Electrolux 2005 Annual Report Download - page 110
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Please find page 110 of the 2005 Electrolux annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.106 Electrolux Annual Report 2005
Producer responsibility (WEEE Directive)
In 2002, the European Union adopted the WEEE (Waste Electrical
and Electronic Equipment) Directive, regarding producer responsibil-
ity for treatment, recycling and disposal of electrical and electronic
products. The Directive applies to a broad range of electrical and
electronic products, e.g., IT and telecommunication equipment,
consumer electronics and household appliances.
The Directive stipulates that as of August 2005 producers are
responsible for the management and financing of treatment, recycling
and disposal of waste electrical and electronic products that are
deposited at collection facilities. The collection of electrical and
electronic equipment from households is the responsibility of local
authorities.
Regulations regarding WEEE were already in force in Sweden,
Norway, Belgium, the Netherlands and Switzerland before the Direc-
tive was introduced. By 2004, WEEE-related national legislation was
published in Greece and Cyprus. By 2005, and with the exception of
Malta and the UK, the remaining EU countries followed, though some
countries only partially adopted the Directive. Both Malta and the UK
are expected to transpose the Directive into national legislation in
2006.
Historical and future waste
Costs for producer responsibility refer to products sold before August
2005, i.e., historical waste, as well as products sold after August
2005, i.e., future waste.
For historical waste, manufacturers and importers are collectively
responsible for treatment, recycling, and disposal in proportion to
their present market share. This is known as collective producer
responsibility.
For future waste, the Directive stipulates that manufacturers and
importers must each finance treatment, recycling and disposal of
their own products, which is known as individual producer responsi-
bility. Financial guarantees must be provided to ensure that sufficient
funds are available even if a producer or importer should withdraw
from the market. In some countries, membership in a collective
organization for financing of recycling is regarded as a sufficient
guarantee. For household appliances these costs are normally
payable 12 to 15 years after actual sale, according to studies by the
European Commission.
Efficient recycling generates competitive advantages
Individual producer responsibility means that efforts to lower the end-
of-life disposal costs through product development and efficient
management systems can generate competitive advantages. Electrolux
invests continuously in product design with the intention of reducing
the total costs over the product’s life-cycle. In order to meet the need
for an efficient recycling system, Electrolux, Braun, Hewlett Packard
and Sony have established a jointly owned company, European
Recycling Platform (ERP). The company’s task is to establish and
manage a pan-European recycling scheme for electrical products
covered by the WEEE Directive.
ERP has signed a contract with two general contractors, CCR
Logistics Systems AG of Germany and Geodis Group of France. On
behalf of the members of ERP, these companies are responsible for
take-back, logistics, recycling and administration in Austria, France,
Germany, Ireland, Italy, Poland, Portugal, Spain and the UK.
Trade associations are developing national recycling systems in
several EU countries where such systems are not yet in place.
Cost of compliance
Approximately 16 million Electrolux products sold every year are
covered by the WEEE Directive. These products include large and
small household appliances as well as floor-care equipment.
Electrolux incurs costs for managing and recycling historical
waste, and makes provisions for future waste. The extent of the cost
depends on a number of factors which at present cannot be accu-
rately quantified. These factors include administration, recycling and
treatment costs, the market price of scrap metal, disposal costs for
non-recyclable material and components of equipment as well as
collection costs per unit and collection rates, which may vary
between countries.
The following assumptions have been made in order to provide
preliminary estimates of annual costs for Electrolux, despite uncer-
tainty regarding the basic factors:
• The producer’s responsibility for management of waste starts at
collection facilities.
• Collection rates for each EU Member State. However, these rates
are highly uncertain.
• Projected future fees for recycling, including transportation from
collection facilities. These are based on internal estimates derived
from information supplied by waste management companies.
On the basis of these assumptions, the estimated annual cost of
historical waste for Electrolux when the WEEE Directive is fully
implemented will be approximately SEK 600m. The Directive does
not require producers to provide financial guarantees for historical
waste. No provisions related to recycling of historical waste are made
in the Group’s balance sheet.
Electrolux makes provisions for the anticipated cost of future
waste on the basis of estimates of future recycling costs, discounted
over anticipated product life-cycles.
Using the same assumptions as for historical waste, and assum-
ing an average lifetime that varies between 10 and 14 years for
different products, as well as a discount rate corresponding to the
prevailing market interest rate, the estimated annual cost for future
waste is approximately SEK 600m, in addition to the cost of historical
waste.
The above cost estimates remain highly uncertain and may vary
considerably. Participation in the European Recycling Platform
provides the Group with access to an efficient recycling system that
is expected to reduce these costs over time. Product development
that enables more efficient recycling will also contribute to cost
reductions.
Compensation for WEEE-related costs
Electrolux intends to achieve full compensation for costs incurred
under the WEEE Directive. Costs related to recycling of both histori-
cal and future waste will be added to the price of products.
The Directive allows producers to show the recycling cost for
historical waste separately as a visible fee. It is expected that this will
improve the potential for off-setting the cost.
Experience of the 2001 introduction of a similar requirement for
producer responsibility in Sweden shows that it had no effect on
overall demand or the profitability of Electrolux products. Consumers
did not forego purchases in response to the price increases due to
the introduction of producer responsibility for recycling. However, it is
still too early to determine whether consumer behavior and purchas-
ing patterns across the EU Member States after implementation of
the Directive will resemble those in Sweden.
Environmental Activities