Who Cares About the Circular Economy?

The truth about the Circular Economy (CE) is it actually makes good business sense. It’s a big reason why more and more organizations, both large and small, across all industries, are taking sustainable practices more seriously.

With the right mindset, processes, and partners in place to optimize a company’s reverse logistics program, circular loops can be of significant business advantage. Among the benefits are resource efficiencies, CO2 reductions, cost savings, and legislative compliance.

Being known as an environmentally responsible business also helps to attract and retain the right staff. And it can lead to improvements in the customer experience, loyalty, and brand reputation. The question’s no longer: ‘why should you adopt circular principles?’ but rather: ‘why wouldn’t you?’

Circular Versus Linear

The concept of the CE, or “circularity”, dates back to the mid-60s, although the notion of sustainability obviously goes much further back - to the earliest agriculture-centric civilizations. CE has two aspects: the first is to eliminate waste in the supply chain and reduce environmental waste to landfill. The second is the continual use of resources.

It achieves its aim by continually routing products and materials to channels centered on activities such as recovery, reuse, recycling, refurbishment, reconditioning, and resale. Circularity also involves replacing scarce resources with renewable, recyclable, or biodegradable materials, to take waste out of the picture.

As analyst firm Gartner puts it, a linear economy creates waste, due to a “take, make, use and dispose” process. Conversely, a CE eliminates waste through a cycle of “make, use, return, recycle, reuse and make”.

For businesses, less waste can translate directly into cost savings in manufacturing, production, and material usage, as well as process efficiencies, plus the spectrum of advantages outlined above.

Circular Economy Advantages

One major advantage of the CE is the positive environmental impact that comes from moving to more sustainable business practices, for example repairing, refurbishing or reusing electronic equipment and accessories.

At Reconext we re-manufactured about 8 million Customer Premises Equipment (CPE) devices in 2019, including set-top boxes (STB) and modems. We estimate an average STB represents a production footprint of 113Kg in CO2e, and 1,018m3 of water, based on information from lifecycle database ecoinvent. And the average modem has a production footprint of 50.8Kg in CO2e, and 494m3 of water. Consequently, through refurbishment and reuse, we have diverted hundreds of tons of equipment away from WEEE disposal and landfill and saved many tons of CO2e for our customers.

Birds-eye view of the CPE processing area, part of Reconext's operations in Poland

Businesses can also improve customer loyalty and brand reputation through sustainable CE practices. Consumers are increasingly making purchase decisions based on a company’s environmental credentials. This was illustrated by a recent global study of circular economy trends by ING. 59% of the 15,000 consumers surveyed said they are becoming more influenced by a product’s environmental impact when they make purchasing decisions. And 83% believe their own behavior and consumer choices can have a positive impact on addressing global environmental challenges. As such, customers are open to refurbishment, recycling, repair, and even product sharing.

Businesses are also motivated by attracting and retaining staff who respond positively to their environmental commitment. Companies are also looking for partners who conform to their CE expectations. Meanwhile, today’s investors are favorable towards ethical and sustainable practices. In fact, environmentally-focused investing is becoming mainstream, with dedicated funds emerging for ethical investments.

So, CE practices are, to some extent, being driven by the long-term environmental and social benefits derived from preserving materials and resources, with future generations in mind. But on a more practical note, businesses are realizing that better resource management means less reliance on virgin raw materials today. Resource security ultimately affects the bottom line, as raw material scarcity, supply volatility, trade wars, and other geopolitical issues can lead to unpredictable and unnecessary costs.

On the flipside, circular loops can result in all manner of financial savings related to manufacturing, production, processing, service, and support, among other things. According to the global circular economy network, The Ellen MacArthur Foundation, replacing just 20% of single-use plastic packaging by weight with reusable alternatives offers an opportunity to businesses worth at least $9 billion.

Lastly, by adopting CE practices now, many businesses, including clients we work with, are anticipating and getting ahead of environmental legislation for packaging, waste, sustainable production, climate-related emissions, and so on - before they’re required to comply.

There is clear evidence that an increasing number of businesses are pursuing a CE agenda today. Another report into circular thinking by ING found that 62% of the US-based C-suite business leaders surveyed said they planned to move toward circular business models, with another 16% saying they already had. These businesses cover a broad span: automotive, electronics, food and agriculture, and healthcare.

Visibility and awareness of the fragile world we live in, is plain for us all to see. Many organizations and businesses have recognized this and are leading the change of avoiding the use of resources and materials that either damage the world we and our children live in or becoming so scarce. Circular Economy is all about how we as individuals understand the positive impact we can have by changing our consumer behavior, embracing re-use rather than buying new, recognizing that this is “better than new” and is positively impacting the world we, our children and their children live in.

Circular Loops in Practice

A variety of Circular Economy practices and circular loop business models are at work today, creating value for businesses that operate them. At Reconext, we have amassed significant experience helping clients with their circular strategies, and we’ve noticed several key trends.

Manufacturers are designing products to last as long as possible by one user, and if returned, then re-used multiple times. And technology is driving new developments. For example, the need for faster, more reliable connection speeds in the home is far higher than in the past, and this leads to new designs and new manufacturing. Where this is the case, it’s important the product still has a re-use opportunity, and this may be in another location with another operator through the recovery of the asset.

The second trend in circular loop usage is Zero Waste to Landfill, an initiative that signifies that a business is diverting 99% of its generated waste away from landfills. Instead, all produced waste is either reused, recycled, composted, or converted to energy. Reverse logistics service specialists can provide the processes to guarantee and ensure materials are being recovered, and that nothing, or at least the bare minimum, goes to waste. Notably, Subaru’s automotive assembly plant in Lafayette, Indiana was reported in Scientific American to be the first zero-landfill factory in the US: a sustainability success story.

The third is Parts Harvesting, where end-of-life equipment does not equate to end-of-life components. Aftermarket specialists like Reconext are able to rescue fully functioning components and give them a new lease of life using systematic and comprehensive testing.

The fourth circular loop trend is Value Recovery. For example, solutions that buy or sell used CPE devices and accessories such as cables and hard drives (HDDs), to operators in a different country, that can use technology considered obsolete by others. The main reason businesses dispose of their devices is technology obsolescence. However, very few units are beyond economic repair in reality and can provide a cost-efficient solution for operators that do not require the latest technology.

Cables and hard drives are ideal for circular loops. Of the 8 million CPE parts we processed in 2019 we recovered around 90% of cables, and between 40% and 60% of remote-control units, of the items returned to us that included accessories. We also recovered the majority of HDDs, which are included in Personal Video Recorder (PVR) units at the end of their life. This illustrates that, when Operators are successful in collecting all parts back from the customer that can’t be re-used in that location, recovery is a very beneficial route. And we’re glad to be in a position to enable customers to meet their CE objectives.

TV and Internet Service Providers

There are immense opportunities for circularity when it comes to CPE, as the TV and Internet services industry has discovered from introducing circular loops into their supply chain activities. Their learnings can help other industries to innovate their product and materials returns and reuse processes.

In our experience of working with Broadcast and Broadband Operators, device leasing is the pervasive model and helps to underpin circularity. It does this by incorporating equipment returns and favoring reuse, as opposed to going straight to equipment sell-off or disposal.

A high percentage of returns are a result of customer churn. These units need an efficient and fast solution within the Supply Chain to return them to new customers with only a small percentage needing repair intervention. Depending on the model, between 40% and 95% would need cosmetic refurbishment or replacement, this can often be the highest cost element of processing a returned product, this cost can be minimized by using recycling and repair of the cosmetic parts.

When you consider there are in excess of a billion pay-tv subscribers globally, this means there is a minimum of a billion STBs currently out in the field, presenting huge potential for circular loops. These devices are used for an average of four to five years globally, but circularity can significantly extend their life.

One service provider we work with has set specific targets for becoming less carbon negative and eliminating the use of single plastics from its supply chain, such as STB packaging. It is also developing secondary markets for components like hard drives that still have utility after they fail. With circular efforts like these, TV and Internet service providers are pioneering the way for other industries.

Innovating within the Circular Economy

It is essential for organizations of all kinds to consider the possibilities of more sustainable business models, especially if they are selling products that do not include returns and reuse. If this is the case, the challenge is for industry to design for circularity and reuse and move away from linear economies.

If you are already turning around used devices with brand new accessory kits, the challenge is to think about re-purposing existing accessories. It’s also worth considering the value of moving from a linear to a leasing business model for electronic equipment and accessories.

Also, think about part harvesting and material recovery before taking the recycling route: a defective device beyond economic repair does not mean 100% of the parts are defective.

Lastly, testing is critical in ensuring the integrity of products and components, and to maximize recovery, so be sure to incorporate rigorous testing into your circular loops. Reconext operates a sophisticated testing process that incorporates leading-edge technology processes to thoroughly check and grade materials.

The primary reason we developed our own test solutions and testing expertise was that we observed the manufacturing-centered test solutions in existence weren’t suited to the aftermarket or circular economy. So, we created ours with circularity in mind, using robotics for speed and efficiency, AI for intelligent analysis, and automation to help make the activity more efficient and objective, enabling our customers to maximize the reuse of their products.

Towards a Sustainable Global Economy

The costs of linear are mounting up, which is why more businesses and consumers are taking seriously the need for sustainable and circular reverse logistics, supply chains, production, and processes.

Finally, circular loops are not just for CPE operators. Many other industries can benefit from circularity’s twin goals of waste reduction and eco-design. Among them are manufacturing, logistics and distribution, retail,
energy, engineering, construction, and architecture. There is much work to do, but each step forward takes us closer towards a sustainable global economy.

To learn more about Reconext and how our Reverse Logistics services can assist your business, visit www.reconext.com.

SOURCE LINKS

1. http://www.ub.edu/prometheus21/articulos/obsprometheus/BOULDING.pdf
2. https://www.gartner.com/en/newsroom/press-releases/2019-09-26-gartner-predicts-circular-economies-will-replace-line
3. https://www.ecoinvent.org
4. https://www.ingwb.com/media/3076131/ing-circular-economy-survey-2020-learning-from-consumers.pdf
5. https://www.theguardian.com/money/2020/jun/13/ethical-investments-are-outperforming-traditional-funds
6. https://www.ellenmacarthurfoundation.org/publications/the-new-plastics-economy-rethinking-the-future-of-plastics-catalysing-action
7. https://www.ingwb.com/media/2692501/ing_us-circular-economy-survey-05-02-2019.pdf
8. https://www.scientificamerican.com/custom-media/scjohnson-transparent-by-design/zerowastefactory 

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Nick Linford
Nick is a veteran of the CPE industry with in-depth technical knowledge and expertise in CPE Product Management and Reverse Logistics. He has worked as an electronic engineer for a defense company, and at a specialist re-manufacturing and repair company for satellite decoders and LNB equipment. Nick has held positions at Nokia, ITV, Amstrad, and Sky. In 2010 he joined Reconext (previously known as Teleplan) and has been responsible for growing the CPE business globally and determining the global CPE strategy in his role as VP CPE.