Former Associate Director, BSR
On the last day of the BSR Conference 2011, Best Buy CEO Brian Dunn noted that we have about five years to address the world’s critical sustainability challenges. But to do this, he added, we need new business models.
This idea was echoed throughout the event. A session on the social impacts of wireless technology featured opportunities to develop businesses that meet people’s needs through access to information. And in a conversation with Generation Investment Management Partner Colin le Duc, Recyclebank Chief Sustainability Officer Ian Yolles talked about how his company’s business model encourages electronics recycling by rewarding consumers for “sustainable behavior.”
In a recent report for CTIA—The Wireless Association, BSR highlighted opportunities to apply wireless technology to improve lives and reduce environmental impacts. But this comes with some tradeoffs. When products like cell phones are discarded after an average of 18 months—often before they have reached the end of their functional life—this can promote environmental degradation through resource consumption, pollution, and waste. Whether the driver for such obsolescence is technological progress, consumer taste, or company strategies to increase sales, these effects are the same.
Fortunately, more leading companies now accept responsibility for their products beyond their own production and marketing activities. Whether as a result of government regulation encouraging extended producer responsibility, strategic business decisions by the likes of Best Buy (which aims to recycle 1 billion pounds of e-waste by 2014) and Patagonia (which has recycled 45 tons of clothing since 2005) to take products back, or other drivers, the question of how best to address rapid obsolescence is becoming increasingly important.
Defining the Problem (It’s Not What You Think)
The fact that consumers upgrade products before the end of their useful life is not, in itself, a problem. In some cases, this can have significant environmental and social benefits. Take the household refrigerator, which may be useful for 15 years: The U.S. EPA recommends replacing it after 10 years because newer models are so much more energy efficient. Even in electronics, where people frequently express concerns about product obsolescence, rapid advances in energy efficiency might reduce overall environmental impacts if certain products, like data center servers, are replaced (and appropriately recycled) on relatively short cycles.
The root concern here is not rapid obsolescence, but the environmental damage that rapid obsolescence can cause. Traditional product lifecycles require raw materials to be mined from the earth, then processed and manufactured into finished products that are ultimately used and discarded. In this system, rapid product obsolescence means more extraction, more manufacturing, and more waste.
Practical Solutions Rooted in Design
There are several ways companies can reduce environmental impacts regardless of whether a product is discarded after a few months or many years. These include designing products that require less material and energy in manufacturing and use; using more sustainable materials (phasing out toxics and using recycled raw materials); and designing systems that reduce the end-of-use environmental and human impacts from processing (by making disassembly easy, or reducing or eliminating toxics), while also enabling resource recovery and recycling so that recycled material derived from obsolete electronics can go back into manufacturing processes and take the place of raw materials extracted from the ground.
Although ongoing product innovation that contributes to rapid obsolescence is central to many companies’ business models, manufacturers and retailers can build alternative models that focus on “appropriate obsolescence” and reduce environmental costs. This can include several complementary aspects including product design, and the design of systems that engage users and effectively support and dispose of products.
As emphasized by Autodesk CEO Carl Bass at the BSR Conference, design is a critical element of developing these solutions. This can include:
- Designing for durability and repair: If a product is easily broken and difficult to fix, this will contribute to rapid obsolescence because the user will have strong incentives to simply buy a new product. If, on the other hand, products are difficult to break and easy to repair, they are much more likely to remain in service.
- Designing for upgradeability: Rapid technological advances may drive obsolescence, but they often apply only to specific product components like computer chips, batteries, or motors. If it’s possible to upgrade individual components without having to replace the entire product, this may significantly reduce the need to manufacture new products and dispose of old ones.
- Designing for reuse and recyclability: Making products that are reasonably easy to break down into reusable components and recyclable materials can significantly reduce product end-of-use impacts by diverting materials from waste streams. This can also increase incentives to recycle the products to obtain potentially valuable components and raw materials. Computer manufacturers like Dell, HP, and others have increasingly focused on this in recent years.
Engaging Consumers in Solutions
These design efforts will be useless if upgrade, repair, and recycling programs are unavailable or unknown to users. There are three specific opportunities in this area:
- Extended use-phase product support: Companies that offer replacement parts, repair services, upgraded components, and other extended support programs at a reasonable price will have the opportunity to emphasize the value of their products and encourage customer loyalty. The French mobile phone service provider Orange, for example, offers customers a discount if they continue using the company without upgrading their phone.
- End-of-use product services: Providing access to reputable reuse and recycling services also helps companies extend the value they offer to consumers. Best Buy and most cell phone service providers in the United States offer product take-back services that encourage customer retention and actually generate revenue for the companies while giving them the chance to project an image of responsibility.
- Engagement with users: Helping users understand the options they have to extend the life or appropriately dispose of the products they buy is an essential part of making these efforts work. This type of engagement also offers companies an opportunity to expand relationships with their customers.
User engagement is a particularly critical piece, but it can be tough. In the United States, for example, only about 10 percent of cell phones are recycled, and even products with strong financial incentives for take-back, as with O2 cell phone handsets in the U.K., have had little success. Sprint Nextel performs significantly better than the U.S. average, but even then, its recycling rate has held steady at around 35 percent over the past few years. The company will need innovative efforts to reach its aggressive and laudable goal of 90 percent recycling by 2017.
Many opportunities to address the environmental costs of rapid obsolescence will come only if we’re able to develop alternative business models—both to replace revenues that may be lost if fewer products are purchased, and to successfully encourage extended product use and appropriate disposal options. Xerox and Interface are two classic “product as service” business models along these lines, and the growing use of cloud computing and wireless technology may also contribute to “dematerialized” models that do not depend on the frequent replacement of obsolete products.
In the end, the “solution” to the costs associated with rapid obsolescence lies not just in product innovations or consumer engagement. There are opportunities—indeed, as Dunn suggested, there is an urgent need—to develop new business models, new means of interacting with customers, and new avenues for product design.
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