This article appeared in the November 2023 issue of Resource Recycling. Subscribe today for access to all print content.
Although there is always an element of change in the electronics industry, one trend that has seemingly taken on a life of its own is the topic of environmental, social and governance (ESG) reporting. ESG reporting is a way for the financial industry to measure risks beyond what was traditionally evaluated, looking at the policies and practices of an organization to include a quantitative assessment of environmental, social and governance risks to the business.
What was once something you only heard about in passing just a few years ago is now increasingly becoming a customer requirement throughout the reverse electronics value chain. Whether it be sustainability, procurement, reverse logistics, mobile, ITAD, reuse or recycling, for the past two years, nearly every conference we’ve attended has included conversations about ESG.
There’s a wide range of understanding around ESG, and although we’ve heard some undercurrent of fatigue on the topic, no matter one’s personal feelings around it, ESG reporting requirements are a reality that the electronics industry needs to address.
Why ESG matters
Why has ESG become such a hot topic? Well, up until recently, ESG reporting was voluntary and largely driven by market driven responses. Today, however, mandatory or voluntary ESG reporting is found in around 70% of countries globally. Even just here in the U.S., recently enacted regulations by the SEC have amplified activity surrounding the topic.
Furthermore, since ESG is being used as a measure of financial risk and now carries significant weight on investment decisions, executive compensation is now being tied to these scores. The markets are looking at a broader risk profile and incorporating this wider range of factors into deciding where and how much to invest.
But even beyond investors and regulations, the emphasis on ESG also shows that businesses truly are moving beyond simply a profit-driven bottom line and that organizations are embracing a triple bottom line of people, planet and profits. We’re moving beyond thinking only about waste as an end-of-life problem and are instead considering waste more holistically. And beyond just trying to do no harm, we’re looking for opportunities to do good.
Though challenging, at times frustrating and rarely on a linear trajectory, we genuinely are moving toward sustainability and a global circular economy.
SERI’s role in ESG
Despite the increased focus on ESG, specific measurements of impact are largely self-reported and typically imperfect, inconsistent and even inaccurate. And while there are efforts to standardize many elements of ESG reporting, there are currently no industry-specific guidelines for the electronics sector, nor is there established third-party oversight to that reporting.
In our role as champions of electronics sustainability, SERI functions as a nexus, bringing together all the various parts of our industry to make electronics sustainable and doing our part to contribute to the larger push for a true global circular economy. We feel it is time to step once again into a leadership position in our industry and to leverage our expertise as an ANSI-accredited standards developer to create an electronics industry ESG reporting standard and certification program.
Since companies need to collect data and report their ESG impacts, they require input from all of their supply chains, including electronics. Since electronics are ubiquitous in business, many customers will be looking at the entire electronics value chain for reporting.
Looking upstream, they need to report the embedded carbon footprint from the products they purchase and use in their daily business activities. Looking downstream, they need to report the impacts from every subsequent vendor that handles these electronics and the choices they make in their business practices. This creates a significant challenge for our industry.
Obviously, ESG reporting gets very complex very quickly. Take a returned product as an example. If an online retailer sells a laptop to a customer and they return it, there are several variables that affect the carbon impact of that product (beyond everything it took to produce and sell the laptop the first time). How far is the laptop traveling from the customer to the returns facility? Is that laptop reused or recycled? And what steps does it go through on the journey to being remarketed or turned into the raw materials for another product?
Think about this complexity within the ITAD space and through all the different downstream vendors that touch a given device through the resale or recycling process. How do you standardize reporting in such a way that is consistent for the big, global facilities as well as the mom-and-pop shops that handle used electronics? How do you measure the carbon impact from shredding compared to manual dismantling? How and when do you measure the social impact of a laptop that is donated versus one that is remarketed? Who gets the credit? Taking it one step further, how would these reported numbers become verified?
Building an ESG standard
This new standard will serve as just one small piece in a very complex ESG reporting system for clients, but it will align all the elements of the electronics value chain to feed into their ESG report. Though the stakeholders will ultimately define the new standard, SERI has a few broad goals for the output:
Create transparency throughout the value chain by standardizing and verifying quantifiable reporting on environmental and social impacts.
Align with broader existing standards so that what we create is compatible.
Clarify how to assign responsibility and take credit for positive and negative impacts.
In terms of process, we are at the very beginning of the journey to creating this standard, but there are two absolutes as we go forward.
First, we will continue to adhere to the ANSI Essential Requirements for standards development, meaning we will be transparent and held accountable by our accreditation throughout the process.
Second, we will stay true to our core belief that making electronics sustainable requires diverse stakeholders to participate in the discussion and the decision-making. We will model this standard and the development process after R2, starting with a formal announcement and a call for stakeholders to join a multi-disciplined Technical Advisory Committee (TAC). From there, we will begin discussions of how best to build a standard that meets the needs of all parties, including reporting facilities in the electronics value chain, public corporations, OEMs, regulators and the investment community.
Although much will need to be decided by the group that engages in the process, we see specific goals being to:
Standardize common categories for types of equipment, components and materials being measured.
Standardize how to calculate sustainability metrics of reverse supply chain operations, such as transportation, energy usage and relevant factors unique to typical operations in this supply chain.
Standardize how to calculate impacts avoided by repair, extended use, reuse or materials recovered.
Standardize where in the value chain that impact is measured, that is, when to take credit for recycled materials.
Identify governance policies and procedures.
Identify methods for verifying reporting. Where is the data reported? Who can validate the data? What is the protocol for verification?
We are excited to begin this journey and know that it will take some time to come to fruition, but we believe it is important for our industry and will result in a valuable and trusted end product.
Jeff Seibert is chief provocateur for SERI, where he has the dedicated responsibility of provoking change in thinking and behavior around electronics, helping businesses and consumers work toward electronics sustainability and a circular economy.
Find more information on this ESG standard development process and sign up for more information about the project on the SERI website at SustainableElectronics.org.