The R2 Standard was originally developed to prevent the misuse and improper recycling of electronic waste. Currently, the SERI institute defines the R2 Standard as, “the premier global environmental, worker health and safety standard for the electronics refurbishing and recycling industry.” A goal of this standard is to help prevent unnecessary recycling, and so a reuse business was born. Reuse refers to a product that’s been used but still has life in it. For products that still have life in them, they can be refurbished or fixed and then resold to an end-user until the product reaches end-of-life (which is when it becomes obsolete and can no longer be used). This idea lends itself to how the secondary market works for consumer electronics (CE) and why the R2 Standard is so important to CE manufacturers, OEMs, retailers, and resellers.
The secondary market reuse business directly impacts OEMs and larger companies like Costco, Best Buy, and Walmart, not to mention carriers like AT&T (who require R2 certification for you to do business with them). That’s because these companies get a lot of customer returns for products that have value, and retailers know these products can be resold on the secondary market. So the question for R2 became: how should businesses properly handle the reuse, refurb, and recycling of CE so that we can get a standard in place to prevent illegal landfill dumping, unnecessary recycling, and stop the illegal export of certain material and unsafe labor practices in developing countries?
In this article:
Who needs R2 certification
Why get R2 certified
Learning what needs to be done for R2 certification
What it takes to become R2 certified
Getting R2 certified
Annual audits and auditors
How R2 can impact reselling consumer electronics
R2 and the U.S. Government
On the surface, gaining R2 certification is about businesses wanting to do the right thing; but dig a little deeper and most companies are pursuing R2 because their customers are requiring them. Basically, R2 certification provides networking opportunities and opens doors to some of the bigger companies so that SMB resellers can grow their business. This appeals directly to domestic e-commerce retailers and refurbishers.
The typical consumer electronic reseller does business through e-commerce. These resellers tend to sell individual units to end-users and those sales tend to stay in the U.S. Mostly, domestic resellers sell either through Amazon or eBay and other marketplace-type sites.
Refurbishers earn R2 certification to get better pricing for materials that they use to fix broken products, which they then turn around and sell to end-users. By earning R2 certification, resellers can go direct to the source for parts. For recyclers, it’s the same concept, you want to get as close to the source as you can to get the best price for the product. For many refurbishers and recyclers, that’s basically what R2 comes down to, getting better prices and opening doors of opportunity.
It’s also about reducing the chain-of-possession and to have as few middlemen as possible between the source and the end-user, to keep prices low and profit margins healthy.
R2 certification allows SMB resellers to purchase directly from bigger companies, including some of the larger recyclers that receive material from large retailers: most will only deal with companies that are R2 certified. As fair warning, if a reseller is not R2 certified, it can be very difficult for them to buy or sell used consumer electronics. To qualify a non-R2 certified reseller can be extremely difficult; so, it’s better to get certified. This is especially true for resellers that work in the cell phone industry, and that’s because most all of the carriers require R2 certification.
When working with recyclers to buy their parts and products, there’s a lot of due diligence that needs to be done to qualify businesses to work with them, even if they just want access to scrap material. Most recyclers don’t want to work with someone who is not R2 certified because it can be a headache to qualify them.
Now that you’re convinced your business needs R2 certification, it’s a good idea to understand what needs to happen to earn that certificate. To do that, you’ll want to start attending training courses and webinars; if that’s not enough help, then you might want to consider hiring a consultant or purchasing documentation that will step you through the process.
When hiring a consultant to help guide you through the R2 certification process, the costs are going to depend on the size of your company. For a medium-sized company, the cost can be anywhere from $10,000 to $15,000 plus travel. This can be an expensive bill for an SMB owner, but that estimate is just the start. There’s also the cost of the certification itself, which can bring the total cost closer to $25,000.
However expensive this might appear, the cost does pay for itself after time, but it’s a big expense up front and should be considered an investment. For the majority of resellers, they should get their money back 10 times over after gaining their certification; because that’s when doors to big companies with parts and products to sell start to open.
You can find webinars and training courses online that will help you with the R2 certification process. For example, companies like Glacier Consulting holds monthly webinars on various topics. They also offer internal auditor training as well if a reseller wants to do their own internal audits, or even just gain general awareness of the audit process and how to train for the requirements of the standard. Good consulting firms offer both online training and face-to-face training.
For SMBs that can’t afford a consultant (and webinars and training courses aren’t enough) that’s when a documentation package can come in handy. Many R2 consultants do offer a documentation package where resellers can buy all of the procedures and forms that they need to be certified. With that comes an instructional booklet that walks people through how to get everything set up and implemented.
The process to get certified is the same across different businesses, but the requirements within the process varies because it all depends on the material you are handling and how you process it. To get started, it’s good to understand that to be R2 certified you also have to be certified with different ISO standards, like 14001 or ISO 45001, or you can earn RIOS (Recycling Industry Operating Standard) certification. So, you can take different approaches to earn R2 certification and which standards you want to be certified in. By earning ISO certification, you’re automatically getting into the environmental health and safety requirements, and with RIOS you can appeal to recyclers.
Part of the process of getting R2 certified is developing a whole management system. This system consists of documentation showing the how, why, what, who, and when of your business. Problems that can occur with the whole management system in general is that too many people will add in too many procedures and processes because they are afraid they are not meeting the requirements. So, they put in a system that’s very difficult to maintain or even to keep track of everything that’s due and what needs to be done. This can hurt a company in the end and that’s why it’s so important to keep it simple, and to build the processes and procedures and forms only around what you’re currently doing. Basically, a whole management system provides a formalized approach to what the business does, and in that way, a new employee could step in, follow that, and continue the system.
To help with developing a whole management system, the R2 Standard uses a PDCA model—Plan – Do – Check – Act—this is a standard, continual improvement model used by businesses all the time. With this model, the first thing to do is plan your system. You have to get all of your documentation in place, that is considered the Plan. And then you implement it, that’s the Do. Then you let it run for a while and then you Check it and make sure it’s effective. All of this is considered an internal compliance audit. If you discover any areas of concerns or issues, you Act on those to improve your system. Finally, you put those improvements into the planning cycle and then redo the whole thing.
That, in a nutshell, explains the whole continual improvement model. As you’ll learn, R2 certification isn’t a do-it-once-and-it’s-over, rather, it’s a do-it-once-and-then-do-it-again -next-year kind of process. This PDCA model is written into the R2 Standard.
To start the certification process, you need to set up your system and you need to create a manual filled with your procedures and forms. It starts with identifying your processes and the interaction of those processes. For example, you need to identify what needs to happen from when you initially receive product all the way through to shipping your product after resale. You need to identify those procedures and then you go through and do a risk assessment for environmental, health and safety, and quality. You need to figure out what are your issues, what are your potential concerns, and then, how do you address those concerns?
Many U.S. companies operate out of a clean and safe office with heating, air conditioning, and proper furniture and lighting; accordingly, the ISO 14001 Standard (since 2013, R2 requires that you be certified to ISO 14001 and 18001 or RIOS) is not necessarily meant for U.S. companies, it’s meant globally. Here’s why: in some developing countries you will find employees working on the floor, or they could be working in 130 degree heat with no air conditioning. The point is, you have to identify what your compliance standards are and that you’re meeting those and you have steps in place to control it.
All of the ISO and OSHA certificates are separate from R2; although ISO and OSHA certificates are built into the R2 Standard. So, a company who is earning its R2 certificate will also qualify for ISO and OSHA certificates. And, during an audit, it can qualify for more than one certificate at a time. Scott Jones from Glacier Consulting explains it this way, “when we set up a system, we do an integrated system, so we have all the standards combined into one system, so when resellers get audited, they have one audit to cover all the standards. And the resellers still get individual certificates for each standard. So, the nice part is that you don’t need four different audits for four different certificates.”
Audits aren’t cheap and companies have to pay for them along with travel expenses for the auditor. On top of the audit fee and travel expenses, most certificate bodies have their own maintenance fee. The average price of an audit is about $1200/day (but it varies). There is a required minimum number of audit days, which is based on employee count and risk level of the organization. To learn more about daily audit rates, read the PDF, R2 Code of Practices.
To gain R2 certification: you need to follow ISO and other standards, you need a whole management system in place, and you need to realize that continual, annual audits will happen; and you also know that it’s going to be expensive, but all that work and investment will pay off in the end.
After you have your documentation set up and you have your procedures in place—including an emergency preparedness plan and a closure plan—you should be ready for an audit to earn certification.
In regards to a closure plan, the R2 Standard is mostly concerned with the abandonment of a facility. You need to show that you have closure steps in place and you have the financial wherewithal to cover closure costs. Take for example a cell phone reseller business that is operating out of an office, they’re really not at risk for closure steps because everything they have has value and they are not going to walk away. So, just like with the health and safety standards, the closure plan is not directly relevant to U.S. companies.
R2 requires three months of data prior to certification, so you need your system up and running for about three months before even starting. That way, you can show shipping records, your downstream due diligence, your testing records and so on. You need to show that you have a working system and you didn’t just quickly put it up, did it for a week, and now you want to be certified. The Standard requires that you have a systematic process in place that you’re constantly following and that it is embedded into the culture of your company.
As part of the R2 certification process, you go through and identify your risks, you set up processes to control those risks, and then you identify your legal requirements and you show that you have a process in place to continue to maintain compliance to those risks. A consulting company can help you set up objectives and targets to improve your system. The experts will tell you, all of these standards are about continual improvement. Year after year you should be able to show that you’re improving your system as a whole. It all stems from an environmental perspective, health & safety issues, quality control—all of the risks associated with running a consumer electronics reseller business.
If, for example, you’re a cell phone company and you’re testing phones for resale, you’d be identified as a ‘low risk’ company. If the core of your business is dismantling phones by hand and you don’t have any mechanical processes like a shredder, or a bailer, or anything like that, then you’re considered low risk.
If you have a shredder on site and you have more mechanical processing, then you’d be considered a ‘medium risk’ company.
If you are doing heavy CRT processing (old TVs), or if you’re doing smelting work, or anything like that, then you’re typically a ‘high risk’ company.
The risk level is not part of the R2 Standard, rather, it’s part of the OSHA and RIOS Standards (that are required for R2 certification). The R2 Standard is more concerned with employee count, the number of downstream vendors that you have, and how many of your downstream vendors are R2 certified and how many that are not.
The R2 Standard does require that you share who your downstream vendors are. If you’re a middleman, then you have to share with your customer who your downstream vendors are, because the R2 Standard wants transparency. The Standard requires documentation of where the material is going, what companies are buying and selling, what countries the materials are shipped to, and so on.
A downstream vendor is a company that receives a product from you while an upstream vendor is a company you received the product from.
R2 certification does require a series of audits. First, there’s an initial certification audit, which gets you a three-year certificate. But every year you’ll need an annual surveillance audit. So, the first year when you get certified, during the certification audit, that’s considered year zero. For the first few years after that, you’ll have your annual surveillance 1, and then 2; those are considered partial system audits. During these system audits, areas of previous concern are looked at and how you made improvements. In the third year, you have a recertification audit where another full system audit is performed. If you pass, then you are issued another three-year certificate and the cycle repeats.
If a product is functional, then you can sell it to anyone you want. If, however, it needs repair work or recycling, then you need to approve the buyer before selling. Here, you can find explanations on what is fully functional, what is key functional, and what is considered repair or recycle.
A product is considered fully functional when you test every component and every function on that device. In the example of a cell phone, you test everything from the WiFi to making phone calls to making sure the Bluetooth and all the buttons work properly. You’re doing a 100% diagnostic check on that device. For laptops, if software is required, you need legally licensed software (that’s a big deal with Microsoft).
Fully functional gets into the cosmetic condition as well. So, it can’t have any cracks or broken parts to it. For Key functional, you can have a little more wear and tear on it.
Key functional is when you’re only testing the main function of what the device was made for. For example, you have a cell phone but the camera does not work, but the camera is not a key function of what the phone was meant for. So, as long as you make the buyer aware that the camera is not working, or whatever function on that device is not working, then that’s acceptable. As long as the end-user can use it for its original intended purpose, the product is considered key functional. This could also include a laptop that doesn’t have the software on it, but everything else is working on it; so, the customer can’t use it right away, but as long as the end-user is aware, that’s acceptable.
If the product is not fully functional or key functional, chances are it needs to be fixed, refurbished, or recycled.
Read more on recycling and the secondary market
Read more on universal condition codes and grading
Many governments now require R2 certification for you to work with them. This includes the U.S. government, meaning that to buy any used equipment from the U.S. government, you have to be R2 certified. Also, if you want contract work as a VAR or to perform ITAD services with government offices, you need to be R2 certified.Contact Us