August 20, 2019 – At Brightstar Capital Partners, we have a sharp focus on investing in and growing the value of middle market companies. A vital element of our value-creation model is the broad industry expertise and leadership of our investment team and portfolio company partners.
Here, two of Brightstar’s team members provide their insight into the rapidly growing “circular economy” for the reclamation and repurposing of electronic devices, and explain how this can create economic value and support environmental stewardship. Tom Meredith is a Partner at Brightstar and is Chairman of Global Resale, a portfolio company that is a leader in reverse logistics services for the telecom and electronics sectors. Earlier, Tom held senior positions at Dell, Sun Microsystems and Amdahl Capital Corporation. Jeff Zeigler is the Founder, CEO and a Director of Global Resale, and has nearly 20 years of experience in the resale and reverse logistics space. He founded TechTurn in 1999 and led the business up to and following its acquisition by Arrow Electronics. Brightstar Capital Partners closed its acquisition on Global Resale in 2016.
- What is the circular economy as it relates to electronics and digital technology?
In the circular economy, products such as electronic devices are recaptured, refurbished or recycled, so the products or their individual components can be put back into productive use. This extends the useful life of devices and component materials, helps keep hazardous materials out of the environment, and has the potential to reduce the cost of digital technology. Because this approach dramatically reduces waste by putting devices back into use, it is a more “green” solution than electronic recycling alone, which can involve significant amounts of energy usage.
- Why is the circular economy increasingly relevant today; why are people and businesses paying more attention to it now?
To understand why the circular economy is increasing in importance, we only have to look at the explosive growth of electronic devices around the world. The affordability of and access to consumer electronics, the rise of digital technology in business, and the expanding adoption of the Internet of Things (IoT) have led to a vast proliferation of electronic devices. By some estimates, the world may have as many as 50 billion connected devices by 2020.
Unfortunately, the growth in electronic devices is causing a dramatic increase in e-waste, which is now the fastest growing waste stream in the world. Experts project the e-waste stream to reach 52.2 million metric tons by 2021. The problem isn’t only the volume of e-waste, but also the nature of the materials, which can include toxic substances like lead, mercury, arsenic, cadmium, copper, beryllium, barium or chromium. As a result, globally we are seeing increased regulation of this issue, with many jurisdictions mandating electronics recycling.
- Isn’t there also a strong business case for participating in the circular economy for electronic devices?
Absolutely. There is enormous economic value in used electronic devices. The worldwide market for refurbished phones represents estimated wholesale revenue of around $14 billion, and that doesn’t include other consumer devices or corporate technology. There is also considerable economic value in recovering precious metals and other materials in e-waste, such as gold, silver, copper, platinum, and palladium. Overall, the World Economic Forum estimates the value of e-waste at $62.5 billion annually – and growing.
Disposing of used electronics also has an intangible cost, in terms of the extensive corporate and personal data stored on these devices. Without responsible refurbishment and reuse of these devices, vast amounts of data are left exposed.
Global Resale’s business model was built around the tremendous opportunity that exists in the circular economy. We partner with manufacturers, wireless carriers, retailers, resellers, leasing companies, and large corporate accounts to create a global network to reclaim and refurbish devices, sanitize data, and return products, components or materials to the global supply chain.
We have demonstrated that participating in the circular economy for electronics is not only the right thing to do from an environmental perspective. It also creates tremendous economic value and, by enabling smaller businesses and less developed nations to access repurposed devices, helps extend the benefits of the digital revolution to more participants.
- What does it take to become a global leader in the circular economy?
It’s vital to invest in the necessary infrastructure, systems and processes in order to be a trusted, reliable partner for major manufacturers, wireless carriers, retailers and other market participants. Industry leadership requires the ability to work across a complex value chain to handle all aspects of reverse logistics, including collection, data sanitization, reconditioning, components and materials harvesting, and resale in an efficient and responsible manner. Investments in data security, compliance with international regulatory standards, and financial management are also essential.
We also believe that playing a leadership role in the circular economy means being at the forefront of efforts to promote strong industry standards for environmentally responsible recycling. Senior executives of Global Resale were instrumental in the creation of the R2 Standard, the industry-wide certification program for electronics recyclers that agree to meet stringent environmental health and safety requirements. The adoption of the R2 Standard, and related cooperative efforts by the industry, have helped promote sound, uniform recycling practices around the world, and we are continuing to work to rewrite the Standard to make it even more effective.
- What’s next; how do you see the circular economy evolving?
Even with the huge number of devices in use today, the circular economy for electronics is still in its infancy and has tremendous growth potential. Just as Uber or Airbnb provide ways for many users to share a vehicle or a home, the circular economy will enable businesses to find new users for older technology – which optimizes use, increases affordability, and minimizes impact on the environment.
Developments such as the adoption of 5G, and the ongoing shift of corporate functions to the cloud, will accelerate the introduction of new devices and the phase-out of older models. We expect the largest growth in the addressable market will be in corporate data center equipment, mobile devices, and technology related to the IoT.
Environmental concerns also will drive the growth of the circular economy. The largest regional producers of e-waste are North America and Western Europe, while the largest recipients are China, Brazil, Mexico, Eastern Europe and parts of Africa. International regulations simply won’t tolerate this dumping over the long term, and we will see more enforcement of collection and electronic recycling.
The circular economy will continue to evolve and grow through deepening levels of trust and cooperation in the industry, as all participants in the chain come to trust the value proposition the circular economy provides. Device manufacturers must recognize that the secondary market won’t cannibalize their existing business, and they must make products that are optimized for long-term durability. Similarly, customers must be able to trust that their data will be purged and handled properly, and also must trust that the refurbished products will be useful and of high quality. The standards and certifications in place provide a solid basis for this deep level of trust throughout the industry, and maintaining industry focus and cooperation will help drive this forward.
At Global Resale, we will continue making investments to be a more valuable partner. We believe a relentless commitment to quality and customer service will help drive an unmatched customer experience and help create a strong industry-leading brand that our partners can know and trust. We will grow our global network and expand our range of services, such as providing analytics and other innovations to manufacturers, to make the secondary market a clear “win-win” for all participants. As we continue to invest in our system, the circular economy will become more attractive to a greater range of technology providers and end-users.