The hidden cost of Weee

Poor auditing could cause confusion when it comes time to work out exactly who should dispose of Weee - which in turn could lead to fines for those not taking responsibility, warns Keith Dolby

The implications of the Waste Electrical and Electronic Equipment (Weee) directive seem to have passed unnoticed by the majority of UK businesses. And why not? The legislation states that the onus of disposal rests with suppliers and distributors.

But endemic poor asset management means this burden will pass directly to the bottom line. With upwards of 10% of assets on the register typically no longer in existence, and the lack of component level recording, businesses will struggle to identify original suppliers and provide an audit trail through to disposal.

The result will be expensive Weee compliant disposal, potential fines and negative publicity. Weee may be touted as a cost for suppliers, but unless organisations get their asset registers in order, it will also create a significant cost for UK business.

Supplier burden
Businesses are keen to publicise their green credentials, and such policies have a firm economic footing. Green strategies appeal to voters and consumers alike - but only if the cost is viable. Overburden the public with cost, and it will take more than a picture of a polar bear to re-energise widespread environmental concern.

So it is no surprise that the Weee directive carefully placed the responsibility with the suppliers and distributors. It aims to minimise the impact of such goods by increasing reuse and recycling and reducing the amount going to landfill.

It hopes to achieve this by making producers responsible for financing the collection, treatment and recovery of waste electrical equipment, and by obliging distributors to allow consumers to return their waste equipment free of charge.

But such policies assume a level of asset management beyond most UK business.

Unless supplying a like-for-like replacement, suppliers will only dispose of equipment they have delivered in the first place. How many businesses can accurately identify the location of their Weee equipment within the organisation, let alone confirm when it was purchased and from whom? Yet, without such information, just which company do they expect to handle the disposal?

Lost assets
The asset registers of most UK businesses are appaling. A full audit of goods reveals that at least 10% of assets recorded no longer exist. Only 40% of the assets can typically be identified - the rest have been moved and/or upgraded without any record being made.

This means that on the average 2,000-item asset register, around 200 items have been disposed of but are still recorded as in use. And while the finance team has already depreciated these assets to zero so that they have no impact on the balance sheet, it will certainly matter when the organisation is asked to prove the items were disposed of correctly.

And the figures are far worse for Weee equipment. With prices for such equipment currently at an all time low, few individual items reach the typical £1,000-£1,500 minimum capitalisation threshold, so are not required to be held individually on the asset register. Instead, finance departments consolidate such purchases into one single entry.

Furthermore, most companies typically switch supplier regularly to reflect changes in pricing and availability. Yet, while these items are recorded as one bulk purchase, they are unlikely to be disposed of simultaneously. Equipment breaks, is refurbished and moves locations - information that cannot be recorded without an individual asset number.

When disposal is due, how is a company to prove the identity of the original supplier? Without such knowledge, the liability will be on the organisation to arrange and pay for Weee-compliant disposal.

The penalties for failure to meet the Weee directive are not insignificant. Guilty producers, distributors and operators can be liable to a fine of up to £5,000 per offence on summary conviction in the Magistrates Court or an unlimited fine imposed by the Crown Court. Directors and managers can also be prosecuted if they consent to, or participate in, the offence, or if their neglect led to an offence.

If organisations are to avoid fines and expensive disposal with one of the multiplicity of firms recently set up to support this burgeoning market, they need to create an accurate, detailed asset register.

The first step has to be a full audit. Next year, any missing assets will be deemed to have been disposed of without following the proper procedures since the company will have no valid certificate. The finance director will be faced with the unpleasant choice of admitting the company has no accurate picture of its own assets or accepting a fine. Neither option will amuse the shareholders.

Once the audit has been conducted, organisations need to implement asset disposal procedures. Linking the asset register to a document management system will ensure a Weee certificate can be linked to a disposed asset, providing the required audit trail. Each asset can be recorded alongside the supplier's name and email address, enabling swift contact when disposal is due.

Critically, an accurate, up-to-date register can also deliver an immediate return on investment, including a reduction in insurance premiums. Recording the cost of asset disposal will also improve a company's understanding of the total cost of each asset - and the true financial implications of the Weee directive.

Compliance overload
UK business is already complaining about red tape. But a belief that the onus of Weee is firmly on equipment suppliers could be an expensive mistake.

There are many reasons for an organisation to clean up its asset register. But, without doubt, those organisations that persist in inaccurate and bulk recording of assets will rapidly discover the true cost of this initiative.

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