RICH DATA IN ELECTRONICS BRINGS SUSTAINABILITY TO PROFITABLE SUPPLY CHAINS
By Tim Foster, Managing Director of Asia-Pacific, Chainalytics
When most people think about sustainability, they think about things like recycling, alternative energy, and reducing consumption. It is true that those are all elements of the greater sustainability universe, but supply chains have been historically slow to adopt sustainability measures unless they are accompanied by increased profits. Asia is no stranger to what happens when sustainability is not profitable: The World Health Organization found that Delhi has the worst air pollution in the world, and cities like Beijing have well-earned reputations for terrible pollution.
Cheap oil, booming populations, and a rising middle class all come together to make sustainability a tough sell throughout much of Asia. As the idea of a circular economy begins to take shape in the West, it is inevitable that certain sustainability measures will eventually be legislated by Asian nations in the future as well. However, the move toward increased sustainability is always easier when accompanied by a profit motive.
A model for this has emerged in what may seem like an unlikely product category — electronics. Largely seen as disposable products, the electronics industry is quickly moving toward more sustainable supply chains due to a combination of factors that are most largely apparent and mature in the cell phone sector. Expected accelerated growth in demand for connected devices of all kinds will mirror much of what cell phone lifecycles are currently experiencing and result in greener supply chains.
The secondary market catalyst
The rapid growth of the smartphone industry has fed a cycle of demand that encourages abandoning handsets long before their useful lives are over because consumers crave the newest features. Average cell phone usage is under two years, but manufacturers design handsets to last considerably longer. Rising middle classes in certain regions of Asia and even areas of Africa are creating significant demand for used cell phones that are high quality, but affordable.
This demand is so strong that manufacturers like Apple have instituted formal buyback programs to recoup their products after they have gone through their first owners so that they can be refurbished (when necessary) and resold. Thriving secondary markets extend the lifecycles of devices closer to the end of their actual useful lifecycles versus their demand cycles in only the most affluent markets. Every phone that goes to a second owner stays out the waste stream for that much longer, boosting sustainability.
Bringing it all home for data
Incentivised by trade-in values, consumers are typically eager to take advantage of buyback programs to help subsidise the purchase of newer devices. But even when they keep units until they have reached the full end of their lifecycles, consumers are still motivated to return devices to manufacturers through reverse logistics channels because they know these smartphones are loaded with highly personal rich data. Modern phones contain all sorts of data on users that can include financial logins and passwords, call histories, and even GPS records. This data is not easily erased and can be recovered from discarded or privately sold devices.
That means that manufacturers can expect to receive phones from customers that expect trade-in value as well as those who simply require safe disposition. Either way, almost every smartphone sold today will ultimately find its way back through the supply chain to manufacturers, who must be equipped to completely wipe them clean of all user data before processing further to secondary markets or recycling. This puts the power — and responsibility — of sustainability squarely on manufacturers themselves.
Triage – Leaving no trace
Upon receipt of used devices, manufacturers face a triage process where the units are sent for refurbishing to be sold again or recycling, passing through data wiping before either destination. When devices are to be recycled, they can be disassembled by the same technicians that assembled them, extracting rare earth metals and any other useful component to be reused or disposed of properly. Recapturing any value the devices have left keeps sustainability profitable, but safe data wiping also build customer loyalty and mastering the necessary reverse logistics to complete these processes now makes sense, in advance of legislation that could fine manufactures for not doing so.
The expected rise of the Internet of Things is going to lead to an explosion of electronic devices that capture user data. From wearable tech to appliances like refrigerators, the problem of how to dispose of electronics that are loaded with intelligence on user preferences and behaviors will become very real very soon. Faced with the question of how to dispose of a refrigerator that knows everything they have eaten or light bulbs that know their sleeping habits, consumers will increasingly turn to manufacturers at the end of product lifecycles to manage the process safely. The reverse supply chains designed to handle repurposing, recycling, and disposition will strengthen the bond between sustainability and profitability.