal compliance
violations remaining certified, or a calamity – such as a fire or explosion – occurring
where the facility’s certified status remains
unchanged.
CHWMEG has invested in a unique
process that allows re-visits to be completed
at significantly-reduced burden to the reviewed facility, while accomplishing a complete, comprehensive report resulting from
the current review of the facility in each
instance. Typical CHWMEG members
have a schedule for periodically reviewing
facilities, but also have built-in options to
add reviews if there is an incident reported
or a change of ownership or other development that suggests the need.
In terms of cost, a program built on “go
it alone” reviews of facilities in the recycling
supply chain can be daunting. Just ask
some of the cutting-edge OEMs about the
resources required to gather information
on each of their suppliers when the dynamics changes the status of those facilities on
a regular basis. The CHWMEG system is
extremely economical with all costs borne
by CHWMEG’s member companies, and
where cost sharing among the members is
the norm. In that fashion, they control the
process and access to the reports, leaving
no doubt about the objectivity or completeness of the information generated in
CHWMEG’s reports. The confidentiality
of CHWMEG information and tightly-held
restrictions from unauthorized distribution of CHWMEG reports are among the
reasons why vendors allow CHWMEG
reviewers on-site. Where fees are paid-in by
vendors to be certified, information claimed
as the basis for certification (e.g., checklists,
etc.) likely will officially and unofficially
become available to third-party organizations and could be disseminated such that
the legitimacy of the source information
ESN | September 2010 31
could be problematic. This may end up
being another limiting factor of vendor
participation or trust in the system.
What happens
downstream?
Another step is also important to producers seeking to get a handle on the
unknown and uncertain fate of e-scrap
leaving their location, and that of their
primary/direct vendor. It is very useful
to have contractual provisions requiring
a vendor to enumerate where material
goes that is not processed at the receiving
facility. As well, contracts should specifically identify all downstream processors
that could/will receive materials as
derived from processes occurring at the
facility. This creates the need to establish
an accounting-for and an audit trail for
materials. Well-managed systems will be
able to generate routine reports that track
materials as received, as transferred offsite
for treatment elsewhere, and for constituents/components or treatment residuals as shipped for further downstream
processing. This will greatly facilitate
the management grasp on an organization’s e-scrap and WEEE necessary for a
stewardship program of high integrity.
Note importantly that indemnification
provisions have oftentimes been proven
meaningless in later years as we have seen
repeatedly in the industrial waste sector.
Validation and assurance concerning the supply chain/treatment train is
a significant problem, and one which is
not adequately addressed by any regulatory or certification program in existence
today. MIT’s SENSEable City Lab’s
32 ESN | September 2010
TrashTrack project (http://senseable.mit.
edu/trashtrack) developed a technology
that is showing tremendous promise and
could help to address this problem. As
demonstrated in some test trials, this
technology would allow for monitoring
devices to be implanted in the waste and
provide for detailed tracking information
on its location over time. CHWMEG has
hosted representatives from the TrashTrack
project at its past meetings, and is currently discussing possible collaborations involving CHWMEG and/or CHWMEG’s
members with the continued development
and the possible commercialization of the
technology.
The technology could make covert
tracking of e-scrap (and other industrial
waste) shipments by corporate generators of spent electronics; e-scrap turn-in
programs (such as retailers); and/or OEMs
with take-back stewardship programs –
through their transport and movement
from facility to facility along the treatment
train. This would allow random checking
by OEMs and other responsible e-scrap
generators to validate the commitments
made by their suppliers, including, but not
limited to, their arrangers of e-scrap collection, initial receiving facilities and the
various downstream processing facilities.
It is likely that significant deviations
identified from this type of random tracking could adversely impact that supplier’s
ability to continue providing services to a
customer. As well, findings of irresponsible routing and downstream management
of electronic scrap could be more broadly
reported, which could affect the ability of
unreliable suppliers from servicing an even
larger audience of customers.
Final thoughts
In summary, despite the introduction of
new certification standards, and the continued improvements of existing practices,
the e-scrap sector will remain complicated
and opaque for the foreseeable future.
Producers can turn to various unofficial
certification programs to attempt to add
a tool to help differentiate vendors. Such
certifications are, however, unlikely to replicate the level of information detail found
in typical on-site facility reviews. Due to
antitrust concerns, it seems likely that those
systems will evolve into simple certification
programs, like ISO 14001, with the free
market placing the value on the certificate,
as has happened with WEEELABEX.
Under the audit-and-review approach, such
certifications can be a part of the individual
member company’s selection process;
however, decisions on what weight to place
on certification is left to the individual
company.
Above all, producers need to understand that, when it comes to e-scrap best
practices, there is no easy solution, simple
fix or silver bullet. We might want to
remember H.L. Mencken’s admonition:
“There is always an easy solution to every
problem – neat, plausible and wrong.”
Randy Michael Mott is the European director of CHWMEG. He can be
contacted at europe@chwmeg.org.
Reprinted with permission from Resource
Recycling, P.O. Botx 42270, Portland, OR
97242-0270; (503) 233-1305, (503) 2331356 (fax); www.resource-recycling.com.