Professor: E-waste Take-back Legislation Could Result In Higher Manufacturing, Remanufacturing Profits

As consumers rely more on computers and other electronic products, communities are faced with the question of how to deal with the growing stockpile of used, obsolete products. While various reports estimate that electronic waste is less than 4 percent of the total solid waste stream in the United States, electronic waste is estimated to be growing 2-3 times faster than any other waste stream.

Though some U.S. states 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. Earlier this year, the Washington governor signed what is considered the most comprehensive electronic waste recycling bill in the nation (SB 6428).

New data from Scott Webster, professor of supply chain management in the Whitman School of Management at Syracuse University (SU), finds that there may be an economic incentive for policymakers in deliberations about 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 (Waste Electrical and Electronic Equipment) 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 said.

WEEE take-back legislation is modeled after the European Community directive on e-waste. 

Webster's study, forthcoming in the Journal of Operations Management and announced on Aug. 22, 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 said. "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 continued: "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 said 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," Webster said.

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 study co-author Supriya Mitra, a recent graduate of the PhD program at SU who is now with Tata Consulting Services in India, 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.

This article originally appeared in the 08/01/2006 issue of Environmental Protection.

comments powered by Disqus