1. Aura Light BLV GE Lighting NARVA OSRAM GmbH Philips Lighting Havells Sylvania WEEE – Producer’s Experience in Europe Christoph von Rautenfeld OSRAM

2. Page 2 Agenda Introduction ELC – the organization and people involved Specialty of lighting for EPR/WEEE The Situation in EU History of the directive in EU Reaction of the lighting industry Organizational model ELC Operational Costs Overview (Current) issues in Europe Key Learnings from EU

3. Page 3 Introduction: Contacts Christoph v. Rautenfeld, OSRAM CFO of OSRAM in Brazil 4 years working on WEEE in EU Since July 2007 responsible for WEEE/EPR Global Phone:+55 11 3684 7471 Mobile:+49 170 636 8755 / +55 11 8196 5043 eMail:c.rautenfeld@osram.com

4. Page 4 Introduction: Who are we? ELC represents the leading lamp manufacturers in Europe 95% of total European production 50 000 employees in Europe €6 billion European Turnover We are an international non profit-making association under Belgian law with a secretariat in Brussels We are a flexible, light & efficient decision-making lobby organisation to promote efficient lighting practice for the advancement of human comfort, health and safety We were created in 1985

5. Page 5 Introduction: Which companies? Havells Sylvania

6. Page 6 Specialty of lighting: Lamps are different with regard to WEEE The collection and recycling of Lamps is considerably different from all other WEEE products due to: Fragility Hazardous waste regulation Low weight High volume over 700 million (WEEE relevant) lamps per year put on the EU market No material value after recycling Also due to these characteristics collection and recycling costs are significant in relation to product prices. Lamps are one of the few components separately included in WEEE legislation in Europe Lamps are different, and require specific WEEE solutions

7. Page 7 COGS Selling others 1) Average calculation for FL Specialty of lighting: High Costs Involved Example Cost Structure 1 Waste Fee 2 2) European average  Drastic impact from WEEE Fee  For most products exceeding all individual cost blocks (selling, material, personnel etc)  Impact for lighting industry in Europe: approx. 180’ mio. EUR p.a. Excluding company provisions for WEEE obligation  (Initial waste fee was more in the range of 0,60 EUR!)

8. Page 8 0% 20% 40% 60% 80% TV DVD Vacuum Cleaner Shaver Coffeemaker Microwave Washer Dishwasher Dryer Freezer / Fridge FL CFL-I CFL-nI HID EoL-Fee ( % of Cost Price) Situation Netherlands after 3 yrs Best case estimation Specialty of lighting: High Costs Involved

9. Page 9 The Situation in EU: History of the directive WEEE Directive in place since February 2003 WEEE = Waste Electric and Electronical Equipment The directive just gave a framework – each member state was supposed to transpose it into national law  Roll out process took way longer than foreseen in the time planning of EU (e.g. target was 02/2005 – Italy started in 11/2007)  Legal environment is scattered due to country specific transposition of the law, even though there is a directive as basis you can not speak of a European model!  The non uniformity causes high compliance costs and market disturbance

10. Page 10 The Situation in EU: Reaction of the lighting industry The impact for the European lamp industry had been estimated at 180 mio EUR ELC started (too late) Europe wide project activities A core team consisting out of experts from all ELC members had been set-up During the past four years more than 27 collective lamps schemes have been set-up by the member companies and the core team

11. Page 11 The Situation in EU: ELC organizational model The Working Principles of a „CRSO“

12. Page 12 A level playing field for (collective) schemes that will Fulfill the full legal responsibility in a financially sustainable way Reach current and future targets Develops Eco-efficient solutions as to successfully integrate financial concerns of its participants and the environmental goals Provide a sustainable infrastructure for collection and recycling Ensure a level playing field Guarantee confidentiality of market data Inform all stakeholders adequately ELC preferred WEEE solutions

13. Page 13 CRSO  CRSO = Collection and Recycling Support Organization  Organizations (legal entities or associations) set-up and owned by lamp industry  Open to all producers – not limited to the shareholders  Equal conditions for all customers (called “participants” or “members”)  Non for profit and tax exempted  What is done by a lamp collective scheme?  Customize logistics concept for country specific aspects  To ensure quality and cost it has been proven successful to invest into lighting specific collection containers  Ensure an utmost efficient cooperation of logistics and recycling providers.  Transportation and recycling are outsourced to third parties: For Europe Recycling itself has proven not be a key success factor – techniques are simple and either widely available or easily to being acquired

14. Page 14 CRSO: main operational flows CRSO End User Municipalities Prof. Collection Site Retail Transporter Recycler Government Producer Product Flow Financial Flow Stakeholder

15. Page 15 Clear Responsibilities of each Stakeholder required Producers: Support the setup of CRSOs, transfer waste fee Consumers: Return of end-of-life products, payment of compliance costs/fee Distribution: Take back end-of-life products Municipalities: Provide municipal collection sites Recyclers: Comply with recycling requirements CRSO: Organize efficient and sustainable processes, inform stakeholders Governments: Define stakeholder responsibilities, ensure level playing field NGO’s:Increase awareness

16. Page 16 CRSO  Waste Fee set by the collective scheme:  Flat = all lamp types have the same fee  For all participants same level  Based on units (reporting of weight offers too much leeway for un- compliant behavior)  Utmost highest transparency  Visible invoicing to the customer

17. Page 17 CRSO  Pay as you go  Collective schemes have been set up as “pay as you go” models  Current periods costs from collection & recycling are allocation to the units sold in the current period  Financing done based on market share  Calculations need to be based on a target collection rate of 90% to 100%, if not:  Limited motivation to increase collection rates  Schemes start to compete only for lower fees instead of competing for an increase of collection rates  Fee would be fluctuating and market acceptance would be low  Schemes need to build up a reserve for the full obligation they take over

18. Page 18 Operational Cost Overview: Different Fee Scenarios

19. Page 19 Issues with the European implementation National issues – Slovakia: Multiple competing schemes for lamps No clearing mechanism between schemes / no legal collection obligation Target of ELC system was to build up logistics infrastructure and raise collection rates (Long-term target > 80%) Driven by the founding importers the competing schemes lowered their fees drastically Sustainable fee would be 0,30 EUR - competing schemes charging 0,03 EUR Despite OSRAM and Philips all other members have left for cost reasons Competing schemes do not collect and therefore have low/zero costs

20. Page 20 Issues with the European implementation National issues – Bulgaria: Producers (= importers to Bulgaria) can choose between a state tax on import and the fulfillment of their WEEE obligation A sustainable fee in Bulgaria would be three times as high as the state tax State tax not used for proper collection and recycling Producers not able to organize a sustainable scheme

21. Page 21 Issues with the European implementation National issues – Austria: Producers can not take their responsibility Only legal entities with local invoicing in Austria accepted as producer Big end users buying across the border can escape as their obligation is not regulated properly

22. Page 22 Issues with the European implementation National issues – UK: Clearing mechanism drives up the price and leave parts of the country without collection Different rules for household and professional 40 uncontrolled, competing schemes for lamps No financial certainty that future lamps can be financed

23. Page 23 General learning Financing Market share vs. share in products returning Visible Fee Keep it simple Do not differentiate legal responsibility for the same product over sub categorize causes complexity (tubular, compact, sodium etc) Definition of weight needs to be controllable and auditable Keep it level (no market disturbance Definition of Producer same in in one economic union Accreditation of schemes : to ensure eco efficiency and fair competition. Allocation between schemes: to ensure competition is not on limiting collection Guarantees: to keep financing for future obligations Key Learnings from EU

24. Page 24 General Learning from EU Non uniform implementation is the major cause of increase of integral compliance costs not the actual technical cost of logistics and recycling: Non uniform legislation increases cost for compliance Protectionist legislation Legislation that triggers provisions without bringing security to society. Defining the responsibility of the producer is not sufficient. The roles of all Stakeholders need to be defined e.g. Producers, other sellers, government, End user, government, Waste operators/recyclers Specific legislation per WEEE product category is needed. Lamps are very sensitive with regard to financing and awareness because expense is high and they can be easily alternatively discarded

25. Page 25 In Europe two schemes are applied: Currently applied is Market-share (with a visible fee). Payment is on product put on the market. This proofed to be a simple and controllable auditable way to finance In legislation but not duly implemented is payment on the basis of waste returning (IPR). This is advocated to drive product design This is causing major provisions for stock listed companies 2005… 20102011201220132009 IPR Market share Sample Life cycle product Financing: Market share vs share in products returning

26. Page 26 IPR a financial driver to design for better recycling? NO The financial driver does not exist Commonly required Payback times in the electronics industry for investments are short: max 2-3 years Products sold now will return on average in 6-10 years Highly unlikely that design projects will start due to financial incentive aimed at ease of recycling Statement: No producer has made significant costly changes for recycling. Examples are anecdotic! Financing: Individual Prod. Resp. (IPR)?

27. Page 27 IPR a financial driver to design for better recycling? NO Changes in design are immediately made so as to Comply with legal requirements on material or energy use Appeal to customers (marketing) Build a sustainable image Not all Producers under WEEE have an impact on design Only manufacturers have an impact on the design of the product, not importers, in many cases also not private brand owners Eco-design should be regulated in Energy Using Products (EUP) or in Restriction on Hazardous Substances (RoHS) legislation Financing: Individual Prod. Resp.?

28. Page 28 IPR a financial driver for increased separate collection rates? NO IPR may rather lead to decreased separate collection rates due to the incentive for Producers to minimize collection (and as such costs) IPR will increase the risk for externalization of costs, e.g. orphan waste (which can never be fully avoided) IPR requires brand specific separate collection, leading to increased costs for C&R and inconveniences due to the need for a multitude to collection and sorting capabilities IPR is only possible if the EEE can be tracked and traced on a Producer individual level from the cradle to the grave (marking not sufficient, esp. not for small items on which no details can be put) IPR will decrease the ability of various stakeholders (a.o. Govt.) to monitor and control the objectives of the WEEE Directive IPR does not ensure increased collection rates Financing: Individual Prod. Resp.?

29. Page 29 Financing: Visible Fee A visible fee Builds ongoing consumer awareness. Awareness is the key for efficient take back. A visible fee is the strongest communication tool available. Specifically needed for products that can be easily alternatively disposed and have a significant cost for collection and recycling related to product price Increases transparency: Effective tool against free riders Allows payback after proven export

30. Page 30 Keep it simple Differentiated legal responsibility for the same product between use in household and professional has caused a un-level playing field and un-clarity for users over sub categorize causes complexity (tubular, compact, sodium etc) for reporting purposes only causes un-needed costs without benefits Definition of weight needs to be controllable and auditable: For lamps due to large variance only pieces or pieces times average weight allow for a auditable financing scheme

31. Page 31 Keep it level (no market disturbance) Definition of Producer same in in one economic union Needs to cover: producer, reseller, re-branding, end-users Accreditation of schemes : to ensure eco efficiency and fair competition. Strict accreditation needed to limit start-up of unsustainable set ups Schemes can not be for profit. All funds need to allocated for collection and recycling Guarantees: to keep financing for future obligations Allocation between schemes: to ensure competition is not on limiting collection.

32. Page 32 Thank you for your attention! Christoph v. Rautenfeld, OSRAM Phone:+55 11 3684 7471 Mobile:+55 11 8196 5043 eMail:c.rautenfeld@osram.com