1. END OF PRODUCT LIFE: CLOSING THE LOOP ISQA 511 Mellie Pullman

2. Overview EOL Supply Chain Management & 3 Rs Landfill vs. Recycling Recycling & Innovation

3. EOL Supply Chain & 3Rs Disposal- Land Fill & Incinerate Product Take-Back Recycling with Disassembly Product Use Distributor & Customer Final Assembly (OEM) Raw Material Suppliers Subassembly Component Suppliers Recycling without Disassembly Remanufacture & Reuse Secondary Markets

4. US Municipal Waste Stream Generated from Products CategoryThousand tons Durable Goods (tires, appliances, furniture, carpets, etc.)45,670 Non Durable Goods (newspapers, books, plastic utensils, disposable diapers, etc.) 58,710 Glass Packaging10, 050 Steel Packaging2,550 Aluminum Packaging1,880 Paper & Paperboard Packaging38,280 Plastics Packaging13,010 Wood Packaging10,670 Other Misc. Packaging310 Source: Franklin Associates (2008), a Division of ERG.

5. The Three Principles Of Waste & Pollution Reduction: There are three different strategies to reduce or prevent waste/pollution: Dematerialization: Increase resource productivity (use less to achieve the same function) Material/process substitution (different material/process to achieve the same) Reuse & recycling (use material and value-added over and over)

6. Dematerialization examples Advanced High Strength Steels (AHSS) in automotive applications (25% weight reduction) Mass reduction of beverage containers Continuous casting technology in metals production Drip lines instead of sprinklers for irrigation Spaceframe design concept Miniaturization in the electronics industry (e.g. precious metal content in consumer electronics)

7. Material substitution examples Steel, aluminum, magnesium, composites in automotive Steel, concrete, timber in construction Glass, steel, aluminum, plastics, paper in packaging CFCs instead of ammonia, chloromethane, sulfur dioxide MTBE instead of lead (TEL) as antiknock in fuels Bio-based plastics versus petroleum-based plastics Lead-based solder versus lead-free solder

8. End-of-life product disposal Product demand & use Raw materials mining Primary materials production Component manufacture Final product assembly Product sale and delivery Component re- processing Product re- processing Materials re- processing Eol product collection & inspection A supply loop is constrained when it is not able to reprocess all targeted end-of-life products into secondary output marketable at above-cost prices. The reasons can be: Limited collection of end-of-life products Limited feasibility of reprocessing Limited market demand for the reprocessed secondary resources Reuse and Recycling (Supply Loops, Closed-Loop Supply Chains)

9. Recycling Rates Batteries are recycled at a rate of 99% Metal has next highest recycling rate 6O% Paper Products: 55% Current Glass (Aluminum) container recycling rates: 11 Deposit States rates 64% (76%) Remaining No-Deposit States rates 12% (35%) Wood Pallets: 800 Million produced each year (300 M from recycled or reclaimed content) 1/3 of US landfills no longer accept these pallets; others charge for their disposal.

10. Primary production DisposalUse Supply Loops – Environmental Benefits 1. Diversion of product or process waste from landfill or incineration by collecting them for economic value recovery via reprocessing. 2. Generation of secondary resources from product or process waste and displacement of primary resources, i.e. materials, components & products. When are the environmental benefits from displacement more significant than the benefits from avoided landfill / incineration? 2.1. Collection & reprocessing

11. MaterialPrimary Production (cradle-to-gate in MJ/kg) Recycling (scrap-to-gate MJ/kg) Savings Factor Aluminum194.710.319 Copper~10020 – 305 – 3.3 Steel21.77.13 Steel section33.316.02.1 PET82.730.22.7 Paper18121.5 Glass1281.5 Supply Loops – Potential Benefits from Displaced Primary Production ProductPrimary ProductionReuseSavings Factor Steel section33.3 MJ/kg5.2 MJ/kg6.4 Cell phone150-250 MJ/phone2.5-5 MJ/phone30-100

12. Could we replace all primary steel (BF/BOF) with recycled steel (EAF)? BF: blast furnace BOF: basic oxygen furnace EAF: electric arc furnace

13. GHG emissions from global steel production in 2005 (in MMT CO 2 eq) MMT= Million Metric Ton Factor 5.4 1020 MMT finished steel (1142 MMT crude steel) Scenario 1: All from basic oxygen furnace (BOF 2.021 kg CO 2 eq / kg) Scenario 2: All from electric arc furnace (EAF 0.3471 kg CO 2 eq / kg) MMT CO 2 eq

14. 195019601970198019902000 200 400 600 800 1000 1200 Global crude steel production (in MMT) EAF 602 (53%) BOF 540 (47%) most consumed 640 MMT scrap generated in 2005 2005

15. Factor 1.4 Factor 1.75 GHG emissions from global steel production in 2005 (in MMT CO 2 eq) 1020 MMT finished steel Current: ~ 70% recycling rate (?), 64% BOF, 33% EAF Feasible today but steel demand increases: 100% recycling rate, 47% BOF, 53% EAF MMT CO 2 eq

16. Research by: Roland Geyer, Vered Doctori Blass, University of California, Santa Barbara Should we reuse or recycle our cell phones?

17. Background Plastics40-50% Glass and Ceramics15-20% Ferrous metals~ 3% Non ferrous metals22-37% Other5-10% Estimated amount of cell phone subscriber in 2007: 2.5 billion Estimated end-of-life phones in 2005 in the USA: 130 million (~ 0.55 wt% of total e-waste in the US) Estimated av. life time 18 months, collection rate < 20% More handsets reuse than recycled Metric tonswt% of US consumption Copper15000.06% Silver400.5% Gold42.3% Palladium21.7% Material composition Recycling potential in USA in 2005

18. in MJ/phone Best case25021.610.51.5~ 0 Worst case15016.2512~ 0 Diversion from landfill E disp Displaced production E displaced Collection E coll & reprocessing E repro Material & product markets Cell phone use Energy required to produce, collected and reprocess cell phones

19. Economics of cell phone recycling and reuse Recycling (including reverse logistics) Reuse (including reverse logistics cost) Not profitable if recyclers have to bear the reverse logistics costs. Profitable even if refurbishers bear the reverse logistics costs.

20. Closer look at cell phone recycling Currently, only copper and the precious metals are being recovered. However, together they make up 95% of the total material value.

21. Conclusions More cell phones are currently reused than recycled Reuse is profitable even if collection cost is included, one of the reasons being the short lifetime of cell phones Recycling is only profitable without the collection cost Recycling currently only recovers copper and precious metals, i.e. 70-84% of the embodied energy and 95% of the economic value The displacement rate of metal recycling is estimated to be high The displacement rate of cell phone reuse is estimated to be low WHY? At current estimated displacement rates cell phone recycling might generate more environmental benefits than reuse

22. Reuse & Remanufactured Products How do you feel about buying these used or remanufactured products? (rate 1 neutral to 3 very strongly on how strong you feel) Unattractive/Disgusting Safety and Reliability Issues Purchase is more green

23. Technology Product Unattractive/Disgusting Safety and Reliability Issues Purchase is more green Would buy it if it were X % of new price?

24. Household Product Unattractive/Disgusting Safety and Reliability Issues Purchase is more green Would buy it if it were X % of new price?

25. Personal Product Unattractive/Disgusting Safety and Reliability Issues Purchase is more green Would buy it if it were X % of new price?

26. Other examples for reuse: Beverage containers and other packaging Printer/copier cartridges Single use cameras Electric motors of analog photocopiers Cell phones Tire retreading Automotive spare parts Fundamental reuse challenges: Challenge to competitively match supply with demand Newness seems to have intrinsic value for most consumers OEMs do not usually support reuse (almost no design for reuse) Reused products are seldom perfect substitutes Therefore unclear to what extent reuse displaces new production Product reuse has conflict potential with product innovation Reuse

27. Question: How can innovation improve the situation? Strategies for reducing waste are not keeping up. Market demand for many materials = volatile As Thomas Edison said about inventing: You need a good imagination and a pile of junk.

28. Factors influencing 3Rs vs. Reverse Supply Chain (EPR) Factors affecting RSC implementation Factors driving 3R Rate LegislationCountry & State Specific Policies: Product Standards & bans, Performance Standards, Charges& Taxes, Emissions trading, Subsidies & Information Disclosure Customer demandCustomer Demand (both consumer & retail customer) Strategic cost/benefit Firms environmental concern Volume and quality of returnsOverall Market Demand for materials Incentives & available resources between partners Integration & coordination of SC Carter & Ellram (1998), Carter & Carter (1998), Bowen et al (2000), Stevens (2004), Choinard et al (2005), Dahlatshahi (2005), Tan & Kumar (2006), Walker et al (2008), Guide & Van Wassenhove (2009), Rahman & Subramanian (forthcoming IJPE) and others.

29. Incremental vs. Radical Innovation (3R Context) Incremental Innovation Product Redesign Improvement to a product within its current typology Process Redesign Improvement to a process within its current typology Radical Innovation Functional Significant change in the device concept to provide the same function as the device it replaces Institutional Replacement of products with services System Significant changes in the device concept, infrastructure and user learning

30. Washing Machine System-Radical Innovation

31. How can we get more recycling innovation? System or Supply Chain Significant changes to device concept, access to & flows of EOL products Product and Process Design & Technologies for Re-processing and Disassembly Concept & Behavior shifts Market Demand vs. Legislation

32. Case analysis findings: Innovation (I vs. R) as a function of key drivers Key Drivers InnovationMarketLegislative Product/ Process Low Value: I High Value: I High Value: I (WEEE & Autos) Low Value: I System/ Supply Chain Low Value: I High Value: I & R (Functional) in shift of durable product to services or servicizing Radical (all types) with Autos and EPR products.

33. Approaches & Challenges Incremental innovation seen with low value Customers demand but may not participate Packaging innovations (weight, unessential packaging, use of concentrates, refills, different materials) Incremental innovations face diminishing margins of return Radical innovation with high value Hard to create system shifts without high value Serviciszing & sharing products (company maintains ownership and others lease as needed) US demand fluctuates for material causing uncertainty & risk avoidance >fragile China demand for materials is high so radical process innovation happens there Incremental innovation more likely with standards, emissions trading, required information disclosure and voluntary recycling. (Cander, 2004) Radical innovation shown with product bans, charges & taxes, subsidies and EPR (EU autos) Shift customer habits in major ways Product Innovations Design for Dismantling & Recycling (DFD/DFR) EEE producers Technology & supply chain innovations Networks of dismantlers/shredders Market Demand-based ApproachLegislative Policy-based Approach

34. Example Market Driven: Chinese Recycling Xmas Lights, Minter (2011)

35. Servicizing or Shared resources B2B Copiers Equipment Others? B2C Cars Clothes Wineries

36. Pros & Cons of Servicizing & Sharing

37. Questions & Thoughts