Cleaning up after your computer: toxics from electronic scrap are emerging in streams and are bobbing on companies' risk horizons. One step ahead of Congress, brokers and underwriters say they are addressing this growing but fractured market

Risk & Insurance, Oct 1, 2005 by Gregory D.L. Morris

Not much usually happens in Washington, D.C., in midsummer. But this year, despite a heat wave, the Senate held hearings about an equally hot issue: the potential for environmental contamination from toxins in electronic scrap. Further hearings were held in September with the object of forming a national e-waste recycling policy.

Some states are already ahead of the federal government. California, for example, enacted a tax earlier this year to pay for the disposal of computer toxins. A few smaller Eastern states have collection or dumping regulations already in place. (See page 40).

The benchmark study in the field is now a little out of date, but gives a good sense of the scale of the issue. The Electronic Product Recovery and Recycling Baseline Report, issued in 1999 by the Environmental Health Center of the National Safety Council, found that only 6 percent of computers were recycled in 1998. By 2004, the center projected there would be more than 315 million obsolete computers in the United States. Some experts estimate that number could easily doubled due to toxins from televisions, cellular telephones and personal digital devices.

According to the Environmental Protection Agency's most recent data, consumer electronics accounted for slightly more than 1 percent of the municipal solid waste stream in 2003:2.79 million tons out of a total of 236.1 million tons. Used components are e-scrap; after precious metals and other valuable materials are removed through physical and chemical processes, the remainder is e-waste. E-toxics are present at each stage, but usually in small amounts.

Awareness of the potential environmental exposures, as well as the need for risk management and insurance coverage, is spreading rapidly. Underwriters estimate the entire pollution legal liability market at about $2 billion to $3 billion in annual premiums. Specific e-toxics coverage is a very small percentage of that so far. But for the Senate chambers to be filled in late July, the issue is starting to appear on many radar screens.

Rick Goss, director of environmental affairs for the Electronic Industries Alliance, a Herndon, Va-based association representing the $400-billion U.S. high-tech and electronics industries, says the lead, mercury and other chemicals in question are used in devices "for very specific performance reasons."

Most importantly, Goss told senators that "EIA member companies are on target to be in compliance with the European Union Directive on the Restriction of Hazardous Substances, which will take effect on July 1, 2006." The EIA is made up of 1,300 member companies.

Those rules sharply restrict lead, hexavalent chromium, mercury, polybrominated biphenyl, cadmium and polybrominated diphenyl ether. Goss notes those voluntary reductions, along with improvements in energy efficiency and durability, will help reduce future volumes into the waste stream.

Goss stresses that the relative risks remain low for e-toxics. "EPA has made it clear going in that they do not think (electronics) represent a health risk in appropriate land fills. Absent an exposure threat, there is no risk. That point often gets lost. However, that does not solve the problem. I have had numerous discussions with member companies--your household names--and they are very aware of both their legal liability and their public-relations liability."

THE DUMPING DIVIDE

The other side of that awareness, and one reason why EIA is so active in this issue, is that the original equipment manufacturers do not want to touch it.

Dell, the largest computer maker, ignored repeated inquiries about its programs and coverage. IBM, which has an extensive "asset recovery program," said its expert was away for several weeks, and a representative for Hewlett-Packard said flatly that the R&I inquiry was "not relevant to what HP is doing in this space."

Similarly, the big national solid-waste companies--Allied Waste, Republic Services, Waste Management and Safety-Kleen--ignored or declined repeated inquiries.

In contrast, however, the specialized electronics recyclers were proud of their practices and relationships with brokers and underwriters. Later this month the International Association of Electronics Recyclers, based in Albany, N.Y., will issue a new benchmark report on its industry. The last report, issued in 2003, estimated industry revenues at $700 million.

Peter Muscanelli, president and founder of IAER, says, "We recognize that anything we do has risk, and we work with insurers to minimize those risks for both parties." The association has established a certification process to examine environmental, health and safety, and management practices. Five companies have been certified, and 15 more are in the process, according to Museanelli.

Two of those certified are Metech International, based in Worcester, Mass., and Earth Protection Services, based in Phoenix.

"The three pillars of our business are: environmental responsibility, intellectual property protection and maximum asset recovery," says Sam Advani, president of Metech, which handles about 500 tons per month at two processing centers. "We have a standard pollution liability policy, nothing out of the ordinary. Coverage is not cheap, but it is certainly available."