Value left on the table with circularity. Could an insetting revolution be the answer?

It is estimated that there is a multi-trillion-dollar global opportunity to reduce Scope 3 emissions.

A revolution in approach for insetting could be key to unlocking it. The huge potential for insetting to drive greater value from eWaste and circularity is a strong case in point.

Overcoming age old barriers to drive value from the circular economy

We take a look at the challenges and potential solutions to address the global issue of eWaste through new ways to drive value from circularity. A more sophisticated approach to insetting, leveraging carbon credits from circularity might hold the answer for your business and your broader business ecosystem, as it focuses on initiatives that a business drives to reduce emissions in their supply chain. This approach isn’t new but the value case is hard to make work for circularity.

Global issue in eWaste with businesses leaving value on the table

It has been estimated that only around 17% of eWaste^[2] is properly recycled and 5.3bn phones were thrown away in 2022^[1] and this is unlikely to abate with continued growth in demand for digital technology and infrastructure (eg data centres). Clearly this is a major and growing environmental issue, not only for the immediate environmental and human impacts, but this further drives resource scarcity and energy and emission intensive mining activity required to extract precious materials. While there are multiple eWaste recycling schemes, refurbishment models, trade-in-trade-up models and more which exist, the underlying economics when compared with traditional linear models often aren’t attractive enough to encourage the kind of mass industry adoption needed to significantly reduce the mountains of waste. Finding new ways to reduce eWaste and related Scope 3 emissions with smart circular solutions would be highly appealing and unlock huge potential across the value chain.

Example: Currys ‘Cash for Trash’ recycling scheme provides customers with cash to recycle their eWaste with the addition of brand propositions and partnerships have provided greater discounts eg Samsung^[3].

So why is this issue so hard to tackle? We think there are five main barriers standing in the way of progress:

1. Higher margin in selling new and challenging value-case: The current value is in resale of a circular product at a higher price than the acquisition cost. The challenge is that it’s worth more for retailers to sell new products with higher margins than lower margin circularity products which also can cannibalise new sales. There are challenges with proving the value case for businesses, customers and suppliers and therefore investments are being delayed or de-prioritised.
2. Limited carbon accounting: Carbon credits/benefits are typically not taken into account when calculating the value case for circularity/eWaste sustainability initiatives. Equally, the carbon cost is often not directly attributed to linear products, inflating true product level return on investment. This is often driven from a lack of awareness or understanding in this space as well as missing key internal capabilities and/or external strategic partners to support more accurate accounting processes.
3. Lack of co-operation across value chains and lack of understanding of third-party verification: Differing priorities across the value chain means sub-optimal solutions are often implemented. We are also seeing challenges with verification of avoided emissions and the transfer of benefits through clear certification. Businesses aren’t always aware this is possible or have the capabilities or strategic partners required. Added management cost and complexity can also be a potential barrier, impacting businesses ability to apply carbon reductions to their own targets.
4. Consumer awareness and behaviours: Whilst consumer awareness is growing, many circular products are not available or attractive enough in the market yet to fundamentally change habits and behaviours and create mass market pull.
5. Nascent secondary markets: Generating critical mass in secondary markets for eWaste materials and components is critical to enabling the flywheel for circular models. Repair, reuse and refurb markets, for example, all depend on a steady supply of recycled parts and materials in order to provide high quality circular (end) products to market reliably.

Example: Innovation from The Royal Mint to recover precious metals from eWaste using patented chemistry from Excir^[5].

Getting this right could drive additional value and better collaboration across the supply chains

Businesses need to take another look at how to address this issue through a step change in circularity strategies covering:

Designing and implementing the right circular strategies

• End-to-end circularity strategy and foundations: This needs to look across the value chain and be underpinned by ‘chain-of-custody’ model and widely recognised eWaste verification and certification process and standards. This will enable all value chain players to understand how to maximise the potential value of certified emissions reductions resulting from circular models.
• Smart mechanisms: Establishing a chain of custody framework to enable transfer of the benefits between players in the value chain can potentially reduce the cost and risk associated with purchasing carbon offsets on the open market.
• Certification: Implementing a recognised and standardised way of measuring and valuing reduced and/or avoided emissions earned from e-waste circular models across the supply chain is key to enabling a functioning ‘book and claim’ system.
• Industry wide collaboration: Creating the right ecosystem of partners across circular models, supported by market place technologies are critical to standing this up. Due to the importance of external validation and certification, choosing the right partner will be critical in the setting-up successful circular business models.
• Build the value case for circular products and services: Development of strong customer facing propositions underpinned by a business case which accounts for the value of avoided or reduced carbon emissions, will support increased levels of investment and help to address the current value-gap between today’s linear and circular models.

Driving increased value through insetting

There is an opportunity to act now and shape the system as an early mover to create additional value and revenue streams. The model design will determine where and how the additional value created will be distributed across the value chain – and ultimately which players stand to benefit.

• Scope 3 decarbonisation: There will be an opportunity for all players in the value chain to bring down the Scope 3 emissions associated with their business. For many, insetting can offer a low risk and transparent means of reaching and achieving their decarbonisation targets.
• Enhance the brand: Insetting is evidence of where organisations have taken direct action to reduce or avoid emissions within and across their extended supply chains and will serve as a clear example of acting on sustainability commitments while guarding against potential greenwashing claims often associated with offsetting. This is likely to enhance brand reputation and should be a positive force for customer purchasing decision over time.
• Trading in surplus certificates: For some value chain players there likely will be opportunities to trade and drive additional revenue streams resulting from eWaste circular initiatives where businesses are in a good position vs their carbon targets. These businesses will likely be able to utilise surplus certificates for additional offsetting, use with new product propositions or even trade with third parties.

Example: Fairphone is disrupting the industry through more and more sustainable, ethical and environmentally friendly phones^[4].

What’s next?

Our next article will explore how different value chain players could stand to benefit from a book and claim system.

We are always looking to build cross-industry coalitions to deliver these sustainability supply chain solutions. To find out more, get in touch with James Taylor, Matthew Roberts or Silvana Centty.

Key terms

• Inset: Insetting involves reducing or removing greenhouse gas emissions within a company's own value chain
• Offset: Offsetting involves investing in external projects that reduce or remove emissions
• Carbon Credits: Carbon credits are created by projects that have either avoided or removed greenhouse gas emissions
• Circularity: Circularity or the circular economy is a model of production and consumption designed to extend the life of products and reducing waste
• eWaste: eWaste, or electronic waste, refers to discarded electrical or electronic devices

Reference list

^[1] International E-waste Day: Of ~16 Billion Mobile Phones Possessed Worldwide, ~5.3 Billion will Become Waste in 2022 | WEEE Forum

^[2] E-waste: Five billion phones to be thrown away in 2022 - BBC News

^[3] Currys and Samsung work together on fresh circularity promotion - Sustainability Beat

^[4] We are Fairphone. Our journey so far

^[5] The Royal Mint to build ‘world first’ plant to turn UK’s electronic waste into gold | The Royal Mint