Striking gold, silver, more in mountains of e-waste

Nashville’s S3 Recycling is mining millions on your old electronics

Friday, June 15, 2018, Vol. 42, No. 24
By Jeannie Naujeck

Americans love new gadgets. Through planned obsolescence or seductive marketing, companies like Apple encourage us to upgrade every year or so to a faster and smarter phone, tablet or laptop.

And we bite.

Consumers will spend more than $350 billion this year on items like smart phones, computers, wearables, drones, smart speakers, 4K televisions and virtual reality devices, the Consumer Technology Association reports.

But when it’s time for an upgrade, where do old devices go?

Most end up in the landfill, where metals and chemicals such as lead and mercury can potentially poison the soil and water supply. Electronic waste is the fastest-growing waste stream on the planet – Americans produce more of it than any other country – and only about 15 percent of e-waste is captured before it goes into the dump.

One Nashville company sees opportunity in recycled junk.

Electronics recycler S3 Recycling Solutions is growing exponentially by contracting with corporations and government entities to get rid of their e-waste.

And in most cases, it’s not waste at all but perfectly good, reusable equipment with plenty of life left.

“We help businesses recycle their end-of-life IT assets and dispose of them in an environmentally friendly way,” says Rod McDaniel, S3 president and CEO.

“We take pretty much anything electronic that plugs into the wall.”

Recyclers like S3 – the 3 S’s stand for stewardship, security and sustainability – repair, refurbish and resell functioning electronics and medical equipment as used products into domestic and international markets.

When clients such as Nissan and the Tennessee Valley Authority decide to upgrade their corporate servers, computers and other devices, S3 not only takes the equipment off their hands but does the work of scrubbing data off hard drives in accordance with privacy standards, then resells the devices through online outlets like eBay and Amazon. Profits are split with the client, which helps offset the cost of recycling.

S3 is a power seller on eBay, moving 600-700 items a month on the site, and it sells in bulk to other companies such as rural hospitals that can’t afford brand-new equipment but can purchase used machines that are still perfectly functional.

On a recent visit, rows of dialysis machines were lined up awaiting shipment to a small health care facility. They came from Vanderbilt University Medical Center, a high-volume academic hospital that refreshes its medical technology frequently to stay on the cutting edge of health care.

But many small hospitals don’t have the budget for such upgrades. For them, the opportunity to purchase used equipment for a fraction of the cost of new is a significant boon to their budgets, and their ability to treat patients.

“People don’t realize that rural hospitals in America need devices,” McDaniel explains.

“Of course, they have to have them re-certified, but it’s a lot less expensive to get a used device and it’s environmentally friendly.”

S3 is the largest electronics recycler headquartered in Nashville. Competitor Dynamic Recycling is based in Wisconsin, and Sims Recycling is an Australian company. In the U.S., about 600 such companies are members of R2, the leading recycling industry trade group, including 15 in Tennessee that include the “downstream” vendors who recycle S3’s scrap.

The United States electronics recycling industry processes more than 4.4 million tons of used and end-of-life electronics equipment, up to 75 percent of that from businesses and commercial interests, according to the Institute of Scrap Recycling Industries.

Most of that equipment is disassembled into components and commodities like scrap steel, aluminum, copper, lead, circuit boards, plastics and glass, which are then sold to materials manufacturers to be remade into new products.

Many of those products are designed to feed the voracious global appetite for new personal electronics, a sector that now dominates consumer retail spending. Televisions are used for less than two years, on average, before being replaced, the Environmental Protection Agency.

Laptops are replaced after three years. Cell phones are now on a two-year replacement cycle. However, those products retain significant value.

For every million cell phones recycled, 35,274 pounds of copper, 772 pounds of silver, 75 pounds of gold and 33 pounds of palladium can be recovered, the EPA states.

And recycling one million laptops saves enough energy to power more than 3,500 U.S. homes for a year.

Yet, only about 15 percent of consumer electronics get recycled, the EPA estimates.

The problem seems to be awareness. A recent survey found 62 percent of Canadians have old cell phones sitting around the house, even though 82 percent know they can be recycled. Most respondents said they simply did not know where to take them.

Many Tennessee municipalities now have e-waste drives, and most accept e-waste at convenience centers. Knoxville and Knox County residents and businesses can take e-waste to the Household Hazardous Waste Facility and several convenience centers, says Patience Melnick, solid waste manager. Last year, the Household Hazardous Waste Facility collected 16.3 tons of e-waste, which was transferred to recyclers by Goodwill Industries for further processing.

“E-waste contains materials that are harmful to our environment, such as lead, mercury, cadmium, chromium, plus other heavy metals and sometimes flame-retardants,” Melnick says, echoing the EPA.

“But it’s also a valuable source of materials that can be recycled, including precious metals and plastics.”

Davidson County residents can drop off electronic waste for free at the East and Omohundro Convenience Centers.

Germantown in West Tennessee recently awarded S3 a contract to collect, process and market electronic waste during its semi-annual public drop-off events, during which residents can take items like cell phones, printers, computers, copy and fax machines, TVs and computer monitors for free disposal. Middle Tennessee had a similar event in November.

Most consumer devices such as personal computers and laptops have a viable lifespan of about five years before advances in chip technology make them seem pokey, and features like CD-ROM drives become obsolete.

But large corporations often replace employee computers on a shorter cycle, so there is plenty of functionality left for someone who doesn’t need the latest product.

If a device has resale value, its data is destroyed to industry standard through methods like sanitization (wiping) or degaussing (destroying data held on magnetic storage) and it is remarketed.

Devices that can’t be resold may be broken down into parts that can be sold or shredded into scrap materials like aluminum and steel that are sent “downstream” to vendors that recycle them into other products.

The company, S3 has a zero-landfill commitment. Everything is recycled from printer paper and cardboard shipping boxes to toner cartridges and batteries.

“Everything in here goes to somebody that specializes in it,” McDaniel says. “The key to recycling is to have it reused, not smelted down.”

McDaniel, who recently was named to the board of the Tennessee Environmental Council, calls himself an accidental entrepreneur. A Nashville native, he began his career on a more traditional path as an IT guy for Metro Nashville Public Schools.

The happy accident came when McDaniel answered a Craigslist ad for part-time work after purchasing his first house and discovering all the hidden costs of becoming a homeowner.

He became the first employee hired by Debbie Gordon, founder of what was then S3 Asset Management. Together, the two grew the company to five employees, and in February 2016, McDaniel and a small group of investors purchased the company from Gordon. Those investors include mentor Darrell Freeman, who sold IT consulting firm Zycron last year for $20 million.

McDaniel has taken the company from $400,000 annual gross revenue in 2016 to about $1 million last year. He estimates bringing in at least $2.2 million this year thanks to new corporate contracts and a recent expansion into government contracts, including a bid to recycle 7 million pounds of electronics in Maryland.

That means moving operations from S3’s crowded 8,000-square-foot warehouse near Fessler’s Lane to a 75,000-square-foot suburban facility and hiring some 25 new employees over the next few years to supplement the current 18.

“I didn’t even know how to spell ‘entrepreneur,’” McDaniel jokes. “Being in the right place at the right time is just a blessing for me.”

McDaniel adds becoming a face of the environmental movement has changed the way he looks at things.

He’ll collect old batteries and bring them to the shop, even though it costs money to recycle them.

And as a father, he’s become hyper-aware of the connection between the careless disposal of hazardous waste and consequences like chemicals in the water supply.

One of his goals is to raise consumer awareness of e-cycling and get the state to pass laws regarding e-waste – something only half of the U.S. has done. That would be good for both business and the environment.

“I hear people say, ‘When I was young we drank the water and it was fine.’ Well, it’s a different time,” McDaniel points out.

“There are a lot of electronics out there now and a lot of people are not responsibly disposing of them. These things have toxins in them that seep into the ground, and people need to start thinking about that.

“We have to be good stewards of our environment.”