Dell: The Business Case for a Sustainable Supply Chain

Introduction

Dell is one of the world’s largest computer manufacturers and technology companies. The company sells a wide range of IT hardware, software products, and services for enterprise, government, small business, and consumer markets.1 As a privately held company, Dell has the freedom to pursue a longer time horizon and to commit to changing how it uses its resources. The principle of efficiency is central to the Dell business model and informs the company’s approach to resources, sourcing, and waste management.

Pain Points in the Ecosystem

Dell’s commitment to efficiency has prompted the company to take on the timely challenge of improving e-waste disposal throughout its business.

E-waste, that is, discarded electrical and electronic equipment, is the world’s fastest-growing waste stream.2 Rapid technology innovation and ever-shortening product lifespans are contributing to the increase of e-waste.3 According to a United Nations’ University report, the amount of global e-waste reached 41.8 million tonnes in 2014.4 To compound matters, e-waste has a low overall recycling rate, which means that unwanted equipment remains unused.

Responsible e-waste disposal is not only important from an environmental perspective, but also makes good economic sense.5 Vast amounts of gold, for example, exit the economy due to low recycling rates, but increasingly there is an opportunity to recapture that value, as a tonne of computer motherboards contains more gold in it than a tonne of gold ore. In terms of scale, the material value of global e-waste was estimated to be €48 billion in 2014 alone.6 This underutilized resource has a vast ‘untapped potential to create a more sustainable, efficient product ecosystem’.7

The circular economy takes the traditional, linear model of ‘take, make, and dispose’—which moves products from design to factory to consumer to landfill—and bends it into a more efficient closed-loop ecosystem. Unwanted used electronics can be taken back for refurbishment and then resold on the secondary market. Products beyond repair, or those that are no longer economical to repair, are recycled to allow for precious and scarce materials to be recovered. Recycled content can either be incorporated into the design and manufacturing of new products or sold for others to use.

Research shows that approximately 30 per cent of consumers have technology products lying around the house unused, and half of consumers are unsure about what to do with their old electronics.8 According to Dell, similar situations exist with businesses warehousing old equipment. Take-back options make it easy for a wide variety of customers to dispose of their old electronic products in a responsible manner. This measure ensures that unwanted electronics get reused or, if at the end of life, properly recycled.

Plastic is one of the most useful and important materials in modern society. It is popular in computers due to its durability, ease of fabrication into complex shapes, and electrical insulation qualities.9 However, plastic recycling remains challenging and, as a result, the material constitutes a major contributor to landfills and to nonpoint source pollution—pollution from many different sources. The production of traditional plastics also uses a substantial amount of fossil fuels. Manufacturing plastics from fuel is resource intensive, requires large amounts of energy, and releases relatively high levels of CO2 emissions in the process. Recent research has shown that our current use of plastics will become unsustainable if we do not take steps to improve recycling and reduce plastics’ usage.

Using secondary, recycled plastic as feedstock for new computers presents one possible solution. With the fast pace of innovation and product upgrades in the ICT sector, recycled content can reduce the environmental toll of manufacturing with virgin materials. The circular economy and the development of secondary raw material markets are high on the European agenda. Nevertheless, it remains challenging to find a sufficient supply of high-quality post-consumer recycled plastics that meets the technical, economic, and aesthetic requirements of ICT products manufacturers.10

Business Strategy

In response, Dell is taking steps towards creating a ‘circular’ supply chain (see also Interface, Chapter 25). In addition to environmental concerns, the increased volatility in commodities and growing pressure on resources have alerted Dell to the business necessity of rethinking materials and energy use.11 In 2013, Dell committed to putting a total of 50 million pounds weight of recycled materials back into its products by 2020. The company reached this goal at the beginning of 2017 and is continuing to scale its efforts.

For Dell, sourcing post-consumer recycled plastics from the market and building a new, stable closed-loop supply chain for plastics from used electronics collected through take-back programmes present viable and affordable alternatives to using virgin materials. Rather than focusing exclusively on individual challenges, Dell has taken steps to approach their supply chain from a broader, systemic perspective. Most recently, this has included expanding its efforts to also address precious metals, such as gold. Jennifer Allison, director of supply chain sustainability at Dell, summarizes the company’s current business strategy:

We’re talking about systems—not just products, programmes, or initiatives. Looking at the whole system is when change begins to make a significant difference. Technology is a great tool for measuring and analysing systems, understanding processes, and identifying inefficiencies.12

In this way, Dell takes a whole ecosystem view of its product life cycles. This approach is transforming the design of products and services. Dell’s life-cycle approach aims to keep viable products and parts in circulation for longer periods of time. It also harnesses global efforts to reuse, refurbish, and resell products and parts to extend their lifetimes and to recycle them at the end of life.

Product design emphasizes ease of repair and recyclability from the beginning. Dell also looks continuously for ways to incorporate sustainable materials, such as recycled plastic and reclaimed carbon fibre, into products and packaging.13

The Take-Back Programme

Dell has the world’s largest electronics take-back programme, which spans more than seventy-five countries and territories. The programme has recovered approximately 800,000 tonnes of electronics since 2008. For commercial customers, Dell offers a full-spectrum of logistics and disposal capabilities via the Asset Resale and Recycling Service. Current capabilities include data security, on-site shredding, recycling, and full traceability reporting. Dell also makes it easy for individual consumers to recycle by partnering with freight companies to provide free mail-back recycling of Dell-branded equipment. In many countries, the pro-gramme will even pick up used equipment from a customer’s home.14

Another programme designed to make the recovery of obsolete electronics easier and more accessible is the Dell Reconnect Partnership with Goodwill, a not-for-profit organization committed to helping people become independent through education and training. The Reconnect Programme allows people to drop off any brand of used electronics to more than two thousand participating Goodwill locations across the United States. Dell Reconnect accepts any brand of computer equipment in any condition from consumers and provides free recycling services.

Dell returns all proceeds to Goodwill in order to help support Goodwill’s mission of putting people to work.15 By participating in this initiative, customers simultaneously help protect the environment, benefit the community, and receive a receipt for tax purposes. In this way, the programme helps both the customers and the business.

The donated equipment has value as a whole system, as parts, and sometimes as raw materials such as metals, plastics, and glass.16 If the equipment can be refurbished, Goodwill sells it. If not, the end-of-life product is sent to Wistron, one of Dell’s recycling partners, for asset recovery in the United States. Metals such as tin, gold,17 and tungsten are re-sold in the commodities market. To complete the closed loop, plastics are sorted and shipped to China, turned into pellets, and mixed with virgin plastics for use in new Dell products.18

Closed-Loop Recycled Plastic Supply Chain

Dell’s 2020 ‘Legacy of Good’ sustainability plan set the goal of incorporating 50 million pounds weight of post-consumer recycled-content plastics and other sustainable materials into Dell products by 2020.19 Dell met this target ahead of schedule in early 2017.

It started with the launch of Dell’s closed-loop recycled plastics supply chain in 2014. Since then, the company has used more than 9,750 tonnes of closed-loop plastics in over 125 products. These products include flat-panel monitors, desktops, and all-in-one computers.

Run in conjunction with various supply chain partners, the programme consists of collecting, recycling, and using e-waste to make new Dell products.20 It begins with sorting plastics out of the various take-back streams, further processing them, and then sending them to a manufacturing partner in Asia. The plastics are then melted down and moulded into new parts and computer components, thereby creating a closed-loop system. The whole process—from the time the equipment is received for recycling to the time the plastics are back in a customer’s hands as part of a new product—takes just under six months. The closed-loop system also provides businesses with a price more stable than the cost of virgin materials, which fluctuates with the price of oil. It also reduces the company’s dependence on those environmentally costly virgin materials. Furthermore, by reusing plastics already in circulation, Dell cuts down on e-waste, reduces carbon emissions, and helps drive a circular economy for IT. The closed-loop process yields an 11 per cent lower carbon footprint than a process using virgin materials,21 and creates products that are better for the environment, which is increasingly what Dell customers demand.22 Dell was also the first PC manufacturer (January 2018) to use recycled gold from e-waste in its products. Working with the data analyst TruCost, it found that this closed-loop process can cause 99 per cent less environmental damage and avoid $1.6 million in natural capital costs per kilogram processed (US$3.68 million for the pilot project alone) when compared to gold mining. The same study showed closed-loop process can avoid 41 times the social impacts of gold mining.

Dell’s leadership in recovering and reusing plastic from used computers constitutes an important step in moving the larger electronics industry towards a circular economy. Louise Koch, corporate sustainability director in EMEA for Dell, describes the impetus for initiating a closed-loop system:

Dell’s programme is driven by both an effort to improve efficiency—a principle that goes back to its founding ethos and business model—as well as a commitment to reducing environmental impact.23

The use of closed-loop plastics may create a demand for plastic from used computers and thereby increase the level of plastic recycling from electronics. This, in turn, generates new jobs and opportunities for those in the nascent industry, all while staying true to Dell’s founding principles.

Challenges in Moving to a Closed-Loop Recycling System

In moving from the traditional take–make–dispose linear supply chain to a circular supply chain, Dell has had to overcome a number of hurdles.

One of the biggest challenges that Dell faced with the closed-loop recycling was identifying which types of plastic can be incorporated back into new products. As Scott O’Connell, director of environmental affairs for Dell, puts it, ‘When dealing with plastics, getting the properties equivalent or better to virgin materials isn’t easy . . . But this is a challenge we’ve been able to overcome with engineering know-how.’24 Dell worked with partners to test different approaches. Testing revealed that, due to mechanical and aesthetic considerations, a blend of recycled-content with virgin plastic produces the best outcomes.

Another challenge involves establishing a reliable closed-loop supply chain. As O’Connell describes, ‘We had to make sure that we had sufficient volume of product coming in to be able to yield enough plastics to put into a mainstream Dell product.’25 Supply of products and plastic derives from Dell’s own sources, which adds a greater degree of insight and security. However, for the closed-loop recycling to work and scale, Dell needs security of supply, which can be difficult to attain with fluctuating numbers of products collected through take-back. Shrinking form factors—the fact that there is less plastic per item recycled as electronics become smaller—further complicate the situation. Hence Dell needs to continue to drive increasing participation in take-back programmes, while at the same time exploring other means of acquiring recycled-content materials.

Transporting materials poses an additional challenge. Dell customers are all over the world, which means that take-back initiatives must accommodate the global scale. While Dell has a small closed-loop plastics supply chain in Europe already and is exploring ways to scale in other geographies, materials need to be collected in sufficiently large amounts to make shipping to a centralized processor worth the economic and environmental costs. This involves logistics, regulations, and other considerations. In some cases, even the definition of the material being moved can affect the viability of closed-loop efforts: is recycled plastic labelled as waste or a raw material, for example?

The final challenge for Dell is to demonstrate the benefits of closed-loop recycling to customers. Ultimately, the products look and perform exactly the same as those made from virgin materials. Dell must communicate the value proposition to customers by highlighting the amount materials, and the benefits to the customers’ own sustainability goals.

Performance

Since 2008, Dell has taken back more than 1.76 billion pounds (nearly 800,000 tonnes) of used electronics and since mid-2014, when Dell launched the closed-loop plastic recycling programme, it has created nearly 5,000 tonnes of plastics from recycled computer parts. Dell has saved more than $1.8 million from this process, and the carbon footprint of circular plastics is 11 per cent smaller than that associated with the manufacture of virgin plastics. Dell now uses circular plastics in approximately 125 products across millions of units globally.

Together with TruCost, Dell has completed an evaluation to understand the gains from moving away from virgin plastics. One of the most useful ways for companies to assess the risks associated with new initiatives is to quantify the environmental impacts generated by their activities—internal operations, upstream supply chain, and downstream product use and disposal—and then convert those impacts into monetary values.26 The monetary value helps identify the value not captured in traditional financial markets and incorporates these considerations into decision-making.27

Findings showed that Dell’s closed-loop plastic has a 44 per cent ($1.3 million annually) greater environmental benefit than virgin ABS plastic.28 In particular, increased computer recycling lessened environmental impacts. The research found that recovering and recycling the used plastics from computers minimized ‘human health and ecotoxicity impacts’ and reduced the overall emission of hazardous substances.29

Dell has also begun to incorporate social impact metrics into its valuation framework.30 Emergent strategies such as analysing activities for their use of social and human capital are likely to be an area for further refinement and application in the future.31 At present, Dell is combining both environmental and social impact metrics into its process in order to help tackle the challenge of responsible e-waste disposal.

Prognosis

• On a global scale, there is still huge potential to scale up circular resource streams in the IT sector and beyond. Only 10 per cent of the plastics produced today are recovered—and more than 50 per cent end up in landfills.

• Dell has increased the use of recycled materials (both closed-loop and traditional post-consumer recycled materials) in new products and plans to continue to scale the programme.

• As Dell continues to scale the current programme, it will look to expand into reclaiming and reusing other materials. Dell has already had success with using reclaimed carbon fibre for products and is currently using recycled ocean plastics ink made from captured diesel emissions for packaging.

• Dell will also look at how ocean plastics or other solutions can be used with products.

• Dell will continue to measure social impact using the same methodology, updating models for collection totals to follow form-factor trends. It will report progress annually, building on this total toward a cumulative 2 billion pounds by 2020.32

• Dell continues to lead conversations with governments and industry partners about recycling and circular loops on a global scale. Dell is open to innovative collaborations with even more customers, partners, and governments in the coming years. Dell sees particular opportunities in creating partnerships in developing countries to strengthen this ecosystem.

Dell’s take-back programme presents a compelling example of the potential of circular economy and closed-loop systems to contribute to responsible, mutual business practices. Looking towards the future, creating closed-loop recycling programmes in developing countries represents a new frontier. Recycling products in the countries from which they are recovered brings skilled jobs, creates industry, and strengthens the local economy.33 Using its proven abilities to leverage partnerships and government relationships to create the infrastructure needed for new programmes, Dell can continue driving a culture of recycling in communities around the world.34 As Dell’s programme example highlights, collaborative approaches have the potential to create both financial and environmental savings for corporations and customers on a global scale.

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Notes

1. ‘Dell Inc. at a Glance,’ Company Profile, Vault.com, http://www.vault.com/ company profiles/computer-hardware/dell-inc/company-overview.

2. Center for Security Studies, http://isnblog.ethz.ch.

3. Baldé,C.P.,FortiV.,Gray,V.,Kuehr,R.,Stegmann,P.TheGlobalE-wasteMonitor–2017, United Nations University (UNU), International Telecommunication Union (ITU) & International Solid Waste Association (ISWA), Bonn/Geneva/Vienna.

4. Rubin (2015).

5. Kitsara (2014).

6. Baldé et al. (date).

7. Anya Khalamayzer.(2017) “8 Ripple Effects of the Circular Economy in 2017”, Greenbiz, https://www.greenbiz.com/article/8-ripple-effects-circular-economy-2017.

8. ‘Switched on to Value,’ WRAP Report, November 2014, http://www.wrap.org. uk/sites/files/wrap/Switched%20on%20to%20Value%2012%202014.pdf.

9. ‘Plastics: Key Materials for Innovation and Productivity in Major Appliances,’ American Plastics Council, http://infohouse.p2ric.org/ref/11/10437.pdf.

10. ‘Best Practices in Recycled Plastic,’ DigitalEurope, August 2016, http://www.digitaleurope.org/DesktopModules/Bring2mind/DMX/Download.aspx? Command=CoreDownload&EntryId=2276&language=en-US&PortalId=0& TabId=353.

11. ‘Best Practices in Recycled Plastic,’ DigitalEurope.

12. ‘Full Circle’, Institute for Supply Management, October 2016—Lisa Arnseth interview with Jennifer Allison.

13. ‘Dell on the Circular Economy’, March 2016, http://i.dell.com/sites/content/corporate/corp-comm/en/Documents/circular-economy-0316.pdf.

14. ‘Dell Recycling,’ Dell Inc., http://www.dell.com/learn/us/en/uscorp1/dell-environment-recycling.

15. ‘About Us,’ Goodwill Industries International, Inc., http://www.goodwill.org/about-us/.

16. ‘Dell Reconnect—How It Works’, Dell Inc., http://www.dell.com/learn/us/en/uscorp1/corp-comm/how-it-works-reconnect.

17. www.dell.com/gold.

18. Hower (2015).

19. ‘Best Practices in Recycled Plastic,’ DigitalEurope.

20. Hower (2015).

21. ‘Dell 2020 Legacy of Good Plan’, Dell Inc., http://i.dell.com/sites/doccontent/corporate/corp-comm/en/Documents/2020-plan.pdf.

22. ‘Dell’s Closed-Loop Recycling Process’, Dell Inc., https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved= 0ahUKEwjdkPqots7TAhXhKsAKHde7AF0QFggoMAE&url=http%3A%2F% 2Fi.dell.com%2Fsites%2Fdoccontent%2Fcorporate%2Fsecure%2Fen% 2FDocuments%2FClosed-LoopRecyclingfull.pdf&usg=AFQjCNHzBL-F4ooKUkKnDSbgyHG8CLRzQ&sig2=bKIXDKjRA1YoWSQgh4H5yg.

23. LouiseKoch(CorporateSustainabilityLeadforEurope,MiddleEastandAfrica), personal communication.

24. Scott O’Connell (Dell, Director of Environmental Affairs), interviewed by Mike Hower (Hower 2015)

25. Ibid.

26. Dell, Dell Inc., http://www.dell.com/en-us/.

27. Ibid.

28. ‘Valuing the Net Benefit of Dell’s More Sustainable Plastic Use at an Industry-Wide Scale’, Trucost, September 2015, http://i.dell.com/sites/content/corporate/corp-comm/en/Documents/circular-economy-net-benefits.pdf.

29. ‘Valuing the Net Benefit of Dell’s More Sustainable Plastic Use at an Industry-Wide Scale’, Trucost, September 2015, http://i.dell.com/sites/content/corporate/corpcomm/en/Documents/circular-economy-net-benefits.pdf.

30. Ibid.

31. Ibid.

32. ‘Dell 2020 Legacy of Good Plan,’ Dell Inc., http://i.dell.com/sites/doccontent/corporate/corp-comm/en/Documents/2020-plan.pdf

33. Ibid.

34. Ibid.

Case Study Contributors

• Louise Koch, Dell

• Stephen Roberts, Dell

• Justine Esta Ellis, University of Oxford

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