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|  | JANUARY 18, 2005
By Andy Reinhardt Turning Tech Green in Europe This year and next, two new EU environmental rules will cause manufacturers to change their ways -- and it could be quite costly The global electronics industry is facing turmoil from new ecological rules in Europe. Two directives from the European Union that strictly limit the use of toxic chemicals in electronics products and require high-tech manufacturers to pay for collecting and recycling used goods are set to go into effect over the next 18 months. Europe's muscular new environmental laws could have an impact on the tech sector as great as the notorious Y2K bug, which required millions of lines of software code to be rewritten to avoid computer meltdowns at the turn of the century. Some estimates place the cost of complying with the new EU rules as high as $20 billion over a decade. The European legislation, nearly a decade in gestation, is aimed at stemming a growing tide of electronic waste pouring into landfills across the Continent. Though the rules apply only in Europe, many manufacturers worldwide plan to adhere to them to avoid the cost and complexity of managing multiple versions of their products. "Everybody is following Europe's lead on this," says Greg Monty, the director of corporate research and development for Northbrook (Ill.)-based Underwriters Laboratories, which has established a program to help clients test their products for compliance with Europe's laws. SCRAMBLING TO COMPLY. The motivation behind the regulations is simple. Though electronics products now account for only about 4% of the 2 billion tons of waste discarded every year by Europeans, the amount is growing two to three times faster than any other category, according to EU figures. Europe is especially concerned about landfills because its population density is nearly 70% greater than that of the U.S., so less space is available for garbage. Equally important, electronics often contain a variety of hazardous metals such as mercury and lead, as well as noxious chemicals. An average 15-inch PC monitor contains five to eight pounds of lead, for instance, and many old laptop batteries include cadmium, one of the most toxic chemicals known. Thrown into landfills, these substances leak and can eventually pollute groundwater. U.S. manufacturers are scrambling to comply with Europe's laws -- no surprise given that the Old World accounts for a third of sales for many American tech companies. Indeed, by Aug. 13 of this year, all makers of electronics products sold in Europe -- regardless of where the companies are headquartered -- have to comply with the Waste Electrical & Electronic Equipment directive (WEEE), which requires the manufacturers to pay for recovery of used products. That means taking them back from customers, paying to take them apart, and responsibly disposing of the parts. MILLIONS OF GIZMOS. The cost of such "end-of-life" processing has to be built into the sale price, not broken out as a separate fee, which gives manufacturers an economic incentive to devise the most efficient methods of coping with discarded equipment. Plus, it encourages them to redesign their products to be more easily taken apart and recycled. Redesign will become even more important under Europe's second new law, the Reduction of Hazardous Waste (RoHS). Taking effect July 1, 2006, the rule bans the use of six chemicals -- including lead, cadmium, mercury, and chromium-6 -- in almost all electronics products. Exceptions are carved out for military and medical systems as well as for some big telecommunications products, but the ban will affect hundreds of millions of gizmos, including PCs, consumer electronics, and home appliances. RoHS could have the more profound effect on the electronics industry because virtually every product on the market now uses lead-based solder to secure chips to printed-circuit boards. Japanese manufacturers have pioneered the use of lead-free solder, but questions remain about its reliability, which is why some high-end products won exemptions from the EU. LOGISTICAL CHALLENGE. Still, big European companies such as Nokia (NOK ) and Philips Electronics (PHG ), as well as U.S. and Asian rivals, have a job ahead them to convert their manufacturing to lead-free processes. Nokia says it has already eliminated all of the banned chemicals except lead from its products, which it aims to phase out by summer. "There has been plenty of time to prepare for this," says Kirsi Sormunen, head of Nokia's environmental office. She believes the transition to lead-free parts and processes won't result in a net price increase for consumers. Amsterdam-based Philips offers a similarly reassuring message. The giant maker of consumer electronics, light bulbs, and medical systems aims to be fully RoHS-compliant by this summer. The challenge isn't technical, says Henk de Bruin, head of the company's corporate sustainability office. Rather, it's a question of logistics. Fortunately for Philips, its home base of the Netherlands has been at the forefront of electronics waste-recovery rules for more than a decade. "Our experience could even give us a competitive edge," de Bruin says.
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