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How Companies Can Build a Supply Chain for the Circular Economy

Reselling and recycling products can offer tech hardware providers a competitive advantage.

  • Technology hardware providers see new opportunities in circularity: the reuse, remanufacturing, and recycling of products and their components.
  • Some companies are developing new revenue streams from selling second- and third-life products, which have been reclaimed from first-use customers and restored for resale.
  • Circular supply chains have benefits, such as maintaining reliable supplies when inflation hits commodity markets, helping companies reduce waste and emissions, and staving off new competitors.
  • Successful circularity efforts identify new ways to create value, anticipate disruption to profit pools, and plan for scale.

Technology companies are under pressure from investors, customers, and regulators to reduce their carbon footprint and become more sustainable. For some tech hardware companies, improving the circularity of their products—repairing, reusing, and recycling products and their materials—creates new value and supports their plans to become more sustainable, though most plans lack specific goals (see Figure 1).

Figure 1: Nearly two-thirds of technology companies don’t have specific circularity goals

Circularity can be particularly challenging in tech, where supply chains span continents, carbon footprints are large, and products are complex with short lives. The raw inputs for advanced technology products derive from a wide variety of sources, and improving circularity requires a deep understanding of the flow of materials before, during, and after the product’s useful life (see Figure 2).

Figure 2: A material flow chart for a mobile phone shows where a manufacturer is already pursuing circularity

But even with these challenges, the advantages and opportunities are hard to ignore. As inflationary pressures hit commodity markets and supply chain bottlenecks threaten to limit access to raw materials, executives are looking for new and innovative ways to ensure access to alternative sources of supply. Circularity also helps manage competition from other sectors for strategic materials, for example, battery materials such as lithium for electric vehicles. More circular and repurposed products could also earn a green premium from concerned customers.

If those are the carrots, there are also sticks. Regulations governing emissions and electronic waste are only going to increase, and more circular models will be essential to hitting those goals. Also, as more tech hardware moves to as-a-service models, providers will increasingly maintain ownership of the physical products, and circular models will help maximize reusability—and therefore, margins. Finally, private equity investors are wading in; if tech hardware providers don’t extend into second- and third-use revenue streams, others will take those profits for themselves.

Seeing these opportunities, some tech hardware leaders have set ambitious circularity targets. For example, HP has said that it’s designing products for long lives and to make it easier to recapture materials from products at the end of their useful lives. Dell has set a goal of sourcing all of its packaging materials and more than half of its product materials from recycled or renewable materials by 2030, and Apple has said that by 2030 every product it sells will have a net-zero carbon impact.

To meet such goals, companies are redesigning their products to make them easier to repair and more recyclable and are making plans to salvage and reuse valuable materials when products reach the end of their useful lives. This will require a coordinated internal strategy across product design, sales and marketing, and supply chain teams. And although most tech companies still don’t have specific circularity plans in place, our research finds that tech companies have more detailed sustainability targets than companies in other industries do (see Figure 3).

Figure 3: Tech companies have more detailed sustainability plans than companies in other industries

Some changes will be easier than others. But creating a more circular supply chain for any product is complex and will require the cooperation not only of the manufacturer, but also channel and other sales partners, along with the end consumer. Customers may not want to part with their old hardware or may not know the value in doing so.

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