By Kerry Chen, CEO of ATRenew
The ability to measure the carbon footprint of pre-owned electronic devices is vital if the circular economy is to attract more ESG investment
The past few years have seen record amounts of ESG investing worldwide. In 2021 US$649 billion was invested in ESG-focused funds, a record amount making up 10% of worldwide fund assets. This is expected to rise significantly over the coming years, hitting US$53 trillion by 2025, a third of global Assets Under Management.
These funds have found their way into a variety of ESG-focused areas, from green energy and carbon capture and storage to greening supply chains. Regulators are also taking note, applying more scrutiny on what is and isn’t truly ESG compliant, with the European Union creating green investment rules for the oil and gas sector, for instance.
As this scrutiny grows, especially during recent periods of market turbulence, investors will become much more wary of where they invest their funds. This presents an opportunity for those in the circular economy space, yet in order to attract a slice of ESG funds, we need to be able to measure the benefits of recycling and the second-hand economy, and specifically the amount of carbon that is produced and saved.
Measuring the environmental impact of unused electronics
While mobile phones themselves cause a small portion of carbon emissions the numbers are huge with 7.26 billion mobile phones in use globally. Furthermore, the energy and emissions generated to manufacture the devices is more significant requiring long and deep supply chains as well as copious raw materials that needs to be mined and extracted – often in environmentally sensitive parts of the world.
Added to that, mobile phones are constantly changing with consumers upgrading to a newer model every few years, generating significant amounts of unused electronics. In 2019 it was estimated that mobile phones contributed 10% of discarded electronics globally at 50 million tons, much of which ends up in poorer parts of the world to be stripped, generating environmental and human hazards.
This provides a ripe opportunity for entrepreneurs and companies to come in and change things. Technology already exists – and is being used – that is able to process used mobile phones, check them for defects and send them back out into the second-hand market to be sold.
However, right now the “greenness” of the circular economy remains a relatively abstract concept—neither practical nor quantifiable. In order for growth to happen, investment is needed and therefore proper measurement is vital. There are a number of ways this can be done.
From original manufacturer to end user
The Life Cycle Assessment (LCA) method analyses the carbon reduction of every second-hand mobile phone sold. Given most materials in second-hand mobile phones are recycled, the cradle-to-grave carbon footprint of second-hand phones overlaps with that of new mobile phones. In order to address the issue of double-counting, the carbon footprint of second-hand mobile phones should be calculated as a certain fraction of that of a new phone.
Additionally, the quality of the secondhand phone affects its ‘greenness’. An older model that is resold should be considered greener than a more recent model that is resold, as it is more akin to ‘turning waste into treasure’. Related to this is the length of time it takes to sell a mobile phone, with an idle phone released years ago but recently sold being greener than a secondhand phone released recently and sold recently.
By calculating the cradle-to-grave carbon footprint of second-hand phones from the initial manufactured through to secondhand processing and reselling we are able to generate accurate data on carbon emissions. This is then measured against its ‘greenness’ based on how recently it is sold and the quality of the phone.
Creating a level playing field
Standardization is key, too. Around the world what constitutes ‘green’ varies considerably, with different standards applied in different countries. While we don’t expect one set of standards to govern every country, it is important that nations set clear and easy-to-follow regulations that govern the dismantling and/or re-use of idle electronics.
Such standards will help in a number of ways. Firstly, they will encourage original manufacturers to create products that last longer, this in turn will make it easier for firms in the circular economy to inspect and process idle electronics, re-selling them back into the marketplace. The number of unusable or broken electronics will decrease.
Furthermore, from an ESG perspective, regulatory standards will help create transparency and trust, attracting more investors into this space. If firms are able to prove that they adhere to a robust set of regulations, investors will have more confidence and be more willing to invest in their growth and success.
Accurate measurements and data not only help those of us in the Circular Economy to do a better job, but it instills confidence and trust and therefore, investment. It is vital that we pay attention to ESG reporting mechanisms and measurement and moving forward all of us in the Circular Economy space need to have big data at our core. If we do, I foresee significant growth in the years ahead.
Kerry Chen is the CEO of ATRenew. Headquartered in Shanghai, ATRenew Inc. (ATRenew) (NYSE: RERE) operates a leading technology-driven pre-owned consumer electronics transactions and services platform. The mission of ATRenew (which stands for “All Things Renew”) is to give a second life to all idle goods, reflecting their commitment to building an enterprise with ESG embedded in its genes. ATRenew’s open platform integrates C2B, B2B, and B2C capabilities to empower online and offline transaction services of pre- owned electronic products.