The importance of the circular economy in the tech sector

In this co-written guest post by EY’s Praveen Shankar, who is the firm’s UK and Ireland technology, media and telecommunications market leader, and Greg Sumner, who is its TMT sector director for UK and Ireland, examine the problem of e-waste.

Electronic waste (or e-waste) is one of the fastest-growing waste streams in the world. Research has forecast there will be 59.4 million tonnes of global e-waste this year, and this will rise to 74.7 million tonnes by 2030. This data is readily available to consumers, and they are now increasingly demanding companies take responsibility and grow ESG consciousness across their business. With the ICT sector predicted to account for 14% of emissions by 2040, it’s clear that IT leaders have a pivotal role to play.

Waste generation is a significant challenge to solve in driving sustainability in the tech sector, so companies need to urgently address this important topic. Demand for technology is high and business leaders face pressures to continue updating their operations by introducing the latest hardware. However, if there is limited consideration for the circular lifecycle of equipment, this can have a negative impact on the environment.

Regulations such as WEEE are already in place to address the challenge of increasing e-waste, and further scrutiny is expected in line with the increasing focus on companies’ ESG credentials and performance. Increased scrutiny will hold businesses liable for their commitment to recycling, repairing and reusing technology to minimise e-waste.

Waste reduction is directly linked to efficiency and thereby cost reduction. There are therefore sizeable commercial benefits, in terms of capex efficiency, from driving a circularity mindset across the business to shift behaviours towards the repair and reuse of equipment. And within the wider ecosystem, organisations are introducing marketplaces where they can trade network materials with other organisations that require the infrastructure and otherwise would have purchased fresh equipment.

Creating this circular economy and driving its importance across organisations and markets is also integral to reducing emissions.

Tangible progress is expected by investors, regulators, consumers and employees, who are all becoming increasingly engaged in how sustainably businesses are run. EY research shows that 43% of investors view climate change and sustainability as increasingly important to investment strategies, and 83% consider ESG factors in their investments. Businesses need to start showcasing their efficiency and commitment to reducing e-waste or they risk compromising stakeholder buy-in.

Business leaders must have the right KPIs and the enabling processes, data and controls in place to transparently, comprehensively and consistently measure e-waste. This measurement will inform how they can take concrete steps to reduce waste through an effective sustainability strategy, and also build credibility with their wider stakeholders. EY and GSMA’s ‘ESG Metrics for Mobile’ provides a starting point for telecom operators, in how to measure and report on e-waste generation.

These measurements can involve setting a target for how much hardware – such as servers or network equipment – is repaired or reused within overall deployment, analysing total waste generated, or looking at the percentage of waste that is recycled.

This will ensure that companies are measuring their progress year-on-year and holding themselves accountable when it comes to putting a framework in place to make improvements.

End-to-end visibility allows tangible action

From here, organisations can take action to reduce the e-waste they’ve created. Securing end-to-end visibility around what is driving the creation of e-waste in the business and supply chain is vital for success. And alongside internal action, organisations should obtain visibility of ESG performance in their ecosystem, so they can take steps like prioritising technology suppliers that are also making tangible progress on their sustainability commitments.

Technology businesses have a unique advantage in terms of their ubiquitous presence and engagement with their end customers. Businesses must engage with consumers to understand how their behaviours and actions are driving e-waste, and what they can do to reduce this.

For business customers, the tech companies could be the engine driving their sustainability agenda, by providing digital tools to support circularity. As a result, tech companies have an opportunity to create new revenue streams by designing and executing these solutions to enable the circular economy for their customers.

Overall, and perhaps most critically, waste reduction needs to be embedded into the culture of the business. To achieve this, organisations should benchmark their objectives to determine success and highlight areas of improvement. True circularity will start close to home before it can become widespread business best practice.

For tech companies to be sustainable, they need to take a holistic approach – working with their ecosystem, thinking creatively about how the organisation behaves, and ensuring they are operating in the right way to move the dial on circularity.

So, technology organisations have a dual role to play. They must reduce their own waste and make tangible progress in their sustainability agenda, but they are also enablers of business transformation for all other industries.