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June 04, 2002
Electronics and Appliances Sector Rated Highly for Environmental Performance
    by William Baue

German research firm also finds, however, that there is much room for improvement in the sector's social performance.

Last week, the Munich, Germany-based social and environmental research firm Oekom Research AG released another in its series of "Corporate Responsibility Rating" sector reports. This most recent report evaluates the world's top 16 manufacturers of office electronic equipment and domestic appliances. The industry received significantly higher ratings for environmental performance than social performance. This may be because new electronics and appliance recycling laws in Japan and the European Union (EU) are forcing companies to develop stricter environmental practices. Specifically, the laws encourage manufacturers to integrate recycling into product design, as the regulations ensure that products will be returned to the company after being used by consumers.

Oekom's Corporate Responsibility Rating assesses the environmental and social performance of companies by examining 200 criteria. Companies are graded on a scale from A+ to D-, with A+ being the best possible score. The electronics and appliances sector scored relatively well in overall environmental performance, earning a B-. The report particularly applauded the sector for its progressive innovations that facilitate the recycling process.

"The equipment can be dismantled [and then] easily and quickly upgraded," said Frank Werner, the Oekom researcher who performed the analysis. "This prolongs its useful life and can stem the flood of obsolete equipment a little."

Japan's new household electric appliance recycling law, implemented in April 2001, and the EU Parliament's current draft of a similar law hold manufacturers responsible for recycling their electric appliances. However, the two laws differ significantly in where they place the economic onus for recycling.

The Japanese electric appliance recycling law, called the "Japan model," calls on consumers to foot the recycling bill when they return the appliances to retailers. However, critics point out that consumers wary of shouldering the economic burden of recycling may divert used appliances into illegal dumps. Also, the development of a large market for used appliances could hurt manufacturers that have established recycling centers. That is because the centers need to receive a large number of appliances to keep costs down. The Tokyo metropolitan government suggested that the Japanese law, which covers television sets, refrigerators, washing machines, and air conditioners, shift from a pay-after to a pay-before scheme to circumvent these diversions.

The EU law, which falls under the rubric of "waste electrical and electronic equipment" (WEEE), places the economic responsibility on manufacturers for collecting and recycling used electric appliances. The recycling of "orphan products," or products manufactured by companies that then disappear, presented a difficulty for the law's authors. The legislators solved this problem by requiring existing companies to share the burden of recycling orphans. To prevent companies from avoiding recycling costs by closing shop before their products were returned, the law also established an upfront fee to cover future recycling. The law's authors also outlawed the practice of installing "clever chips" that seek to buoy the new market by preventing products, such as ink-jet cartridges, from being reused.

The trend toward legislating recycling is pushing the office electronics and appliances sector to create innovative practices for product recycling. Apparently, this challenge has inspired the industry to advance its environmental performance much more progressively than its social performance. The Oekom study revealed the sector's dismal record for employing women in management positions, especially at Japanese firms. Sharp and Toshiba, both of which scored well with an overall grade of B, have a mere 0.5 percent of their top executive positions filled by women. Oekom compares this to Xerox, the U.S.-based rival that employs 31 percent women in the upper echelon of its management. Overall, the electronics and appliance sector scored a C- on its social rating.

"Despite the poor social performance, the overall results of the study are encouraging," said Mr. Werner. "With an average score of C+, manufacturers of office equipment and domestic appliances showed themselves to be more progressive than companies in many other sectors."


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