Impactful entrepreneurship

John Shegerian says throughout his career he has sought to build companies that make the world a better place. Shegerian, who describes himself as a “serial entrepreneur,” has co-founded several organizations over the past few decades.

He co-founded Los Angeles-based Homeboy Industries in the early 1990s to create new jobs and opportunities for gang-impacted youth in the city before co-founding FinancialAid.com in the late 1990s as a lending platform for students. In the early 2000s, Shegerian entered the recycling industry when he co-founded Electronics Recyclers International, today known as ERI, in Fresno, California, with his wife, Tammy Shegerian, as well as with Kevin J. Dillon and Aaron Blum.

Shegerian admits he knew very little about recycling when launching ERI 20 years ago but says being a newcomer to the industry gave him and the other co-founders opportunities to start from a blank slate and do things differently.

“[We weren’t] tied down by any legacy concepts,” he says of the early years at ERI. “You have none of that baggage. You just do [business] the way that’s best to make the best profit and to keep the world the cleanest while you do it.”

Shegerian says the electronics recycling industry was in its infancy when ERI began. “We were codifying and professionalizing an industry that historically had gone just to scrap yards,” he says. “There’s nothing wrong with that, but [electronics recycling] wasn’t an industry, so, we were coming in and doing something that nobody’s done before.”

Since 2004, ERI has expanded to 13 locations, including nine full-scale recycling facilities, across the U.S. It also has established partnerships with LS MnM, Alcoa and Redwood Materials.

He says the Redwood Materials partnership has enabled ERI to embrace what he calls the “last mile” of electronics recycling, with ERI sending materials such as lithium-ion batteries and solar panels to Redwood Materials to be recycled and reentered into the circular economy.

ERI sends copper and precious metals to LS MnM, headquartered in South Korea, and aluminum to Alcoa, headquartered in Pittsburgh.

Shegerian says ERI also has been diligent about achieving industry certifications, including Responsible Recycling Practices (R2), National Association for Information Destruction (NAID) AAA Certification, e-Stewards and Systems and Organization Controls 2 (SOC2).

Continuously improving the sustainability of its operations has been a goal for ERI since its inception. Earlier this year, the company announced it had achieved carbon-neutral status for its operational emissions in the U.S.

Recycling Today connected with Shegerian in January to learn more about ERI’s growth throughout the past two decades and some of the company’s recent initiatives related to environmental, social and corporate governance (ESG) as well as carbon neutrality.

Recycling Today (RT): What have been some of the biggest challenges you have had to work through in your time at ERI? How did you navigate those?

John Shegerian (JS): The biggest challenge was, when we started the business, it was all about keeping electronics out of landfills. Many companies were simply shipping e-waste to Africa, India or other emerging economies like China. We wanted to do it differently. So, we commoditized these electronics into all the elements that come out of electronics—steel, plastic, aluminum, copper, gold, silver, lead [and] palladium—and those materials went back for smelting.

The bad news is this: At one point or another, probably around 2014, our aggregate revenue was exposed to that commodity revenue in order of magnitude of about 54 percent. So, about 54 percent of all our revenue was generated from commodity sales. When commodities took a huge plunge, it hurt us financially. And that’s when we got together, Tammy and I, and Kevin and Aaron and our leadership team, as well, and we huddled together and said, “Never again.”

We said, honestly, the industry has grown up enough … that people who want to use our services … have to pay up for our services. We’re no longer going to pay our bills depending on commodities; we’re going to charge our customers a fair rate. … We increased our prices to the point that we said we’re going to limit our leaning on commodities for revenue; we’re going to greatly limit that.

Some clients left us, but we were able to continue growing because we were now able to offer our great platform at a reasonable and sustainable rate. There’s no such thing as free responsible recycling … So, now our commodity exposure is a total of about 17 percent.

RT: What are some trends in electronics recycling that have changed how ERI does business in the last couple years?

JS: Cybersecurity is one for sure. Responsible hardware destruction, being NAID certified—we’re the only company that has been NAID certified in all nine of our locations. Being SOC2 certified—we’re the only recycler in the world that has been SOC2 certified. [It is] basically the highest certification when it comes to data security in the world. It’s very hard to achieve. We spent years pursuing it and investing in it to get our processes and procedures correct. But it’s made a huge difference. SOC2, along with NAID, is the future—[the] one-two punch of NAID and SOC2 is very important.

These are critical trends because data protection has become an issue not only of protecting your family but [also] protecting the organization you work with and also protecting our countries and our nation-states.

During COVID, I actually took the time to earn degrees in cybersecurity both at Harvard and MIT. They were eight-week intensive courses, and it’s about understanding cybersecurity at a deep level and learning to apply preventive, protective concepts to a wide variety of industries. And now, ERI’s CTO [chief technology officer] and my partner and co-founder Kevin Dillon have also taken the courses because we want to understand the language that chief information security officers are dealing with across the world. That’s a big trend.

Also, ESG, the circular economy and radical transparency are three trends that are here to stay. Unfortunately, our industry has historically been opaque, and other organizations have gotten away with that forever. … We believe that the more radically transparent you are, the more you will be rewarded with more business.

RT: Related to ESG, ERI announced in January that it partnered with CO2.com to achieve carbon-neutral status. Could you talk about your partnership with CO2.com and why you worked toward the goal of becoming carbon neutral?

JS: I just was amazed by what Simon Mulcahy and Marc Benioff, who bought Time magazine in 2018, did to start [CO2.com]. … Simon came on [my Impact Podcast] to start promoting [CO2.com]. He really didn’t have any clients in the United States. So, after the podcast, I said, “Let’s have another conversation.” A day or two later, we spoke [and] I said, “Simon, I went to bed that night after I interviewed you, and I thought, ‘Why not ERI?’” And he goes, “I don’t know, why not?” [Then] we started brainstorming.

He’s put a team of climate experts together from the World Economic Forum, Conservation International, the World Bank, Salesforce, Twitter, Amazon, Yelp and Time. They’re coaching us on how to further achieve our carbon-neutral goals.

It’s actually something that we’ve been working on since our inception, implementing carbon-reducing measures such as recycled furniture, zero-emission vehicles used by our sales team, energy-efficient lighting, electric forklifts on our facility floors, shifting to off-peak demand energy usage, fleet management, paper-efficient business cards and more.

In addition, we’ve been working with all of our top partners and customers to increase the volume of material captured within a closed loop.

We’re proud of our sustainability history, but we’re far from done. We know we can continue to do more at our facilities to be even better. We’re continuing to expand our goals through evaluation of renewables at our facilities, [electric] trucks and countless other projects to reduce our carbon footprint. As we continue to grow as an organization, we want to keep our climate impact from growing with us. There is no finish line in the world of sustainability—we can all always do more.

Leadership begins with actual leading, not just talking. I believe we have to do more than simply say, “Everyone wants us to be carbon neutral by 2030—let’s do it by then.” Not good enough. There’s no time like now.

Here’s what I realized. I love our industry, I love what we do, but what happens when you’re blessed to be in the environmental services industry is you take a little bit of institutionalized hubris toward the beneficial effects of what you’re doing, and you think you may assume you come from a higher ground than the guy down the street who owns a restaurant or a dry cleaner or a supermarket. And what we all need to do—in every industry—is look in the mirror and ask, ‘What more can I be doing right now?’ Just because we’re doing what we feel is a noble thing with a great mission of recycling electronics, that’s great, but there’s always more we can be doing to get to carbon neutral and make the world a better and greener place.

RT: What exactly does it look like to be a carbon-neutral company?

JS: We started the process of comprehensively measuring our efforts a couple of years back when [our sustainability team] said, “Why don’t we do a self-assessment. We think we’re really good at circular economy [behavior] because Alcoa is an investor, Redwood is an investor and LS MnM is an investor. Let’s assess ourselves.”

[Our sustainability team] contacted the Ellen MacArthur Foundation out of England … They have a scorecard called Circulytics. It takes months to go through the auditing process of what you’re doing in your procedures, who your downstream is, who your upstream is. They grade you confidentially so you’re not publicly embarrassed.

We got our first grade, and they graded us A-. We said, “OK, let’s focus on this. Let’s get better. Let’s see where our deficiencies are.” They pointed out where we could improve in terms of how we can be more energy efficient, how we can pick better downstream vendors [and] upstream vendors. [In 2022], we upgraded to an A grade.

We’ve been doing self-assessments now for two years on our behavior. We’re constantly analyzing the efficiency of our facilities. We changed all our lighting in our facilities to LED lighting; all our forklifts are electric forklifts now to maximize power usage. We shifted our operating hours to off-peak hours.

It’s a cultural shift and a mindset. Leadership starts it, but you need buy-in from everyone, and achieving carbon neutrality is the next part of the journey, not just doing self-assessments. … You’ve got to self-analyze everything you do—your logistics, your energy, your lighting, your factory usage, your water usage, everything you touch and the cars that your employees drive to go make sales calls. Everything you do should be assessed and graded, and that’s part of what CO2’s doing—their experts help us with science-based recommendations.

RT: Now that ERI has achieved carbon-neutral status, what are your next steps to maintain a minimal carbon footprint as a company?

JS: With carbon neutrality, there’s no going back. We’re going to publish our ESG impact report every year. It’s not going to be perfect, but we’re going to do what we can with what we have where we are every day, every week, every month [and] every year. … We’re going to publicly report on that every year. We’re going to work with CO2 every year because, again, it’s a journey.

We are excited about our achievements, and we’re not stopping. On the carbon side, we’re investigating what else we can do internally and how we can push our suppliers as well.

On the circularity front, we are obsessed with a circular flow of products, whether it be new partnerships or changing how we process material. We want to make sure that we aren’t just a downstream but a manufacturing upstream as well.

I’ve had over 1,500 environmental or impact specialists on the Impact Podcast over the last 15 years. … They all tell me the same thing: There’s no finish line in the journey. This is a process. This is not a zero-sum game.

It’s not that ERI’s going to be better than the other recyclers. It’s that hopefully we can inspire other environmental services [companies] to do more where they are as well because we all are sharing this one planet together. If we all do our part, it’s a clean place for all of us, our kids and our grandkids. That’s what we’re here for—to be servants to our families and to the planet.

RT: As you look back on your career with ERI, are there any important lessons you learned?

JS: You have to give luck credit. An entrepreneur who says they are successful thinks it’s all about them. But some degree, if not a large degree, of luck has to come, and it’s up to them to really take advantage of those lucky moments. They have to be willing to have the nerve to take advantage of them.

And the team and the culture that you build also plays a huge role in the success of any venture. Without my partners, without the team of executives at ERI, I would never be here today.

John Shegerian co-founded Fresno, California-based ERI, where he serves as CEO. Visit https://eridirect.com for more information.