Is it safer to wait and see, follow the crowd or proactively shape the landscape? It depends whether you’re resigned to the fate of the dodo. Back in 2011, when companies were confronted with sustainability legislation that drastically changed their landscape – and bottom line – our message to them was: Don’t be a dodo or a sheep. Be an owl. 

Today, with a new wave of sustainability-related regulations and sweeping changes to existing ones, our advice remains relevant: Proactively look in all directions – like an owl – for changes in legislation and solutions, or risk extinction. 

That said, effecting change alone is hard. We’ve seen companies tap on the wisdom of the collective to shape the landscape and in doing so, lower the costs of compliance and even generate new revenue streams. How did they do it?

Know your regulations

At the turn of the millennium, discarded electrical and electronic equipment was growing at an alarming rate, as was the associated environmental and health risks. This prompted the European Union to put in place the Waste from Electrical and Electronic Equipment (WEEE) Directive in 2002. The implementation of the policy on the basis of extended producer responsibility mandates that manufacturers shoulder the costs of collecting and proper disposal (e.g. recycling) of their used products.

In principle, these could go a long way in addressing the harms of irresponsible waste disposal. But they didn’t create a level playing field for all producers, not when the loudest voices of influential companies and the industry associations were advocating for collective producer responsibility. 

Splitting the end-of-life costs of all items in a product category equally among all manufacturers was hardly feasible and could be unfair since producers had different product designs, margins and revenue scales. Many were already grappling with thin profit margins and could face existential issues with the additional costs. 

Moreover, if costs were shared equally without accounting for product design variations, companies would have no incentive to make durable products that can be repaired and recycled. If instead, individual producers are responsible only for their own products, they may be motivated to modify the design of their products to enhance environmental performance. 

A fairer form of producerresponsibility system was and will always be needed to better balance the needs of all parties and the planet. 

Harness the power of the ecosystem

At the time (as it is today), the sustainability landscape was too complex for a single company to navigate, let alone shape regulations at the European level. In 2002, united by the goal of exploring an alternative to the collective responsibility model, an informal coalition was formed among multiple European electrical and electronic equipment manufacturers. 

They sought to better understand the WEEE landscape in Europe and gain diverse perspectives by engaging with European policymakers, as well as NGOs and national industry associations. To facilitate these exchanges, they came to us. Kieren Mayers, then with Sony Europe and now an executive-in-residence at INSEAD’s Sustainable Business Initiative, worked with us to initiate the INSEAD WEEE Forum. Almost every quarter between 2003 and 2006, representatives from some 70 electronics, manufacturers, NGOs, trade associations, recycling companies and governments came together to try to understand each other’s perspectives, debating market-share systems, return-based systems, “orphan waste”, and the nuts and bolts of WEEE.  

The Forum and related workshops equipped them with the perspectives and knowledge to become a more effective force in their policy discussions. One of the tangible outcomes was a carefully worded commitment to the principles of individual responsibility written into the WEEE directive, which remained in the recast version in 2012.

These dialogues also left their imprint in other ways. As the host and enabler, INSEAD not only influenced the outcomes, but also benefited from the creation of knowledge with practical impact, which we continue to teach in class to future business leaders till this day. 

Think out of the box beyond compliance 

When it comes to on-the-ground implementation of the directive, while basic recycling infrastructure was already in place in most European countries, they were mostly operated by monopolies controlled by states, local authorities or trade associations often helmed by ex-politicians. In the interest of containing the costs of compliance, these recycling infrastructures would not do. Not when monopolies set the price. 

A pan-European structure that brings economies of scale could work – except no such organisation existed then. But a seed was planted by some of the companies in the INSEAD WEEE Forum. Following policy discussions, a non-monopolistic clause was written into national laws, such as in the UK, which gives producers the right to exit monopolistic arrangements. 

This paved the way for cost-competitive alternatives. As the prices of raw material continued to rise, a forward-looking coalition between Braun, Electrolux, HP and Sony was convinced that resource recovery would not only help to contain compliance costs, but was also economically viable. A joint venture between their companies was born. 

By the time the WEEE Directive came into effect, the allies-turned-entrepreneurs had established a continent-wide collection, recycling and compliance service provider known as the European Recycling Platform (ERP). They sought to create value for manufacturers bound by the WEEE Directive by creating scale and flexibility in recycling operations as they built a profitable business. Operating from Ireland and Austria, ERP served most EU member states and tailored its operating model to the regulation in each jurisdiction and the state of local recycling infrastructure.

By 2010, ERP had a WEEE and battery compliance service market share of 25% in Europe, more than 2,000 customers and €100 million in turnover. In 2014, the business was acquired by Landbell Group  and continued to grow, diversifying from electronics and batteries to the packaging and textile industries.

The value of being at the table

The impact of environmental legislation on the electronics industry demonstrates the need for companies to be competent as both market and political actors. Companies facing environmental legislation must try to be like owls, mobilising their networks and resources to exert political influence as early as possible.

This is especially important when rules seem intuitive to regulators but counterintuitive to industry players. We can’t assume that they’ll always be fair. In the case of WEEE, the updated directive assigned costs to producers based on the weight of their products and their current market share. While this formula was by no means fair to all producers, it has come a long way thanks to a coalition of proactive producers. Not only does it allow flexible implementation and hence more equitable cost-sharing, it also incentivises producers to develop more sustainable product designs. 

Even though the sustainability reporting and due diligence directives in the European regulatory landscape may appear to have lost steam in the last year, there is more to come. This landscape will keep evolving and impact different sectors. For instance, the EU’s Ecodesign for Sustainable Products Regulation passed in February bans the destruction of unsold apparel, clothing, accessories and footwear which generates around 5.6 million tonnes of CO2 emissions each year. The EU’s Biodiversity Strategy for 2030 to protect nature and reverse the degradation of ecosystems is in the works. 

As more rules emerge, smart companies – the owls as we like to call them – will identify allies and be ready to proactively shape the agenda and look for new opportunities that new disruptions invariably offer.