For Profit, Not For Profit, Non-profit, Loss

I get asked fairly often whether my company is for profit or non-profit. The short answer is that the company that does the recycling (Good Point Recycling, American Retroworks Inc.) is a C-corporation. That means we pay taxes on profits. The WR3A is a "not for profit" business consortium, but not a charity.

What I personally feel about it is that the IRS code should get blown up. I volunteered for a not-profitable Fayetteville (AR) Recycling Center in the 1970s. I ran the Careleton College dorm Recycling Program in the early 80s, which was claimed every year by Minnesota PIRG but which ran completely on volunteer labor and revenues from scrap.

I went from a Peace Corps Volunteer to a federal employee (cross-culture trainer) hired by Peace Corps to train other volunteers - at which time I had a lot more money and could do a lot more favors for a lot more Cameroonians than I could on Peace Corps wages. It was a constant chore as a volunteer to convince Cameroonians I really wasn't paid any more than a Cameroonian teacher (which peasants still thought of as rich).

I joined a coop recycling company, Earthworm Inc., in the late 80s, which was a 501-c(3) certified by IRS non-profit organization... which made nearly 100% of its revenues from collection and sale of scrap paper (or waste paper) recycling. We filled out IRS form 990s which said that the office paper collections were non-profit "demonstration projects", which the org had been "demonstrating" for 20 years or so. We started consulting for MA DEP and EPA Region 1 and UMass (non-profits all?) about recycling, surveying for-profit recyclers to get their expertise. Jonathan Gold of North Shore Recycled Fiber and Ben Harvey of E.L. Harvey and Sons, among other recyclers, asked aloud how come it was better not to pay taxes and call competitors for private information and then sell it to the government for more money... I think I shrugged and said something about we were hired more because we were small and non-threatening because of our tax status.

But later I worked for the MA DEP as recycling director, and worked jointly on US EPA grants, and I saw that in fact, yes, a lot of the studies were subbed out to non-profits, and people were always asked for 501-c(3) documentation. And there was definitely a culture of distrust towards "for profits". There was an underlying assumption that contracting to a non-profit somehow was "insured from criticism". Of course, a lot of non-profits liked that.

Generally speaking, I earned more money and risked less during my non-profit and government career than now as an entrepreneur. That may not be true of everyone.

But at this point, ten years later, I don't have time for all that 501c(3) debate. Wherever I can raise more money without begging, and invest it to reduce mining, which I picked out as the best way I could think of to preserve habitat and slow extinction of species when I decided to get into environmental work in the 1970s. This whole life is my shot at picking the best way to make the longest range impact I could, to leverage my life work in any way I could to reduce mankind's footprint on the planet. The main problem with working from the inside, in retrospect, is that it is easier to consume meat or generate waste if you think of yourself as an environmentalist with "offsets" due you. What any of that has to do with tax policy is beyond me.

I will say this: my entire life's work would be quickly accomplished through the free market if Congress had changed this law 30 years ago, when I wrote to my Senator from Arkansas, Dale Bumpers, about it. Sportsmen United for Sensible Mining Reform may in the end do more for recycling, as game hunters, than I will have accomplished by recycling, if they make reform of the General Mining Act of 1872 move closer.

Simple due diligence Model for "ewaste" exports

No export for disposal. Example: 89 sea containers of hospital waste sent to Brazil (BBC) misidentified as "for recycling". There really are cases of hazmat dumping on foreign beaches. But this rule should also cover "negligent sorting" of electronics (not hiring enough people to remove the bad stuff to meet the specs of legal exports, defined below).

Establish Rules for Export for recycling. Conditional exemption of sorted commodity grade CRT glass, as well as plastics, metals, etc. means it cannot include more than de minimus quantities of TAR (Toxics Along for the Ride). Export for recycling requires commodity agreements which are legal in the country you are exporting to. Recycling should not be held to a higher standard than raw material extraction, but if we "close one eye" to the byproducts, society will turn back to mining.

Establish Rules for Export for repair and refurbishment. EPA already requires 3 years of recordkeeping that demonstrates the CRTs sent for reuse as a condition of "commodity" status. WR3A requires that de minimus (replaced parts, incidental breakage) be recycled properly downstream, and proof that a significant percentage of CRTs were recycled in the USA. The overseas facilities should be audited and BOLs inspected to make sure that material is properly screened (no one is refurbishing imploded, screen burned, monochrome monitors or 20 year old TVs or cracked LCDs). This is legal under Basel Convention Annex IX B1110, but has been an "excuse" to export CRTs to China. Our industry needs to regulate this trade or we will lose a great, affordable environmental option.

Export of "fully functional" for direct reuse should be completely exempt. There can be definitions and rules, e.g. that the be under certain age, require 3 years of record keeping that the material was in fact reused, material is under waranty (full refund, no de minimus for broken). Any laws bearing on legality of shipping (e.g. USA restrictions on export of high tech to unfriendly countries, protectionist laws in China) to any country are presumed not to be environmental laws, and EPA and ISRI should probably stay silent on those.

EPA R2 (Responsible Recycling) Practices

Over the past couple of years, on behalf of WR3A, I have been participating in the development of EPA's "R2 Standards" for electronics recycling stewardship. This is an initiative by EPA to create consensus on standards for the management of:

  • surplus electronics
  • store returns
  • used electronics sales
  • electronics scrap
  • "e-waste" or "ewaste" (the dregs)

The group, moderated by a professional mediator, John Lingelbach, had lots of ebbs and flows. I would probably emphasize the "ebbs". Like most of these groups (NEPSI - National Electronic Product Stewardship Initiative), there was a certain "last man standing" dynamic. Good people with things to contribute drop out after the 3rd or 4th meeting, and the less progress is achieved, the more extremely narrow focused participants hang onto their pet issues. Some participants manage surplus stuff which is in very good shape, like off-lease equipment from hospitals. Other participants managed municipal material, gathered directly from residents. Others are in the business of processing the "dregs" for the other two. There were original equipment manufacturers, product stewardship devotees, regulators, non-profits, etc., all gathered together to "voice" opinions and create consensus on ewaste management. There was a lot of ping-pong.

For example, the OEMs who don't like to see toner cartridges RE-filled tried to get cartridges onto the list of "focus materials" even though there is nothing hazardous about them. It was a constant struggle to keep the OEM interests in the gray market for toner refurbishing out of the R2 discussion. BAN objected to toner not being included as a banned item, even though no MSDS (material safety data sheets) show any concern with toner as a toxic.

There were also differences between companies which collect everything - municipal, schools, small businesses, processing for other collectors (like my company), especially in more rural markets, and companies which served an established niche, like hard drive shredding, typically in a very urban market. The latter tended to push standards like hard drive chain of custody which is a great marketing concept for them, but which is difficult to get payment for from a public school. Joe Clayton of Synergy coined the term that "they don't want meat with hair on it" to distinguish between companies like mine that have to satisfy all types of deliveries from companies which don't accept, and don't plan to accept, TVs or municipal tonnage... as opposed to companies which are in the business of "shredding hard drives" (period), or managing surplus and off-lease equipment from Fortune 100 companies.

Those groups got along ok, despite long interludes of pontification. In the end however, the biggest issue turned out to be with the self-declared Environmental Stewards, groups like BAN and Computer Takeback Campaign. They really brought a lot to the table, and I think had a positive effect compared to what an all-industry group might have defined. But in the end, I think they were finding things to object to simply because they benefit from the perception that EPA is not doing its job. If EPA fixes the problems they complain about, what do we need their "certification" for? BAN's objections to R2 are laid out on their website. Here is BAN's objection to the export for repair:
  • In addition, untested and non-working “equipment” and “parts” supposedly destined for “reuse” will be allowed to go to an endless number of downstream vendors before someone, somewhere is held accountable (by the R2 certified recycler) for ensuring that only fully functional units are exported.
"Fully Functional" is a long way from the language of the Basel Convention. Further, the "endless number of downstream vendors" is completely accounted for in the WR3A civil law, purchase order, model. We also object to vague "intended for reuse" language. EPA, and federal law, require that ACTUAL documentation of ACTUAL reuse be kept on file for 3 years, which BAN doesn't acknowledge in their attack on EPA. Under Basel Convention, as we have said before, it's perfectly legal to export for repair and refurbishment. It meets the hierarchy, it provides sustainable jobs. You want the factories to be certified and to make sure they really are repairing, but if that's done, it's legal. Basel Convention simply doesn't say "tested working" or "fully functional". But that became one of the reasons the eco-groups dropped out of R2.

The other was that the statement "legal in the country of import" had discussion about whether that allows other countries to ban import for protectionist reasons, end-running WTO agreements. China bans import of used tested working Pentium 4 laptops, for example... another country might ban electronics "made by Jews". There was a fair discussion about drawing the line on what I called "Orange Laws"... China may ban the color orange, but should we really incorporate references to that into USA laws, de facto making export of "orange" a violation of USA law? Or should we acknowledge China's sovereignty over Chinese soil, accept that we could get arrested for selling orange commodities, but stop short of making it a violation of USA law to sell something colored orange to a Chinese consumer?

The last discussion was admittedly legal and nuanced, I was promoting a clarification such as "foreign restrictions within the scope of the Basel Convention" or other limits to letting foreign governments put USA citizens into USA jails under USA laws that reference their laws. But in any case, it became a reason to part ways with R2 Standards.

One thing we agreed on with BAN:
  • R2 continues to allow mercury devices and batteries to be shredded. Current US regulations allow recyclers to shred batteries in e-waste, along with mercury lamps and switches, which is highly likely to expose workers and release toxins into the environment. The draft R2 standard ultimately allows these irresponsible practices to continue, this time with EPA’s endorsement.
One of my pet peeves is that people who buy a big shredder are assumed to have been doing something more for the environment than people who employ 60 people to take the same stuff apart by hand. But calling people who invested in early stage shredding technology "irresponsible" has to sting, because most of the people I know who invested in that flawed technology did so to appease BAN and avoid the export market.

Personally, I still like the tried and true WR3A standards. These are still good chestnuts for a municipality without the means to do a full audit, and who doesn't want to wait for independent accreditation of R2 or RIOS standards.
  • 1) CRT Glass Test: The most expensive and difficult and insurance-heavy activity is what you do with the bad CRTs that are NOT repairable. Of the total tons of material a recycler ships, how much is CRT glass?
  • 2) PCB Test: Of the total tons of CPUs brought in, how much CRT printed circuit boards went back out? It's tough to police whether a Pentium 4 had enough RAM in it, or to ship it with a hard drive. But if someone has NO PCB recycling, then the Pentium 1 computers MUST be going along for the ride. Like the CRT test, you don't really need to suspect a company of recycling the good ones and shipping the bad ones, you just need to verify that some reasonable percentage is getting removed and recycled before export.
  • 3) Employees per ton. Companies which don't take anything apart tend not to hire people to stand around.
  • 4) Sea containers per year per ton. Nuff said.
All of those tests are independently verifiable through IRS, DNB, Dept of Commerce channels, some of which are available to EPA but not to a private company. Eventually, a group like ISRI will probably take over and establish R2 standards under RIOS, the Recycling Industry Operating Standards they developed in the past to govern concerns over auto batteries, freon, etc.

The WR3A Tests also compliment a good old fashioned walk-through. When people tour Good Point Recycling, we like to point out those 4 tests. We don't mind getting an R2 Accreditation as well, but the poor man's audit will eliminate the 20% of companies exporting 80% of the pollution.

"Recycling is Garbage", "Recycling is Waste", etc.

Sometimes, when I am not sure what I should be doing in the morning, I google search terms that are the opposite of what I'm supposed to be doing. I wind up meeting people online, like H. Sterling Burnett, and Betsy Hart of Chicago, who publish editorials dissuading people from participating in their local recycling programs. John Tierney and Lynn Scarlet created a ruckus in the mid 1990s by arguing recycling was wasteful. The Freakonomics guy Dubner made quite a stir on Good Morning America by suggesting that recycling is only worthwhile, if (and only if) the item to be recycled will disappear from your lawn.

I threw his Freakonomics book on my lawn the next morning, and it was still there at nightfall.

Then I wondered, which is MORE likely, that my bundle of newspaper and cardboard will get picked up from my lawn in a stack, or that they will get picked up for free inside my garbage bag? Then I read in that the USA will probably have to mine landfills by the middle of this century to retrieve metals (especially in electronics) which we stupidly buried (how do you say "duh" in Greek or Latin?).

The point is, you have to think logically and not dogmatically. It is good to be challenged, and we have to be sharp and on our toes when these skeptics challenge our recycling system.

Socrates: “The unexamined life is not worth living for man.”
(Plato, Apology)

Dubner's and others comments about recycling being wasteful are, most often, contradicted by the free market, which is his main source of data. Tierney and Scarlett made a valid case that secondary materials (recyclables) should be managed in a free market. They just never made the case that virgin materials are collected in a free or fair market. If they compared RCRA 1976 (which, under EPA regulates recycling) with the General Mining Act of 1872 (which, under Department of the Interior, regulates mining and forestry), the "recycling subsidies" would have looked more like start up costs, or at worst a "market correction". In a truly free market, where recycling and mining are equally unregulated, recycling rates soar (Southern Communist China probably providing the best case study in that free market).

Recycling rates increase in time of war, time of want, and are highest in places like Guangzhou and Cairo and Mumbai. Waste increases (and recycling rates decline) with affluence. Complaints about the waste of a second (recycling) truck on the street? Remind them that toilet paper is made of recycled paper, and if we assume we are going to keep using it, then there must be another truck replacing the recycling truck, collecting timber and cellulose. The industry association, American Forest and Paper Institute, is a big advocate of people participating in existing recycling programs.

However, I think that some of us recyclers have a dogmatic streak which probably leaves us ill-equipped to nip Dubners arguments in the bud. Simply expressing shock or indignation probably encourages the critics in their belief that recycling needs to be challenged. I personally think that "Zero Waste" is a theory that gained advocates relative to states meeting their recycling roles ("Zero Waste" offers more job security than "46% diversion"). Not that I oppose "Zero waste" as a concept, but if there is a limited amount of "eco-dollars" in the economy, and the last bit of waste is the most expensive to eliminate (the last soda can on the bottom of the sea), that it seems likely that something - rain forests, carbon, toxics, ivory trade, etc. - would be a higher priority to spend the last eco-dollar on than the last piece of waste pried from the most unwilling hand. "Zero Waste" as a goal is like "zero death" at a hospital, hard to disagree with but kind of a millstone around the nurse's necks in the real world. I don't know, it just sounds like what the Dubners portray recyclers as... out of touch eco-Quixotes.

Perhaps we can convince the critics first that the best time to challenge recycling is before a program starts (it is arguable whether collecting the last bottle from the most remote island is a good use of limited environmental resources). Subterfuge of participation in existing recycling programs is just ornery. When they make an argument not to participate in an existing program, recycling trucks perform less efficiently, and more lumber trucks have to go into the forests to cut timber for cellulose.

What I really hope is that the up and coming generation of environmentalists will approach the health of the environment the way we approach the study of human health. Western medicine is great, but it only got where it is by getting it out of the hands of organized religion and into the university system. It began in alchemy, and by feeding King Edward of England spoonfuls of liquid mercury because those really improved his bowel movements. What saved Western Medicine was dialectic and scientific method, which thrives on argument and defense of arguments with statistics and analysis.

Environmentalists like me get off to a better start in the morning with a strong cup of coffee and a challenge on the table. We recycle better when we don't succumb to group-think, platitudes, and back slapping. I am a better man when I fly back and forth between red states (sweet home Ozark Mountains of Arkansas) and blue states (sweet home Green Mountains of Vermont). I hope that by challenging well meaning colleagues like Greenpeace and, they will see benefits, and correct me when I'm wrong.

Socrates: "Well I am certainly wiser than this man. It is only too likely that neither of us has any knowledge to boast of; but he thinks that he knows something which he does not know, whereas I am quite conscious of my ignorance. At any rate it seems that I am wiser than he is to this small extent, that I do not think that I know what I do not know.”
(Plato, Apology)