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Why We Need Regulation for Fair and Effective Stewardship Programs and Why Voluntary Systems are not the Answer

October 19, 2011

Last month, as the Product Stewardship Institute celebrated its 10th Anniversary at our national forum, a new coalition of manufacturers seeking voluntary programs announced its creation. The Product Management Alliance (PMA) launched a press release stating that it seeks to “…support voluntary market-based extended producer responsibility efforts and voluntary incentives for increased recovery and sustainable product and package design.” PMA is comprised of manufacturers of carpet, electronics, toys, paper, packaging and transportation materials, mattresses, plastics, personal goods, and pharmaceuticals. But while voluntary programs have a definite role in reducing the health and environmental impact from consumer products, they are no substitute for balanced regulation, which is often a better way to foster innovative market-based solutions.

One good place to start is with the facts. Voluntary, market-based approaches will result in high collection rates only when a product has value at the end of its useful life greater than the cost to collect and transport that product to a secondary market. For example, many retailers collect toner cartridges because they can refill and sell them at a profit. No regulations are needed because the value of the used cartridge is greater than the cost to collect, transport, refurbish, and resell the refurbished cartridge. Retailers have the incentive to heavily market the return of those cartridges. In another example, a car battery left on the curbside will magically disappear because some enterprising scrap dealer will always pick it up and bring it to market for the value of the lead. Unfortunately, though, the cost to properly manage many other consumer products – including carpet, mattresses, electronics, toys, and all the other products whose manufacturers have formed the Product Management Alliance – is much greater than the market value of the used product.

After nine years and a signed agreement, the carpet industry’s best efforts to put in place a voluntary collection and recycling system has resulted in the recycling of only 4.5 percent of all the carpet available for recycling in 2010. The rest of that carpet material – more than 95 percent, or nearly 2.9 million tons – was disposed of in landfills and incinerators. Not only was this material wasted, but it causes operational problems at these disposal facilities, resulting in extra costs. The 13-year old voluntary industry thermostat recycling program reached only a 5 percent recycling rate before governments started to regulate. And the voluntary industry recycling program run by the rechargeable battery recycling industry for the past 17 years has posted only a 10-12 percent rate.

Wasted resources result in lost jobs and economic value. This is not a band wagon to hop on and emulate.

Don’t get me wrong. PSI supports voluntary programs under certain circumstances. Voluntary programs work well as a ramp up to regulated programs. They can grease the wheels so that, when a regulated system kicks in, the players know what they are supposed to do. These programs can also allow an industry leader to spark an innovative program. PSI worked with Staples in 2004 to develop the country’s first computer take-back program, which was piloted, then scaled nationally after two years. This voluntary program is available to everyone, and it resulted in innovative programs by others in the office supply sector, such as Office Depot and Office Max, as well as Best Buy. And voluntary programs can operate in areas where no laws, or weak laws, are in place.

But relying on manufacturers to voluntarily collect their products is like trusting that people will stop at intersections with no stop lights or signs…and no threat of enforcement.

Some people will have the sense to do it, but most will not. This is why the environmental movement was born nearly 50 years ago. It was because the market cannot police itself, resulting in environmental externalities in the form of pollution that impacts all of society. Do we really have to explain this concept all over again? Have we regressed this much?

Imagine a professional ballgame with minimal rules, no common goals, and no referee, where each player performs according to his own definition of success, and where there is no penalty for not playing. Like this imaginary game, voluntary product stewardship programs create a competitive advantage for those companies that will not act unless forced to do so. And, in every case, there will be a significant number of those companies. This reticence is unfair to those corporate leaders that know what is needed, have the ability to reach high performance, but get dragged down to the least common denominator.

The buzz among the product stewardship community is that the formation of the PMA is an indication that the product stewardship movement has gained steam, attention, and credibility. There is an interest in finding ways for voluntary industry initiatives to integrate with regulated programs. But there is also a concern that PMA is promoting voluntary programs to block sensible laws that will require them to take greater responsibility, even if the results will be better for the common good. There are other concerns about voluntary programs. Since they rely on the good will of companies, they could be here today but gone tomorrow. And it is often hard to know how effective they are since program operations are often not transparent, and companies selectively report data.

For the past 30 or 40 years, there has been a creeping sense among some in politics that all government officials are inept bureaucrats tying companies in knots, preventing job growth, and wasting investment dollars for little benefit. To be sure, those officials exist. But most officials I know are interested in using their authority to create a level playing field for fair competition that will result in more recycling jobs from materials that previously polluted the environment. They want to set broad performance targets and allow companies the flexibility they need to innovate and reach the targets at minimum cost. That is the type of balanced regulation and progress we need.

Government product stewardship regulations will result in fair and effective systems. Voluntary actions will not.

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10 Comments leave one →
  1. October 20, 2011 1:26 pm

    Government involvement in the free market needs to be done only in a limited fashion and in extreme circumstances. Take carpet recycling.

    AB 2398, California’s Carpet Stewardship Legislation [new tax], has been in place since July and it is already resulting in unintended consequences. It will be interesting to see its full effects after a year or two.

    Meanwhile, in other parts of the country, carpet recyclers are collecting unwanted carpet and pad without government mandates, laws or new taxes, creating a viable industry where one did not previously exist.

    Advancements in finding uses for the resources and materials in carpet are being made, meaning the industry can grow and develop on its own.

    Instead of taxes, government entities need only encourage these entrepreneurs and create a friendly business climate. Consumers will take it from there.

    • November 13, 2011 2:21 pm

      Jim, thank you for your comment. I appreciate the feedback. There is no doubt that voluntary efforts will gain ground over time. But don’t you have to wonder why, after 9 years of voluntary programs, the industry only reached a 5% recycling rate. How else can you see that but a market failure? There are certainly small positive advancements in carpet recycling. But, as governments are laying off essential employees so they can pay for carpet and other trash disposal, it gets ludicrous. What we have experienced over the past 9 years of voluntary carpet recycling is wasted resources, lost recycling jobs, and continued costs imposed on taxpayers. That is not a future that we would like to see for our kids. And that is after government spent alot of resources encouraging these entrepreneurs and creating a friendly business climate for them. This is what you propose…but it didn’t work.

      The CA carpet law is not one that product stewardship advocates wanted. Instead, it is a negotiated solution. Even so, It is important to have a continued dialogue so we all can learn from the laws and make them better.

      What “unintended consequences” do you see? What data do you have?

      Let’s keep up the dialogue.

      Scott

      • November 30, 2011 3:40 pm

        An unintended consequence with AB2398 is the glut of carpet pad on the market, resulting in a precipitous drop in the price recyclers get from manufacturers.

        As businesses grow and find more uses for recovered carpet and pad, the economics of recycling turn around.

        As other have mentioned, the status quo is a powerful force. We are creatures of habit, but those habits need to change in order for carpet recycling to have a chance.

        I find it both surprising and a bit disappointing that some of the resistance I encounter is from local governments who are unwilling to promote voluntary recycling.

  2. October 21, 2011 2:49 pm

    While it’s true that regualtory schemes are needed to increase the diversion of certain products from landfills, here are 2 things to keep in mind-

    1. It isn’t just manufacturers that need to get on board to make take back programs work. Take carpet recycling for example. My company Bentley Prince Street offers our customers the opportunity to recycle carpet at the end of its life. The cost varies, but often it is less than landfill disposal fees and sometimes it’s even free! You’d be surprised at how hard it is to get some customers to agree to recycle even when it is financially beneficial for them to do so. The status quo is a powerful thing.

    2. The structure of laws like AB 2398 is something that many manufacturers including Bentley Prince Street stands behind. However, if each state enacts their own stewardship law, the result will be an overwhelming mess for manufacturers. National stewardship laws are needed.

    • November 13, 2011 2:38 pm

      Kim:

      Your experience is sad but true. You rightly point out that we cannot forget that consumers are a big part of the solution. A true product stewardship approach for carpet, which PSI proposed to the carpet industry, would allow for a multi-stakeholder group to address this very question and for ideas from all stakeholders to be melded into pilot projects and solutions.

      We know that 3 things need to be available for consumers to take action – a viable collection option, clear information so they have an awareness about the problem with disposal and the collection solution, and an incentive to act. If all 3 of these elements are present, you will get high recycling. But it cannot be done in a vacuum. Consumers need to know that carpet disposal wastes resources, causes greenhouse gas impacts, loses jobs that would go to carpet recyclers, and is responsible for employees getting laid off in their towns so services must get cut back.

      PSI proposed to the carpet industry a solution that would result in a state model, just as we did with the paint industry. But it was rejected. Governments do not want state by state different laws, but instead are ready and willing to work on a state model that can be introduced in all states that are interested. When we all know that the model works, after refinement from state to state, then it is time to go with a federal bill. These laws are too new to go to a federal law right away. And many government officials believe that a desire for federal legislation is just a way to stall any state legislation. There is very little chance right now that any action would be taken on a federal carpet bill even if all stakeholders supported the same solution. But let’s keep talking.

      Scott

  3. October 26, 2011 5:59 am

    Voluntary programs can work and deliver high collection rates, even when the product’s value at the end of its useful life is NOT greater than the cost to collect, transport and recycle that product.

    MobileMuster, the mobile phone industry recycling program in Australia is a great example of a voluntary scheme that delivers high collection rates – in just over 5 years the scheme has lifted collection rates from 18% to 50%. The scheme takes back all mobile phone components i.e. batteries, chargers and accessories as well as handsets. Its 2010-11 annual results, which are independently audited are available at http://www.mobilemuster.com.au.

    What is unique about this scheme is that it is funded by an advance recycling levy by its members on number of new mobile phones imported rather than generating revenue from the back end of the process from recycling the components. This means funds are available to promote the scheme, maintain a collection network of over 4500 public drop off points, offer a free post back satchel/mailing label, pick up collections from a further 3000 schools, businesses, unis, government agencies and other organisations who help to promote and collect mobile phones for recycling as well as ensure all components are recycled to the highest environmental standards.

    It is a true product stewardship scheme in the sense that participating manufacturers and retailers accept their responsibilities (and the associated costs) for ensuring that their products do not end up in landfill at the end of their useful life, but instead recycled for material recovery to the highest environmental standards. None of the products are refurbished and resold on to secondary markets which in effect is simply passing on waste problems to another country, usually a developing country that does not have the environmentally sound recycling facilities.

    Many mobile phone recycling programs across the globe aren’t true product stewardship schemes but are rather second hand dealers, trading product from one country to another with little or no consideration of the product stewardship responsibilities they have. Each entity or individual who makes, sells or uses a product has a responsibility to minimise its impact on the environment and human health.

    Crucial to MobileMuster’s success is the strong support of the majority of the mobile phone industry, all but two handset manufacturers contribute to the schemes, plus of mobile network carriers. As well as ensuring the highest of recycling standards with no mobiles being resold for reuse, but rather recovery of more than 90% of the raw materials in the phones that go to make new products. Generating substantial greenhouse gas emission and energy savings

    Where industry cant work collaboratively to deliver real product stewarship outcomes, then sensible legislation may be required, but as MobileMuster illustrates voluntary systems can work when industry comes together

    • November 13, 2011 2:52 pm

      Hi Rose. Thanks for providing a good example of an industry run program that seems to be succeeding in keeping cell phones from the waste stream. First, let me say that cell phones are not the target of product stewardship legislation in the U.S. (with a few state exceptions). There are many voluntary programs set up to collect the phones BECAUSE THEY HAVE VALUE ONCE COLLECTED. The cell phone program in the U.S., therefore, is a case in point from my original blog post. There is money to be made. Since our organization does not work closely on cell phones, I don’t know whether the program and circumstances in Australia are any different. Perhaps they are. I also don’t know if the environmental standards from cell phone recycling you cite are being upheld from U.S. collected phones as they are from ones collected in Australia. These are all good research questions.

      That said, industry in the U.S. has not come together as you cite for the MobileMuster program. Perhaps that is a good learning to pass to your corporate friends here!

      Scott

  4. November 24, 2011 9:23 pm

    Scott, I don’t agree the choice between voluntary or legislated product stewardship is as simple as you suggest. My experience while running voluntary cartridge collection and recycling programs in both Australia and the US is that there are tremendous benefits to be gained from well organised and managed voluntary programs. Our program in Australia has been regarded as a best practice model as the Government has moved toward a legislative framework for product stewardship for electronics products.
    The challenge is striking the right balance between corporate motivations and desired outcomes in relation to product stewardship. By that I mean dealing with free riders on the one hand and being overly prescriptive in the regulations on the other. Free riders need to feel the pressure to take on responsibility for their products at end of life, but the regulation can’t be such that it significantly restricts how companies fulfill their responsibilities. So the challenge is to stimulate innovation in materials recovery to provide a commercial justification for adopting end-of-life management programs, while not becoming so prescriptive that the end-of-life management degenerates into a compliance program. The latter largely becomes a cost minimisation exercise, that is the adoption of practices that allow a company to meet its obligations at the lowest cost, which in turn is likely to result in much less desirable environmental outcomes even though they may fulfill lthe compliance reporting requirements.

  5. November 26, 2011 11:11 pm

    Greg, I cannot argue with a single thing you wrote. I agree completely. I do not mean to suggest that there is no role for voluntary programs. Nor do I believe that all regulation is good. Some regulations are downright strangling, and need to be changed. The first case you raised was about cartridges (presumably toner cartridges), which I see as an example where EPR legislation in the U.S. has not been needed at all owing to the value of an empty cartridge (for refill/resale). With your second case, electronics, you provide a good example where a voluntary program (in Australia) was a ramp up to sensible legislation. The balance you suggest is exactly what we are seeking – where regulation provides a loose framework for the free market to operate, where innovation is encouraged, where regulation is minimized to the extent needed to provide the results sought (e.g., more recycling, less disposal, better designed products, etc.). All too often government is regulating on its own without input from industry, or industry is changing their product design without the input from government. The unfortunate aspect that we see in the U.S., which was the impetus for my blog piece, is that an increasing number of industries propose ONLY voluntary programs as an ideological position. All regulation is perceived as bad, and no regulation is promoted as always the best way to stimulate the markets. I support your balanced approach, in which sometimes all that is needed is a voluntary approach, and other times some degree of regulation is needed to provide the incentive for companies to take responsibility for managing their products at end of life.

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