Often, advocacy groups campaign against specific business practices — take the movement to ban BPA from baby bottles, for instance. But when it comes to the electronics industry, non-government organizations are attempting to shift the entire business paradigm.
Rather than urging companies to stop using a given substance or stop using a trading partner, green-minded advocacy groups, such as the Green Electronics Council, Electronics Takeback Coalition, the Basel Action Network, or Greenpeace, want the electronics industry to change the way it sources materials, constructs and powers goods — everything about electronics lifecycle management, from cradle to cradle. And these groups are also working hard to make end users understand that current electronics manufacturing practices are energy-intensive, involve the use of environmentally sensitive materials and need to embrace recycling of e-waste.
How does the work these group do affect IT operations? Will it help enterprises green the data center and desktop computing, or is mere window dressing? Interviews with key players show that the movement clearly helps, although it still has a way to go before it makes a major impact.
Purchasing Power
Back in 2004, a large group of government representatives (including members of the EPA), electronics producers including Nokia, Sharp and Dell, and other stakeholders such as electronics recyclers, convened an effort to establish a national system for managing the reuse, recycling, and disposal of electronics products. While this group, dubbed National Electronic Product Stewardship Initiative (NEPSI), managed to scope out protocols and specifications for e-waste takeback, the initiative never really got off the ground. However, some of those involved in NEPSI went on to work on a second project, called Electronic Product Environmental Assessment Tool (EPEAT). Thankfully, this one stuck.
While NEPSI could have formed a national e-waste takeback policy, it would not have held up electronics producers to a higher standard when it comes to the materials they use in manufacturing, nor the energy consumption of those goods. But EPEAT — though it’s a voluntary program — does. What’s more, EPEAT, which was developed by Portland, Ore.-based Green Electronics Council and created through an EPA grant, is taking off because it helps end users understand their role in the electronics supply chain and how their dollars help push producers toward making ever-more efficient and environmentally-benign goods that are responsibly recycled.
EPEAT is comprised of a product registry that is designed to help institutional purchasers in the public and private sectors evaluate, compare and select desktop computers, notebook computers and monitors based on their environmental attributes, such as material composition, design and energy efficiency. It categorizes them at three levels: bronze, silver and gold. EPEAT also offers buyers draft wording that they can include in the requests for proposals for new electronics purchases, so that these requests include requirements for EPEAT-certified goods.
But EPEAT has also been a great motivator to urge manufacturers to create more environmentally-sensitive products, since it fosters competition among companies to do so. EPEAT is the implementation of the IEEE 1680 Standard for Environmental Assessment of Personal Computer products (including laptop and desktop computers, and monitors).
The US Federal Government now requires that 95 percent of the computers that government agencies purchase met minimum EPEAT standards, and the states of California and Massachusetts and the city of San Francisco have also passed measures that require EPEAT-compliant computer purchases.
In 2007, after a campaign spearheaded by the Silicon Valley Toxics Coalition and a student-led subset of that group, called Toxic Free UC, the University of California decided to incorporate a mandate that desktop computers, laptops, and computer monitors that the University purchases must meet the EPEAT standard at the Bronze level or higher.
Yale and Cornell University have also begun purchasing computers based on EPEAT rating. When Yale first began using the EPEAT registr — silver and gold-rated items only — as its standard for purchasing laptop and desktop computers, it was discovered that a good percentage of the computers already met the standard. “We got lucky on that,” says Brenda Naegel, the associate director of community and training for Yale’s procurement department, “and now that we are aware, we have made it a standard.”
Prior to instituting the EPEAT silver and gold purchasing standard, Yale purchased only computers with an Energy Star rating. But using EPEAT marks a huge improvement on Energy Star, from a sustainability standpoint, says Naegel. “EPEAT is so much more all-encompassing, because it takes Energy Star into consideration but also so many other attributes of the lifecycle of the computer and everything that goes into the computer.”
Sarah O’Brien, EPEAT’s outreach director, attended Yale’s first sustainability fair and helped build awareness about sustainability beyond the scope of just computer equipment, Naegel adds.
As for the private sector, there are a growing number of healthcare companies, including Kaiser Permanente, McKesson, and Premier Purchasing Partners, that are using EPEAT guidelines in purchasing computer equipment.
“We are proud to have been associated with supporting the EPEAT program and incorporating it into our procurement programs,” says Dean J. Edwards, Kaiser Permanente’s chief procurement officer, adding that Kaiser Permanente believes that “the Hippocratic Oath to first do no harm, extends beyond the individual member to encompass the communities that we serve.”
Pradeep Saxena, who is responsible for sourcing laptops and computers for Kaiser, says that purchasing from the EPEAT registry does not necessarily mean high cost comes with a high environmental ranking. “The HP computers [that Kaiser recently purchased] were the most cost-effective but also most compliant with EPEAT standard. We didn’t have to choose between being green and being economical.”
And Ingram Micro, a major wholesale distributor of technology products, has included EPEAT ratings information in its product database, so the resellers it serves can then use the EPEAT ratings criteria to help their customers select products.
Grassroots Report Card for Computers
The word Greenpeace conjures up images of impassioned activists risking their lives to stop the progress of whaling boats in Asian seas, or dangerously scaling smokestacks to unfurl a banner to decry a polluting corporation. But over the last couple of years, Greenpeace has also become known as a formidable influencer in the world of electronics, thanks to a quarterly report card, called the Greener Electronics Guide, that Greenpeace has been issuing on the environmental records of computer makers. The first of these report cards was issued in August of 2006 and there have been nine to date. The number of companies included has grown from 14 to 18 and now includes gaming console manufacturers such as Nintendo, in addition to the PCs, TVs and cell phone makers that have always been reviewed.
The rankings of some of the reviewed firms have remained relatively consistent, moving only one or two spots up or down. Others have greatly improved their standing, while a third group seems to get pushed up and down the list with each subsequent report. To improve its standing in the list, a manufacturer must lower the number of toxic chemicals used in its products, make recycling them easier, and work to reduce its over carbon footprint by changing its design and manufacturing practices.
Zeina Al-Hajj, campaign coordinator for Greenpeace International, points to Lenovo as one of the companies that made strides to green its products and business practices.
“Lenovo started reacting,” she says. It ranked dead last in the first report, but within six months it received the highest score. What led to the that high score was an expansion of its free recycling program for Lenovo desktops, notebooks, monitors and servers as well as Lenovo or IBM-branded ThinkPad notebooks, ThinkCentre desktops and ThinkVision monitors. The company also committed to a timeline phase out of brominated flame retardants (BFRs) and polyvinyl chloride (PVC) in its products. Lenova even released a press release to highlight its high score in the April 2007 version of the Greenpeace report.
But three months later, in the next report, Lenovo fell to third place, with Greenpeace stating that “closer examination of Lenovo’s takeback and recycling services has revealed some weaknesses e.g. time-limited takeback in Thailand, therefore Lenovo loses points in that criteria. Lenovo also still fails to score any points for providing models on the market that are free of PVC and BFRs.”
“Lenovo has not yet taken any steps to put a greener product on the market and that’s why they have fallen behind,” says Al-Hajj, adding that it should eliminate the toxins by 2009.
The rise and fall of Lenovo on the Greenpeace report card is a good example of how the advocacy group is pitting the companies against each other by ranking each in comparison to the efforts and achievements of the other companies on the list. Lenovo fell in ranking not because it regressed in its commitment to a green agenda, but because it hadn’t advanced it as far as other companies.
Pushing for Cradle to Cradle Management
Aside from lobbying for higher environmental standards and developing tools for making greener purchasing decisions within IT departments, advocacy groups are also working to promote ways for companies to ensure that their used computing equipment is disposed of in an environmentally-responsible manner.
There is a patchwork of state laws regarding how, and by whom, electronics should be collected and refurbished or recycled at the end of their useful life. (See The Promise and Pitfalls of E-Waste Takeback for more details.) But in the absence of comprehensive US legislation (European laws are more broad and hard-hitting, which has led to greater global awareness of the e-waste problem), advocates for responsible e-waste handling are working directly with end users. One way they are doing this, according to Barbara Kyle, the national coordinator for the Electronics Takeback Coalition, is to help institutional buyers with strategies such as including a takeback clause as part of their requests for proposals, so that responsible e-waste recycling becomes another end user requirement for which computer vendors must compete.
The University California system, for example, requires that when electronics devices such as desktop computers are replaced, they must be recycled by environmentally-responsible recyclers who follow standards set forth by the Basel Action Network as part of its Computer TakeBack Campaign’s Electronics Recyclers Pledge of True Stewardship.
Onward and Upward
Advocacy groups are continuing to roll out campaigns designed to deepen the awareness of end users, be they institutional or consumers, about the environmental impacts of electronics — not just of the end product but of the entire lifecycle management and business processes that go into electronics. And as time goes on, there is a growing level of awareness and concern around these topics at the enterprise level. There is also more and more transparency: A recent report shows that 80 percent of the world’s 250 biggest multinational companies are now publicizing their corporate social responsibility policies and data, compared to only 64 percent in 2005. (For more information, see Sustainability Reporting Grows Dramatically Among Multinationals).
Progress is slow, but incremental, said Kyle in a GreenBiz.com podcast on the status of e-waste takeback: “I think we’re going to see a lot more…companies realize they have that buying power… Shareholders or staff, leadership in the companies [will] start to think, ‘We need to pay more attention to this.'”
Business is booming at Supreme Asset Management & Recovery, one of the nation’s largest recyclers of electronic waste. Inside a cavernous warehouse in the industrial section of Lakewood, N.J., workers in T-shirts grapple with newly arrived truckloads of old computer monitors, keyboards, printers, and TVs: tons of e-waste that contains dangerous lead, mercury, and cadmium. Such major manufacturers as Panasonic and JVC and municipalities like Baltimore County, Md., and Westchester County, N.Y., have paid Supreme to dispose of their digital detritus, relying on the company’s assurances that the work is done safely.
But as the e-waste industry proliferates—some 1,200 mostly tiny companies generated revenue of more than $3 billion last year—it has also become enmeshed in questionable practices that undercut its environmentally friendly image. Next year the volume of e-waste will probably surge. In February, U.S. consumers must switch from analog to digital television service, a move that is expected to result in the mass junking of analog TVs.
Supreme, founded and still run by a man who pleaded guilty in 2001 for his role in a computer-theft ring, maintains that it lawfully disposes of e-waste after neutralizing all hazardous contaminants.
But a recent probe by the U.S. Government Accountability Office found that “a large electronics recycler in New Jersey”—which BusinessWeek (MHP) has identified as Supreme—was one of 43 U.S. companies that sought to sell e-waste for export to Asia, in apparent violation of the law.
In China and elsewhere, electronic gear commonly is stripped for reusable microchips, copper, and silver; dangerous metals are dumped nearby, often close to farms or sources of drinking water.
Supreme doesn’t dispute that it is the New Jersey recycler mentioned in an August GAO report about the investigation. But it denies any wrongdoing. BusinessWeek independently found postings on China-based Alibaba.com and other international trading Web sites in which people identified as sales representatives for Supreme and affiliated companies offered to sell scores of shipping containers filled with monitors of the sort that the Environmental Protection Agency has barred from export without special permission—which Supreme doesn’t have, according to government records. “These monitors are all located in my N.J. warehouse and are ready to ship!!” one post said. A 40-foot-long container filled with monitors and TVs sells for as much as $5,000 in Hong Kong, according to e-waste recyclers.
Since the early 1990s, an international agreement known as the Basel Convention has restricted trade in hazardous waste, but the U.S. has failed to ratify the pact. As one limited response to the Basel initiative, the EPA adopted civil rules that went into effect in January 2007 forbidding U.S. companies from exporting monitors and televisions with cathode-ray tubes unless they have approval from the EPA and the receiving country. CRTs electronically project images on screens that are typically made of leaded glass. The gear contains mercury, cadmium, and other toxins that when released carelessly can cause neurological damage in children, among other harmful effects. The blood of children in rural Guiyu, China, a notorious e-waste scavenging site, contained lead at twice the acceptable level set by the U.S. Centers for Disease Control & Prevention, according to a 2007 study conducted by Shantou University.
“No Accountability”
Seven former Supreme employees told BusinessWeek in interviews that they knew about the company selling large monitor shipments overseas. Despite the sales offerings on the Internet and the accounts of its former employees, Supreme says flatly that it “is not an exporter” of e-waste. The phrasing of its statement leaves open the possibility that others export the materials. But Supreme adds that to its knowledge, all of its buyers behave lawfully. “We’re doing everything we can to play by the law, to save the environment, and to run a successful business,” says Brianne Douglas, vice-president for marketing. She adds in an e-mail: “Unlike some competitors, we don’t simply buy and drive goods to the dock to be shipped overseas. Items that are not reusable are broken down to a commodity level and everything—100%—is recycled.”
With out commenting on Supreme’s practices, some of its rivals confirm the GAO’s findings that the e-waste business is rife with corner-cutting. “Ninety percent of electronics recyclers are cheaters,” contends Robert Houghton, president of Redemtech, an e-waste processor in Columbus, Ohio. “This industry has a tradition of no accountability.”
Thomas L. Varkonyi, proprietor of Metal Recycling in El Paso, says that Houghton’s assessment applies all around the country. Varkonyi’s scrap shop does a brisk business in e-waste trucked to him by recyclers. He, in turn, ships monitors and motherboards a couple of miles south to Juárez, Mexico. There, Mexican workers—”cheaper labor,” he says—pry the e-waste apart, plucking out valuable metals and components that can be sold to international buyers.
Regulation of the unwanted toxins is far more lenient in Mexico. “If you wanted to break those rules, it would be easy because you can pay off anyone [in Mexico],” says Varkonyi. Nonetheless, he says he brings salvageable material and contaminated scrap back to his El Paso facility. As a result, he says, he doesn’t need permission from the EPA or Mexican government. The EPA disagrees; activities such as Varkonyi’s do require approval, the agency says.
Varkonyi, 63, describes himself as a middleman for recyclers who, he says, want to tell their corporate and municipal clients that they don’t export PCs or other potentially hazardous gear: “I buy stuff from other recyclers who then claim that they do not export anything.” Varkonyi won’t name his customers.
Sixteen years ago, Supreme Asset Management’s corporate predecessor was started by Albert Boufarah, a man who went on to compile a colorful résumé in the computer-parts business. In the 1990s, Boufarah, a former organizer of computer trade shows, became involved with a loose-knit group of people who stole electronic equipment worth millions of dollars, according to federal law enforcement officials. Boufarah’s role was to sell laptops and other stolen gear, says James M. Maxwell, the special agent with the FBI who arrested him in 1999. Boufarah cooperated with prosecutors and pleaded guilty to conspiring to possess stolen property. He received two years of probation. More than a dozen people were convicted.
Boufarah, 41, remains president and owner of Supreme. The company didn’t make him available for an interview. In a statement, Supreme said that Boufarah was “unknowingly engaged with an individual who was dealing in stolen property. We resolved this problem quickly and appropriately, ensuring that the original victims received some reimbursement for their goods.”
Supreme has grown from a handful of employees in the late 1990s to more than 100 today. Its facility in New Jersey encompasses 100,000 square feet. Rows of old monitors bound in plastic shrink wrap stand seven feet high. In the executive offices, a marble lobby floor and wood-paneled conference room exude an air of corporate success. Affiliated companies in Virginia, Maryland, and Massachusetts accommodate clients in those states, including Massachusetts Institute of Technology. Supreme says it processes more than 100 million pounds of e-waste a year. The trade magazine Recycling Today ranked it No. 2 in the industry in size. But the privately held company wouldn’t disclose its financial results.
Like most of its rivals, Supreme charges clients several hundred dollars for carting away a shipping container of e-waste. The company promises to break apart the old equipment and dispose of the dangerous ingredients through a variety of methods, from unscrewing computer units by hand and prying loose circuit boards to cleaning leaded monitor glass in an expensive machine. Supreme says it sells the remaining glass, plastic, aluminum, copper, and steel for reuse.
Profitable Exports
It costs several hundred dollars, including freight and labor, to disassemble and recycle properly a container filled with toxin-laden monitors or TVs, industry executives say. Done domestically, that activity typically isn’t profitable. But some companies engage in it as a loss leader, hoping to win lucrative contracts for recycling less toxic circuit boards and cell phones. Exporting e-waste offers a different route to making money. In Hong Kong, the e-waste import center of Asia, a container of unprocessed monitors and TVs that sells for $5,000 can net profits of $4,000, according to people familiar with the trade.
Although it claims otherwise, Supreme appears to be active in the export market. In one message in September on Alibaba.com, Matthew Evans, identified on the site as a Supreme sales manager, said: “We have in stock and ready to ship 20 containers of tested, working [monitors], 1997+ and 10 containers of tested, nonworking.” In an April posting, Scott Applegate, listed as international sales manager for Reusable Assets, a company that former employees say is affiliated with Supreme and operates from the same New Jersey address, offered to sell 10,000 nonworking 15-inch computer monitors. “We have more than 100,000 sq. ft. of warehouse space in Lakewood, N.J., loaded with merchandise ready to sell and ship at all times,” his message read. Evans and Applegate are listed in Supreme’s phone directory, but couldn’t be reached for comment.
As part of their investigation, GAO employees posed as foreign buyers of U.S. e-waste, including CRT monitors, which under most circumstances would be illegal to export. Of the several offers from the New Jersey company that BusinessWeek has identified as Supreme, one sought a buyer for 60 large containers of used TVs—perhaps 48,000 units in all—the GAO said in its August report.
Many of the 43 U.S. companies that expressed willingness to export items to the GAO undercover buyers “publicly tout their exemplary environmental practices,” the report noted. On its Web site, Supreme says that “100 percent of the electronic waste we receive is reused or responsibly recycled.”
The GAO stressed that the EPA’s rules and enforcement efforts are inadequate because they focus only on CRTs, ignoring the export of other potentially hazardous electronic parts. The EPA has done relatively little enforcement, the GAO added.
Dangerous Batteries
The EPA counters that it has focused on educating e-waste recyclers about the CRT rule and now is stepping up enforcement. In August the agency fined Chino (Calif.)-based Jet Ocean Technologies $32,500 for shipping a container of scrap monitors to Hong Kong. “We want to encourage safer recycling,” says EPA spokeswoman Rosemarie Kelley.
E-waste dumping is a growing problem not only in the developing world but also in the U.S. In October 2007 a Supreme affiliate disposed of 37 tons of refuse that contained lithium batteries at the King & Queen Sanitary Landfill in Little Plymouth, Va., according to a written description of the subsequent cleanup by Golder Associates, a consulting firm in Richmond. Lithium batteries, which are used to power laptops and other portable devices, are not supposed to be dumped like regular garbage, in part because they can ignite when exposed to water as they corrode. A related danger is that landfills produce large amounts of flammable methane gas. Supreme dispatched workers to the Little Plymouth landfill to collect the batteries, which filled up three 55-gallon drums, according to Golder. Supreme denied that it ever disposes of lithium batteries at landfills but said it helped clean up the batteries dumped in Little Plymouth.
Supreme’s customers say they believe the company handles their e-waste properly. MIT, Baltimore County, and JVC all explain that they have visited Supreme’s premises and observed nothing inappropriate. “Everything gets broken down at their facility,” says Ed Nevins, director of environmental affairs at JVC. Panasonic said that it worked with Supreme on a single e-waste collection drive last year.
Norman Magnuson, director of operations for MIT’s facilities, says that Supreme routinely provides a “certificate of proper destruction,” indicating that the university’s e-waste doesn’t get sent overseas. “They assure us,” he adds, “that everything is recycled in a safe way.”
Business Week
Brian Grow, Chi-Chu Tschang, Cliff Edwards and Brian Burnsed
The American military faces a growing threat of potentially fatal equipment failure—and even foreign espionage—because of counterfeit computer components used in warplanes, ships, and communication networks.
Fake microchips flow from unruly bazaars in rural China to dubious kitchen-table brokers in the U.S. and into complex weapons.
Senior Pentagon officials publicly play down the danger, but government documents, as well as interviews with insiders, suggest possible connections between phony parts and breakdowns.
In November 2005, a confidential Pentagon-industry program that tracks counterfeits issued an alert that “BAE Systems experienced field failures,” meaning military equipment malfunctions, which the large defense contractor traced to fake microchips. Chips are the tiny electronic circuits found in computers and other gear.
The alert from the Government-Industry Data Exchange Program (GIDEP), reviewed by BusinessWeek (MHP), said two batches of chips “were never shipped” by their supposed manufacturer, Maxim Integrated Products in Sunnyvale, Calif. “Maxim considers these parts to be counterfeit,” the alert states. (In response to BusinessWeek’s questions, BAE said the alert had referred erroneously to field failures. The company denied there were any malfunctions.)
In a separate incident last January, a chip falsely identified as having been made by Xicor, now a unit of Intersil in Milpitas, Calif., was discovered in the flight computer of an F-15 fighter jet at Robins Air Force Base in Warner Robins, Ga. People familiar with the situation say technicians were repairing the F-15 at the time. Special Agent Terry Mosher of the Air Force Office of Special Investigations confirms that the 409th Supply Chain Management Squadron eventually found four counterfeit Xicor chips.
THREAT OF ESPIONAGE
Potentially more alarming than either of the two aircraft episodes are hundreds of counterfeit routers made in China and sold to the Army, Navy, Air Force, and Marines over the past four years. These fakes could facilitate foreign espionage, as well as cause accidents. The U.S. Justice Dept. is prosecuting the operators of an electronics distributor in Texas—and last year obtained guilty pleas from the proprietors of a company in Washington State—for allegedly selling the military dozens of falsely labeled routers, devices that direct data through digital networks. The routers were marked as having been made by the San Jose technology giant Cisco Systems (CSCO).
Referring to the seizure of more than 400 fake routers so far, Melissa E. Hathaway, head of cyber security in the Office of the Director of National Intelligence, says: “Counterfeit products have been linked to the crash of mission-critical networks, and may also contain hidden ‘back doors’ enabling network security to be bypassed and sensitive data accessed [by hackers, thieves, and spies].” She declines to elaborate. In a 50-page presentation for industry audiences, the FBI concurs that the routers could allow Chinese operatives to “gain access to otherwise secure systems” (page 38).
It’s very difficult to determine whether tiny fake parts have contributed to particular plane crashes or missile mishaps, says Robert P. Ernst, who heads research into counterfeit parts for the Naval Air Systems Command’s Aging Aircraft Program in Patuxent River, Md. Ernst estimates that as many as 15% of all the spare and replacement microchips the Pentagon buys are counterfeit. As a result, he says, “we are having field failures regularly within our weapon systems—and in almost every weapon system.” He declines to provide details but says that, in his opinion, fake parts almost certainly have contributed to serious accidents. When a helicopter goes down in Iraq or Afghanistan, he explains, “we don’t always do the root-cause investigation of every component failure.”
While anxiety about fake computer components has begun to spread within the Pentagon, top officials have been slow to respond, says Ernst, 48, a civilian engineer for the military for the past 26 years. “I am very frustrated with the leadership’s inability to react to this issue.” Retired four-star General William G.T. Tuttle Jr., former chief of the Army Materiel Command and now a defense industry consultant, agrees: “What we have is a pollution of the military supply chain.”
Much of that pollution emanates from the Chinese hinterlands. BusinessWeek tracked counterfeit military components used in gear made by BAE Systems to traders in Shenzhen, China. The traders typically obtain supplies from recycled-chip emporiums such as the Guiyu Electronics Market outside the city of Shantou in southeastern China. The garbage-strewn streets of Guiyu reek of burning plastic as workers in back rooms and open yards strip chips from old PC circuit boards. The components, typically less than an inch long, are cleaned in the nearby Lianjiang River and then sold from the cramped premises of businesses such as Jinlong Electronics Trade Center.
A sign for Jinlong Electronics advertises in Chinese that it sells “military” circuitry, meaning chips that are more durable than commercial components and able to function at extreme temperatures. But proprietor Lu Weilong admits that his wares are counterfeit. His employees sand off the markings on used commercial chips and relabel them as military. Everyone in Guiyu does this, he says: “The dates [on the chips] are 100% fake, because the products pulled off the computer boards are from the ’80s and ’90s, [while] customers demand products from after 2000.”
BusinessWeek traced the path of components from Guiyu to BAE Systems Electronics & Integrated Solutions in Nashua, N.H. The company’s confidential reports to the Government-Industry Data Exchange Program were critical to this research. A unit of BAE’s $15 billion U.S. division, the electronics operation makes a variety of sophisticated equipment, ranging from missile-warning systems for fighter jets to laser-targeting devices for snipers. It has reported far more counterfeiting incidents than its rivals: 45 over the past three years. Industry executives say that large figure may reflect BAE’s candor or its aggressive pursuit of low-priced chips from China. The Justice Dept. is investigating BAE’s military electronic-parts procurement, a company spokesman confirmed.
In a statement, the company said that it “has attempted to pursue the origin of components provided through the supply chain, [but] has no further insight, nor certification to the origins of components that are provided by supply-chain distributors.” Only a “small percentage” of its parts have turned out to be counterfeit, BAE said. It now has restricted its purchases to original chipmakers and their approved distributors “except in very limited circumstances,” such as when it needs a hard-to-find component.
BAE isn’t unique. Other contractors that have reported counterfeit microchips to GIDEP include Boeing (BA) Satellite Systems, Raytheon (RTN) Missile Systems, Northrop Grumman (NOC) Navigation Systems, and Lockheed Martin Missiles & Fire Control. The companies all said they take the threat of counterfeits seriously but wouldn’t comment on specific incidents.
The flood of counterfeit military microelectronics results largely from the Pentagon’s need for parts for aging equipment and its long efforts to save money. In the mid-1990s, after the collapse of the Soviet Union, the Clinton Administration launched an initiative, continued during the Bush years, of buying all sorts of components off the shelf. In addition to the traditional pattern of purchasing equipment from original manufacturers and their large, authorized distributors, the Pentagon began doing business with smaller U.S. parts brokers that sprang up to offer low-cost items, including microchips. Federal affirmative-action goals have further encouraged the military to favor suppliers that qualify as “disadvantaged.” The chips wholesale for as little as 10 cents and as much as $2,000 each, depending on their complexity and quality. The Pentagon spends about $3.5 billion a year on spare chips, many of them for planes and ships that are 10 or 20 years old.
Name-brand manufacturers and well-established distributors, some of which acquire the rights to make obsolete chips, say they mark up prices 10% to 30%. Smaller brokers settle for far less generous margins. The number of small brokers increased sharply after 1994, when Congress stopped requiring government contractors to certify that they were either original manufacturers or authorized distributors. The brokers have to obtain a contractor code but receive little or no oversight. Hundreds are now operating, some out of suburban basements and second bedrooms. A BusinessWeek analysis of a contracting database identified at least 24 active brokers that list residential homes as their place of business. Several have won chip contracts for “critical applications,” which the Pentagon defines as “essential to weapon system performance…or the operating personnel.” In many cases these entrepreneurs comb Web sites such as brokerforum.net and netcomponents.com, which connect them with traders in Shenzhen and Guiyu. The brokers sell either directly to Pentagon depots or via suppliers to defense contractors such as BAE.
ON A QUIET STREET
Mariya Hakimuddin owns IT Enterprise, a company she runs with her mother out of a modest one-story house in Bakersfield, Calif. Rosebushes line the street, and a basketball hoop hangs in the driveway. Hakimuddin, who is in her 40s, says she has no college education. She began brokering military chips four years ago, after friends told her about the expanding trade. Since 2004 she has won Pentagon contracts worth a total of $2.7 million, records show. The military has acquired microchips and other parts from IT Enterprise for use in radar on the aircraft carrier USS Ronald Reagan and the antisubmarine combat system of Spruance-class destroyers.
Hakimuddin says she knows little about the parts she has bought and sold. She started her business by signing up on the Internet for a government supplier code. After the Defense Dept. approved her application, with no inspection, she began scanning online military procurement requests. She plugged part codes into Google (GOOG) and found Web sites offering low prices. Then she ordered parts and had them shipped directly to military depots. “I wouldn’t know what [the parts] were before I’d order them,” she says, standing near her front door. “I didn’t even know what the parts were for.”
The Navy’s Ernst became concerned about IT Enterprise in March 2007. His team found a suspicious transistor—a basic type of microchip—supplied by the firm for use in the AV-8B Harrier, a Marine Corps fighter jet. The transistor, which turned up during an inspection of a military depot in Cherry Point, N.C., was supposed to contain lead in its solder joints, but didn’t. That defect could cause solders to crack and the flight control system to fail, Ernst explains. When a member of the team telephoned IT Enterprise in Bakersfield, he heard children chattering in the background, Ernst recalls. “It was the ‘Aha!’ moment for me on counterfeit parts,” he says.
Unknown to Ernst, a separate Defense inquiry later found that at least five shipments from IT Enterprise since 2004 had contained counterfeit microcircuits, including those intended for the USS Ronald Reagan, according to Pentagon records. During her interview with BusinessWeek, Hakimuddin denied any wrongdoing and blamed her suppliers, but she wouldn’t name them. In January the Defense Dept. banned IT Enterprise, Hakimuddin, and her mother, Lubaina Nooruddin, from supplying the military for three years.
The Hakimuddins weren’t deterred. A month after Mariya was barred, her husband, Mukerram, received his own supplier code, using the same home address with a new company name, Mil Enterprise. This time the Pentagon caught on more quickly, banning Mukerram for three years as well. He couldn’t be reached for comment. People familiar with the matter say the Defense Criminal Investigative Service is looking into IT Enterprise.
In written responses to questions about kitchen-table brokers, officials at the Defense Supply Center in Columbus, Ohio—a major Pentagon electronic-parts buyer—said they don’t inspect brokers or conduct background checks. “The law does not prohibit” work-at-home brokers or using the Internet to find parts, the officials said. “Is there risk? Yes, there is risk,” Brigadier General Patricia E. McQuistion, the center’s commander, says in an interview. She estimates that “less than one-quarter of 1% of what we buy is compromised.”
RULE CHANGE
Nevertheless, after BusinessWeek’s inquiries, the center in August issued new contracting rules for microchips. Suppliers now must document the “conformance” and “traceability” of chips when they place bids. Previously such records didn’t have to be filed at the bidding stage and were sometimes missing or faked, industry and government officials say.
Even after the likes of IT Enterprise are identified, it can take time to clean up the mess. On Feb. 5, 2008, a manager at Tobyhanna Army Depot, the Pentagon’s largest electronics maintenance facility, in Stroud Township, Pa., notified the supply center in Columbus that his unit had discovered counterfeit chips supplied by IT Enterprise for use in global positioning systems on F-15 fighters, according to internal Pentagon e-mails reviewed by BusinessWeek. The e-mails show that, as late as July, the Columbus center was still trying to locate parts purchased from IT Enterprise.
In a July 24 e-mail, an F-15 engineer, whom BusinessWeek agreed not to identify, wrote: “Suppose that a part like that makes it onto a flight-critical piece of hardware or mission-essential piece of hardware. The[re] is a very good chance that the part may work…but what happens at 40[,000] ft and -50 degrees? Hardware failure. Not good.”
Ernst says the Hakimuddin episode helped him realize how blind the military has been: “We don’t know how big the counterfeit problem is, and, to me, that is irresponsible.” Now he’s trying to get others in the bureaucracy to confront what he considers to be a crisis: “The risk of counterfeiting is so high, and the cost to our weapon systems is so great, that we need to take action.” Glenn Benninger, a senior civilian engineer at the Naval Surface Warfare Center in Crane, Ind., concurs: “Counterfeiting has literally exploded over the last few years, but not a lot of people have been paying attention.”
The pending investigations could force the Defense Dept. to heed such warnings. In addition to the Justice Dept.’s probe of BAE, there is the Pentagon’s in-house criminal inquiry. “The DoD takes this threat very seriously,” John J. Young Jr., Defense Under Secretary for Acquisition, Technology, and Logistics, said in a statement. “This security threat will require great vigilance by DoD to defeat, but we will do everything within our power to do so.”
Policies aimed at promoting “disadvantaged” businesses have apparently encouraged dealings with brokers that otherwise might seem questionable. Federal affirmative-action goals require the Pentagon to seek to make 22% of its purchases from small contractors—as measured by staff and revenue—including those run by women, military veterans, or members of certain ethnic minority groups. A contracting database refers to IT Enterprise as a “Subcontinent Asian American Owned Business.” Hakimuddin wouldn’t discuss her ethnicity but says she was born in the U.S.
Daniel Spencer designated his wife, Brenda, as the legal owner of his brokering business, BDS Supply. “I thought we’d get some kind of benefit [from being woman-owned],” says Spencer, 54, who acknowledges that he runs the company with his wife. Working from home in Great Falls, Mont., he says, he buys from legitimate suppliers and has parts shipped to him before sending them on to the Pentagon. But he admits that, despite a background in computers, he doesn’t have the expertise to identify fake chips. Promod Dubey, who runs Phoenix Systems Engineering, a broker in Lake Mary, Fla., complains that military procurement offices “want the cheapest possible s–t they can get.” Dubey, who lists Phoenix as a “small disadvantaged” business on Pentagon documents, says he acquires parts from China only as a “last resort” because “sometimes the quality is questionable.” Neither he nor Spencer has been accused of impropriety in their military work.
Contractor reports to the GIDEP counterfeits database show a total of 115 incidents over the past six years. But “everybody believes the [GIDEP] reports are just the tip of the iceberg,” says Brian Hughitt, manager of quality assurance for NASA. Hughitt says that, during testing, NASA inspectors have identified two shipments of counterfeit chips in the past 18 months. One lot was installed in flight hardware. “That’s something that is going to be launched into space,” Hughitt says, declining to elaborate. “It could have been real bad.” NASA, which helps launch military satellites and missiles, is investigating the shipments.
TRACKING THE CONNECTION
To understand the counterfeiting phenomenon, BusinessWeek independently traced four incidents of phony parts that BAE Systems reported to GIDEP. The circuitous trails all led back to China, as did those of at least six other BAE incidents that BusinessWeek did not investigate in detail.
In April 2007 BAE reported receiving fake military-grade chips purportedly made by Philips Semiconductor for undisclosed weapon systems. A production date stamped on the supposedly military-grade chips identified them as having been made in 1998. But NXP Semiconductors, a unit spun off from the Dutch company Philips two years ago, confirms that it stopped making military-grade chips in 1997.
BAE bought the chips from Port Electronics, a Salem (N.H.) distributor. Robert W. Wentworth, a vice-president at Port, says in an interview that BAE asked his firm to find a series of older microchips to avoid a redesign of weapon systems “that would have cost [BAE] millions.” He declines to specify the weapons but adds: “These people [at BAE] were desperate to find the parts.”
BAE said in a statement that, after discovering the counterfeits in 2007, it “immediately ceased” using all independent chip brokers, including Port. Following a careful review, BAE added, it again began buying certain products from Port, which it described as a “small disadvantaged and disabled veteran-owned business.” Without commenting directly on Wentworth’s account, BAE said that redesigning older weapon technology is expensive and that it sometimes makes more economic sense to seek “small quantities of the original parts.”
Port obtained the fake Philips chips from another distributor, Aapex International, in Salem, Mass. Aapex had purchased the components from Hong Kong Fair International Electronics in Shenzhen, according to BAE documents. A brochure provided by Hong Kong Fair at its office on the 15th floor of a well-kept commercial building says it enjoys “a good relationship and faithful partnership” with Aapex. Jiang Hongyan, 43, Hong Kong Fair’s export manager, says in an interview that her company never tests the microchips it supplies and rarely knows anything about the companies from which it buys. “We are a trading company,” says Jiang, who wears red-rimmed glasses and uses the English name “Snow.” She adds: “We buy goods with one hand and sell them with the other hand. We do not have any capability to do research, production, or modifications.”
SUPPLIER WARNINGS
The owner of Aapex, Marie Gauthier, says her company purchased chips from Hong Kong Fair only once. She says she doesn’t know anything about the brochure in which Hong Kong Fair boasts of its “faithful partnership” with Aapex. She says she made chip sales worth $2 million to Port Electronics between 1999 and 2007. “Ninety-nine percent of it was for BAE,” she says. BAE engineers regularly contacted Aapex in their search for older, hard-to-find chips, Gauthier says. She told the defense contractor she was buying parts from China. “We notified BAE that this was high-risk,” says Gauthier. “They begged us because they said they needed the product.” E-mail exchanges, reviewed by BusinessWeek, confirm that Aapex repeatedly warned Port and BAE about parts from China.
Gauthier says BAE and Port no longer buy from Aapex. “I got thrown under the bus by BAE,” she says. “They did not want to take responsibility, so they pointed at us.” BAE declined to comment on her assertion or on the e-mail exchanges.
Hong Kong Fair bought the fake Philips chips from the Guiyu Electronics Market, according to the BAE documents. No specific vendor is listed in BAE’s GIDEP report. At Jinlong Electronics Trade Center in Guiyu, proprietor Lu Weilong says he could easily supply many types of military-grade chips, including those acquired for BAE. As he speaks, he turns to a PC in the back of his cluttered store and types military part numbers into Google to see from which kinds of circuit boards they can be extracted. “I have the circuit boards at home,” he says confidently.
Some Chinese parts providers appear to have set up front companies in the U.S. and sell to brokers that supply the U.S. defense industry. JFBK of Fullerton, Calif., seems to be one such Chinese affiliate. The company is identified in GIDEP documents from this past June as having provided chips to North Shore Components, a distributor in Bellport, N.Y. The chips, typically used in the FA-18 fighter and E-2C Hawkeye surveillance plane, were supposed to have been made by National Semiconductor (NSM) in Santa Clara, Calif., but they turned out to be counterfeits of only commercial grade, according to North Shore’s report to GIDEP. North Shore Vice-President Joseph Ruggiero says in an interview that his company found JFBK on the chip-trading Web site NetComponents.
JFBK’s office in a strip mall in Fullerton is a single small room that also houses two other companies: MeiXin Technologies and New World Tech, both chip brokers. JFBK’s Web site describes a “knowledgeable and friendly staff” with “years of collective experience and professional support.” One afternoon in mid-July, four women and a man, who all appeared to be in their 20s, sat at desks with small signs tacked above them bearing the names of the three companies. The employees answered the phone on each desk with the name of the company designated on the card. Asked about microchip sales, one young woman, who declined to give her name, said: “We’re not allowed to talk about what we do.”
According to the California Department of Corporations, JFBK and New World have been “dissolved” as legal entities since 2000. MeiXin is still listed as active. Public records identify a woman named JianJu Cho as the agent for JFBK. Reached by phone while on vacation in Florida, Cho said neither she nor her staff knows much about microchips. “I don’t have any knowledge about electronic components,” said Cho. “All the things just depend on what our supplier tells us.” Cho says the owners of JFBK and MeiXin are “a couple from China and a man from Taiwan. MeiXin and JFBK [are from] China; New World is from Taiwan.”
A company called Tongda MeiXin Electronics operates on the 15th floor of an office building in Shenzhen. Under the MeiXin nameplate is another sign that states, in Chinese, “JFBK Shenzhen office.” Asked about the relationship between JFBK and Tongda MeiXin, Wang Tong, general manager of MeiXin, says: “We are their supplier.” Wang, 27, says JFBK probably didn’t appreciate that the purportedly military-grade chips supplied to North Shore were counterfeit because neither MeiXin nor JFBK knows where the product came from. “They don’t understand the technology,” says Tong. “They only do trade. None of us understand the technology.”
Wayne Chao, secretary general of the China Electronics Purchasing Assn., based in Shenzhen, admits that microchip counterfeiting is rife in China: “It’s widespread, and we acknowledge that.” Asked why Chinese officials don’t shut down the blatant counterfeiting, he says: “Everyone wants to blame China. But it’s difficult to differentiate between a legitimate product and a fake.”
U.S. chipmakers say it is not their job to police a disorderly global marketplace, although some companies are at least trying to assess the challenge. John Sullivan, vice-president for worldwide security at Dallas-based Texas Instruments (TXN), has traveled to chip markets in Shenzhen to photograph allegedly counterfeit stockpiles and label-printing machines.
U.S. Customs & Border Protection officials at American ports have seized eight shipments of fake military-grade chips purportedly made by Texas Instruments in the past three years, according to GIDEP records. Sullivan says Pentagon representatives have met with TI and other chipmakers. “They’re not seeing it as just an economic problem; they’re seeing it as a problem that could affect national security and health and safety,” he says.
Major chipmakers blame the Pentagon and its practice of buying from small brokers for the spread of counterfeit military-grade chips. “We’ve been telling people [at Defense] for 10 years to buy only from us or our authorized distributor,” says Chuck Mulloy, a spokesman for Intel (INTC). “The military is slavishly following the low-cost paradigm but not following the idea of checking the quality as well.”
Hong Kong Fair’s Jiang, the alleged supplier of counterfeit chips to BAE, argues that if the U.S. military wants guaranteed high-quality chips, it should purchase them directly from the original manufacturers or their official franchisees. “Why do you come to China to buy it? You know that these things in China are cheap,” Jiang says. “Why are they cheap? They have problems with quality.”
The U.S. Environmental Protection Agency (EPA) knows that most of the 1.9 million tons (1.7 million metric tons) of discarded cell phones, computers and televisions, among other electronic goods, went into landfills, because those are the agency’s own figures.
The EPA also knows that this so-called e-waste contains cadmium, mercury and other toxic substances, and it is responsible for making sure that lead-laden monitors and television sets with cathode-ray tubes (CRT) are disposed of properly and the parts recycled.
But congressional investigators charge that the EPA has failed to even attempt to clean up the mess—or keep it in check.
The agency has “no plans and no timetable for developing the basic components of an enforcement strategy,” concludes a report released this week by the Government Accountability Office (GAO), Congress’s investigative arm.
GAO official John Stephenson testified at a House hearing yesterday that his investigators had posed as would-be buyers of CRT waste in Hong Kong, India, Pakistan, Singapore and Vietnam and found at least 43 recyclers willing to export the toxic e-waste from the U.S. in direct violation of EPA regulations. In addition, unlike the European Union (E.U.), the EPA has no regulations concerning the disposal of other types of used electronic devices, despite their dangers.
“This is a failure to enforce even the weak regulations they have,” says Democratic Rep. Gene Green of Houston, who introduced a House resolution calling for a ban on the export of e-waste. (Sen. Sherrod Brown (D–Ohio) introduced a similar measure in the Senate.) “EPA is sometimes not as interested in doing what statutorily they should be.”
According to the report, the EPA told GAO officials that it prefers “nonregulatory, voluntary approaches” to the growing e-waste problem. “EPA currently has 10 ongoing investigations and the [regional offices] plan to conduct inspections at electronic waste collection and recycling facilities this year,” wrote assistant administrators Granta Nakayama and Susan Parker Bodine in response.
When such e-waste is exported to places such as Guiyu in China, it ends up in vast recycling centers where laborers earn a pittance smashing, cracking, melting and cooking old electronic goods to extract the valuable materials they hold, ranging from gold to plastics. But burning off wire insulation, cooking circuit boards and using acid to extract gold all take a health and environmental toll. A study published last year in Environmental Health Perspectives found that children in Guiyu had lead levels 50 percent higher than those in surrounding villages and 50 percent higher than safety limits set by the U.S. Centers for Disease Control and Prevention. Lead is known to cause brain damage.
That toll is not confined to China. According to a recent study by chemist Jeffrey Weidenhamer of Ashland University in Ohio, the lead in recalled children’s jewelry bears a proportion of tin and copper that are “consistent with an origin from recovered solder.” And U.S. prisoners are often exposed to the same conditions working at disassembling e-waste for the government-owned corporation UNICOR Federal Prison Industries in Washington, D.C. “I visited a federal prison in California and I saw prisoners with hammers smashing apart CRT monitors,” says Ted Smith, chairman of the advocacy group Electronics TakeBack Coalition. “There are prisoners who have been made ill and a number of prison guards as well.”
As a result, at least nine states, including California, Maine and Maryland, have implemented their own controls on the proper handling of e-waste, and the electronics industry has voluntary guidelines to reduce it. “We have a national system to collect and recycle all products we put our name on,” says Mark Small, vice president for corporate environment, safety and health at Sony Corporation of America, which has partnered with Waste Management, Inc., to recycle e-waste. “We have eliminated probably 99 percent–plus of the toxic materials in our products. We use lead-free solder and changed the design of TVs from CRT to new [liquid-crystal displays].”
Other companies, such as Apple, Dell and Hewlett-Packard have similar programs, and Samsung is set to launch a free take-back program for all their electronic products, including old televisions, on October 1.
The E.U. in 2002 imposed a comprehensive ban on the export of any e-waste, along with a requirement for producers of such electronic goods to take back used electronics. Violators face fines up to 1.2 million euros or imprisonment. In contrast, the EPA to date has imposed only one fine of $32,500 on a single exporter, according to the GAO report.
But given the difficulty and expense of dealing with e-waste properly, unscrupulous E.U. recyclers have taken to labeling their shipments as used electronics that can be employed in developing countries to bridge the digital divide. “The containers arriving in ports like Lagos [Nigeria] were loaded with 75 percent junk and 25 percent material that could be resold in the marketplace,” Smith says. “They take that material that was not salable, dump it and burn it.”
He adds: “There are an awful lot of bottom-feeders in this industry.”
But some companies, such as Columbus, Ohio–based Redemtech, have found that coping with the more than three billion electronic devices purchased each year by U.S. companies and consumers can be good business. “Per weight of e-waste, 90 percent of it is moderately valuable nontoxics like steel, aluminum, plastics,” says Redemtech president, Robert Houghton, which the company handles at one of six plants in North America. The rest is sent to centralized facilities with the safety equipment to handle toxic materials such as lead. “If we send 1,000 pounds of toxic-bearing circuit cards, we expect to have 1,000 pounds of materials liberated.”
The volume of e-waste, particularly lead-bearing CRTs, will likely grow exponentially next February, when U.S. television networks switch from analog to digital signals. And it would appear, based on the GAO report, that EPA is not ready to enforce regulations for the proper handling of such toxic materials.
Further, the liquid-crystal display televisions that are likely to replace them contain mercury in the fluorescent lightbulbs inside them. “We don’t know how to take out the mercury, let alone deal with it responsibly,” Smith says.
In the future, light-emitting diodes might prove a toxic-free alternative, according to Sony’s Small. But that would just unleash another onslaught of e-waste if all TV owners were to make the switch again—and much of that would likely end up shipped out of the country. “Only 5 percent of imports are inspected,” Small notes. “One can only imagine how many exports are inspected.”
“We can’t just ship it overseas any longer and pretend it doesn’t exist,” says Rep. Mike Thompson (D–Calif.) who supports federal e-waste legislation. “It should be regulated to prevent harm to human health and the environment overseas—and right here in this country.”
As the countdown to the switch to digital television continues, Samsung has joined the ranks of companies offering free recycling of their used electronics.
Samsung joined Sony and LG as the only three companies offering free recycling of old televisions, according to the Electronics TakeBack Coalition.
Samsung earned bonus points from the coalition for agreeing to publicly disclose data about its recycling program, which begins Oct. 1. Samsung has also pledged to use only those recycling programs that don’t incinerate, landfill or export toxic waste to developing countries — a step that should cut down on pollution.
Manufacturers still have a long way to go to achieve the cradle-to-cradle ethic whereby all materials that are used to make a piece of electronics (or furniture, or home or whatever) can be reused indefinitely. But at least offering convenient recycling will help keep electronics out of the waste stream, and the stream of televisions has been awe-inspiring as Americans switch to flat-screen HD plasma televisions (which, by the way, are unparalleled energy hogs — something that will be more apparent when the EPA rolls out new EnergyStar standards for televisions this November).
Why are these recycling programs important? Now, less than 13% of electronics is recycled, and the traces of toxic metals found in all electronics ends up in the air (after incineration), in the water (potentially, eventually, after being buried in a landfill) or in the hands of poor trash-pickers (often in third-world nations). All of which is a reminder why it’s so important to keep working toward that cradle-to-cradle goal.
The Texas Campaign for the Environment opened an office in Houston today. Rod Rice reports that organizers will begin door-to-door canvassing to spread the word about recycling electronics.
The Texas Campaign for the Environment has returned to Houston full time after an absence of about eleven years. TCE’s Zac Trahan says the organization has been focusing on recycling things like computers, televisions and cell phones. In fact it played a key role in the law that just went into affect last week in Texas requiring all computer manufacturers to offer free recycling of their products.
“So if someone has an old Apple, or Dell or HP, they simply need to contact the manufacturer to take advantage of the recycling program. Also Dell has a partnership with Goodwill here in Houston so that anyone can take any brand of old computers directly to any Goodwill here in Houston for free recycling.”
TCE helped get that passed by going door-to-door to ask people to let computer makers and legislators know there is a demand for computer recycling.
“Our door-to-door efforts in Austin and in Dallas generated more then 12-thousand personal hand written letters to state legislators. With Dell’s recycling program our door-to-door canvassers in Austin generated more than 10-thousand letters to Michael Dell the CEO.”
Zac Trahan says this is only the beginning of work in Houston. Another recycling problem is televisions. With the switch to digital TV next year analog sets will be obsolete. Currently only three TV makers provide recycling for those obsolete sets. Trahan thinks once TCE’s face-to-face efforts gets underway fewer old TV’s will end up in landfills.
A day before the Olympic torch was lit Friday in Beijing, two men in warm-ups, waving bouquets and wearing giant fake gold medals, ascended a podium on a hot street corner in Northeast Austin.
The podium was made of milk-jug crates, and the corner was outside Samsung Electronics’ semiconductor facility.
The mock ceremony was part of a demonstration by an environmental group designed to shower attention on Samsung’s competitors for offering to recycle televisions, which contain toxic components.
Samsung recycles its computer components but not its TVs.
Protesters thousands of miles from Beijing are using the games to draw attention to their causes. In Canada on Wednesday, protesters chained themselves to the Chinese embassy in Ottawa to show support for Tibet independence. In San Francisco, two dozen activists gathered outside the Chinese consulate to stage mock hangings, again for Tibet independence.
Over the past year, the Beijing Games have variously been described by interest groups and commentators as the Genocide Olympics for China’s alleged ties to Sudan, the Green Olympics by China itself for its efforts to clean its air, and the Tibet Olympics.
“As the first Olympics in a communist state since Moscow in 1980, a battle looms over the message of the 2008 games,” Jonathan Watts, the East Asia correspondent for the British paper The Guardian, wrote last year. “For the ruling party, it is the ultimate propaganda opportunity to show the government’s success in lifting hundreds of millions of people out of poverty. For Tibetan independence activists, human rights campaigners … persecuted peasants and environmentalists, it is a chance to expose the dark side of the planet’s biggest one-party state.”
Samsung is an official sponsor of the games, making it a special target for advocacy groups hoping to piggyback on Olympics media attention.
“It’s the day before the Olympics, and we want to send a message to Samsung that it’s losing the race for TV recycling,” said Robin Schneider, executive director of Texas Campaign for the Environment. “It’s time for them to go for the gold.”
For the record, Samsung has not broken any laws. In a statement, the company said it’s committed to “responsible product design, energy efficiency and product recycling.”
Samsung also said that 93 percent of its televisions meet the government’s voluntary energy-star criteria for energy-efficient electronics. It said it is testing TV recycling programs in several states and will roll out broader programs.
For a nonprofit like the Texas Campaign for the Environment, it can be “difficult to make a point when you’re not the focus of the media attention but you’re in the larger panorama,” said Dave Junker, who teaches public relations in the University of Texas’ Advertising and Public Relations department. “It’s an opportunity to introduce a problem to a larger public that has not heard about the issue.”
This form of guerilla public relations, of co-opting an event like the Olympics, warned Junker, “can instill hostility or animosity if it’s not done tactfully or if it’s perceived to be unreasonable or a nuisance.”
The Samsung protest also illustrates the dangers of conventional sponsorship, says Brad Love, who teaches media campaign classes at UT. “Associating oneself with these particular games is a challenge even for a corporation because there’s a risk that the association will backfire.”
NEW YORK, N.Y. — LG Electronics and Waste Management will partner to open more than 160 recycling centers across the country to handle masses of unwanted electronics.
Beginning next month, the companies will launch e-waste recycling centers in all 50 states with the goal of locating a center within 20 miles of 95 percent of the population. Users can drop off LG, Zenith and Goldstar brands for free, and pay a fee for other brands.
“By recycling used, unwanted, obsolete or damaged electronic equipment, useful materials such as glass, metals and plastics may be recovered for reuse in other products,” Patrick DeRueda, president of WM Recycle America, said in a statement. “Reuse minimizes the amount of waste disposed, while also reducing the amount of raw materials extracted as well as energy required to make new materials.”
Manufacturer-led recycling efforts have become more prevalent during the last few years at a time of growing e-waste awareness. Waste Management joined Sony in an e-waste effort last year that allowed consumers to drop off Sony products at its e-Cycling centers.
Panasonic, Sharp and Toshiba created an e-waste recycling company in January for the Minnesota market, with plans of eventually going national.
Retailers, too, have gotten into the act. In June, for example, Best Buy Co. rolled out a free pilot program across 117 stores in the Baltimore, San Francisco and Minnesota markets. A national program could follow.
In 2006, 2.9 million tons of electronics entered the U.S. waste management stream, of which only 11.4 percent was recycled, according to the U.S Environmental Protection Agency.
PORT ARTHUR— Dealing with chemicals is a way of life for Southeast Texans because of all the plants and refineries. One thing is never acceptable, however, and that is people coming into contact with toxic waste.
A press release from the Texas Campaign for the Environment in Austin believes Port Arthur avoided such an issue last week. TCE and Community In-Power and Development Association, a Port Arthur environmental group, originally filed a motion in December 2007 with the Texas Commission on Environmental Quality to overturn the temporary authorization for acceptance of Newpark Waste as alternative daily cover at the city’s landfill. The TCEQ commissioners voted unanimously to deny the city permission to cover the landfill in what TCEQ called toxic waste.
TCE said Port Arthur requested in November 2007 to use Newpark material on its landfill. Permission was granted from the TCEQ executive director. The material is produced by oil services firm Newpark Resources and is comprised of coal plant fly ash and oil drilling waste.
“I’m very excited. This is a victory for the whole community. This stuff should had never been used. It’s a mixture and a conglomerate,” Hilton Kelley of CIDA said. “The mayor (Deloris “Bobbie” Prince) didn’t put a lot of thought into it and is ill-informed.
“It could leak into the waterway and we would never know about it. The mayor needs to pay a lot closer attention to the paper work on the environment and the waste they’re allowing. The material is nothing more than chemical waste and needs to disposed of in a controlled manner. It should not be used in Texas.”
Port Arthur City Manager Steve Fitzgibbons spoke on behalf of the city and said the Newpark substance was used in the past several years ago at the landfill.
“We had an option to use it if it was a good option. We would have to work on the terms and conditions, and the pay if was used. It was another option and approved by the (city) council,” Fitzgibbons said.
The standard coverage for landfills is 6 inches of dirt. On the other hand, Fitzgibbons said the dirt coverage costs more than the substance. One option that was looked at was mixing the dirt with the Newpark substance.
“It made sense to the council and they wanted to make sure the TCEQ would determine if it was safe to be used or not. They’re more knowledgeable about it. The more options you have, the better off you are,” he said.
In addition to environmental questions, the city also had to weigh if the Newpark substance would be more damaging on equipment at the landfill.
The TCEQ commissioners voted to uphold new rules passed in 2006 that tightened the standards for what could be used to cover landfills to reduce landfill odors, windblown waste and the presence of scavenging animals. TCE said these new rules clearly state if a waste material was too toxic to be allowed into the landfill as waste, it could not be used to cover the landfill either.
Kelley believes this incident is part of a larger environmental challenge to the region.
“With the expansion of the plants, no one is taking duty on this. No one is finding out how much is being dumped. There is no environmental cabinet in city hall. Jobs are great and needed, but there will be some emissions increases. There is a need for gas and fuel and Southeast Texas pays the price.”
June is the wet season in Ghana, but here in Accra, the capital, the morning rain has ceased. As the sun heats the humid air, pillars of black smoke begin to rise above the vast Agbogbloshie Market. I follow one plume toward its source, past lettuce and plantain vendors, past stalls of used tires, and through a clanging scrap market where hunched men bash on old alternators and engine blocks. Soon the muddy track is flanked by piles of old TVs, gutted computer cases, and smashed monitors heaped ten feet (three meters) high. Beyond lies a field of fine ash speckled with glints of amber and green—the sharp broken bits of circuit boards. I can see now that the smoke issues not from one fire, but from many small blazes. Dozens of indistinct figures move among the acrid haze, some stirring flames with sticks, others carrying armfuls of brightly colored computer wire. Most are children.
Choking, I pull my shirt over my nose and approach a boy of about 15, his thin frame wreathed in smoke. Karim says he has been tending such fires for two years. He pokes at one meditatively, and then his top half disappears as he bends into the billowing soot. He hoists a tangle of copper wire off the old tire he’s using for fuel and douses the hissing mass in a puddle. With the flame retardant insulation burned away—a process that has released a bouquet of carcinogens and other toxics—the wire may fetch a dollar from a scrap-metal buyer.
Another day in the market, on a similar ash heap above an inlet that flushes to the Atlantic after a downpour, Israel Mensah, an incongruously stylish young man of about 20, adjusts his designer glasses and explains how he makes his living. Each day scrap sellers bring loads of old electronics—from where he doesn’t know. Mensah and his partners—friends and family, including two shoeless boys raptly listening to us talk—buy a few computers or TVs. They break copper yokes off picture tubes, littering the ground with shards containing lead, a neurotoxin, and cadmium, a carcinogen that damages lungs and kidneys. They strip resalable parts such as drives and memory chips. Then they rip out wiring and burn the plastic. He sells copper stripped from one scrap load to buy another. The key to making money is speed, not safety. “The gas goes to your nose and you feel something in your head,” Mensah says, knocking his fist against the back of his skull for effect. “Then you get sick in your head and your chest.” Nearby, hulls of broken monitors float in the lagoon. Tomorrow the rain will wash them into the ocean.
People have always been proficient at making trash. Future archaeologists will note that at the tail end of the 20th century, a new, noxious kind of clutter exploded across the landscape: the digital detritus that has come to be called e-waste.
More than 40 years ago, Gordon Moore, co-founder of the computer-chip maker Intel, observed that computer processing power roughly doubles every two years. An unstated corollary to “Moore’s law” is that at any given time, all the machines considered state-of-the-art are simultaneously on the verge of obsolescence. At this very moment, heavily caffeinated software engineers are designing programs that will overtax and befuddle your new turbo-powered PC when you try running them a few years from now. The memory and graphics requirements of Microsoft’s recent Vista operating system, for instance, spell doom for aging machines that were still able to squeak by a year ago. According to the U.S. Environmental Protection Agency, an estimated 30 to 40 million PCs will be ready for “end-of-life management” in each of the next few years.
Computers are hardly the only electronic hardware hounded by obsolescence. A switchover to digital high-definition television broadcasts is scheduled to be complete by 2009, rendering inoperable TVs that function perfectly today but receive only an analog signal. As viewers prepare for the switch, about 25 million TVs are taken out of service yearly. In the fashion-conscious mobile market, 98 million U.S. cell phones took their last call in 2005. All told, the EPA estimates that in the U.S. that year, between 1.5 and 1.9 million tons of computers, TVs, VCRs, monitors, cell phones, and other equipment were discarded. If all sources of electronic waste are tallied, it could total 50 million tons a year worldwide, according to the UN Environment Programme.
So what happens to all this junk?
In the United States, it is estimated that more than 70 percent of discarded computers and monitors, and well over 80 percent of TVs, eventually end up in landfills, despite a growing number of state laws that prohibit dumping of e-waste, which may leak lead, mercury, arsenic, cadmium, beryllium, and other toxics into the ground. Meanwhile, a staggering volume of unused electronic gear sits in storage—about 180 million TVs, desktop PCs, and other components as of 2005, according to the EPA. Even if this obsolete equipment remains in attics and basements indefinitely, never reaching a landfill, this solution has its own, indirect impact on the environment. In addition to toxics, e-waste contains goodly amounts of silver, gold, and other valuable metals that are highly efficient conductors of electricity. In theory, recycling gold from old computer motherboards is far more efficient and less environmentally destructive than ripping it from the earth, often by surface-mining that imperils pristine rain forests.
Currently, less than 20 percent of e-waste entering the solid waste stream is channeled through companies that advertise themselves as recyclers, though the number is likely to rise as states like California crack down on landfill dumping. Yet recycling, under the current system, is less benign than it sounds. Dropping your old electronic gear off with a recycling company or at a municipal collection point does not guarantee that it will be safely disposed of. While some recyclers process the material with an eye toward minimizing pollution and health risks, many more sell it to brokers who ship it to the developing world, where environmental enforcement is weak. For people in countries on the front end of this arrangement, it’s a handy out-of-sight, out-of-mind solution.
Many governments, conscious that electronic waste wrongly handled damages the environment and human health, have tried to weave an international regulatory net. The 1989 Basel Convention, a 170-nation accord, requires that developed nations notify developing nations of incoming hazardous waste shipments. Environmental groups and many undeveloped nations called the terms too weak, and in 1995 protests led to an amendment known as the Basel Ban, which forbids hazardous waste shipments to poor countries. Though the ban has yet to take effect, the European Union has written the requirements into its laws.
The EU also requires manufacturers to shoulder the burden of safe disposal. Recently a new EU directive encourages “green design” of electronics, setting limits for allowable levels of lead, mercury, fire retardants, and other substances. Another directive requires manufacturers to set up infrastructure to collect e-waste and ensure responsible recycling—a strategy called take-back. In spite of these safeguards, untold tons of e-waste still slip out of European ports, on their way to the developing world.
In the United States, electronic waste has been less of a legislative priority. One of only three countries to sign but not ratify the Basel Convention (the other two are Haiti and Afghanistan), it does not require green design or take-back programs of manufacturers, though a few states have stepped in with their own laws. The U.S. approach, says Matthew Hale, EPA solid waste program director, is instead to encourage responsible recycling by working with industry—for instance, with a ratings system that rewards environmentally sound products with a seal of approval. “We’re definitely trying to channel market forces, and look for cooperative approaches and consensus standards,” Hale says.
The result of the federal hands-off policy is that the greater part of e-waste sent to domestic recyclers is shunted overseas.
“We in the developed world get the benefit from these devices,” says Jim Puckett, head of Basel Action Network, or BAN, a group that opposes hazardous waste shipments to developing nations. “But when our equipment becomes unusable, we externalize the real environmental costs and liabilities to the developing world.”
Asia is the center of much of the world’s high-tech manufacturing, and it is here the devices often return when they die. China in particular has long been the world’s electronics graveyard. With explosive growth in its manufacturing sector fueling demand, China’s ports have become conduits for recyclable scrap of every sort: steel, aluminum, plastic, even paper. By the mid-1980s, electronic waste began freely pouring into China as well, carrying the lucrative promise of the precious metals embedded in circuit boards.
Vandell Norwood, owner of Corona Visions, a recycling company in San Antonio, Texas, remembers when foreign scrap brokers began trolling for electronics to ship to China. Today he opposes the practice, but then it struck him and many other recyclers as a win-win situation. “They said this stuff was all going to get recycled and put back into use,” Norwood remembers brokers assuring him. “It seemed environmentally responsible. And it was profitable, because I was getting paid to have it taken off my hands.” Huge volumes of scrap electronics were shipped out, and the profits rolled in.
Photo: Basel Action Network
Any illusion of responsibility was shattered in 2002, the year Puckett’s group, BAN, released a documentary film that showed the reality of e-waste recycling in China. Exporting Harm focused on the town of Guiyu in Guangdong Province, adjacent to Hong Kong. Guiyu had become the dumping ground for massive quantities of electronic junk. BAN documented thousands of people—entire families, from young to old—engaged in dangerous practices like burning computer wire to expose copper, melting circuit boards in pots to extract lead and other metals, or dousing the boards in powerful acid to remove gold.
China had specifically prohibited the import of electronic waste in 2000, but that had not stopped the trade. After the worldwide publicity BAN’s film generated, however, the government lengthened the list of forbidden e-wastes and began pushing local governments to enforce the ban in earnest.
On a recent trip to Taizhou, a city in Zhejiang Province south of Shanghai that was another center of e-waste processing, I saw evidence of both the crackdown and its limits. Until a few years ago, the hill country outside Taizhou was the center of a huge but informal electronics disassembly industry that rivaled Guiyu’s. But these days, customs officials at the nearby Haimen and Ningbo ports—clearinghouses for massive volumes of metal scrap—are sniffing around incoming shipments for illegal hazardous waste.
High-tech scrap “imports here started in the 1990s and reached a peak in 2003,” says a high school teacher whose students tested the environment around Taizhou for toxics from e-waste. He requested anonymity from fear of local recyclers angry about the drop in business. “It has been falling since 2005 and now is hard to find.”
Today the salvagers operate in the shadows. Inside the open door of a house in a hillside village, a homeowner uses pliers to rip microchips and metal parts off a computer motherboard. A buyer will burn these pieces to recover copper. The man won’t reveal his name. “This business is illegal,” he admits, offering a cigarette. In the same village, several men huddle inside a shed, heating circuit boards over a flame to extract metal. Outside the door lies a pile of scorched boards. In another village a few miles away, a woman stacks up bags of circuit boards in her house. She shoos my translator and me away. Continuing through the hills, I see people tearing apart car batteries, alternators, and high-voltage cable for recycling, and others hauling aluminum scrap to an aging smelter. But I find no one else working with electronics. In Taizhou, at least, the e-waste business seems to be waning.
Yet for some people it is likely too late; a cycle of disease or disability is already in motion. In a spate of studies released last year, Chinese scientists documented the environmental plight of Guiyu, the site of the original BAN film. The air near some electronics salvage operations that remain open contains the highest amounts of dioxin measured anywhere in the world. Soils are saturated with the chemical, a probable carcinogen that may disrupt endocrine and immune function. High levels of flame retardants called PBDEs—common in electronics, and potentially damaging to fetal development even at very low levels—turned up in the blood of the electronics workers. The high school teacher in Taizhou says his students found high levels of PBDEs in plants and animals. Humans were also tested, but he was not at liberty to discuss the results.
China may someday succeed in curtailing electronic waste imports. But e-waste flows like water. Shipments that a few years ago might have gone to ports in Guangdong or Zhejiang Provinces can easily be diverted to friendlier environs in Thailand, Pakistan, or elsewhere. “It doesn’t help in a global sense for one place like China, or India, to become restrictive,” says David N. Pellow, an ethnic studies professor at the University of California, San Diego, who studies electronic waste from a social justice perspective. “The flow simply shifts as it takes the path of least resistance to the bottom.”
It is next to impossible to gauge how much e-waste is still being smuggled into China, diverted to other parts of Asia, or—increasingly—dumped in West African countries like Ghana, Nigeria, and Ivory Coast. At ground level, however, one can pick out single threads from this global toxic tapestry and follow them back to their source.
In Accra, Mike Anane, a local environmental journalist, takes me down to the seaport. Guards block us at the gate. But some truck drivers at a nearby gas station point us toward a shipment facility just up the street, where they say computers are often unloaded. There, in a storage yard, locals are opening a shipping container from Germany. Shoes, clothes, and handbags pour out onto the tarmac. Among the clutter: some battered Pentium 2 and 3 computers and monitors with cracked cases and missing knobs, all sitting in the rain. A man hears us asking questions. “You want computers?” he asks. “How many containers?”
Near the port I enter a garage-like building with a sign over the door: “Importers of British Used Goods.” Inside: more age-encrusted PCs, TVs, and audio components. According to the manager, the owner of the facility imports a 40-foot (12 meters) container every week. Working items go up for sale. Broken ones are sold for a pittance to scrap collectors.
All around the city, the sidewalks are choked with used electronics shops. In a suburb called Darkuman, a dim stall is stacked front to back with CRT monitors. These are valueless relics in wealthy countries, particularly hard to dispose of because of their high levels of lead and other toxics. Apparently no one wants them here, either. Some are monochrome, with tiny screens. Boys will soon be smashing them up in a scrap market.
A price tag on one of the monitors bears the label of a chain of Goodwill stores headquartered in Frederick, Maryland, a 45-minute drive from my house. A lot of people donate their old computers to charity organizations, believing they’re doing the right thing. I might well have done the same. I ask the proprietor of the shop where he got the monitors. He tells me his brother in Alexandria, Virginia, sent them. He sees no reason not to give me his brother’s phone number.
When his brother Baah finally returns my calls, he turns out not to be some shady character trying to avoid the press, but a maintenance man in an apartment complex, working 15-hour days fixing toilets and lights. To make ends meet, he tells me, he works nights and weekends exporting used computers to Ghana through his brother. A Pentium 3 brings $150 in Accra, and he can sometimes buy the machines for less than $10 on Internet liquidation websites—he favors private ones, but the U.S. General Services Administration runs one as well. Or he buys bulk loads from charity stores. (Managers of the Goodwill store whose monitor ended up in Ghana denied selling large quantities of computers to dealers.) Whatever the source, the profit margin on a working computer is substantial.
The catch: Nothing is guaranteed to work, and companies always try to unload junk. CRT monitors, though useless, are often part of the deal. Baah has neither time nor space to unpack and test his monthly loads. “You take it over there and half of them don’t work,” he says disgustedly. All you can do then is sell it to scrap people, he says. “What they do with it from that point, I don’t know nothing about it.”
Baah’s little exporting business is just one trickle in the cataract of e-waste flowing out of the U.S. and the rest of the developed world. In the long run, the only way to prevent it from flooding Accra, Taizhou, or a hundred other places is to carve a new, more responsible direction for it to flow in. A Tampa, Florida, company called Creative Recycling Systems has already begun.
The key to the company’s business model rumbles away at one end of a warehouse—a building-size machine operating not unlike an assembly line in reverse. “David” was what company president Jon Yob called the more than three-million-dollar investment in machines and processes when they were installed in 2006; Goliath is the towering stockpile of U.S. e-scrap. Today the machine’s steel teeth are chomping up audio and video components. Vacuum pressure and filters capture dust from the process. “The air that comes out is cleaner than the ambient air in the building,” vice president Joe Yob (Jon’s brother) bellows over the roar.
A conveyor belt transports material from the shredder through a series of sorting stations: vibrating screens of varying finenesses, magnets, a device to extract leaded glass, and an eddy current separator—akin to a reverse magnet, Yob says—that propels nonferrous metals like copper and aluminum into a bin, along with precious metals like gold, silver, and palladium. The most valuable product, shredded circuit boards, is shipped to a state-of-the-art smelter in Belgium specializing in precious-metals recycling. According to Yob, a four-foot-square (1.2-meter-square) box of the stuff can be worth as much as $10,000.
In Europe, where the recycling infrastructure is more developed, plant-size recycling machines like David are fairly common. So far, only three other American companies have such equipment. David can handle some 150 million pounds (68 million kilograms) of electronics a year; it wouldn’t take many more machines like it to process the entire country’s output of high-tech trash. But under current policies, pound for pound it is still more profitable to ship waste abroad than to process it safely at home. “We can?t compete economically with people who do it wrong, who ship it overseas,” Joe Yob says. Creative Recycling?s investment in David thus represents a gamble—one that could pay off if the EPA institutes a certification process for recyclers that would define minimum standards for the industry. Companies that rely mainly on export would have difficulty meeting such standards. The EPA is exploring certification options.
Ultimately, shipping e-waste overseas may be no bargain even for the developed world. In 2006, Jeffrey Weidenhamer, a chemist at Ashland University in Ohio, bought some cheap, Chinese-made jewelry at a local dollar store for his class to analyze. That the jewelry contained high amounts of lead was distressing, but hardly a surprise; Chinese-made leaded jewelry is all too commonly marketed in the U.S. More revealing were the amounts of copper and tin alloyed with the lead. As Weidenhamer and his colleague Michael Clement argued in a scientific paper published this past July, the proportions of these metals in some samples suggest their source was leaded solder used in the manufacture of electronic circuit boards.
“The U.S. right now is shipping large quantities of leaded materials to China, and China is the world’s major manufacturing center,” Weidenhamer says. “It’s not all that surprising things are coming full circle and now we’re getting contaminated products back.” In a global economy, out of sight will not stay out of mind for long.
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