The circularity paradox

Since circularity first became an aspiration of the electronics recycling industry, the endgame always has been a closed loop—allowing each original equipment manufacturer (OEM) to create new servers, laptops, mobile devices and more out of their own recycled products. But getting there has been easier said than done—even in the United States where e-scrap increasingly is being recycled in responsible and circular ways. Material labeling and tracking must be improved, and the recycling process, including shipping, must be easier for consumers and businesses. But less attention often is paid to one of our industry’s biggest barriers to achieving a closed loop: scale.

More than a thousand companies are Responsible Recycling (R2) and e-Stewards certified and have met high standards that have been established to safely recycle and manage end-of-life electronics. In theory, this allows more information technology asset disposition (ITAD) companies and partners to move toward the same environmental goals. But it also means the industry is largely dispersed, making e-scrap harder to track. The industry also can’t get and apply recycled material data at scale.

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

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Why scale matters

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

These three elements are key to the supply chain because 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 volumes of e-scrap help identify in advance what types of recycled materials OEMs are looking for so they are forecast to 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 facing circular economy adoption. Virgin raw materials supply simply always has been more reliable and cost-effective than recycled materials supply, in part because the industry remains too distributed to create and service the circular supply chain. It’s a paradox; a circular supply chain can’t become viable until it’s larger scale, which leads to persistent (or increased) fragmentation as ITAD partners try to absorb more volume.

The issue remains even despite the economic and ecological opportunity it would provide, including a cleaner planet, less waste and more detailed data that could be used by businesses to meet increasingly prevalent environmental, social and governance (ESG) standards. Solving scale could produce great ESG benefits because further consolidating recycling naturally means less Scope 3 carbon emissions from downstream partners. In some cases, four legs of downstream materials are shipped, which send emissions through the roof. With stable volumes of recycled materials that manufacturers can rely on, those materials can go directly to end consumers, positively affect ESG metrics.

To effect major change in the industry, it probably needs to be a profit opportunity for some and a government mandate for others.

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-scrap recyclers that do have the scale and are recycling their materials in open loop applications but might not be focused on closed loop circularity. Some greater form of consolidation must take place, and it will take everyone working together to find the best path forward.

Realistically, this type of shift requires sacrifice as well as an investment of time and money. It can include making hard decisions, such as changing a company’s entire downstream. 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 compared with producing goods with higher carbon footprints.

For now, what’s most needed is the desire to collaborate and an example that others might follow. If everyone (OEMs, ITAD firms, recyclers, original design manufacturers, manufacturing partners, etc.) can take a focused approach and demand we work together to create viable closed loop applications for e-scrap, a recycled materials supply chain won’t be far behind. Fixing scale issues means changing the circumstances to make it worthwhile. If we can accomplish that, a better, more profitable world awaits.

The author is CEO of Atlanta-based Apto Solutions and can be reached at jjones@aptosolutions.com.