ASKING THE TOUGH QUESTIONS ON CERTIFICATION
Transcription
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 [email protected]. Reprinted with permission from Resource Recycling, P.O. Botx 42270, Portland, OR 97242-0270; (503) 233-1305, (503) 2331356 (fax); www.resource-recycling.com.