The economy as we know it today was built over the past two hundred years, and it will have to be changed radically over the next twenty years to achieve global decarbonization and net-zero emissions. This economic transition will open new markets for businesses that innovate and take advantage of green growth opportunities. Others will be put at risk.
As the implications of climate change are becoming more and more apparent, there is an increasing focus on the consumer electronics industry and the direct environmental impact of electronics and the electronics industry as a whole.
It wasn´t always like this. Before, the electronics industry was regarded as a rather clean industry that is helping other “dirty” and unsustainable industries become more environmentally friendly by providing them with digital solutions that reduce their negative environmental impact.
It was not until recently that the consumer electronics industry started receiving the same attention as other manufacturing industries. And even then, the pandemic arrived and slowed down this equalization by portraying it as a “savior” because electronics helped propagate and enable social distancing and remote work by transforming decades-old processes in weeks.
That period, however, has finally ended and the whole consumer electronics industry is becoming affected by regulations and audits regarding its environmental performance. Relatively short consumer electronics lifecycles and consumers accustomed to frequent changing of electronics are creating increasing piles of electronic waste that has an enormous impact on the environment.
And if that was not enough, an increasing amount of data transmission and storage increases the amount of data centers that consume a great deal of electricity and produce a severe carbon footprint.
Sustainability as a Challenge
According to a study conducted by Ecofys, the electrical, machinery, metals, and manufacturing sector accounts for 10% of the consumption of key raw materials, 17% of GHG emissions, 5% of water use, and 8% of land use. This shows that the impact on the environment from the consumer electronics industry is moderate when compared with other sectors such as food production and agriculture.
However, the industry is a vital sector for the circular economy due to the following reasons:
- It uses raw materials, particularly metals and critical raw materials that are produced only in some regions in the world (and therefore are considered critical materials) and are not well recycled or substituted.
- It offers a significant opportunity for innovative business models such as rental management and leasing, for example, device as a service or home appliance as a service) to optimize and prolong the use phase of consumer electronics.
- It offers significant opportunities for the repair sector to cover the remanufacturing and refurbishing of consumer electronics.
According to the research conducted by the International Electronics Manufacturing Initiative (iNEMI), some companies in the consumer electronics industry have already started taking steps toward sustainability and a circular economy, but the industry as a whole has not undertaken the steps toward closing the loop on recycling and reuse.
The main reasons for this can be summarized as follows:
- There is a lack of economically viable infrastructure for reusing and recycling, considering the rapid evolution of product design and material content. In addition, separating electronic products and materials is a challenge, considering that most products contain integrated components, such as circuit boards, consisting of different materials fused together. Often, there are no cost-efficient methods of extracting the embedded raw materials without degrading the product.
- The relative value of materials in waste electrical and electronic devices is primarily low because there are significant losses during the collection and treatment chain. With current extraction methods, the total value of precious metals such as gold, silver, and palladium, that can be recovered from a mobile phone is 3$ which, when brand new, contains a total of $16 of those same materials. As a consequence, the supply chain lacks both infrastructure and incentives needed to reuse and recycle.
Currently, most consumer electronics companies are focusing on reverse logistics and the end-of-life phase of their products as the main actions to improve sustainability and circular economy. This is because, although the technology needed to make the industry more circular is already available, different products have different lifetimes, costs, and usage, making them require different strategies. For example, consumer electronics such as mobile phones have a relatively high turnover of buyers and users compared to white goods.
While circular economy activities in the consumer electronics industry mostly revolve around circular logistics, recycling, and energy efficiency, one other activity is quickly gaining traction: leasing and rental business management. Companies are experimenting with P2P renting of their products in rental business management.
More known as the device-as-a-service and home appliance-as-a-service business model is an innovative business model where the customer does not become an owner of the product but a user. And although the relatively low price of certain consumer electronics products does not create a big enough incentive for people to share rather than buy, the trend of this business model is increasing.
Sustainability as an Opportunity
The consumer electronics industry continues to grow at a staggering rate, and the global consumption of electronic products is expected to double by 2050. Consequently, the amount of waste from consumer electronics is also growing at a rate of 6.5% per year. With just 20% of electronic waste being efficiently recycled, there are big opportunities for companies that take the proactive instead of reactive approach to sustainability.
Design is everything as it makes the basis for how a certain electronic product is made. Eco-design is a design method in which the product is made to minimize the environmental impact and maximize its impact on the business.
It´s an innovative design solution that considers the whole lifecycle – from the extraction of raw materials to distribution and use of finished products—to recycling, refurbishing, and disposal.
Besides providing a useful marketing method and encouraging innovation around product development, eco-design can also give consumer electronics companies direct economic benefits such as lower production and labor cost and increased market share through improved customer relationships.
Sustainable raw and packaging materials
The amount of waste created by the consumer electronics industry is growing at a high rate, as mentioned above. The opportunities for the industry to reduce waste and save resources are numerous, and it is safe to say that, as regulations increase, it will have to start using more and more raw materials that are based on renewable resources. One such example is nanocellulose which has the potential to replace PET films in electronic products and FR4 in circuit boards.
Nanocellulose has the same durability, requires less material, is made of renewable natural resources, and is completely biodegradable. Another example is bioplastics that break down into carbon dioxide and water. Bioplastics can be used to manufacture various sensors, diagnostic tests, and biodegradable smart packaging.
The material has better moisture resistance than cellulose-based alternatives and a better potential for developing new solutions. Using biodegradable and renewable materials can further reduce manufacturing and waste management costs for companies and improve their brand image as more and more customers are becoming increasingly aware of recycling and sustainability.
Leasing and rental business models
Similar to any other manufacturing, production in the consumer electronics industry followed a rather linear route to market, such as shipping directly to the customer or directly to a retailer. However, today they are operating in a very different market environment filled with eCommerce stores, marketplaces that are fragmented, and subscription-friendly customers.
New leasing business models for consumer electronics (device as a service) and white goods (home appliance as a service) are emerging quickly as desirable options for both customers and electronics manufacturers. With these business models, customers get flexibility, lower costs, and are free from managing the device. On the other hand, manufacturers get a more predictable revenue stream, lower warranty costs, and substantially reduced material, disposal, and labor costs with device redeployment.
Towards a Sustainable Future
Based on the challenges mentioned above and increased regulatory and legislation drivers, the outlook for sustainability and the circular economy shows improvements across the supply chain – design, manufacturing, logistics, remanufacturing, reuse, extended lifetime of products, rental business management, and recycling.
And although these challenges and their complexity can lead to an assumption that the full potential of a circular economy will not be reached before 2030, business models such as device as a service and home appliance as a service act as an immediate opportunity for the consumer electronics industry as a way of getting closer to achieving their sustainability goals and meeting their customers´ demands.
It´s a fact: sustainability provides a chance for the consumer electronics industry to both improve their risk mitigation and seize new business opportunities. Although real, the risks mostly revolve around compliance with regulatory requirements. The opportunities, on the other hand, all carry tangible benefits such as cost savings, improved product development, and production processes, innovative business models, and revenue increases.
circuly, a subscription management software company, empowers companies in the consumer electronics industry to reach their sustainability goals by providing them with the know-how needed to launch a circular business model and an easy-to-implement software solution to manage and grow their subscription revenue.