Left Coast Voyage

The state of California established an ambitious electronic scrap collection agenda when it passed Senate Bill 20 (SB20) as a means of preventing obsolete electronics from entering landfills.

Subsequently, pre-licensed networks of collectors and recyclers have been established to handle the collected flow of covered electronic devices generated by the state’s 40 million residents.

California’s system of collection and processing rebates provides a revenue stream for collectors and recyclers beyond what can be gained from refurbishing, pulling components and producing secondary commodities.

Among the companies that have worked within the SB20 system to build their business is Electronics Recyclers International (ERI) of Fresno, Calif.

John Shegerian founded ERI in 2002 as Computer Recyclers of America (CRA), but changed its name to the more global brand in 2004.

Shegerian’s previous career was as the founder of www.financialaid.com, a Web site offering guidance to college students and their parents trying to navigate the scholarship and tuition maze.

With ERI, he has helped lead a team that has increased the company’s processing capacity at two sites in Fresno to serve the SB20 electronic scrap stream.

More recently, the company has been opening facilities in other states to help serve its national client base. Currently ERI has locations in Colorado, Indiana, Massachusetts and Washington, as well as a branch office in Minnesota.

On its Web site, the company estimates that it now handles some 10 million pounds of electronic scrap each month.

Recently, Recycling Today’s Brian Taylor asked Shegerian to comment on several aspects of the electronics recycling sector and ERI’s role within the market.

Recycling Today: How has SB20 affected the way obsolete electronics are handled in California?

John Shegerian: Overall, I think it would be hard for anyone to argue that California hasn’t been the most successful state in collecting electronics in a way that is transparent and measureable. And what’s measurable is manageable.

For instance, the first year this program was implemented in 2005, 65 million pounds of SB20 material was recycled. More than 120 million pounds was recycled in 2006, and in 2007 more than 200 million pounds was recycled.

That is just the SB20-mandated material—CRTs, LCDs, etc. What has happened in California is that there is also material that is non-SB20 that comes along with it. The law has created an awareness and a movement in California.

We see about a 2-to-1 ratio in our facilities; say 1 million pounds of SB20 material to one-half-million pounds of non-SB20 material. So overall in California, it could be 200 million pounds of SB20 to 100 million pounds of non-SB20 that came in last year.

If one looks at collection figures from New York or New Jersey, the amounts [per capita] are going to be much smaller.

California has led the way on this issue. It has been a beacon-of-leadership type of state when it comes to recycling electronics.

JS: There has again been a lot of material coming in this year. This comes down to education. We’ve had years now to educate the consumer. Even so, I do speaking engagements, and people come up to me afterward and still don’t know they’re not supposed to throw out their laptops.

But the more we educate that this stuff has hazardous material and that it can be recycled and reused efficiently, the more we’re going to motivate behavioral change and more recycling.

JS: There are some things. California was enjoying SB20 so much that it began banning everything electronic from the landfills. But SB20 didn’t cover all that stuff, so you have items that are not allowed to go to landfills, but not all of that is going to appropriate recyclers. Some of it is, I’m sure, being shipped abroad for recycling or dismantling or for harvesting of precious metals.

Since the CIWMB (California Integrated Waste Management Board) is the steward of the program, there is a lot of paperwork that goes into it. Our monthly claims forms to prove that we are doing what we say we are doing are in excess of 8,000 to 10,000 pages monthly.

It becomes a push-pull where the process overwhelms the substance. I give the state credit for creating this ground-breaking statute, but it’s always tough when you’re the leader in something. Trying to manage that money and weed out the bad recyclers is important, but you’re overwhelming the good recyclers with mountains of paper.

JS: With someone like Homeland Security, of course, it’s security—the absolute destruction of information. With financial institutions, it can be both—good recycling practices, but their clients’ data on hard drives needs to be protected.

Some customers are concerned about their downstream vendors. That’s why I go overseas and audit the downstream vendors myself—to ensure there is no child labor or polluting. It’s a mixture of transparency, security and downstream vendor responsibility. What’s going to happen is you can’t just talk a good talk, you’re going to have to walk a good walk.

Customers who bring us non-SB20 stuff, they may seek ROI. But that market has diminished for now.

JS: It was insatiable the last couple of years. But, just now, hanging up with my commodity guys, and it’s gone. Some of our buyers in Asia are saying it’s gone for the foreseeable future. And what’s happened is all about the China slowdown.

We may have to stockpile plastic for awhile. A company our size, going from 10,000 pounds per month to 11 million pounds per month, bigger is better when you’re trying to get economies of scale. But now I have the greatest risk, because I have the greatest volume of the stuff.

For the most part, because of the size and quality of my [metals] product, I’m dealing with the smelters. The markets will open up again, whether it’s a month from now or a year from now.

JS: I travel the world looking for new technologies. Some might untether us from the China cycle and create domestic markets for our commodities. That’s a goal for us—to invest in technology and in people, human resources and hiring the best people.

Basically, I’ve seen a lot of new technologies. That’s part of the future for us: getting big enough to invest in new technologies that help create cradle-to-cradle products out of our old commodities.

We’re going to be unveiling in the next couple of weeks the largest electronics scrap shredding system in North America. And we intend to replicate that in other parts of North America.

The shredding system is an aggregation of new technologies we picked up from around the world. It’s large in horsepower, throughput and what it can handle.

I met with people around the world, but none of it made sense for what we needed to do except for a large SSI (Shredding Systems Inc.) shredder, which is what we purchased…the shredder goes into full production [in the fourth quarter].

JS: I think the OEMs are doing everything they can to make products more recyclable and less hazardous. I think they’re doing an amazing job, not just to help our efforts, but because it’s good for business.

I don’t foresee a laptop or cell phone yet that we can plant in the ground, and a tree will grow. But short of that, I really do think [manufacturers] are spending a lot of time and money in the R&D process, making products greener and easier to recycle, and I think they see it helps their marketing efforts.

JS: Yes. We’re already in Indianapolis and in Denver, Seattle and in Gardener, Mass.

Part of this is we built a great brand here in California that we are very proud of. But the real opportunity and the future of recycling is now that corporate America has caught the recycling bug and that it’s here to stay, they now want a one-shop solution. So our national clients, whether waste companies or retailers or any of the 2,000 customers we represent, they want a one-shop solution. They don’t want 10 vendors any more.

Our opportunity is to replicate our brand geographically across North America now. We have a minimum of four more locations coming next year. We’re planning to be in New York/New Jersey, in Florida or Georgia and in Texas.

JS: The challenges include a declining economy. With credit tightening, how do you grow your business?

Another one is logistics, including the logistics challenge of not harming the carbon footprint. The more locations we can put up across America and the closer we can get to the large cities, the better we can service this country.

JS: That size does matter in this industry, for establishing practices, procedures and economies of scale and in selling commodities. I didn’t know anything about commodities when I stepped into restructuring this business in 2004, but I’ve learned and am still learning.

Brand matters. The big players are transferring the liability and they want to sleep at night.

Transparency matters. You have to run a transparent company in this business. The more transparent you are, the more clients you can get and hold onto.

Service matters. You can never forget that we’re in a service industry. You have to service your clients, and they’re all different with idiosyncratic needs.

And, finally, technology matters. There are some technologies that in six months or one year we will help unveil that have never existed in this country before. This will create domestic solutions so some of these materials never leave the country. That also includes technology online. We’re going to do something online that will create opportunities that have never existed.

Recycling Today readers who wish to contact John Shegerian regarding the above Q&A can e-mail him directly at jshegerian@electronicrecyclers.com or phone him at (800) RECYCLING.