bRIC with a small b Part II: 4 opportunities for a circular economy in Brazil

April 3, 2013 2 Comments

In this blog post I argue that there are key intervention points within the Brazilian economic, social and legal structures that open up opportunities for a circular economy. It is intended as a follow-up from my last blog post, which discussed key trends that point to the need for Brazil to embrace a more sustainable economic model.

Why the circular economy: an opportunity for restoration

I am currently reading Paul Hawken’s The Ecology of Commerce, which outlines the destructive effects of our global linear economy. A fact I read this morning during my commute put our urgent situation into perspective:

Our human economy utilizes, consumes, converts, [...] and burns annually more than 40% of the total net primary production* of the planet. [...] Our species, out of 5-30 million species, is directly and indirectly claiming 40% of the earth’s production for itself. If, as predicted, population grows to 9 billion, we will usurp 60% of the primary production of the planet. [...] We will quadruple our impact, a physical impossibility.

(*Net primary primary production of the planet = defined as the sum of all photosynthetic production minus the energy required to maintain and support those plants.)

The economic activity described above is currently being driven largely by Western consumption and demand for goods. As Brazil, and other emerging and developing countries, move towards high levels of income and consumption, this will compound the destructive effect illustrated by Paul Hawken.

With the EU and China taking positive steps towards such a transition, the circular economy has been gaining attention from business, government and society.

The circular economy is an opportunity for growth, enabling the development of a restorative economy that protects the environment and natural resources. This can be achieved through a broad range of strategies, including closed-loop material flows, replacing end-of-life waste disposal with repair, design theories such as Design for Remanufacture and Design for Disassembly, and Cradle-to-Cradle production and Industrial Ecology (see image below).

Kretslopp eng 09 2009 300ppi

These strategies lie in stark opposition to those practiced by our ‘take-make-waste’ economic and industrial systems. This structure depends on linear modes of production, namely: extracting resources, manufacturing goods, transportation, sale, use, disposal. Whilst we have enjoyed a boom in trade, economic prosperity (not for all) and mass production since the Industrial Revolution, this has been at the expense of ecosystems, cheap labour, abundant resources and energy. As theprice for energy and resources rise (see graph below), there is an urgent need for a non-destructive, restorative economic as an alternative to our ‘take-make-waste’ model, and current trends in Brazil give rise to the opportunity for a more circular economy.

Screen shot 2012-07-21 at 20.44.54

Key intervention points Brazil can leverage in order to restructure for a more circular economy

1. National Policy on Solid Waste 

After much dithering (approximately 20 years) the Brazilian government introduced the country’s first national law on solid waste, the Política Nacional de Resíduos Sólidos. The policy focuses on six hazardous waste types, including e-waste and aims to decrease the production of waste and improve the sustainability of municipal solid waste management.

Key features of the policy render it a viable platform from which to build a circular economy:

  • the policy introduces the waste hierarchy that determines priorities for post-consumer waste management, stressing the need for prevention and reduction, which has implications on product design
  • polluter pays principle is upheld, as producers are obliged to pay for waste management
  • reverse logistics and supply chains are to be developed, in order to divert waste from landfill and dumps and return end-of-life products to the producer

It is this last point concerning reverse logistics, in particular, that is of importance. Reverse logistics help transition an economy from a ‘take-make-waste’ model to one which operates based on closed-loop models of production, where waste is reused as an input. This Brazilian law requires producers within a given industry to work together to build reverse supply chains, which fosters greater collaboration, information sharing and communication between key players. Of course, there are large institutional, physical and economic barriers involved in developing reverse logistics. For example, whilst Brazil has the fourth largest road network in the world, only 13% of it is paved, which sets challenges for the development of road cargo for reverse logistics (CIA World Factbook).

Nevertheless, in developing reverse supply chains, Brazilian industries could be setting themselves up for circular modes of design, production and reuse.

2. Policies and financial mechanisms

Several funding sources and policies exist that incentivise the production of sustainable goods:

  • National Fund for Climate Change – Climate Fund Fundo Nacional sobre Mudança Climatica - Fundo Clima will soon support projects that develop reverse logistics
  • FINEP’s (Projects Financing Institution) Brasil Sustentável invests in projects that promote sustainable production and innovation in technology
  • BNDES (Brazilian National Bank for Sustainable Development) Funtec invests in sustainable innovation in technology
  • National Action Plan for Sustainable Production and Consumption Plano de Ação para Produção e Consumo Sustentáveis

The three funds above are national programmes that provide investment to help sustainable business, technology and services overcome market barriers. Brasil Sustentável, for example, has access to US$ 987 million in funding that is intended for the development of sustainable products, technologies and innovation. 75% will go towards projects that enhance company innovation and the remaining 25% will subsidise the development of new technologies in priority areas that hold relevance to the Circular Economy.

Furthermore, the Brazilian government recently launched the National Action Plan for Sustainable Production and Consumption, which I have written about here. In brief, the Plan sets out sustainability  objectives and targets for six key sectors (see table below) that are aimed at transitioning Brazil towards a more sustainable society. This Plan provides a necessary regulatory framework from which to grow the market for sustainable goods and services.

Screen shot 2013-03-23 at 04.55.45

One of the biggest barriers concerns the market demand for sustainable goods: currently only 5% of Brazilian consumers consider themselves as ‘conscious consumers’ (Instituto Akatu). This stifles innovation and sustainability efforts, as the return of investment for sustainable products remains very low. Other challenges include high running costs in Brazil, known as custo Brazil, and bureaucratic processes that act as barriers to market entry.

3. São Paulo & Rio de Janeiro: a South East city-region opportunity 

Brazil is typically divided into five regions, which group together several states. The South Eastern region is made up of four states, including some of Brazil’s most competitive and tech-savvy cities: São Paulo, Rio de Janeiro, and Curitiba (The World Bank, 2010).

The South Eastern and Southern regions of Brazil provide the biggest enabling factors for a circular economy, given:

  • Most of Brazil’s industrial activity is concentrated in the city regions of São Paulo and Rio de Janeiro, which between them contribute on average 25% to Brazil’s GDP annually
  • The largest amount of waste is produced in the South East, most driven by São Paulo and Rio de Janeiro cities
  • Eco-Industrial Parks are flourishing in the state of Rio de Janeiro, originally set up by a government initiative and now private sector led
  • The best road infrastructure lies within the South East, facilitating the development of reverse logistics at lower cost
  • The majority of the BNDES funding mentioned in point 2 above went to companies based in this South Eastern region of Brazil

4. Entrepreneurs & SMEs in the driving seat

Finally, entrepreneurs and SMEs have a real opportunity to grow niche markets and lead the way in the design and production of sustainable goods, given their ability to innovate around products, as exemplified by TerraCycle, NovoCiclo and EPEA Brasil. These actors benefit from not being locked-in into resource and energy intensive production and processes. The National Law on Solid Waste offers the opportunity to generate new market opportunities, supported by sustainable finance offered by FINEP and BNDES that support entrepreneurs and SMEs, which lowers the barriers to entry.

Admittedly, the Brazilian government hasn’t developed the best operating environment for start-ups and entrepreneurs, but the good news is that change is imminent: last month the government announced it would invest R$200,000 for each of 100 selected start-ups that demonstrate the most potential for growth and opportunities for scaling up.

The verdict

There are certainly opportunities that can be leveraged to transition Brazil to a circular economy. The above four points lower the ‘barriers to entry’ for such a transition to occur. I have also attempted to (very) briefly outlined some of the key challenges involved in this process, one of which remains political will. With a track record of influential government leadership and the use legislative solutions, political will and backing is required for any economic transition to take place in Brazil (without it many initiatives fail to be successful). The above points remain context specific in isolation, however, when taken in aggregate, they represent a network of opportunities for a new economic system, business and consumption models that will help Brazil develop into a sustainable, resilient society.

Resources

National Fund for Climate Change / Fundo Nacional sobre Mudanca Climatica

FINEP’s Brasil Sustentável (Projects Financing Institution)

BNDES Funtec (Brazilian National Bank for Sustainable Development)

National Action Plan for Sustainable Production and Consumption / Plano de Ação para Produção e Consumo Sustentáveis

Competitiveness and growth in Brazilian cities: local policies and action for innovation

Filed under Circular Economy, Systems change Tagged with , , , , ,

bRIC With a Small ‘b’: Rethinking Business Models for the Emerging Middle Class

January 14, 2013 1 Comment

Screen shot 2013-01-01 at 08.03.36

In 2012 Brazil overtook the UK as the world’s 6th largest economy, moving closer to meeting the expectations set by the novelist Stefan Zweig in 1942, when he said that ”Brazil is the country of the future”.

Unfortunately it seems that Brazil has slipped back a few paces, as the UK economy resumes its place in world rankings ahead of the South American nation, much to the dismay of a proud, nationalist country that likes to celebrate occasions: “We have to go back to being the ‘country of the future’ “, says Marcos Troyjo, director of the BRICLab at Columbia University in his guest blog for the FT.

A model driven by consumption

The love for celebration is strongly expressed in a very consumerist society. Brazil’s GDP grew by 8% in 2010, its fastest growth rate in over 25 years (Euromonitor International, 2012), reducing unemployment and boosting household disposable income (Accenture, 2011). Yet GDP growth has been volatile, dropping to 2% in 2012 , and is expected to remain under 2% until 2013.

Economists attribute the past growth in the Brazilian economy mainly to:

i) policies and a culture that favours consumption,

ii) easy access to personal credit,

iii) income distribution methods.

The combination of the above has resulted in a consumption boom. According to the marketing research agency Euromonitor, Brazilian consumers rank top four in almost all product categories. They are also marked by vanity, as an Accenture study revealed that

“72% of 8000 consumers [interviewed] that the electronics brand they own is important to be perceived as most innovative.”

Rising domestic consumption has been the main driver in lifting Brazil into the ranks of a middle class economy, which now makes up 60% of the population.

This shift was spurred on by social and economic policies targeting social inequality from Lula’s government that helped 30 million people move up from the lowest socio-economic bands between 2003 and 2010.

The Family Grant (Bolsa Família) and growth in the minimum wage are key policies that have increased Brazilian consumer spending power. In addition, increase in credit access and rising incomes boosted domestic consumption, increasing consumer confidence and spending.

But is this growth model also limited by consumption? 

But now, in 2013, it seems that the boom as been cancelled – at least until 2015 (the World Cup and Olympics are sure to give a helping hand, however temporary and despite Michael Palin’s visit).

As an emerging economy struggling to develop a stable, strong economy, it seems that the

“the old consumption-led model of development is now less likely to deliver impressive rates of growth that it has done in the past.”

- Neil Shearing, Capital Economics

The rise in consumption has not been paralleled by a rise in productivity. During the same period, productivity increased 4% in China, whilst it grew by a mere 0.2% in Brazil.

And what’s more, the socio-economic benefits from the emerging middle class are questionable. Yes, 30 million people have been lifted out of poverty, but they are now heavily in debt, and inequality hasn’t decreased. Easy access to credit and a culture that encourages consumption has led to a ‘consumerisation’ of Brazilians. Debt has surged to represent 43% of a family’s income, limiting the economic sovereignty of Brazilians, and has developed a culture of material ownership that mirrors the USA.

I have had conversations with many Brazilians who would prefer to be stuck in a traffic jam for 2 hours than take the public transport, as they value the status gained from driving and owning a car. Almost all big-ticket items are paid for in 12, 24 and even 36 instalments over several years, often pulling families deeper into debt. The need to own is strong.

How fair is to to bring people into the middle class status when this burdens them with debt and is dependent on their consumption, therefore fuelling more debt? Additionally, lack of investment in public education has resulted in an elitist education system, benefiting those who can pay and locking those into poverty who can’t.

An ill-fitting business model

Screen shot 2012-12-31 at 22.00.26It would seem then that a consumer-dependent model was ill-fitting for this huge emerging middle class. A conversation I had with Alexandre Fernandes, Founder of EPEA Brasil, challenged conventional consumer business models: what if one could meet the needs of the emerging middle class by supplying products through a different ownership model?

He mentioned that Brazilians, once they can afford it, opt to buy a washing machine or dish washer, as this “frees up manual labour and time for leisure”. Yet there are long-term consequences when 30 million people buy and own a new washing machine. In a consumer society based on ownership, questions regarding the end-of-life are left unanswered, especially in a country like Brazil where over 80% of collected rubbish goes to landfill and less than 1% of all electronic waste is recycled (roughly 10,000 tonnes a year is collected for recycling).

As a result, electronic waste is landfilled and increases the risk of pollution, people are held ransom to consumption, resources are used inefficiently and, ultimately, middle class prosperity is falsely upheld.

We already know that UK and US lifestyles require the equivalent of three planets to support their needs, and that the planet’s resources are currently being overused by  25% (most management consultancies would cringe at this level of inefficiency in a business) and a consumption economy will further exacerbate these stresses. Is this really the dream, the lifestyle we want to ‘export’ to emerging economies?

Rethinking ownership: performance, quality and equality

So, let’s take a look at different model, one based on performance rather than ownership. Instead of 30 million people buying a washing machine, they buy into a service contract with a company, who owns the washing machine and retains customer loyalty through enhanced customer service and replacement. Competition is therefore not only led by cost, but also by customer service, performance and quality.

Companies retain ownership over resources, bringing down the need to exploit virgin resources, decreasing the rise in resources cost and limiting environmental damage by minimising waste. This type of business model requires reverse supply chains and generates new jobs in logistics, remanufacture, repair and distribution. Concerning job potential for reverse supply chains,

“Microsoft found that computer reuse creates 296 jobs for every 10,000 tons of material disposed of each year”

- United Nations Industrial Development Organisation, 2009

In comparison, incineration creates merely 20-40 jobs for 10,000 tonnes of material, whilst landfill a meagre total of 10 jobs (Huisman, Magalini et al. 2007).

The ownership model is steadily establishing itself, with classic and quality examples including Interface, Desso, Caterpillar, Spotify and Ricoh.

Consumption of electronics has risen rapidly in Brazil and is highest in the world as as a proportion of GDP. Globally, Brazil is the world’s fifth largest producer of computers (Oliveira et al., 2012) and the Brazilian industry electronics association ABINEE has estimated that in 10 years Brazil will be second globally in terms of purchase figures. There is a real opportunity to provide these goods in a way that lessens the burden on resources, waste and energy and that promotes economic activity.

As it happens, Brazil isn’t very good at promoting innovation. It tends to focus on innovating new processes within existing businesses, rather than innovating new goods. In fact, the most common form of innovation is copying ideas from the West, but adding a Brazilian flavour to it. What’s more, it is notoriously difficult and costly to set up a business, which doesn’t attract entrepreneurs and locks existing businesses into heavily bureaucratic structures.

Going forwards: the $200 billion opportunity

Screen shot 2013-01-01 at 08.36.55Brazil has the opportunity to tackle its economic slump and structural problems, known as Custo Brasil, by implementing policies that encourage business models based on performance, and improving environmental and social standards.

The opportunity within Brazil is huge, as the Carbon Trust recently issued a report that the Brazilian low carbon economy is worth $200 billion.

The question is whether Brazil can restructure its economy, and what key intervention points it can leverage to do so, which I’ll be taking a look at in my next blog post.

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The EU commits to a Circular Economy

December 27, 2012 Leave a comment

Screen shot 2012-12-20 at 01.17.48

This is a press release you probably missed. On December 17th, the EU issued a press statement confirming its commitment to transition towards a circular economy:

“In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy.”

Resource efficiency isn’t new to the EU, and over the past decade this topic has gained strength and attention in discussion and debate. Europe 2020 is the EU’s growth strategy for the following decade, building on lessons learned from its predecessor the Lisbon Strategy. EU 2020 focusses on helping its members states to build “smart, sustainable and inclusive economies”. This strategy has produced other key documents, such as the The Road to a Resource Efficient Europe.

However, UK residents will know that the politics of climate change are complicated and convoluted at a national level, let alone a continental level. It remains to be seen how the Manifesto for a Resource Efficient strategy will be implemented and how member states will react.

Elsewhere in the world 

China

china energyCurrently, China is the only other country to have integrated the transition to a more circular economy in its economic development strategy. China has seized the opportunity to tackle economic instability, use of natural resources and environmental degradation through a systemic “root-and-branch” restructuring of its economy, becoming the world’s first country to adopt closed-loop economic principles (Mathews et al. 2011). Historically, China’s growth has been driven by abundant and cheap resources, which is likely to change (ibid.). Therefore the objective is to shift to a new growth model, namely one that maximises GDP, and protects natural resources to maintain long-term economic stability (Zhijun & Nailing, 2007).

Announced in its 12th Five Year Plan, China’s strategy seeks to solve both the waste and resource issues at source and to “minimise the throughputs of both energy and materials” (Zhijun & Nailing, 2007). The Chinese government has begun with implementing the Circular Economy at an Industrial level, having approved the development of 30 Eco-Industrial Parks based on circular economy principles.

Here is a link to a good summary of environmental implications of the 12th Fiver Year Plan. 

Brazil

sustentavelsitioHaving carried out my MSc thesis research on the opportunity for a circular economy in Brazil, I was startled to find little research having been carried out on resource efficiency in the Brazilian economy. The truth is that Brazil benefits from vast material, labour and land resources, rendering the concept of scarcity not a priority.

However, the Brazilian government recently launched the National Action Plan on Sustainable Production and Consumption (PPCS).

  • The PPCS aims to take a systems-based view, acting as a central link between seven other government action plans, the UNEP and international conventions, agreements and environmental bodies to advance sustainable production and consumption.

Key priorities include:

  1. Education for sustainable consumption
  2. Sustainable public procurement
  3. Embedding the environmental agenda into public policy
  4. Increasing solid waste recycling
  5. Sustainable retail
  6. Sustainable built environment

A radical strategy? 

However, in terms of a more radical shift to sustainable production, the PPCS fails to acknowledge the need to close the loop on material and energy throughput, and the need for changing production cycles is left by the wayside. Objectives for use of renewable energy and water efficiency are related to either retail shops or construction only, rather than production. What’s more, innovation for sustainable production is barely cited, which is key to shifting Brazilian industry to greener and cleaner production.

Positive direction

Every strategy ever produced has always fallen short of something, depending on one’s point of view. However, all three strategies cited here recognise the need for more sustainable economic, production and consumption models. It remains to be seen whether economies chose to adopt a protectionist agenda in the face of material price rises, or choose to collaborate to share resources and achieve greater resource and energy efficiency along supply chains.

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From Computer Case to Toaster: Re-imagining Design

December 24, 2012 Leave a comment

Serendipitous recall

Serendipitous recall

Recently I’ve attended several events that have called upon the role of designers in steering us towards greater sustainability. As I leafed through my diary this A5 poster popped out, reminding me of some amazing design for sustainability I’d seen at the London Design Festival this autumn (more below).

A less enchanting thought also came to mind: our global electronics industry is a market failure blunder.

 

And here are 8 reasons why (check out my previous blog posts for more detail):

  1. E-waste is the world’s fastest growing waste type.
  2. It is the most complex and toxic type of waste.
  3. Recycling rates for e-waste are shockingly low- about 90% of the world’s e-waste is not recycled.
  4. At least 75% of the world’s e-waste is exported to developing countries for ‘backyard’ recycling.
  5. Illegal e-waste recyclers in developing countries are subject to pollution and health hazards.
  6. Electronic goods are often replaced before their material end-of-life, due to market demand for innovation.
  7. The legal system for dealing with e-waste effectively remains immature.
  8. Developing countries lack appropriate recycling systems for e-waste, but simultaneously are driving global demand.

Broadly speaking, the electronics sector can be described as a ‘take-waste-dispose’ model (McKinsey & Company 2012). As the report Towards a Circular Economy states: “The ‘take-make-dispose’ model relies on large quantities of easily accessible resources and energy, and as such is increasingly unfit for the reality in which it operates”. Under “business as usual” circumstances, the issues listed above will be compounded by the growing demand for electronic goods from population growth: the global middle class is set to swell by 2 billion today, to 5 billion in 2030 (Pezzini, 2012).

Design: a key intervention point

There is a pressing need to decouple economic growth from the dependence on resources and the degradation of natural capital (Fischer-Kowalski & Swilling 2011). For long-term economic, social and environmental sustainability to flourish within the electronics sector, current production and consumption patterns cannot continue.

So imagine if we could produce a lightweight system of production that produces little waste, uses materials and energy efficiently and produces social value whilst limiting its damage to the environment.

This is exactly what designers at Degross have done, by designing “an easily disassembled computer case (no bolts, no screws and no glue were used) by using pre designed embedded parts within the hardware to assemble a second cycle product: a toaster in this example.”

C'est quoi? C'est le toaster that was once a computer case

C’est quoi? C’est le toaster that was once a computer case

Through intention, design can eliminate waste in the production of products. Principles such as design for remanufacture, reuse, or disassembly are being evolved but currently lack application in practice and research (Grey & Charter, 2007). These design principles allow for increased recovery of material at the product’s end-of-life, with the intention that it will be used in other production chains. The onus is on using high quality materials that can be cycled through various production cycles, and on using non-toxic biological materials that do not create pollution and facilitate disassembly (McKinsey & Company, 2012).

A practical example

Product design and business models determine to what extent a company’s operations and productions are contributing to a linear or circular economic model. A change in the design of products is needed in order to encourage more sustainable production, whilst a shift in business models will guide consumption towards more sustainable patterns.

Ricoh, a business to business provider of office equipment has a stated environmental policy with objectives to generate zero waste to landfill and engage in the recovery and recycling of its products (Ricoh, 2012). Applying a life cycle systems approach, Ricoh’s products are designed with end-of-life management and recovery in mind. Recycling is the final option, as maintenance, reuse of products and parts, and materials recovery are priority.

screen-shot-2012-08-19-at-13-30-44

Richo’s operational model. Source: Towards a Circular Economy, The Ellen MacArthur Foundation (2012).

Products and components are easily disassembled for component recovery, are lighter and more suitable for recycling. At the end-of-life, Ricoh’s toner cartridges can be used in the production of road traffic bollards, crab pots and garden planters. Ricoh’s Green-line machines are remanufactured to be used for a second cycle and produce 40% less carbon emissions over their life cycle. The company has developed expertise in reverse logistics, operations and energy efficiency and provides clients consultancy advice, helping them save 30% in energy costs and reduce their CO2 emissions.

This idea at a wider scale contributes to the development of a Circular Economy. This concept isn’t new, but has recently been brought to the fore by the amazing campaign efforts by the Ellen MacArthur Foundation.

I’ll be writing more on the opportunity to advance sustainability through the Circular Economy, particularly for developing countries.

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Beyond Responsibility 2.0 – Insights from Brazil

November 10, 2012 1 Comment

I recently saw Tom Burke speak at an alumni event at Imperial College London. He focussed on the politics of climate change and how we need to move discussions beyond responsibility to get the positive collaboration we so need. A recent PwC report  highlights how the global economy is most likely going to miss the 2ºC target in global warming; instead at the current economic trajectory we’re likely to see global warming increase by 6ºC. Tom’s call to action thus comes at a crucial moment.

Yet sustainability and environmental issues are notoriously complex, involve lots of different actors and statements like “the systems at fault!”, “consumers need to change their behaviour!” and “large corporations are w**kers they should be paying for all this!” are not so uncommon when it comes to discussing solutions.

When it comes to e-waste generation, the biggest conundrum remains: “whose responsibility is it anyway?!” The issue of waste disposal is a complex one that poses challenges to policy makers. Let’s take a closer look.

There are two key steps between when an electronic good fails and when it enters end-of-life processing. End-of-life processes are those that treat e-waste appropriately, so dismantling it, separating different components, reusing and recycling it accordingly.

These two steps are

  1. storage
  2. disposal

Storage

Storage influences the amount of electronic products entering the waste stream before they can be appropriately treated. Nokia published survey results on on the end-of-life of mobile phones, which revealed the difficulty in collecting phones as nearly 50% were kept in home drawers, and merely 5% were collected for recycling. This delay caused by storage makes collection for recycling difficult, and minimises opportunities to substitute virgin materials through recycling.

Disposal

Once an item is thrown away, it should hopefully enter the recycling system. The recycling system is made up the following processes and the effectiveness of recycling is determined the weakest link. Often, the weakest link is the disposal of e-goods, which is closely tied to our behaviour.  

However, not all electronics end up being disposed this way. Recycling electronics is a  costly activity in developed countries, and drives the illegal exportation of e-waste to countries like India, Pakistan and China, as this is the cheaper option. In fact, over 80% of the world’s e-waste is either dumped, landfilled or illegally shipped to developing countries where it is dismantled.

Therefore, correct disposal is one of the most important factors that determines high recycling rates. 

Where illegal e-waste ends up – remember e-waste is mostly produced by rich countries!

Considering responsibility

So why are appropriate disposal rates not higher? If disposal is down to the consumer, should consumers be fully responsible? Is it fair to make them pay? What about the role of manufacturers and retailers?

I argue that consumers are not entirely at fault. The lack of strong incentives, an easy disposal system and low awareness are the main drivers for low collection. Our behaviour is shaped and limited by the systems that surround us, which determine whether safe and appropriate disposal of mobile phones is easy or not.

Beyond responsibility 2.0 – insights from Brazil

So how to tackle this phenomenon? Ideally, we want a solution that makes returning defunct and undesired electronics easy and cheap.

The EU Waste Electrical and Electronic Equipment Directive (WEEE) is a flagship policy that holds producers responsible for the collection e-waste. The systems put in place for this to happen can take many shapes and form, from collection points to buy-back schemes, the opportunities for returning e-waste are improving. What’s more, the need to divert e-waste from landfill is giving rise to business opportunities as companies like Mazuma and Envirofone deliver services to individual consumers and entire organisations.

But ultimately consumers will also need to raise the bar and play the role of active environmentally-responsible citizens. We bear a social responsibility, we also need to bear an environmental responsibility.

Innovatively, Brazil has made all stakeholders along the lifecycle of electronic goods responsible for ensuring that it is appropriately returned to the manufacturer. From the consumer, to the retailer, the distributor and manufacturer, by law all of these stakeholders are required to ensure that e-waste enters the recycling system and is diverted from landfill. The National Solid Waste Law is the first to hold all actors accountable, and is a huge step towards environmental citizenship and solving sustainability through holistic means.

Furthermore, Brazil has also introduced a national programme to driver greater environmental citizenship. The Plano Nacional para Produção e Consumo Sustentável brings together the public, private and civil society sectors in a national effort to increase environmental awareness and responsibility. The effects of the policies remain to be seen, but one thing is clear: Brazil has moved towards a more holistic definition of responsibility and is making efforts to mobilise all affected parties in an effort to advance to more sustainable behaviour and technologies.

In this Digital Era of e-waste, we’re all linked to e-waste and need  to pull our weight (or more, like this ant).

Filed under General

The energy efficiency revolution might lose out to our bad behaviour

October 6, 2012 Leave a comment

With the recent launch of the iPhone 5, it is worth considering how the rocketing sales will affect energy consumption, as the figures are huge.

Within a week, Apple had sold five million mobile phones and within a year 170 million units will be sold. This year, it’s predicted that a whopping 567 million units of smartphones will be shipped we’re set to reach the 1 billion mark by 2016.

So what does this mean for energy use?

Powering the 170 million iPhones purchased this year will require the same amount of annual energy needed to power 54,000 homes in the USA. That’s about the size of Oxford, UK.

To power all the smartphones currently in global circulation requires the equivalent energy of supplied to 162,000 households, which is slightly bigger than Birmingham, UK.

However not all is doom and gloom. There are some interesting trends arising where the smartphone is substituting the use of more energy-intensive gadgets like plasma TVs and computers. For a more detailed break down check out this article. The article concludes with the idea that with the rising tide of smartphones, we might be at the cusp of an energy efficient revolution. This is a valid point, but the article omits an important factor: our behaviour.

Energy security and our bad behaviour

I  previously mentioned that the annual emissions of CO2 from the ICT industry is equal to that of the aviation industry. Yearly emissions of the ICT sector consume an estimated total of 700 TWh representing 15% of global residential electricity use.

The rise in electricity consumption is due to energy intensive behaviour of consumers and the increase in per capita ownership of electronic and digital appliances that consume more energy.

A study by Crosbie (2008) found that marketing encourages energy intensive behaviours, causing consumers to develop the following energy-intensive habits:

• Leaving appliances on standby;
• use of various appliances simultaneously by multiple users;
• replacing appliances at short intervals to acquire the latest technology.

These increases in energy demand surpass previous forecasts and provide new challenges and opportunities for energy security to policy makers. The International Energy Association has recommended that governments begin implementing policies to curb the effect of the growing energy demands from the ICT and consumer electronics sectors, which traditionally have received little attention from policy makers.

Cheeky stand-by mode

The use of standby mode of products currently accounts for 200-400TWh each year (remember that total energy consumption from use alone is 700TWh!). Typically, a television set, DVD or CD player wastes 50% of the energy it consumes whilst in standby mode.

Cheeky stand-by lights – lots of them!

The Energy Savings Trust estimated that if the entire UK population neglected using the standby mode, the total energy saved would be enough to power 2.7 million homes for a year.

The Energy Savings Trust also blamed the consumer for this bad behaviour. I tend to disagree and think this is a rather simple way of explaining the standy-by phenomenon.  Research has indicated that marketing, the operational functions of electronics and poor instructions mislead consumers who feel they are compelled to leave electronics on stand-by mode.

Evolving tech, evolving behaviour

So, whilst evolving technology is providing us with wins in terms of energy efficiency, our behaviour needs to evolve too so we don’t experience a rebound effect: where energy efficiency gains are cancelled out by our increase in the use of electronics “Oh, solar-powered? It’s totally kosher to leave it on stand-by mode!”. Nope. When not in use, just turn those bad boys off.

Shut those bad boys down

Filed under Circular Economy, General, Systems change

Update on resource conflicts

August 22, 2012 Leave a comment

Following my last post on 21st century gold rushes and growing tensions regarding geopolitics, I am somewhat pleased to announce that China has in fact increased its quota to export rare earth minerals.

The act follows some hefty complaining from the USA, the EU and Japan, who filed a trade complaint to the World Trade Organisation.

An article from the Wall Street Journal, however, explains how this move is somewhat vacuous, given that demand for Chinese rare earth metals fell this year.

It’s possible to predict that this move will merely “buy us more time” for now, given that China’s rare earth metals are finite and our demand for them is infinite.

As I pointed out in the last blog post, continuous mining won’t solve the problem of depleting natural resources, and the challenge lies in decoupling this trend from economic growth. My next blog post will look at the principles of the Circular Economy and how it can be employed as a strategy to solve this very conundrum.

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A glimpse of future conflicts? The modern gold rush

August 15, 2012 Leave a comment

The high content of rare materials within electrical and electronic devices demonstrates a rising problem of resource scarcity and geopolitics. Consumption of electronics is on a high, and is set to grow exponentially as more consumers join the ranks of the middle class.

In 2007 the combined sales of mobile phones and personal computers represented 3% of global supply of silver and gold, 13% of palladium and 15% of copper.

A PwC report highlighted the growing demand and consumption of these materials as one of the most important drivers for resource scarcity. The same report by PwC highlighted the importance of minerals and metals scarcity as a top priority for 78% of business executives from the high-tech industry.

Geopolitics also plays an important role, as the risk is that resource nationalism becomes self-fueling, and that concerns about the security of supply translate into increased protectionism, less integrated resource markets, and therefore increased uncertainty over price volatility and supply.

China is largely responsible for mining the 17 rare earth metals used to fuel our digital economy. Since announcing that it would export less of these, this has raised many European eyebrows and shifted glances towards Greenland. Unfortunately for the EU, it is completely dependent on imports for 14 out of 17 minerals known as “rare earths”. With thawing of Greenland ice famously underway, European politicians are keen on getting ahead of Chinese competition. Mining has harmful social and environmental consequences if not appropriately regulated. Unfortunately for Greenland, the policies and the regulation framework are largely not in place or appropriately developed yet. Greenland currently lacks the ability to control the behaviour of mining companies, if several were to being operating soon.

Forget Greenland, landfills are the mines of the future

As a quick reminder, there is more gold in a tonne of discarded mobile phones than a tonne of gold mine ore. Mining new materials is a strategy, but it’s an archaic strategy. A more long-term approach to resource security might be to close the loop on materials flow and change our unsustainable patterns of production and consumption. For instance, is it sustainable to own 2 mobile phones and replace them every 2 years, whilst not disposing of them correctly?

Regarding electronics, this means getting consumers to dig out the mobile phones they’ve left to dust in drawers and return it to producers, to extract the copper, palladium, gold and other rare earth metals. The EU has already legislated as the Extended Producer Responsiblity under the European WEEE Directive.

Excitingly, Brazil introduced its first national law on solid waste that obliges reverse supply chains to be created for electronics. What’s interesting, unlike the EU where the onus is on the producer to bring the product back to the manufacturer, in Brazil everyone is responsible: the consumer, the retailer, the distributor and the producer. This shared responsibility is set to mobilise hundreds of electronics back to the original manufacturer, where it will be recycled and disposed of correctly.

However, this is for future production. Last year 1.6 billion new phones were introduced into the global market. What’s more, 40 million tonnes of e-waste was produced, of which merely 20% was recycled properly. Huge amounts of e-waste already exist and many electronics have not yet entered the waste stream.

There is huge potential to close the loop on electronics and make materials savings. Keeping copper in circulation is a lot more valuable than sending it to landfill after it was used for 2 years in a mobile phone or as copper wire for electronics.

We should adjust how we value landfills and recognise that one day landfills will become a source for materials. Unfortunately, for now it seems that we prefer to mine unexplored areas before tackling the underlying root causes: our unsustainable patterns of production and consumption.

Filed under Circular Economy Tagged with ,

Taking it back to the original source

July 12, 2012 4 Comments

Do you know how much aluminium you consume per year? Could you take a guess at how much copper your friend in a country like Brazil, Nigeria or China consumes?

It’s a bit of an odd question to ask yourself. Usually we’re asked to consider how much water or energy we consume, to which most of us splutter out some figures we don’t even really understand, like 5kWh (a unit I’m still getting my head around, but apparently most professionals don’t get it either, so here’s a good explanation if you wish to learn more, from David MacKay).

Yet, the electronics we own consume vast amounts of non-renewable resources. We’ve had an impact on the environment in just buying the product, even before we turn it into waste. I came across some data regarding the extraction of aluminium to produce electronic goods and I spent 40 minutes checking calculations because I couldn’t believe how much waste is generated.

The figures just reinforce how critical it is to recycle materials from electronics.

Metals for electronics: crash course
To make electronics, we need to extract metals. Some of the most popular metals found in electronics are:

  • Gold
  • Silver
  • Palladium
  • Copper
  • Tin
  • Aluminium

There are also some less well-known metals, like ruthenium, antimony, bismuth, selenium and indium.

Your average mobile phone contains around 250mg of silver, 24mg gold, 9mg palladium and 9g of copper (according to this report by the UNEP). That’s not much on an individual scale, but consider that in 2010 1.6 billion new mobile phones entered the market.

For the 1.6 billion mobile phones produced in 2010, this required:

  • 400 tonnes of silver (80 African bush elephants)
  • 38.4 tonnes of gold (7 elephants)
  • 14,400 kg of palladium (2 elephants)
  • 14,400 tonnes of copper (2 elephants)

In 2007 the combined sales of mobile phones and personal computers represented 3% of global supply of silver and gold, 13% of palladium and 15% of copper [1].

If we continue mining silver at the rate at which we did in 2010, we’re left with 23 years worth of reserves. So by 2033 all the silver in the ground will have been mined. The good news is that silver is fairly substitutable, but that doesn’t solve the issue of resource scarcity. For copper it’s been estimated we have about 39 years left and for gold about 20 years.

If these figures have stoked some interest, take a look at the Resource Revolution Report. It contains lots of information on all types of resources and how we’re guzzling them away.

Back to the start
In answer to the original question, people living in a country with a GDP higher than US$25,000 are said to consume between 15-35 kg of aluminium per year. Individuals living in a country with a GDP lower than US $5,000 consume less than 5kg of aluminium per year. The aluminium is embodied in TVs, laptops and computers amongst others.
To produce 1 tonne of aluminium, you need to extract 4-5 tonnes of bauxite first, which then gets processed into aluminium. One tonne of bauxite generates 13 tonnes of waste, meaning that one tonne of aluminium create 65t of waste.Click on the image to the right for better detail.

For 10,000 televisions, you need to extract 6t of aluminium, which generates 390 tonnes of waste (equivalent to 36 new London Routemasters [2]).

So far, so good. Now, lets consider that 200 million new televisions were produced last year. This means 7,800,000 tonnes of waste produced to make the aluminium for 200 million TVs. This is equal to 300 million London Routemasters.

These facts are for aluminium alone. The extraction of copper, silver, gold and other materials further contribute waste and pollution to the environment, and human health.

All these numbers provide a somewhat clouded, jaded, view of the environmental impacts of electronics. It’s not easy to get your head around what 7,800,000,000 tonnes of solid waste looks likes, or even means.

What’s important to understand is that mining metals to produce electronics is driving resource depletion and waste generation. The facts speak for themselves and make a good case for recycling. According to the UN: “Recycling 1 kilogram of aluminium saves 5 to 8 kg of bauxite, 4 kg of chemicals and 14 kilowatts of electricity. It also produces 95% less air pollution.”

The origin of electronic and digital life begins deep down in mine ores. The question is how long and how deep can we continue digging?

A river bleached white with the waste of aluminium production, emerging into red lake. Darrow, Louisiana – J. Henry Fair

Footnotes

[1] The Global Aluminium Recycling Committee. Global aluminium recycling: a cornerstone of sustainable development. London: International Aluminium Institute, 2006.

[2] Weighing around 11 tonnes each according to Wikipedia (no shame in using it as reference).

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The Dark Side of our Digital Revolution

June 29, 2012 Leave a comment

Digitisation – it’s the latest thing and it’s everywhere. Over the last 30 years, increasingly rapid technological developments have thrust us into what is often called the third industrial revolution, with technology evolving from the analogue, mechanical, and electronic formats to the digital stage. Core to this revolution is the widespread use of digital logic circuits, aka motherboards, and printed wiring boards (the ubiquitous green plats covered in wiring and nodes). Some of our favourite devices have undergone digital surgery: cars, radios and even fridges are all receiving makeovers, being implanted with microchips, enhancing their functionality, speed and price.

The Digital Revolution has been accompanied by a boom in the electronics industry. One of the fastest growing industries worldwide, global sales almost reached $780 billion in 2012. This year, over 3.5 billion units of electronic goods will be sold all over the world; goods that bring us closer together, allow us to stay in touch, shrink the digital divide and grant more people access to information.

What’s more, the Digital Revolution has a powerful social dimension. As described in this CNN article, the kind of attachment to digital devices and brands displayed by their most zealous fans bears close parallels with religious devotion.

A Sydney shopper being celebrating his latest purchase: the iPad

It is impossible to deny the various benefits that the digital revolution has brought: more jobs, demand for skilled workers and efficient technologies that unleash creativity and innovation. The recent surge in tech start-ups is testimony to the relatively low barriers involved in setting up a tech company. More and more students are studying computer science and programming is becoming an essential skill.

However, all is not sunshine and rainbows. There are signs that this digital revolution may be heading down a one-way street of consumption and environmental degradation.

A few startling facts:

  1. The UN has assessed that 20-50 million tonnes of electronic waste is produced every year;
  2. On average, electronics are replaced every 18 months by consumers;
  3. Between 2008 and 2012, 1 billion computers entered the waste stream;
  4. Nearly 1 million tonnes of metal were used to manufacture PCs sold in 2007;
  5. 50-80% of electronic waste collected for recycling is shipped to developing countries, where it is dismantled in ‘back yard’ operations.

It is in the nature of the electronics industry that major producers like Apple, Dell and HP gain their competitive advantage by constantly pushing the innovation and features of products, and maintaining a pipeline of innovations, churning out new products every 12-18 months. This short-term innovation cycle feeds the consumer frenzy described above, which further fuels the need to outdo the competition by developing new technologies.

The operations of innovation, product development and marketing undertaken by brand name firms are completed in developed countries. The less glamorous and more toxic tasks of assembling and manufacturing electronics take place in developing countries, like China.

“Designed by Apple in California. Assembled in China.”

Current recycling rates are shockingly low, at about 10% of global production of electronic waste. As such, the electronics industry could almost be characterised as the pinnacle of the linear economy model: extract, produce, use, dispose. The Basel Action Network and Silicon Valley Toxics Coalition found that in the USA, between 50-80% of the e-waste collected for recycling is exported to developing countries illegally. There, e-waste is dismantled in open acid baths, burnt in open fires near rivers and causes toxic harm to human and environmental health. Workers are paid a pittance of $1.5 a day to extract materials such as copper from mobile phones, printed wiring boards and other familiar devices.

The lack of an appropriate legislative infrastructure means that producers are currently not held accountable for the production of externalities and the ultimate destination of over 91% of e-waste branded products. Despite the EU having implemented the Basel Convention (that bans the exportation of electronic waste to developing countries) and the EU WEEE Directive, 75% of the electronic waste on the continent remains part of the ‘hidden flow’ of e-waste, which slips through regulation and recycling.

The illegal exportation of electronic waste is not without its supporters, most notably former Chief of the World Bank Larry Summers who appears to think that some parts of the world suffer from being “under-polluted”, with air pollution levels that are “probably vastly inefficiently low compared with Los Angeles or Mexico City”. Some arguments speak for themselves.

What’s more, all of that this “rubbish” is actually astonishingly valuable. For example, you can extract more gold from a tonne of mobile phones than you can from a tonne of gold mine ore. So, it might be true that landfills are the mines of the future.

An e-waste worker in Guiyu, China

The vicious model: produce, use, dispose.

By now you might have spotted the vicious circle: demand for electronics is nourished through brand loyalty, marketing and planned obsolescence, which puts pressure on raw materials. The global electronics industry is a complex network of brand firms and suppliers, with manufacturers exposing their staff to hazardous and unsuitable working environments, whilst their clients like Apple are being criticised for doing little to improve working conditions.

With electronics being replaced at least every 18 months, the waste is piling up and policies have failed to incentivise an appropriate infrastructure and take back schemes to deal with all this rubbish.

What lies ahead

This linear economic model of manufacturing simply will not work. At this current rate, we might see some of the following consequences in future:

1)    As the developing world industrialises, greater demand for electronics will increase the need to extract more resources, which are already dwindling;
2)    Companies are ever increasing their rate of innovation and product replacement, meaning that more products will become obsolete faster;
3)    Rising mountains of e-waste and poor legal and recycling infrastructure means we will continue to export waste to developing countries.

The need for change is urgent and the opportunities exist. The recent Rio+20 conference, despite its failure to produce concrete targets, recognised that “fundamental changes in the way societies consume and produce are indispensable for achieving global sustainable development”.

Calls for the private sector to engage with a green economy have been made, as the drivers for economic growth we have relied on thus far seem to be vanishing. It is important to recognise how such an innovative industry is actually undermining our ability to innovate in future and grow a sustainable society.

 

In the next blog post, I will explore how electronics are made and what their environmental impact is and where it lies: in production, use or disposal?

I’m currently researching the environmental implications of the electronics industry and how rising consumption of electronic goods and e-waste are drivers for a closed loop economy. As my research progresses, I will share data and findings on this blog. 

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