Circular Economy in ICT – Completing the circle of supply
Bringing Circular Economy (CE) into the Information and Communication Technology (ICT) industry effectively targets two major fields: products and equipment (waste and consumption) and internal operations and networks (energy and data). Successful implementation of CE initiatives starts by engaging with suppliers, a reality that has been once more confirmed by participants of the 3rd Suppliers Forum organized by Orange in July 2017. The French telecom leader’s goal by 2020 is to collect 30 percent of all sold mobile phones which would normally go to waste. Other players in ICT, including Apple, HP and Cisco, are also watchful of the potential of CE initiatives but are facing serious challenges hindering their implementation. But first, what are the issues?
Accelerating obsolescence of material and equipment to keep up with the fast evolution of technology can be observed just by looking at the release rates of new smartphone models and respective sales numbers, or by following the development from 3G to 4G and 4G+ networks. Accordingly, enormous amounts of electronic waste, which largely end up in landfills and outside of legal take-back systems, along with all well known environmental impacts, continue to rise. The United Nations University estimated that the total amount of e-waste generated in 2014 was 41.8 million metric tonnes (Mt) and predicted an increase to 50 million Mt of e-waste in 2018 (United Nations University 2014). From the producer point of view, however, product return is lacking incentives and access to secondary markets is often blocked through regulatory barriers across the countries involved in global supply chains. Citing Cisco, there is global supply, but no global trash return. Nonetheless, ICT carries responsibility in making product composition more transparent (e.g. labels and certifications), to sensitise consumers on the impact of e-waste and to promote (existing) take-back schemes.
Besides material and equipment, energy efficiency improvement of internal processes and networks comes on the agenda when realizing that the carbon footprint generated through ICT in 2002 will more than double by 2030, as it was estimated by the Global e-Sustainability Initiative (GeSi). Accordingly, the industry will be responsible for 1.25Gt CO2e in 2030, or 1.97 percent of global emissions (Fibre-Systems 2017). In information technology, energy consumption is (still) proportionate to data rate, so companies now need to look for ways to decouple this relationship between environmental impact and sectoral growth. Besides efficiency increases in own operations, alternatives lurk in the various possibilities to offset consumption by supporting clients to meet their energy and emission goals through digitalization and technology. As suppliers of “green tech”, ICT can play a vital role in promoting CE across industries.
So how are ICT leaders responding to these challenges? The first and classical approach for addressing product and equipment obsolescence is formalizing objectives for take-back and secondary sourcing of material, as done by Orange. Ericsson also claims to have a take back program for e-waste in place which achieves 95 percent of collected material recovered as raw material. Even more ambitious, Apple promised to entirely end its dependence on mining and aims to produce with hundred percent recycled material and renewable energy, pushing for closed-loop supply chains (CNBC 2017). The list can be continued with Cisco, achieving recycling of circuit boards with rates up to 99.5 percent and designing products with 100 percent recyclability.
While it is difficult to benchmark individual performances with regard to CE, the EcoVadis rating system allows to describe the overall sector development. According to our recent report, the EcoVadis Global CSR Risk & Performance Index, the score results in the environmental theme have evolved differently according to company size: While large companies have decreased their environmental score by 3 %, small and medium-sized companies are catching up to narrow the gap in 2016. Between 2015 and 2016, the number of assessed small and medium companies in the ICT sector has increased twice as much as that of large companies. Besides big players like Orange, Ericsson, Apple and Cisco, smaller actors are now moving into the focus of attention: As important suppliers to reach CE goals or as new pacemakers themselves in sustainable procurement.
In any case, CE efforts will surely impact the traditional, linear supply chains involved in the sector and, if successful, achieve a transition to a (yet) parallel, “circular” supply, involving new services and sources of material, including waste collection and (pre-)treatment. Such transformation will go along with upstream investigations into suppliers’ performance in terms of raw material sourcing and recyclability as well as energy input. Crucial for the long-term success of initiatives promoting circular economy in ICT, however, is achieving a positive and trust-guided client perception of technological products with lower overall environmental impact. Only then they will turn into a business case for the producer.