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Are You in the Pallet or the Recycling Business? Introducing E-Recycling: The Fastest Growing Segment of the Recycling Industry

Industry consultant Rick LeBlanc explores the processes and synergies of electronics recycling and pallet recycling. Should this be a potential new business prospect for your company?

By Rick LeBlanc
Date Posted: 2/1/2011

It wasn’t that many years ago that wood pallet recycling was the fastest growing segment of the recycling business, but things have changed. In case you haven’t noticed, the huge growth of consumer electronics has led to an ever-expanding surge of end-of-life electronics that must be managed. More than just trash, this material can be an environmental and health hazard as well as offer value in terms of rare metals, plastics and spare parts.

With the average life of a computer being 18 to 24 months and new digital products being developed seemingly by the nanosecond, electronics recycling is now the fastest growing segment of the recycling industry.

Approximately two million tons of electronic scrap is processed every year in the United States according to Mark Neuville director of media relations and online communication at ISRI - the Institute of Recycling Industries. Among its 1,600 total members, this association represents the interests of about 350 e-recyclers around the country.

Bigger picture, the global e-recycling industry was worth $5.4 billion in 2009 according to ABI Research, which charts it to reach $14.7 billion by the end of 2014.

Electronics recycling “is absolutely a growth industry,” stated Lauren Roman, Business Director for e-Stewards, a recycler certification program launched in 2010 by the Seattle-based Basel Action Network, and backed by business and environmental groups alike. While it is still an exciting business to enter, Lauren explained, today it is much more challenging to enter because of regulatory and certification hurdles that e-recyclers must face.

Fast Growing, but Increasingly Regulated

In the past, Lauren explained, a business could just hang up its shingle, begin collecting electronics, and start separating it into separate bins by material. Offers would come in for various metals and plastics, and over time the business might take steps to improve its processes and expand its volume of incoming end of life electronics in order to turn a bigger profit. Little thought was given to what happened with materials once they were shipped away. The outcome of such an approach resulted in some participants in the electronics recycling industry taking unethical shortcuts. This included electronics being improperly dumped offshore in destinations such as Asia and Africa, and materials ending in landfills where heavy metals could potentially leach out.

“Now with e-certification programs,” Lauren stated, “you know that the recycler has gone through a rigid certification process. It is a pretty good indication that they are doing the right thing.” There are currently two voluntary certification programs in the United States. One is the R2/RIOS Certified Electronics Recycler program, supported by ISRI, and the other is e-Stewards.

The e-Stewards standard, for example, calls for recyclers to eliminate exports of hazardous e-wastes to developing countries; to halt the dumping of such wastes in municipal landfills or incinerators, and to cease the use of captive prison populations to manage toxic e- wastes. It also calls for strict protection of customer’s private data and occupational health safeguards to ensure that workers in recycling plants are not exposed to toxic dusts and fumes.

There are also mandatory programs created by several jurisdictions. In British Columbia, for example, the Electronics Recycling Standard is enforced by Encorp, which is a not-for-profit organization contracted by the Electronics Stewardship Association of British Columbia, and funded through environmental handling fees paid by retail consumers when they purchase affected electronics products. Certification audits are handled by 3rd party inspection companies such as SGS, known in the pallet world as the pallet inspection provider for pools such as EPAL and CPC.

Various Types of Business Opportunities in the E-Recycling Sector

There are various types of businesses in the e-recycling sector, with typical operations ranging anywhere from a few million dollars in annual sales up to $50 to $60 million, according to Mark of ISRI. Investment can be quite low for businesses that simply collect, palletize and ship end of life electronics, up to several million for companies that install sophisticated shredding and separation technologies.

Another consideration is the cost and the time it takes to achieve certification. Lauren commented that depending on the type of operation, the cost of a certification program could be in the $5,000 to $50,000 range, and take over six months to achieve. For someone serious about entering the business, Lauren advises to be working towards compliance in the early stages of creating the enterprise.

Collection Depots: Keeping with the British Columbia example, the physical flow of electronics scrap starts with authorized collection depots. Encorp contracts over 100 sites in B.C. to accept authorized items, where they are typically palletized according to type (computers, televisions, etc.) and wrapped, for shipment to a consolidation center. Many of the B.C. collection centers also act as bottle and beverage can return centers, which generate much more business than the e-scrap side of the operation. For this reason, Lauren suggested that one low-cost way for a pallet recycler to potentially get into e-recycling might be as a collection site, if they have an appropriate location and available space for such an activity.

The issue of site security was raised by interviewees such as Clayton Miller, director of business development at eCycle Solutions, a large Canadian e-recycler, as well as Tyler Garnes, logistics manager at Encorp. Restricted access and monitoring of the facility is a hugely important consideration at most e-scrap facilities, due to the issue of information privacy. “We don’t want the public coming through and picking at items,” remarked Tyler. “In fact, as part of our contract, we mandate that participants in the program provide a secure location.

Consolidation Points: Consolidation points are a common tactic in the world of logistics. They allow less than load (LTL) accumulations to be combined into full load to provide transportation efficiencies. In the B.C. model, the next stop after the collection center is the consolidation center. Encorp runs six such contracted sites in the province. At these locations, palletized products are scaled and cross-docked to create full, uniform loads to send to the recycler. Collectors are paid for their services by Encorp, based on that scaled weight. For a company interested in this type of consolidation business, dock doors to facilitate unloading and loading of trailers handling equipment, and a secure storage area for product to accumulate are required.

Primary Recycling: At recycling operations such as Intercon Solutions (http://www.interconrecycling.com), an Illinois-based e-recycler with over 100 employees at its 250,00 sq. foot main facility, incoming scrap is removed from pallets and de-manufactured by operators who take equipment apart at work stations and sort material into the appropriate pallet bin, including such categories as circuit boards, steel, plastic and glass. At Intercon Solutions, 100% of incoming material is recovered, with zero material sent to the landfill. The result is the liberation of clean material that is subsequently sent to other approved processors. Brian Brundage, CEO of Intercon Solutions, emphasized the importance of the chain of custody in handling e-waste. For large companies, there are considerations of reputation and liability as well as the need to safeguard confidential corporate information.

At eCycle Solutions, incoming pallets of product are identified and scaled, with a barcode label affixed to each, providing weight and product information. “Depending on the type of material,” Clayton said, it goes through a manual separation process, or a combination of manual and mechanical separation.

Secondary Processing: Clean material is then sent to other operations for further processing. Some of that material, such as copper, may generate revenue for the recycler, while other material, such as glass, the recycler will have to pay to have properly processed. One approach to the further liberation of materials is the use of shredding machinery, which tears apart electronic scrap to facilitate liberation of materials. Material extraction is aided by a number of sorting technologies including magnets, vibration, optical devices and eddy currents. At eCycle, the company operates primary recycling operations in five provinces, but directs applicable material to two sites that have shredding equipment, thereby enjoying better utilization of expensive shredding and sortation machinery at those two locations.

Business Challenges

Like any business opportunity, the e-electronics industry comes with the basic hurdles of running an operation, in addition to application-specific challenges. As mentioned above, increasingly there are rigorous certification and security requirements for companies operating in this sector. Additionally, the fragmentation of legislation from state to state puts operators in some jurisdictions at a disadvantage, Brian pointed out. “We really need someone at a federal level and make a blanket program for everyone to create a level playing field,” he said. He noted that Canada, on the other hand, has done a pretty good job of creating a level regulatory environment among the provinces. Brian said, “They are closer to having a countrywide system than we are.” Yet another consideration is the handling of hazardous products. Because of potential exposure to heavy metals and other concerns during the recycling process, recyclers must take care to have such features as adequate dust collection systems and other managed safety practices.

“We provide training and resources for our employees to make sure they are following proper hygiene,” Clayton commented. Leading e-recyclers such as Intercon Solutions and eCycle Solutions both have rigorous health and safety programs involving 3rd party certifications.

With rapid growth projection, the $1.8 billion electronics recycling sector is definitely a niche of the recycling industry worth watching. “What keeps me excited,” Clayton summarized, “Is that no matter what industry, we all use electronics in some capacity. The industry is growing fast, and it is good to know we are doing something in partnership with other groups to make sure that it is getting recycled properly. That’s what it is all about.”

Electronics Recycling and Pallets

One thing that is notable about electronics recycling is that pallet usage is integral to operations. Pallets, typically of the 48x40” recycled variety, are used for the unitization of such items as televisions, monitors and computers at collection facilities for shipment to recycling facilities. At the recycler, bins on pallets are a standard feature for sorting different categories of materials during the de-manufacturing process, and these in turn are shipped to other approved processors for further recycling. Pallets are loaded on and off of trailers, and may be racked or stacked during staging or storage.

“We recycle a tremendous amount of pallets,” I was told by Brian Brundage, CEO of Intercon Solutions. Intercon prides itelf on recycling 100% of incoming materials. Nothing is landfilled. “We purchase some pallets when needed but reuse them more than the average person or company might. In most cases, we put down a layer of cardboard before stacking equipment on pallets so we are able to use pallets a bit more frequently and longer than most companies.

As we are one of the few recyclers that recycle every crumb of what comes through the door, pallets are very much a part of our recycling operation. Most loads come in to our facility on pallets and we reuse or recycle all of them.

In British Columbia, Encorp contractors move about 45,000 pallets per year. Extrapolating from B.C.’s population to the total for Canada and U.S., that would equate to roughly 4 million pallet trips per year, everything else being equal.

Recycling Hierarchy and Electronics

Across the spectrum of recycling, there is a concept known as the recycling hierarchy. What this says is that generally speaking, the most valuable outcome of recycling a product is to be able to reuse it as is, followed by refurbishing, dismantling for components, and ultimately recycling the materials. The hierarchy generally holds true for pallet recyclers as well. Typically the most attractive outcome is to be able to sell used pallets as is, or to repair them during the refurbishment process. This is followed by dismantling for parts, and ultimately grinding for further material liberation.

This approach has been the normal approach followed in electronics recycling during its early stages, with reuse and refurbishment often the outcome of choice. “There are two sides of the business,” Mark of ISRI explained. “The refurbisher side of the business collects devices, refurbishes them, and puts them back out for reuse. Then there is the collector side of the business. They are looking to take equipment apart, recycle and sell.”

More recently, however, one overriding issue is changing that strategy – the concern about data security, which has led to an emphasis on computer destruction. “I don’t know about you, but I have a lot of things on my personal computer that are very personal,” observed Brian Brundage, CEO of Intercon Solutions. Such information as corporate secrets and corporate client lists could be extremely painful for companies to have leak to competitors. “A lot of companies are thinking about that. It takes a long time to win a customer and you don’t want to see your competitor buying your customer list over the Internet.”

“Most people believe that refurbishment is the way to go because they can drive better value that way,” Brian elaborated. “I am not concerned so much with cost as with getting the job done right. People at conferences say to me why aren’t you getting on the bandwagon with refurbishment, but it is one thing that really sets us apart.”

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