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CloudBlue CEO Ken Beyer: Bringing transparency, accountability to e-waste

CloudBlue CEO Ken Beyer: Bringing transparency, accountability to e-waste

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What do companies do with their old electronics? They give them to CloudBlue CEO Ken Beyer, who reuses them, harvests from them or recycles them -- and turns a profit, too.

What happens to your old computers and phones when you've replaced them with the latest and greatest technology?

You might recycle them properly with other electronic waste -- or, with a cringe, you might just throw them in the trash, with an eventual destination of your local landfill.

Now what if you're a major multinational company -- then what?

That's where CloudBlue comes in. The company's specialty is to responsibly and securely recycle electronic waste from corporations large and small, and CEO Ken Beyer says business is booming.

Beyer visited SmartPlanet HQ in New York City to tell us how recycling e-waste is not just ethical -- it's profitable, too.

SmartPlanet: How did CloudBlue get started?

KB: I'm an entrepreneur. I started my career at Ernst and Young. From there, I've managed companies in the IT space. After Ernst and Young, I had an IT consulting practice – we did Sprint's first terabyte installation database. After that I did a mortgage technology company, sold that business to a company called OfficeTiger. [RR] Donnelly bought OfficeTiger in 2006, I stayed until 2007 and started CloudBlue in late 2007.

My partner, Randy Altshuler, founded OfficeTiger. We're both environmentalists, but we come at it from a business perspective: how can we do this sustainably?

SmartPlanet: You're an entrepreneur -- you could have started any business. Why e-waste?

KB: We got excited about the e-waste space because:

  • It's a huge problem and people didn't appreciate how big a problem it was;
  • There's no one big player in the space;
  • Government regulation is happening pretty rapidly, on data security side and the environmental compliance side. There are 23 states that prevent electronics from going into a landfill.

We thought, this is a really interesting company – every business is a potential customer, and every consumer is a potential customer.

Randy and I put our own money in, bought three companies –- in Chicago, Indianapolis and Phoenix –- and got started. That allowed us to gain some expertise.

Our focus is businesses -- for example, CBS Sports is a client of ours. We went to large companies and said, what do you do with your old stuff? And the answer always was, "We have no idea." So we've gone to them and said, "Let us help you implement a standardized way to deal with electronics on a global basis."

SmartPlanet: And for certain companies, security plays a part.

KB: People want to be environmental, and people want to make sure they're not breaking the law, but most importantly, they want to protect their brand -- through data security, and making sure a laptop doesn't end up in a dumpster.

Our biggest customers are looking for a vendor who can manage that.

Our employees have been background-checked and drug tested and all that and they show up and pick up the material. Otherwise, if we outsource that, there's no chain of custody.

Our operational strategy was to put our facilities close to our customers in major metropolitan areas. It cut down on the logistical and carbon footprint. It also allowed us to provide on-site services. Because data security was the issue, you've got to be close to the customers.

We do on-site data destruction or we bring it pack to our facility and do three-pass DoD compliant erasure.

One of the key things we're doing is tracking each asset. By serial, we can say to customers, "Here's what happened to your ThinkPad."

Then we:

  • Reuse them. For schools and small businesses, or redeploy them back to the customer.
  • Harvest their components. We pull out what's valuable and reuse the parts in refurbished products.
  • Recycle them. We demanufacture a device down into its commodities: plastics, metals, glass, circuit boards.

SmartPlanet: OK, this all sounds well and good, but anyone who's kept pace with environmental issues knows that non-recyclable items eventually end up in a landfill in the country with the loosest laws. How do you respond?

KB: The stuff is all manufactured in China, it comes here [to the U.S.], and then it goes back…it's a big round trip.

We're certified by the Basel Action Network, a watchdog organization based in Seattle that helps bring awareness to the issue of e-waste. According to a GAO study two years ago, 80 percent were [found] to export waste to a third-world country.

What we try to do is be upfront with our customers. We charge a fee to pick it up. There's some value in reselling equipment, and if there is, they receive a cut of it, and sometimes, there's a cost to recycle in the country in which it was picked up.

Disposing of your electronics has always been a black box. What we're going to bring is transparency in the process. We created a customer portal where they can track their asset. It's like Domino's Pizza: you can see it being made.

But once it's recycled, and the plastics go to the refinery, what happens then? To be a Basil Action Network e-steward, you need to track two levels down past you. That's how they're trying to bring accountability to the process.

That's what's needed in this business. And we are getting requests in response to corporate sustainability reports. The "e-steward" designation becomes a corporate responsibility accolade that can go into their report.

One in four businesses have environmental awareness, rather than simple money savings, as motivation to recycle their e-waste. The smaller the business gets, the less focused they are on it.

We’re seeing more and more of our customers requesting, "Show me the downstream."

SmartPlanet: Now the big question: how does CloudBlue make money?

KB: We make money three ways:

  • A service fee for processing;
  • Reselling the product is another income stream -- we make less than half of the total profit;
  • The commodities value for scrap materials.

We're seeing a huge growth in volume. Last year, [IT] people stopped refreshing. This year, the refreshes are picking up.

The next step is consumer. That's gigantic. We partnered with one of the large retail stores that has a take-back program. Consumers aren't going to pay you to pick up their equipment. You've got to do it for free. And you have to have a really dense dropoff map.

SmartPlanet: We see take back programs everywhere, but are stores really making money off people's old gadgets?

KB: I don't think it's been worked out yet. A retail store wants to get traffic. They're probably taking a loss. Or manufacturers are paying retail stores -- say, in OfficeMax, you get $50 off new printer if you bring in the old one. Or store gift certificates for any in-store purchase.

Producer responsibility laws require Dell or any other computer company to provide consumers a way to recycle their electronics at no cost.

We think the business market is in the $4 to $6 billion range. It's a big market -- there's a lot of upside.

SmartPlanet: If recycling e-waste is a money-maker, why wouldn't large corporations just take their e-waste processing in-house?

KB: It's not their core competency. It's highly specialized. And scale matters with this stuff. We get better rates because we're in the millions of units.

SmartPlanet: Who are your competitors?

KB: Waste Management, Iron Mountain.

Our goal is to create a really profitable, sustainable business that's here for the long-term. It's something you feel good about.

SmartPlanet: And the name? Why CloudBlue?

KB: We wanted it to sound clean.

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Andrew Nusca

Editor Emeritus

Andrew Nusca is editor of SmartPlanet and an associate editor for ZDNet. Previously, he worked at Money, Men's Vogue and Popular Mechanics magazines. He holds degrees from the Columbia University Graduate School of Journalism and New York University. He is based in New York but resides in Philadelphia. Follow him on Twitter. Disclosure