Electrolux 2005 Annual Report Download - page 48
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Please find page 48 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.44 Electrolux Annual Report 2005
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, including:
• Collection cost per unit for each country
• Collection rates for each country
• Recycling and treatment costs, including market
price of scrap metal
• Disposal costs for non-recyclable materials and
components of equipment
• Administration costs
At present, these factors cannot be accurately quantified.
Electrolux expects that the future cost for recycling, including
transportation from collection centers, will decline over time.
The following assumptions have been made in order to pro-
vide preliminary estimates of annual costs for Electrolux, despite
uncertainty regarding the following- basic factors:
• The producers’ responsibility for management of waste starts
at collection facilities.
• Collection rates for each EU Member State. However, these
rates are hard to predict.
• Projected fees for recycling, including transportation from col-
lection 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, dis-
counted over anticipated product life-cycles.
Using the same assumptions as for historical waste, and
assuming 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 Plat-
form provides the Group with access to an efficient recycling sys-
tem that is expected to reduce these costs over time. Product
development that enables more efficient recycling will also con-
tribute 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 his-
torical 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. Con-
sumers 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 con-
sumer behavior and purchasing patterns across the EU Member
States after implementation of the Directive will resemble those in
Sweden.
Implementation of the ROHS Directive
The European Union Directive on the Restriction of the use of
certain Hazardous Substances in electrical and electronic equip-
ment, known as the RoHS Directive, has been implemented in
national legislation of the EU Member States. As of July 1, 2006,
the Directive will ban placement in the EU market of electrical or
electronic equipment containing lead, mercury, cadmium,
hexavalent chromium and two groups of brominated flame retar-
dants (PBB and PBDE), with a limited number of exceptions.
Electrolux continues the comprehensive program of identifying
cost-effective alternative components and manufacturing meth-
ods to comply with the Directive. Almost all Electrolux electrical
products are being modified to some extent. RoHS substances
may be present in printed circuit boards, solders, plastics, con-
nectors and cables. Together with its suppliers, the Group is in
the process of phasing out RoHS substances from all these com-
ponents and materials.
Environmental activities
Electrolux operates 90 manufacturing facilities in 24 countries.
Manufacturing operations mainly comprise assembly of compo-
nents made by suppliers. Other processes include metalworking,
molding of plastics, painting, enameling and to some extent cast-
ing of parts.
Chemicals, such as lubricants and cleaning fluids, are used as
process aids and chemicals used in products include insulation
materials, paint and enamel. The production processes generate
an environmental impact in the form of water and airborne emis-
sions, solid waste and noise.
Studies of the total environmental effect of the Group’s prod-
ucts during their entire lifetime, i.e., through production and use
to disposal, indicate that the greatest environmental impact is
generated when the products are used. The stated Electrolux
strategy is to develop and actively promote increased sales of
products with lower environmental impact.
Mandatory permits and notification in Sweden and elsewhere
Electrolux operates 13 plants in Sweden. Permits are required by
Swedish authorities for eight of these plants, which account for
approximately 12% of the total value of the Group’s production.
Seven plants are required to submit notification. The permits
cover, e.g., thresholds or maximum permissible values for air and
waterborne emissions and noise. No significant non-compliance
with Swedish environmental legislation was reported in 2005.
Manufacturing units in other countries adjust their operations,
apply for necessary permits and report to the authorities in
accordance with local legislation. The Group follows a precau-
tionary policy with reference to both acquisitions of new plants
Report by the Board of Directors for 2005