Smartphones, tablets and laptops are ubiquitous in the wealthy world, and the makers of these devices have their eyes set on selling to the next five billion consumers in emerging markets. And why not? Access to the internet is a good thing, and digital technologies can enable better resource productivity, smarter conservation, and lower waste. The fact that smart devices have been selling like hotcakes for the past decade might lead business executives to think more growth is practically inevitable.
Smart technology belies a messy reality
But the picture’s not as rosy as it might seem. Expanding from two billion rich consumers to five billion people in the developing world is going to be harder than just pushing out more of the same: for a start, few in emerging markets will pay £600 for a new phone. Instead, the price point is somewhere under £100.
In the developed world, new device sales have stagnated as consumers have begun to resist the two year upgrade cycles that have sustained the industry. Eight per cent of new sales are likely to be cannibalised by reuse by 2018, and the second-hand market is already worth $3 billion per year in the US. Perhaps worse, the idea that consumers are being duped into upgrading early has begun to take hold: France passed a law last month to limit planned obsolescence, the EU has considered the merits of a total ban on built-in defects designed to end the product’s life, and a German study showed that some consumer goods are breaking sooner today than they did a decade ago.
And then there are the environmental implications. New devices have higher carbon emissions: producing an iPhone 6 generates four times more CO2 than an iPhone 4. The industry’s total emissions already exceed those from the UK’s transport sector. And more new devices could mean greater demand for conflict minerals, with all the attendant harm to humans and habitats.
Is the circular economy a solution?
The circular economy could provide a solution. 89 per cent of mobile devices in the US were thrown into landfill in 2010, and millions more were left forgotten in drawers once their owners upgraded. It wouldn’t take much to give these devices a second lease of life, creating a new, low cost source of supply.
Our analysis, A circular economy for smart devices, shows how this could be done. It demonstrates that repairing and reusing discarded devices makes economic and environmental sense for at least four years, and up to seven in some cases.
It identifies a range of potential consumers for second-hand devices in the US, UK and India, to make sure that what looks economically rational on paper can translate into a viable business model.
And it quantifies the environmental gains: just keeping a smartphone in use for an extra year cuts its lifetime CO2 impact by a third.
An industry used to transformation
Of course, computers and phones might seem like the last place a circular economy could take hold. They’re complex products that are hard to fix, and the industry’s blind pursuit of thinness has made them much less repairable over the past decade. The rapid upgrade cycle the industry has fostered is the antithesis of a sustainable model.
But there are grounds for optimism. The sector is the poster child for transformation: in the past 15 years, Apple went from near bankruptcy to overtake Exxon as the most valuable corporation in the world. Google went from two guys in a garage to powering 60 per cent of the planet’s internet searches. And Nokia and Blackberry have gone from dominant players to dead in the water even faster.
If ever there was an industry that can grab new technology and new business models quickly, it’s the internet industry. The company that makes a success of the circular economy approach will probably be the one that sells smartphones to the next five billion.