Disposal of Old Computer Equipment
A Mounting Environmental Problem

By Michael J. Meyer, Waleed Abu El Ella, and Ronald M. Young

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Most organizations have been collecting obsolete computers for years. The U.S. Environmental Protection Agency (EPA) has estimated that 45 million computers will become obsolete annually by 2005. California, Massachusetts, and Minnesota have already outlawed the disposal of computer waste in landfills; in 2003 alone, 23 states initiated legislation to address the mounting problem of computer waste (Exhibit).

Most of the environmental concerns with computers lie with the monitor, specifically its cathode ray tube (CRT). Each color monitor contains, on average, four to five pounds of lead, considered hazardous waste when disposed of, according to EPA standards. Computers also contain other hazardous materials, including mercury, cadmium (a known carcinogen), and hexavalent chromium (shown to cause high blood pressure, iron-poor blood, liver disease, and nerve and brain damage in animals). The Utah Department of Environmental Quality estimates that 314 million computers will be thrown away by the end of 2004, containing 1.2 billion pounds of lead, 2 million pounds of cadmium, 1.2 million pounds of hexavalent chromium, and 400,000 pounds of mercury.

Imagine a worst-case scenario: Groundwater near a landfill becomes contaminated. In a search for potentially responsible parties, a company that had disposed of computers at the site (identified by a control tag or manufacturer’s number) could be subject to potentially costly criminal and civil litigation (i.e., SARA, formerly CERCLA, litigation). All of this could happen even if the organization had donated the equipment to a charity or paid a company to recycle it.

Federal Environmental Law

The Resource Conservation and Recovery Act (RCRA) has been updated recently to include guidelines regarding the disposal of computer monitors. Computer monitors are different from most computer equipment because of the concentration of lead: 27% of the weight of a CRT monitor is due to its lead content. The threshold for establishing refuse as hazardous waste is the toxicity characteristic leaching procedure (TCLP) of the waste. The EPA guidelines indicate that waste having a TCLP of 5mg/l of lead qualifies as hazardous waste. Color monitors have on average 18.5mg/l of lead—more than
3 Qs times this threshold.

The RCRA classifies waste generators into four categories: households; conditionally exempt small quantity generators (CESQG); small quantity generators (SQG); and large quantity generators (LQG). In general, all households are exempt from federal EPA rules regarding computer disposal (although state regulations often include households). Organizations disposing of less than 100 kg (220 lbs) of hazardous waste in a month are classified as CESQG; those dumping between 100 kg and 1,000 kg (2,200 lbs) are classified as SQG; and those dumping more than 1,000 kg are classified as LQG.

CESQG organizations are exempt from most of the RCRA disposal standards. If a company disposes of more than seven to eight monitors in a given month, it may exceed the threshold and be classified as an SQG. In that case, the organization will be required to follow many of the hazardous waste standards set forth in the RCRA. These standards include documentation of proper recycling (including manifesting each disposal), which can be expensive. LQG organizations face the most restrictions and costs.

As an example of the documentation requirement set forth by the EPA, in 2000 AT&T agreed to pay a penalty of $195,000 for not properly responding to an agency request for information about its computer-disposal practices. An investigation by the EPA was initiated by a tip that a New Jersey plant was incinerating hazardous waste, including computers and other equipment. Although AT&T eventually provided all of the information requested, the EPA believed that the company did not fully answer inquiries about how it managed waste computers and electrical equipment in a timely manner.

It is important to note that the RCRA rules regarding computer disposal are restricted to landfilling. Disposal usually does not include recycling, donations, or trade-ins. An organization, therefore, comes under the auspices of the RCRA only if it chooses to throw away its old equipment.

State Environmental Laws

State regulations regarding computer equipment disposal vary considerably. Some states (e.g., California, Massachusetts, and Minnesota) have made it illegal to landfill computer monitors, and nine states have proposed legislation to ban landfill disposal of all computer equipment. Most states have no regulations to date, though in 2003, 23 states had proposed some form of legislation regarding the disposal of computer equipment (see the Exhibit). Besides banning landfill disposal, some states have considered additional taxes, called advanced recycling fees, ranging from $5 to $50, on purchases of computer equipment. Furthermore, some states have imposed restrictions on computer sellers, requiring them to have trade-in programs in place before doing business. States are clearly sensitive to the issue, and additional regulation is almost certain in the coming years.

Developing a Disposal Plan

To ensure that they do not find themselves in violation of RCRA, organizations should develop a plan for the proper disposal of computer equipment.

The first step is to realize that most computer equipment that is stored “for a rainy day” will almost certainly never get used. By the time this equipment is finally disposed of, its value will have been greatly diminished. So it is necessary for an organization to take a full inventory of all computer equipment. Any equipment not likely to be used again should be tagged for disposal. The used equipment that can be sold or given away should be sold or given away immediately. Equipment with little or no value (e.g., dot matrix printers, broken monitors, pre-Pentium computers) should be sent to a reputable recycler. Some municipalities have a disposal center where obsolete computer equipment can be disposed of. When planning to upgrade to new computer equipment, take advantage of manufacturer trade-in programs, which can reduce the combined cost of acquiring new equipment and responsibly disposing of old equipment. This assessment should be done regularly to ensure that old computer equipment does not pile up.

In addition to its environmental benefits, a well-defined plan for disposing of computer assets can help a company financially. Assets not contributing to productivity should be disposed of, because they can become a drag on return on investment (ROI). Not only does disposal reduce the average investment (denominator of ROI), it can also improve net income through gains on sales or reductions in tax payments (numerator of ROI).

Options for Disposal

After upgrading computer systems, most organizations store their old computers, which serve as backup equipment in case newer computers break down. These old computers often sit in storage well beyond their potential useful life. At some point, a decision must be made about disposal of this equipment. Continuing to store it is often not a viable option, because it eventually takes up a considerable amount of space. The least desirable option is to throw old computers in the garbage. Not only are there the potential liabilities and disposal costs imposed by state and federal environmental agencies, there is also the possibility of someone removing hard drives and recovering sensitive data. There are three better options available: reuse, recycle, and trade-in.

Reuse. The term “reuse” refers to giving (or selling) computers to someone or some other organization to use. Computers are often sold on a secondary market, given (or sold) to employees, or donated to charitable organizations and schools. Selling computers on a secondary market can become a burden. The most popular options include selling through advertising or an Internet auction site. Regardless of the method, an organization must carefully assess whether the employee time and effort necessary to sell these computers is worth it. In most cases, the value of a used computer is far less than managers perceive. The original purchase price should be viewed as a sunk cost, leaving as the only relevant consideration the marginal benefit versus the marginal cost.

There are several advantages to giving (or selling at a significant discount) older computers to employees. In an age of job-hopping, this additional benefit may reflect a commitment by management to employees, garnering greater employee loyalty. Employers should be careful, in documenting the exchange, to avoid creating a taxable benefit.

Donating computers to charitable organizations and schools provides a company with tax benefits that may exceed the expected realizable value from selling the computers via a secondary market. There are many private and public organizations willing to help businesses donate their computers. Valuing computer equipment for tax purposes requires using fair market value; guidelines can be found in IRS Publications 561 and 526. Also, secondary market auction sites, such as eBay and Amazon.com, can provide support for valuing computers for tax purposes. Federal and state tax credits are available for certain donations of computers by corporations to schools.

Recycle. Depending on the state, recycling computers can be simple or difficult. In states that have bans on landfilling (California, Massachusetts, and Minnesota), recycling programs are well organized. In most states, however, finding a place to recycle old computer equipment can be difficult. Moreover, reputable recycling companies usually charge a fee for pick-up and the requisite documentation to show that the computers were appropriately recycled. The savings from using a nonreputable recycler, however, are generally not worth the attendant risk if the computers are not properly disposed of.

Recycling is the best option for computers that are extremely old (pre-Pentium) or broken, especially monitors. In states that have voluntary recycling programs, local municipalities are in charge of setting up convenient drop-off locations for computers. Some municipalities have monthly, quarterly, or annual computer recycling days in which they provide for the collection or pick-up of old computer equipment.

Trade-in. Most major computer manufacturers (e.g., Dell, Gateway, HP/Compaq) have trade-in programs. For example, Dell has a program (DellExchange) that facilitates Dell customers donating, trading, or selling used Dell computers. Gateway’s program provides individuals who donate their used computer a $25 to $50 cash refund. HP/Compaq’s trade-in program provides a refund check for the value of a computer, if the computer is traded in on the purchase of a new HP/Compaq computer.

Recent proposed state legislation has forced manufacturers to implement trade-in programs. For example, California has proposed legislation that would require manufacturers that sell any computer within California to develop, finance, and implement an “e-waste recovery system” for the collection, handling, transportation, processing, recovery, reuse, and recycling of the devices sold by that producer.

Considerations

Regardless of how old computers are disposed of, there are several important steps to take before handing them over. First, remove the hard drive or reformat it. Simply deleting files does not prevent them from being recovered from the hard drive; sometimes, files can even be retrieved from reformatted drives. Next, evaluate software license agreements to determine if they preclude transfer of the software along with the computer.

It is important to remove all company insignia and inventory control tags from computers to be disposed of. Removing company insignia and control tags can hamper hackers from identifying to which company any recovered information belongs.

If possible, have the recipient of the used computer equipment sign an agreement accepting responsibility for its proper disposal. This is necessary whether it is sold, given to an employee, or donated. In the event of future litigation, this documentation supports the position that the recipient has accepted responsibility for the equipment’s disposal.

Recycling companies should also provide written documentation of the proper disposal of computer equipment. If a recycling company cannot or will not provide such documentation, this could be a sign that it is not a reputable company. Finally, a written record of all disposed-of computers should track the serial number, description, method of disposal, and date of disposal. This information should be kept with all other documentation regarding computer disposal.


Michael J. Meyer, DBA, is an assistant professor at the University of New Orleans. Waleed Abu El Ella is a graduate student at the University of New Orleans. Ronald M. Young, CPA, PhD, is an associate professor at the University of New Orleans.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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