Environmental Accounting Snapshot PRECISION CIRCUITS, INC. Company Profile Location: Lynnwood, WA Size: 30 employees Annual Revenues: Not reported Business: Circuit board manufacturer. Industry Sector: Electronics Capital Investments What are the savings realized from the following two investments? (1) New plastic-coated racks used to carry circuit board panels through a series of baths and rinses. The old stainless steel racks had to be cleaned with nitric acid. (2) New waste water treatment process that produces less waste water sludge and fewer waste streams. Business Benefits (1) 5-year Net Present Value is $33,589; 5-year IRR is 66%. Payback is just over one year. A portion of these savings is attributable to quality improvements. (2) This relatively inexpensive change has a 5-year Net Present Value of $62,824. The 5-year IRR is 1,886%. Payback is well under one year. Why Was Project Performed? Precision Circuits' management policy statement describes the company's commitment to protect the environment as well as the health and safety of its workers and neighbors. Precision Circuits prepared and submitted a Pollution Prevention Plan in 1993 to the Washington Department of the Environment, with a stated goal of reducing its use and generation of hazardous materials and waste by 50%. In 1994, Precision Circuits initiated two changes with positive environmental impacts: (1) they purchased new plastic-coated racks, eliminating nitric acid from the workplace, and (2) a new waste water treatment process was put in place that produces less waste water sludge and fewer waste streams. The Pacific Northwest Pollution Prevention Resource Center worked with Precision Circuits to demonstrate the use of Total Cost Analysis (TCA) and illustrate its value as an effective decision-making tool for small firms evaluating the costs and benefits of pollution prevention opportunities. Project Description (1) Use of New Plastic-Coated Racks In the manufacture of used circuit boards, the board panels undergo a number of plating and rinsing processes. The boards are carried through these baths on racks. Prior to installing the new plastic-coated racks, the stainless steel racks used required rinsing in solution of nitric acid to clear them of any metals accumulated during the plating process, and thus prevent contamination of the boards and baths during the next plating cycle. The shift to the plastic racks produces three significant benefits: 1) removal of nitric acid from the workplace, 2) elimination of the need to strip the racks, and 3) production of a better product due to the electrical properties of the plastic-coated racks. (2) Change in Waste Water Treatment Process A vendor presented Precision Circuits with a new waste water treatment process that results in smaller volume of waste water sludge. Implementing this new process involved relatively minor changes: In addition to replacing one chemical and eliminating another, process steps required minor modification to suit the new treatment chemistry. Analysis Cost Considerations Plastic Coated Racks Year One Savings Materials $5,262 Disposal $4,445 Quality $8,660 Employee Productivity $7,525 Total Savings $25,892 . Year One Costs Maintenance $3,674 Total Costs $3,674 (1) Use of New Plastic-Coated Racks The cost of switching to the plastic coated racks was estimated by Precision Circuits as $22,522. The primary direct savings to the company came from reduced materials and disposal costs related to eliminating nitric acid. Additional savings came from a reduction in the number of defective boards and increased employee productivity. (2) Change in Waste Water Treatment Process The investment associated with implementing the new waste water treatment process was estimated at $900. This small investment yielded significant benefits: Net annual costs for treatment chemicals were reduced by $17,697 (current dollars). In addition, net annual disposal costs were reduced by $10,526 (current dollars). The new process resulted in an annual $150 (current dollars) increase in maintenance costs. Financial Parameters The analysis of the two investments used a cost of capital of 15%, an inflation rate of 10% on disposal costs and 5% on all other items, a tax rate of 40%, and used straight-line depreciation over 5 years. Financial Results (1) Use of New Plastic-Coated Racks The 5-year net present value of this investment is $33,589. The 5-year internal rate of return is 66%. Straight payback time is just over 1 year. A portion of these savings are attributable to quality improvements. (2) Change in Waste Water Treatment Process This relatively inexpensive change has a 5-year net present value of $62,824. The 5-year internal rate of return is 1,886%. Straight payback time is well under 1 year. Contact Not provided. Source Pacific Northwest Pollution Prevention Resource Center, Analysis of Pollution Prevention and Waste Minimization Opportunities Using Total Cost Assessment: A Case Study in the Electronics Industry. September 1995. DISCLAIMER: This database presents a number of case studies developed in recent years by a diverse group of organizations. The concepts, terms, and approaches represented throughout the database represent many different philosophies and means of applying environmental accounting principles and don't necessarily reflect the position or views of the US Environmental Protection Agency. Through production of this database, the EPA is presenting many different possible approaches to environmental accounting without intending to endorse any one. http://www.epa.gov/opptintr/acctg/casestudy.htm Revised: 04/09/98