Some of the biggest multinational firms in the State have warned the Government that they face huge bills in conforming with a plethora of new European directives on issues such as recycling, gas emissions and labour. Rules on recycling are causing concern for firms, writes Jamie Smyth, Technology Reporter.

The companies are concerned that the direct cost of implementing the new European directives, combined with the indirect cost of changing their processes to ensure compliance, will undermine their competitiveness.

New research undertaken by ICT Ireland, the IBEC body that represents the high-tech sector, shows that manufacturers and retailers of electronic goods estimate that a new European directive on recycling will cost them up to €20 million when implemented next year. Complying with several other new European directives on labour, gas emissions and chemicals will cost firms tens of millions more.

"It will be a requirement by 2005 for manufacturers to take back electronic products bought by businesses or consumers for recycling," says Mr Brendan Butler, director of ICT Ireland. "This will be instead of dumping and will cost industry €10 million in direct set-up charges... It will cost the same again to prepare their systems for the change."

Companies such as Hewlett-Packard, Dell, Apple, Philips, Sony, Dixons, ESB and Panasonic will all be affected by the tough new regulation, says Mr Butler.

The Waste Electronic and Electrical Recycling Directive will enable consumers by August 2005 to return waste electrical and electronic equipment free of charge either to the place of purchase or to an authorised collection point. Producers will be responsible for financing the collection, recovery and recycling process from this point onwards.

The Government is scheduled to transpose the directive into Irish law by August next year and has set up a taskforce to consider the implications of the directive for industry.

The taskforce, which consists of industry, environmental and Government figures, is due to report to the Government in the next few months.

Dell, the biggest computer manufacturer in the State, would make no direct comment on the new EU regulations but a spokesman confirmed to The Irish Times that it was considering the impact on its business.

One possible solution the computer firm is considering is setting up a household collection scheme similar to one that it introduced in the US earlier this year. Dell's US recycling scheme charges people $15 (€16.50) to come and collect Dell-branded equipment for recycling. But under the new EU proposals Dell would have to cover the full cost of the scheme. It is understood that this is likely to increase the cost of its equipment to cover the cost of complying with the new directive.

But the electronics industry is understood to favour setting up call-in depots nationwide where consumers could bring their electronic equipment for recycling.

"An industry scheme is better," says Mr Butler. "We have some experience of this as we set up a similar scheme for packaging which became Repak."

If industry doesn't bring in initiatives then Government will have to legislate anyway, he says.

The battle to limit the financial impact of the electronic waste directive waste has already been lost by industry, as it has already been mandated by Europe. But industry has had more success lobbying the Government on new EU proposals on chemicals.

A proposed new chemicals policy, supported by the EU's Environment Commissioner, Ms Margot Wallström, would mean that all substances over one tonne in volume that are manufactured or imported should be strictly regulated and tested.

The new legislation on chemicals, known as the Reach programme, would also allow the EU to restrict the use of any substance that it believes poses an unacceptable risk. It has caused consternation among the pharmaceutical sector, which accounts for $38 billion in annual exports, and in the biotechnology sector.

Lobbying from industry has successfully persuaded the Government to seek substantial amendments to the proposed Reach framework directive. The Government's submission on the directive, published on the EU's website, states: "Ireland shares the concerns of European colleagues about the competitiveness implications of the Reach and anticipates significant revision by the Commission of its proposals before it is published."

Among the specific concerns outlined by the Government are fears that Reach will affect production and employment, particularly in small and medium-sized businesses.

The proposals will also cut profit and reduce the amount of finance available for research and development, says the submission.

Mr Shaun Connor, director of hospital products operations at Abbott, one of the Republic's biggest medical device and pharmaceutical firms in the State, says new regulations in Europe are another factor increasing costs.

"There is always a cost associated with regulations... There is a once-off implementation cost and the ongoing cost of ensuring compliance," says Mr Connor.

"I think it would be OK if the market were contained just within Europe but we are competing against Asia and Eastern European countries which are not subject to EU regulations."

Abbott, which employs 1,800 staff in the Republic and plans to recruit an extra 950 over the next few years, is already competing with many Third World countries for investment in the lower end of the hospital products market.

These increased costs are hurting competitiveness, he adds.

Mr Butler describes the Reach proposals as very challenging for Irish industry and "significantly over the top". The business lobby will be making approaches to all the Irish MEPs to push for significant changes in the proposals.

But the business lobby will face tough opposition from the Irish and European environmental lobby, which strongly supports the new European directives on waste and chemicals.

The Green MEP, Ms Patricia McKenna, believes the proposed chemicals directive does not go far enough to protect the environment and health of EU citizens.

"It is very important that governments act in a more responsible way on health and environmental issues and become more responsive to the electorate and not just the financial concerns of big multinationals," she says.

Industry has responded with a typically panic reaction, says Ms McKenna, who disputes whether Irish jobs will be at risk due to the proposals. "The only way to create an incentive for firms to be more responsible is to legislate... it is only when the EU legislates that industry takes some responsibility," she says.

The debate between business and the environmental lobby will become more frantic as the deadline to transpose new directives approach. But whatever the response to the Government's objections to the Reach proposals, European directives are already forcing firms to change their processes and incur extra costs.