28 Aug 2019
This article, written by George Power in Macquarie’s Equipment Finance team, was first published in Mobile News, 27 August 2019
The success of waste reduction campaigns in the last two to three years has had a dramatic impact on how consumers are seeking to reduce their impact on the environment. Why then are we not equally aware of the impacts of technology and particularly the smartphone, arguably the most ubiquitous consumer good of all?
The environmental cost of a smartphone provides a fascinating case study of how companies at each stage of the device value chain can recover vital resources and, through new business models, extend the life of the device by promoting re-use. Smartphone manufacturers and operators are currently missing an opportunity to use the popularity of the circular economy to deliver benefits to shareholders and to bolster their green credentials.
The mobile industry has already made huge efforts towards reducing its carbon impact. The Carbon Trust “Mobile Carbon Impact”1 report has estimated that, thanks to customer behaviour change, for every 1kg of CO2e emitted the mobile industry takes an equivalent of 5kg CO2e out of the atmosphere. In addition, research from Ericsson2 shows a potential saving of up to 15 per cent of total global greenhouse gas emissions by 2030, through the widespread adoption of mobile devices and uptake of smart technology. More than the current footprint of the EU and the US combined!
However, there is still a great opportunity for the mobile industry to further reduce its environmental impact. So far, most operators have sought to reduce their direct emissions and energy consumption. Moving to renewable energy is welcome but is focused on direct emission targets, despite indirect emissions representing over 80 per cent of the total emissions for some mobile operators.3
Opportunities for operators to realise value and environmental benefits related to indirect emissions are manifold - particularly when we consider the smartphone itself, of which 40 to 50 per cent are not recycled4 today.
The CO2 generated by smartphones is seen at all three stages of the phone’s lifespan:
- The manufacture of a smartphone is estimated to produce on average 55kg5 of CO2e, and requires ~35kg6 of raw materials. These include a complex cocktail of rare earths and minerals found only in the most remote places in the world.
- The usage of a phone, both direct energy consumption of the phone itself, but also the indirect energy consumption in remote data-centres to serve the applications sitting on our device. It is estimated that the energy required for a phone to stream one hour of video per week is the equivalent annual usage of two modern refrigerators.7
- The disposal of smartphones poses additional socio-environmental questions, including the export of potentially toxic waste to many developing nations. It is estimated that a shocking 435k8 tonnes of smartphones end up in landfill each year.
The mobile industry can address and minimise its impact throughout these stages.
By influencing the manufacture and design of the product from the outset, the attraction of re-use increases. For example, parts designed to be repaired, replaced, and recycled in a modular, efficient manner, rather than designed obsolescence.
An excellent example of “eco-by-design” is that of the Sky TV box in Germany9, where from the removable hard-drive to the recycled packaging, the result was a next-generation Sky box with a modular, re-usable design, that was easy to upgrade and could be effectively recycled repeatedly for customers, thereby increasing both profits and customer satisfaction.
However, the opportunity for a mobile network operator to influence the design and manufacturing strategy of a device may be more limited. Hence the next most impactful action for these companies is to focus on extending the life of handsets.
Deploying a business model where the physical return of the used device is hard-wired into the customer offering is a critical part of second-life use. By embedding a device-return model into their customer proposition, mobile operators can use the residual value of a device at the end of its contract term (e.g. 24 months) thus offsetting a proportion of the ongoing monthly charges to the customer - building a lower-cost device financing plan that can drive acquisition and retention.
Fortunately, this model exists today, and in its most simple form involves either the leasing of the smartphone to the customer (the customer never owns the phone), or the swap (“trade-in”) of the old phone to partly offset the cost of the new one.
The final area where the industry can protect the environment is by implementing a more responsible process for recycling of phones, when they truly are at “end-of-life”. A recent UN report10, claims only 20 per cent of global e-waste is collected and recycled properly today. In addition to making it easier for consumers to initiate the recycling process, a big win would be for industry players to ensure that all product destined for recycling is only sold to entities with R2 certification11, which ensures traceability and responsible recycling for end-of-life equipment.
By adopting strategies to prolong the life of the phone, for example through smartphone leasing or swap programmes, organisations can provide an ecologically attractive and differentiated customer proposition. In doing so, they can build even greater sustainability into their core business model, limit landfill and ensure that every gram of CO2e that is required for manufacture is fully utilised.