There are about 500 million obsolete computers in the U.S. alone. More than 130 million cell
phones are tossed away annually. And there are about 24 million TVs sitting unused in homes and
offices. This e-waste takes up space and adversely affects the environment. And with the green
way of life gaining popularity, the public is demanding that something be done.
In response, 12 states already require original equipment manufacturers to take back damaged,
unwanted or outmoded items -- and 12 more states are considering it. This means that electronics
and electric products companies are going to have to go green one way or another.
Our research looks at take-back legislation, state-level requirements for electronics producers to be
responsible for the remanufacturing and disposal of old or obsolete products. The result: thousands
of pounds of waste (toxic and otherwise) diverted from landfills and used in remanufacturing.
Considerations for Policy-makers
Before adopting take-back legislation, policy-makers first need to clearly identify their goals. In our
research, we studied take-back legislation’s effectiveness in achieving the solitary goal of
increasing remanufacturing levels. However, for many regulators, take-back legislation provides a
means for achieving several goals, such as shifting the cost of recycling off of tax-payers,
encouraging manufacturers to design for longer product life, and encouraging use of more
sustainable and easily recycled materials.
Based on our research, we developed the following considerations for policy-makers:
Across-the-board collection levels can be counter-productive. The same level of legislation
(for example, setting the same collection target across a wide range of products) may induce
remanufacturing when imposed on a product that is costly to manufacture. But when take-backs
are required for a product that is inexpensive to manufacture new, the regulations may not spur
any remanufacturing at all. Policy-makers must be aware of cost structures before imposing
regulations that might not meet every stated goal.
Take-back legislation isn’t effective in third-party dominant markets. Policy makers should
especially be careful about imposing legislation on industries where remanufacturing is done
predominantly by third-parties. Our research shows that remanufacturing levels may go down in
these environments after legislation is imposed. Because legislation may induce the brand-name
manufacturer to follow a strategy where they are taking back the products and disposing of them
just to restrict the access of remanufacturers to the products while the brand-name manufacturer
would not be following this strategy in the absence of legislation. Some remanufacturers already
worry that the amount of cores available to them will decrease as a result of take-back laws due to
cores going directly to collection centers where it is easier for the OEMs to pick them up
Simultaneous development of collection and re-use levels is optimal. Our research shows
that policy-makers need to simultaneously decide on the right levels of collection and reuse
targets. If the collection target is very high and the reuse target is set very low, it may not spur
any more remanufacturing than the collection target does by itself. Given the administrative
burden of enforcing legislation, this redundant legislation simply increases costs without resulting
any environmental benefits. Some legislative bodies, like the EU may include such targets in its
Waste Electrical and Electronic Equipment Directive as early as December 2008.
Implications for Manufacturers
Looking at the number of countries that have some type of take-back legislation in effect, it’s safe
to assume that manufacturers will continue to face different forms of regulation. Given the
inevitability of take-back legislation and the opportunity to meet consumer demands for “greener”
electronics, manufacturers should start finding ways to make money using the materials they
But how they do that will depend on their underlying product lines and the business environment in
which they operate. Our research indicates that the optimal response may be to change the
product mix (i.e. the mix of manufactured and remanufactured products).
Since take-back legislation will cause companies to incur extra costs from collection and disposal of
materials, manufacturers able to create economic value from these materials can actually benefit
Therefore, company management should make the following considerations:
Profitability stems from production capabilities. By appropriately allocating their production
capacities to new and remanufactured products (especially if they already have in-house
remanufacturing capabilities), OEMs can still achieve high levels of profitability. Under legislation, a
company with high manufacturing but low refabrication cost may be more profitable than one with
low manufacturing but high remanufacturing cost. That’s because the profitability of
remanufacturing, among other things, depends on the unit cost to remanufacture a product.
The competition may be a potential partner. Under the legislation, OEMs are forced to incur
the collection cost of taking back the products. One way to offset that cost is to increase
remanufacturing. And for OEMs with no in-house capability for that, third-party remanufacturers
become valued partners because they represent a market for selling collected cores. Obviously the
remade product and the OEM’s new product will compete in the market, but by setting the price of
the cores optimally, the OEM has the ability to maximize profit.
Pre-emptive collection manages the marketplace. When remanufacturing is very profitable,
OEMs can “preemptively collect” all cores to restrict the remanufacturer’s business. The original
manufacturers are in a good position to explore the creation of take-back facilities that allow for
collection of all the cores in a relatively cost-efficient manner. This may allow OEMs to collect and
resell the cores to refabricators for less than their cost of collection. Conversely, when refabrication
isn’t highly profitable, OEMs can still collect some cores for sale to remanufacturers at a price lower
than the cost of collection. This is beneficial since the OEM still makes a profit on the sale while
saving on disposal cost.
Design decisions can impact profits. If the original product is not designed properly and/or is
made of nondurable materials, it may be difficult and costly to remanufacture. However, if
manufacturing is redesigned with remanufacturing in mind, then the remanufacturing cost can be
brought down, making remanufacturing profitable. This showcases another area in which take-back
legislation is a positive force for change. Since the research and development of changes in design
costs money, few manufacturers are willing to rework products if there’s no market or regulatory
In the final analysis, when developed thoughtfully and executed intelligently, take-back legislation
can be good for the environment and good for business.
Gőkçe Esenduran is a PhD candidate at the UNC Kenan-Flagler Business School. Eda KemahlıoğluZiya is an assistant professor of operations, technology and innovation management, (919) 962-
8768, firstname.lastname@example.org. Jayashankar M. Swaminathan is chairman of operations,
technology and innovation management and Kay and Van Weatherspoon Distinguished Professor,
(919) 843-8341, email@example.com