July/August 2019
By Amanda Abrams
Photographs by Steve Babul jak
For decades, AERC split its operations between universal waste processing and electronics recycling. Today, the company sees IT asset management as its future.
AERC was at a crossroads. With locations on the East and West coasts, it processed universal waste and was also getting serious about IT asset disposition. The question was, which one should it lead with? “Do we want to position AERC as a universal waste company that handles electronics, or as a high-end [IT] asset management company that also does universal waste?” Mark Kasper, AERC’s chief operating officer, says of the decision the company faced. He also had the responsibility of integrating AERC into Clean Earth, a company that provides a wide array of remediation, disposal, recycling, and beneficial reuse services for both hazardous and nonhazardous materials. “That’s the pivot—it can be both, but we need to lead with one.”
The answer, the company decided, is ITAD. AERC is focusing intensively on acquiring, wiping, refurbishing, and selling used consumer electronics, and it’s beefing up its West Coast facilities that perform such work. Universal waste will remain one of the company’s key functions, but ITAD is its future. Given the growing ubiquity of electronics in our lives, Kasper says, “there will never be an end to that demand.”
Leading with lamps
Founded in 1992 as the Advanced Environmental Recycling Corp. in Allentown, Pa., AERC now has five locations around the country and more than 100 employees. Every month, the company recycles roughly 1.5 million pounds of electronics and another 2 million pounds of universal waste.
Its origins were as the research and development wing of another company, Advanced Environmental Technology Corp., to study options for mercury recycling and disposal. It acquired its first machine for recycling fluorescent light bulbs, or lamps, shortly after. Thus, processing universal waste—specifically fluorescent bulbs—is in its DNA, and it has invested heavily in that side of the business.
In late 2016, AERC acquired lamp processing technology from Balcan Engineering for its facility in Hayward, Calif. Imported from Balcan’s manufacturing plant in England, it’s the only machine of its kind in California and one of only about 40 in the country, the company says; it has a second one in Allentown near its headquarters. “Balcan engineers came over from England to install the machine, a process that took two weeks, but the expense was more than justified,” Kasper says. “It’s almost a paradigm shift, how it processes bulbs,” in terms of its speed and flexibility, he says.
The 7,000-square-foot Hayward facility handles fluorescent lamps, batteries, and electronics, and it receives shipments from all over the West Coast. Some lamp deliveries come straight from the users; other arrive courtesy of third parties that collect bulbs from Target, Walgreens, and other retailers. For each shipment, “we receive it, weigh it, get it in the system, and verify it,” explains Chendy Chea, the facility manager. AERC carefully monitors every shipment that arrives so that its customers can track exactly where the lamps went and what happened to the hazardous materials they contained.
An enormous blue machine, roughly 48 feet long and 29 feet wide, the Balcan has two sections: one for linear fluorescent tubes and the other for other shapes of bulbs, including compact fluorescents. The first section can process at least 5,000 tubes per hour. Within about seven minutes, the machine crushes, cleans, and separates the aluminum end caps and glass particles; vacuum tubes collect the mercury-containing powder. All of it gets recycled. The mercury powder is cooked and rendered inert; an AERC partner in the Midwest uses a proprietary process to extract from the inert mercury rare earth elements like cerium, europium, and gadolinium, which can be used by weapons manufacturers and other advanced technology companies.
As lucrative as the lamps are, they’re a vanishing breed. “Companies are changing to LEDs,” says Juventino Barajas, the facility’s universal waste supervisor, and the Balcan is not designed to handle them. “They’re plastic and aluminum; they’ll shut it down.” In another 10 or 12 years, Kasper estimates, fluorescent lamps will be largely gone, which means AERC—like any forward-thinking scrap company—needed to redefine its focus.
Electronics processing evolution
AERC has been recycling used electronics for almost as long as it’s been recycling fluorescent lamps. An Allentown subsidiary of AERC, Com-Cycle, began processing computers and related equipment around 2000. In 2013, Com-Cycle was absorbed into AERC. Like most electronics recyclers in the early 2000s, the company was largely focused on shredding used computer equipment and other technology and selling the commodities. But a shift occurred around 2013. “A lot of the end-of-life [electronics processors] started to go out of business because commodities took a turn; people were chasing that volume for no money,” Kasper says.
That’s when IT asset disposition (also called IT asset management) grew in importance for the company and the industry. As most electronics recyclers have recognized, there’s far more money to be made in data destruction, refurbishing and reselling electronic products, and dismantling equipment and selling the parts than there is in selling the scrap commodities these products contain.
According to a 2016 report by research firm MarketsandMarkets (Northbrook, Ill.), the ITAD market is forecast to double in size between 2015 and 2022, growing from $10 billion to $20 billion. Even now the margins are remarkably good: as high as 30 to 40 percent, AERC leaders say. Roughly 40 percent of AERC’s efforts are focused on ITAD right now, but that will change in the future, Kasper says. “Our No. 1 focus now is to grow that part of the business.”
In recent years AERC has consolidated its operations. Today, its Richmond, Va., facility serves as a hub for the company’s East Coast ITAD activities. And last year AERC opened its Modesto, Calif., facility, which is the heart of its West Coast activities. Well east of Silicon Valley and San Francisco and that region’s sky-high real estate prices, the 32,500-square-foot building is still close enough to easily receive shipments from the thousands of companies in Northern California that prioritize having the best, most up-to-date technology.
The Modesto facility is still ramping up its operations. “It’s in its adolescence,” Kasper says. Chea, the Hayward facility manager, also oversees activities at the Modesto site. AERC hired him and Matt Anderson, program manager of electronics, to jointly establish the facility’s work processes. Together, they have more than 10 years’ experience in the ITAD industry. Kasper says he gave Chea and Anderson a free hand to design the flow of goods within the warehouse in whatever way made the most sense. One of the first things they focused on was security, something that’s essential to current and potential clients. Exit doors are alarmed, security cameras monitor the facility inside and out, and parts of the facility—particularly areas that contain devices with sensitive data—are restricted by badge access to just the employees trained to work in that area.
Right now AERC does not use all of the space in its Modesto facility for data destruction, refurbishment, and resale. It devotes a large portion to universal waste, including cathode-ray tubes and lithium batteries, which workers carefully package and send to downstream processors. AERC and its auditors monitor the disposition of those and other focus materials to ensure the downstream companies handle them responsibly. End-of-life electronic products are here, too; the company demanufactures them and ships them to vetted, approved downstream processors.
The company is an authorized participant in California’s state electronics recycling program, which charges members of the public an advanced recycling fee when they buy certain new electronic products—most notably computers, monitors, and televisions. Some of the collected funds go to participating recyclers. It’s not a focus for the company, but Kasper says the program is a good one, with manufacturers ultimately paying the transportation and processing costs. The law requires participating processors to keep meticulous records about what they accept and how they manage those products, most of which are too old for refurbishment
and resale.
It’s the other side of the facility that has the most potential, Kasper says. That’s where newer computers and other electronic products arrive and AERC employees record, sort, sanitize, repair, clean, and market them. In February, the company was waiting for permits from the city to finish setting up the shredder and to build a separate, temperature-controlled room with racks that can process thousands of hard drives every day. They expect to complete that work by the end of the third quarter this year. A host server simultaneously collects registration information from laptops, desktops, and servers and wipes them clean of data. The setup currently handles 100 units at a time, but it has the flexibility to scale up almost instantaneously, he says.
“The software to do this is highly customizable,” Anderson says. “We wipe data according to [National Institute of Standards and Technology] standards, but the software can wipe to a number of other standards, including Department of Defense standards.” Customers tend to be quite apprehensive about data security; many wrongly believe it’s very difficult to completely destroy data, he says. AERC can provide certificates for each drive showing the method used to wipe it, the results, and other details.
After the data destruction process, employees test, repair, and/or upgrade the products, installing more memory or new operating systems in some cases. After that, they go up for sale, either directly to buyers like school systems and nonprofit organizations that don’t require the most recent hardware, or to wholesalers that might sell them anywhere in the world. “For things where we think we can get a higher price, we do direct sales through eBay,” Anderson says. “We can carve out the high-value stuff”—networking equipment, for example, which can fetch a particularly good price—“and have it sold by the end of the day.”
In cases where a company is so security-conscious that it refuses to let its computers be reused, or when a component is particularly valuable, AERC employees will destroy the data and dismantle the device, harvesting parts for resale if the customer allows it.
While the Modesto facility is reaching out to tech firms with high-end computers, it’s also focusing on other types of companies, such as banks, hospitals, and law firms, all of which work with sophisticated machines full of sensitive data. The possibilities for data destruction and remarketing are huge.
The bigger picture
AERC is continually working to improve its processes, particularly in ITAD, at the still-new Modesto facility. Chea and Anderson have set up a Gemba board—a visual management tool used in lean manufacturing processes—that lists categories including quality, delivery, inventory, and safety. Every day, they invite each division to measure and examine its strengths and weaknesses. “This is to hold each team accountable,” Chea says. “It’s about culture-building, tracking how we’re doing: Are we hitting our goals?” Both men say that AERC demands that they think creatively, particularly at the Modesto site, which is quickly expanding. “We’re learning as we grow,” Anderson says. “I think employees really want to be challenged—and if they don’t, they won’t last.”
One goal is standardize the processes across the Modesto and Richmond facilities—to use the same data destruction software, for example, so they can easily integrate the two operations. Another is to pursue National Association for Information Destruction AAA certification for data destruction at the Modesto facility this year. AERC’s Allentown processing facility already has that certification, and all of the company’s locations are R2/RIOS certified.
And then there’s the biggest challenge: integrating AERC into Clean Earth so that it operates under the Clean Earth brand. “We’re rebranding everything: signs, e-mails, webpage,” Kasper says. That will mean consolidating workers and procedures and communicating to customers that the name has changed and the portfolio of services has expanded. Compared with AERC, Clean Earth is huge: 27 locations, more than 600 employees, and $267 million in revenues in 2018. Most of Clean Earth’s operations focus on hazardous waste and contaminated soil remediation. But Kasper says Clean Earth is fully on board with AERC’s increased focus on ITAD, which is a new direction for the company. “They’re giving us everything we need in terms of capital, equipment, and personnel because they see the growth potential in this space,” Kasper says. It just a matter of time and effort, he says. “There’s room to grow. But we want to do it the right way.”
Amanda Abrams is a freelance writer based in Durham, N.C.