Being “Smart” Ain’t Enough - Circular Economy and the Electronics Sector
No sector symbolizes today’s modern innovations better than the electrical and electronics (EE) sector. Within sustainability, circular economy is at the top of the list of revolutionary approaches. C-Servees, a recent European initiative, brought together these two elements, creating a network and delivering valuable circular economy solutions in the EE sector, which currently produces one of the fastest growing waste streams in the EU.
EE waste is growing at 3-5% per year in the European Union, with 12 Mt estimated for 2020. Beyond quantity, quality is also a major issue, because EE waste contains significant amounts of valuable materials that can cause serious environmental and health problems if not properly managed.
We spoke about C-Servees initiative, circularity and much more with thinkstep’s expert, Dr. Constantin Herrmann, who is a member of the C-Servees Consortium’s Advisory Board.
Before going into details, I have a crucial clarifying question: Can the EE sector adopt circular economy models?
Yes, absolutely. According to the Ellen MacArthur Foundation, circular economy has four building blocks: eco-design (everything related to product specification), reverse logistics (everything related to the End-of life), business models (such as lending or leasing) and organizational boundaries (cultural and legal conditions—the company’s context).
The EE industry is very aware when it comes to “smartness.” The smartness characteristic of their businesses includes a continual expansion of functions. But so far they almost never apply their competencies to the last two building blocks (business models & organizational boundaries). For example, they don’t normally use smartness to help them close the material loop. In other words, they are very advanced in their technology, but they are rarely using that technology to actually become more circular.
So Eco-Design and Reverse Technologies, which are part of their daily business, are part of the “smartness” and not a part of a circular approach. In the same way, this tendency is also causing one of their most important challenges, namely the ever-increasing complexity of their products.
This brings me to my next question. What are the biggest challenges for the sector in becoming more circular?
We already mentioned complexity as a sector-specific challenge for the industry. That consists of hotspots, such as dispersion of tiny amounts of materials through miniaturization (not economically viable enough for collection) and using toxic or critical materials, for example.
The other challenge we could define as “universal,” or applicable to all sectors, is that in principle the world and most people in companies still think linearly. “Take-make-dispose” is still the common approach. So all tools, templates and processes are tailored to linearity. The “produce cheap, sell a lot, don’t worry too much about End-of-life” motto is probably the most critical roadblock.
Another obstacle is when companies fear that going circular will cannibalize their current business. However, the dangers are higher for other companies to start to cannibalize their business. In other words, those who are unprepared to tackle sustainability and circularity will be cut out of the market by competitors that offer affordable and valuable circular alternatives.
The last important challenge is the cost and the risk of adopting a circular business model. Moving from linear toward circular is generally more expensive at the beginning and is associated with greater risk than many state-of-the-art EE products. Companies need to integrate totally new capabilities and competences. In the same way, customers need to change their mindset and behavior, and companies need to test whether they are able to manage the new requirements or not.
The question is, are companies willing to do this or not? From the company’s perspective—but maybe not from the planet’s perspective—all this is cost and risk. The big leverage with circular economy is that external costs may be integrated as a requirement for business. When resources and emissions have a price tag (and they will soon enough), companies will immediately need to rethink their business models. Right now, they are still not responsible for the true cost of their resource use and emissions.
Is there a solution for solving this contradiction between environmental and business interests?
We need to accept the fact that becoming circular adds costs. An example is internalizing external costs for emissions trading programs. If we all would pay (also privately) for impacts and emissions, for example for more flights, we would all improve our behavior and environmental outcomes. That would be realistic and a fair way forward, instead of trying to immediately install circularity.
So in the end, we have to accept that we will have to pay to become more circular. We can’t think only about profit. Is that correct?
Could you name a few best practices more companies can adopt?
The first point is material. The emphasis needs to be on material reduction and on material selection. There are many approaches, for example the C2C approach, in which materials are banned that are not circular. That means banning toxic, harmful, non-organic and non-recyclable materials.
Then comes the evergreen approach of “services instead of products.” This means switching from producing a product to offering more services or to delivering product-service systems.
If that is impossible, if the business model is not ready yet, leasing and lending can be an option, retaining ownership of products and taking them back. From an economic point of view this is a big challenge. You can negatively affect the company’s balance sheet if you keep your assets, because you need to preserve resources for them. That’s poison for a good balance sheet.
So the problem is virtual?
Yes, absolutely. But then how do we know who rules the world?! (laughs)
Returning to best practices, extending use is another good approach. Along with that comes predicting maintenance, repair, reuse of exchangeable parts and reused parts as exchange parts. In the auto industry, 20 or 30 years ago, this was already a common practice.
In the electrical sector, new technologies are developing so rapidly, and products change so quickly. Customers prefer the latest version of everything. Doesn’t that contradict the attempt to significantly extend a product lifespan?
You are totally right. That again returns us to the sector-specific challenges. If your product’s use phase is consumer driven, sometimes it doesn’t make sense to extend the lifespan of a non-efficient product, because it will continue to be inefficient. Fridges, air conditioners and TVs are good examples. On the other hand, each new product includes more convenient functions. This increase in functions has a rebound effect. It makes the more efficient product consume more than the less efficient product (with less functions). Now we return to the question as to whether or not we really need the extra conveniences that greater functionality brings.
So there is a need to fundamentally change our mindset, something often requested from customers.
Exactly. But who sets rules about what or how much we should consume or how convenient everything should be? It is a very difficult question to answer. It’s again the challenge of thinking linearly or circularly. We ALL still think linearly.
The deeper we go into the topic, the more complex it becomes. It’s not only a technological or economic question. It’s almost philosophical or cultural. It makes us rethink the entire society as it is today.
Absolutely. At the same time, in environmental science, thinking culturally or philosophically without meaningful analytics doesn’t make sense. We need to ground our thinking in verifiable evidence.
Could you name one of your favorite innovations in the EE sector?
Well it is hard to name one favorite, but a commonly used example that demonstrates the evolution is how we listen to music. First, we listened to vinyl records, then we switched to tape and then to CDs and with that to less material, but more valuable material. The next step has been the MP3, an electronic device small enough to fit in your pocket. Music was virtualized into a storage system containing thousands of tracks. Today you can listen to music directly from the cloud, so it is a phenomenon of dematerialization. From this example, we can also understand the change in behavior of consuming music. In the era of vinyl or CDs we were proud to have “an album.” It was even a status symbol. Today we download an infinite number of tracks and switch from one to another after a minute.
Could you introduce the C-SERVEESs project?
The initiative aims to boost a resource-efficient circular economy in the electrical and electronic sector through the development, testing, validation and transfer of new circular economic business models based on systemic, eco-innovative services.
The techno-economic, environmental and social feasibility of these new models are tested through four target products: washing machines (household appliances), toner cartridges (IT equipment), TV sets/displays (consumer equipment) and access link monitoring equipment (telecom equipment). The project is funded by H2020, and the consortium currently has 16 members from large enterprises, SMEs, research centers and other organizations.
Can other organizations still join? If yes, what are the criteria to join?
Absolutely, yes. We invite all stakeholders involved in the electronics and electrical loop to join. This includes EEE producers, people and companies in the recycling industry and the WEEE management sector and other organizations interested in circular economy, such as academia, policy makers and standardization and consumer organizations (click here to learn more).
You are a member of the advisory board. How are LCA and PEF (your principal domains of expertise) connected to this project?
In 1997, I conducted the first LCA for an electronic product ever conducted worldwide. That is perhaps already a good example of my strong belief in analytics as crucial to sustainability and circular economy, giving you orientation for innovative thinking. LCA can help to define indicators and identify hotspots independent from a company’s approach, focusing on the product’s or the product system’s approach. From there companies can think about how to avoid or reduce hotspots with circular thinking, ultimately transforming this knowledge into business models.
This is also the core of thinkstep’s activity. We deliver software solutions, data and services that provide facts and indicators for decision making and that support scientific eco-design for innovation.
Regarding the Product Environmental Footprint (PEF), it is interesting to add that the PEF program is listed under Circular Economy with the European Commission. This reminds us of the importance of having indicators available to you for judging whether circularity makes sense or not.
What is your main goal and expectation for the project?
My goal is to represent the above described approach in the initiative. Regarding expectations, I want to see the results of the 4 test products. I want to know what the participating companies can and are willing to do. I hope that the results will go beyond efficient recycling. Ideally, they would develop beyond the technical aspects to business models with the potential to re-think things outside of today’s realities.
What’s the first step you recommend to companies in the EE sector with regard to Circular Economy?
First analyze your product systems from a Life Cycle perspective as they are today. Then define indicators to discover hotspots. After this, try to understand how you can reduce these hotspots by analyzing from the environmental (LCA) and the circularity perspectives, as these approaches do not always give you the same results. Once you have simulated the different alternatives, think about how to make a viable business model.
It is very important to underline that you should never start with a business model. First you need to re-design the system and only then think about how to make it economically profitable.