Are Distributors Ready for Product End-of-Life Programs?

Despite the current administration’s shift away from sustainability and ESG (Environmental, Social, and Governance), many building products manufacturers continue to prioritize the adoption of greener practices. Among these is the integration of circularity into how items are disposed of when they arrive at the end of their lifecycle. In the context of PHCP and PVF, some argue that wholesalers are in an excellent position to facilitate — and even profit from — these efforts.

“[Wholesalers] sit at the center of this value chain in between the manufacturers and the contractors,” said Olaf Schatteman, global service leader for sustainable products and supply chain at ERM, a sustainability consultancy based in London, England, U.K. “They’re ideally placed to orchestrate these reverse flows and things like collection, storage, sorting and transportation because a lot of manufacturers don’t have that last mile distribution to construction sites.”

At Ferguson, a building products wholesaler with headquarters in Newport News, Va., Michael Wong, director of sustainability, relays that offering product end-of-life services is a given part of doing business with the company’s clients — especially when they’re replacing existing appliances with new equipment. In this scenario, they need someone to recover the old products and get rid of them properly.

“This has been really tied to what the customer needs,” Wong explained. “We’re getting more and more requests from larger customers that as a requirement of the job, they want to make sure that the units that they’re disposing of are getting disposed responsibly, or recycled.”

Participating in a product end-of-life program is one way wholesalers can differentiate themselves, argues Lisa Anderson, president of LMA Consulting Group, a supply chain-focused firm based in Claremont, Calif., and author of Future-Proofing Manufacturing & the Supply Chain Post COVID-19, and several other books.

“Distributors have to stand out from the crowd in order to be successful,” Anderson said. “The key is to make sure that your customers are served, but in a way [where] you don’t end up with a bunch of extra inventory, which is going to be extra cost.”

What product end-of-life programs can look like

According to Schatteman and his colleague, Beth Murphy, principal consultant at ERM, product end-of-life programs may be modeled in several ways. For example, a manufacturer may institute a take-back process wherein the distributor provides logistical support in the collection, and even delivery, of items that are destined for recycling or reuse. It may be a deposit return scheme that places a price on the materials that are being recuperated. Some industries, such as the automotive business, have embraced a product-as-a-service approach, which spans an item’s entire lifecycle.

“It would be the manufacturer [and] the wholesaler that would hold ownership of the product,” Murphy explained. “Essentially, [they] hold the value that is within that material instead of it just going into the typical linear route of landfill incineration and potential recycling.”

Making these programs work

The key to building a successful product end-of-life program is strong relations and communications between manufacturers, distributors, and contractors. For this to work, everyone must buy in.

“[It requires] engaging with customers so they know what can be returned, and helping them understand how things should be separated, what’s valuable, what’s not, [and] where different things should go,” Murphy said.

Murphy adds that the distributor’s employees — including counter staff, sales reps, and even drivers — need to be trained in how to handle these products as well. “There’s a big communication and engagement piece that needs to be in place,” she said.

It’s also necessary to draw up a contract between the manufacturer and distributor that stipulates things like guaranteed offtake. If this isn’t in place, Schatteman warns, distributors run the risk of housing items that they can’t get rid of. Additionally, he underlines the importance of providing incentives for contractors to participate in the program, or “otherwise it’s not going to happen.” This means that, for contractors, participating in a product end-of-life program should be relatively easy. “They don’t want to be hassled with complicated tools and forms. Make it really simple.”

It’s also necessary to establish a way to measure how effective the program is, Wong notes. “Make sure you’re very clear with what success looks like and how you can track it with metrics or targets,” he said. This provides concrete proof of how well it is or isn’t working, and if it’s the former case, stakeholders armed with this data can help the initiative gain more ground.

To get started, Schatteman advises distributors to roll out small pilot programs with one or two manufacturers. Murphy encourages wholesalers to lean on these partners for help with gathering sustainability data to make measuring success easier.

“They will have an understanding about emissions, and they should be incentivized [to help] because their Scope 3 emissions include their downstream and [product] end-of-life,” Murphy explained.

Making circularity simple

Pump and water solutions manufacturer Grundfos, headquartered in Bjerringbro, Denmark, has been running a product take-back program in collaboration with its European distributors for over a decade. Ninoslava Zvicer, divisional DBS EHS and plant FEHS senior manager at the company, explained that one of the main goals behind this program is to prevent old equipment from going to landfills.

“Usually, products like pumps and boilers will end up at scrap dealers [where] they are discarded and sold,” Zvicer said. “The good thing is that more companies like us are looking into how to [take their] own products back, and [how] to create more value from them, either through reuse or by recycling them properly.”

At its core, the Grundfos method is simple: it provides its wholesalers with collection boxes for products that have reached end-of-life. While the program is continent-wide, Zvicer noted that the company works with individual distributors — businesses that possess valuable local knowledge — to align messaging and education with the needs and concerns of the contractors operating in a specific region. This also applies to distributors, who may have limited space for storing collection boxes and require a more customized solution.

“We are flexible with the wholesalers [and will] adjust the program to make it fit a certain location and market,” Zvicer said.

Circularity as a business

If distributors view their product end-of-life program as something they can improvise, the likelihood of success is low. This approach can even wind up costing money.

“Don’t see it as an add-on and play it by ear,” Schatteman said. “Unless you set it up with its own strategy, with its own business plan, with its own dedicated team — and that could be very small if it’s a small wholesaler — it will fail, and it will become a mess,” Schatteman said.

Which would be a shame when retired products still contain valuable materials. This is why Murphy emphasizes the importance of building solid relationships with manufacturers and contractors. “It’s [about] working out how you can make the partnership work for all of the people involved,” she said. “And a lot of that is thinking about how this value can be shared to offset some of the effort that is involved in doing these schemes.”