September 20, 2005


By John Elkington and Mark Lee

Europeans are a wee bit funny when it comes to incubation. During the
Middle Ages, they obsessed about the threat from incubi, evil spirits
rumored to descend upon women and have their way with them as they
slept. Then (in the condensed version of history) came the New
Economy, and incubating was all the rage, at least in the Silicon
Valleys and Alleys across the Atlantic. Before long, most self-
respecting European cities had jumped on board, boasting sparkling
high-tech incubators too. Now the tables have turned entirely, and the
European Union -- far from its bod-fearing roots -- has emerged as a
leading incubator of new environmental rules and regulations.

Ah, the sweet sounds of electronics recycling.

This trend has a variety of firms in a frenzy. Two factors ensure that
the new laws aren't an issue only for E.U. companies. First, all those
wanting to play supply and demand in the region must comply. Second,
as California demonstrates in the U.S., there is a tendency for the
highest standards prevailing in any key market to dictate the wider
market's evolution -- as Europe goes, so might the world. So with
sweeping environmental controls coming into effect, some parts of
America, Inc. and Asia, Inc. are lying awake at night, plagued by
E.U.-inspired nightmares.

Most companies are preparing to face three major new eco-laws. They
all bear delightful acronyms: REACH (Registration, Evaluation, and
Assessment of Chemical Hazards); RoHS (Restriction of Hazardous
Substances); and WEEE (the directive on Waste Electronic and Electric
Equipment). All are complex pieces of legislation that will have an
impact on a vast spectrum of products, particularly electronics, that
are made, sold, used, and disposed of across 25 E.U. member countries.

The least assured of these three, REACH, is currently making the most
headlines. This proposed regulatory regime, still wending its way
through the European Parliament, would tighten requirements for
testing as many as 30,000 chemicals, including many already on the
market. The law has had chemical companies and their allies in a blue
funk for some time. Thomas Donohue, president of the U.S. Chamber of
Commerce, made his feelings known recently with typical American tact:
"We're going to sue the hell out of them on some of this stuff."

The other two laws have already passed, though they might still be
giving Donohue and friends bad dreams. RoHS, which was approved in
2003 and will come into force across the E.U. next July, aims to
squeeze six substances out of the E.U. economy: lead, mercury,
cadmium, hexavalent chromium, polybrominated biphenyls (PBBs), and
polybrominated diphenyl ethers (PBDEs). Its controls have left nearly
all electronics manufacturers fretting about how to build
semiconductors and other components without these important

Man, what a waste.

And then there's WEEE. For companies that manufacture things like TVs,
refrigerators, or cars, this law looms particularly large. Also
enacted in 2003, it went into effect last month, setting collection,
recycling, and recovery targets for electrical goods. This "take-back"
legislation has a lot going for it: It's fun to say. It has found
popular form in the shape of the 23-foot-tall, 3.5-ton, electronic-
waste WEEE Man in London. And it has relatively deep, albeit somewhat
questionable, roots in Europe.

Germany fathered the take-back industry in the early 1990s with its
fabled (or notorious, depending on your view) Ordinance on the
Avoidance of Packaging Waste -- or Verpackungsverordnung(!). This
program shunted the recycling costs of packaging materials back to the
companies that made the materials in the first place. It soon added
end-of-life accountability for the products themselves to the heap.
Unfortunately, Germany found itself sitting atop a mountain of
reclaimed materials it didn't know what to do with, and ended up
exporting a great deal to countries with less compunction about
burying the stuff. But the experiment was the first step in
encouraging companies to recover and reabsorb materials that once
would have disappeared into landfills.

Today, major companies from DuPont to Dell are among those affected by
the new legislation. Few public protests have been lodged by
individual companies so far; of course, much of the industry's
resistance to change goes on behind the scenes, through trade
associations. Brand-name companies tend to be particularly leery about
speaking out against green initiatives, for fear of upsetting
consumers or triggering NGO attacks (a topic for another day).

Ultimately, Europe's actions raise a number of major questions. Will
the new directives genuinely address the underlying environmental
challenges? Will they win the support of non-E.U. companies that must
now invest in some of the take-back and recycling infrastructure that
will be needed? And will they even stick around long enough to make a

On the first question, the jury's out. On the second, the answer is
reasonably certain: once it is clear which rules are here to stay, big
companies generally do what is asked. During the battle over the
environmental-management standards known as ISO 14000, Japanese and
South Korean exporters led the charge; they were determined to stop
environmental issues from being used against them as de facto trade
barriers. (Indeed, it's a paradox that non-E.U. companies that have
invested over decades in their E.U. footholds tend to be better
"Europeans" than many natives.)

On the third question, only time will tell. E.U. Environment
Commissioner Stavros Dimas has been under intense pressure from fellow
commissioners to stem the flow of new environmental laws. So far, he
has largely managed to fight them off. But economic downturn and
eastward expansion are blunting the appetite for new legislation, and
European Commission President Jose Manuel Barroso has just launched
the region's biggest-ever deregulation campaign, promising to scrap
more than 60 draft E.U. laws.

While some may hope that Barroso's rollback effort will limit the
scope of responsibility they face inside the E.U., we don't see his
initiative as an unmitigated disaster for the environment. If the
region is to successfully incubate tomorrow's global rules,
environmental issues must be weighed against political and economic
health. There's a balance to be struck -- and, while it is clearly
trying to push the envelope, the E.U. hasn't got it right yet. In the
meantime, we have our dream: that industry will moderate its reflex
lobbying against new laws like REACH, RoHS, and WEEE, and begin to
view them as a form of market research instead. A world of opportunity