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The Next Economy
The Circularity Paradox:
Overcoming the Problem of Scale in Achieving a Closed Loop

In finding innovative ways to ensure new electronics are made from their recycled counterparts, one of the biggest barriers for manufacturers continues to be the supply chain.

Since circularity first became an aspiration of the electronics recycling industry, the endgame has always been a closed loop — allowing each original electronics manufacturer (OEM) to create new servers, laptops, mobile devices and more out of their own recycled products — resulting in zero waste.

But getting there, even in the US — where increasingly e-waste is being recycled in responsible and circular ways — has always proven to be easier said than done. There are many factors: Material labeling and tracking must be improved; and the recycling process, including shipping, must be made easier for consumers and businesses. But less attention is often paid to one of our industry’s biggest barriers to achieving a closed loop: Scale.

There are over a thousand certified Responsible Recycling (R2) and e-Steward companies that have met the high standards to safely recycle and manage electronics. In theory, this is a good thing — allowing for more IT asset disposition (ITAD) companies and partners moving toward the same environmental goals. But it also means that the industry is largely dispersed, with many different companies utilizing so many entry points into the recycling process that e-waste is harder to track and the industry can’t get and apply recycled-material data at scale.

Solving the scale problem is crucial to helping manufacturers be more circular. If we as an industry are truly committed to achieving a closed loop, it may take some hard decisions — and perhaps consolidation — to make that dream a reality.

Why scale matters

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While conducting our own audits of our processes to verify what was actually happening to our materials downstream, certain realities became clear. First, large volumes of e-waste can actually help ITAD partners move from receipt to disposition faster, rather than building loads over time. This is because the supply chain needs to hit certain minimum-volume benchmarks in order to make recycling and reuse financially viable for those that maintain and leverage it. Most ITAD companies are forced to go through a series of middlemen to consolidate loads for this reason. Second, large amounts of similar product (ex: metals) makes sorting, packing and shipping easier and less labor-intensive for end recyclers to refine into new raw materials. Finally, large amounts of similar materials are easier to track — maintaining the circular process in the supply chain.

These three elements are key to the supply chain since, in order to create scalable, open- and closed-loop, circular applications, manufacturers need to be able to plan their production alongside a reliable supply of raw materials. In this way, large, consolidated amounts of e-waste actually helps identify in advance what types of recycled materials the OEMs are looking for so that they are forecasted into the supply chain and used in new products, hopefully creating a real closed-loop, circular application.

Unfortunately, this has been one of the main challenges of widespread adoption of circular processes. The supply of virgin raw materials has simply always been more reliable and cost-effective than recycled ones, in part because the industry remains too distributed to create and service a circular supply chain. It’s a paradox — a circular supply chain can’t become viable until there’s a larger scale, which leads to persistent (or increased) fragmentation as ITAD partners try to absorb more volume.

The issue remains, despite the economic and ecological opportunity that it would provide — including a cleaner planet, less waste and more detailed data that could be used by businesses toward meeting increasingly prevalent ESG standards. In particular, solving scale could produce great ESG benefits — because, if you can further consolidate recycling, it naturally means less scope 3 carbon emissions from downstream partners. There are cases of four legs of downstream materials shipping, which sends emissions through the roof. With stable volumes of recycled materials that manufacturers can rely on, those materials (like metals) can go directly to end smelters — which can only benefit ESG metrics and reporting.

Getting there

Convincing the industry to help build a circular economy means working together to confront those who would rather continue old ways of thinking and doing business — while helping others that have the desire, but not the means. This includes ITAD companies that simply don’t have the scale to do it efficiently and e-waste recyclers that do have the scale and are recycling their materials in open-loop applications, but may not be focused on closed-loop circularity There must be some greater form of consolidation; and it will take everyone working together to find the best path forward.

Realistically, I understand that this type of shift requires sacrifice — as well as an investment in time and money — and can include making hard decisions such as changing a company’s entire downstream. In order to effect major change in the industry, it probably needs to be a profit opportunity for some and a government mandate for others — making the high cost of recycling cheaper in the long run over producing goods with higher carbon footprints. But, for now, what’s most needed is the real desire to collaborate and an example that others might follow. If everyone (OEMs, ITADs, recyclers, ODMs, manufacturing partners, etc.) can take a focused approach and demand that we all work together to create viable closed-loop applications for all the e-waste, a recycled materials supply chain won’t be that far behind.

Fixing the scale issues means changing the circumstances to make it worthwhile. But if we can accomplish that, a more sustainable, profitable world awaits those that embrace change.