Female Technician working on a conductor board in workshop. Her male colleague calling in foreground

If circularity is the future, how will it shape telecoms?

A photo of Rainer Zah
Dr. Rainer Zah

Director, Business Consulting | EY Switzerland

9 minute read 27 Jun 2023
Related topics
Sustainability
Consulting
Telecommunications

To build a sustainable telecommunication ecosystem, players will need to embrace circular practices in manufacturing and operations. 

In brief

  • The telecom sector is helping drive change as connectivity powers a growing number of business models – but it’s lagging when it comes to sustainability.
  • Regulatory, economic, environmental and social imperatives present challenges but also guidance in the shift to a more circular telecom ecosystem.
  • Besides adopting ecodesign, product passports and re-X principles, telecoms providers and consumers will need to be open to new business models.

Remote healthcare, connectivity of self-driving cars or precision farming: these are just some examples where the telecommunication industry will play a decisive role in the future. At the same time, increasing demand for bandwidth amid exponential data growth will require a new network infrastructure and telecom equipment. These developments need to be looked at through the lens of sustainability and, specifically, circularity. Circularity can act as an enabler for a sustainable telecom ecosystem.

High priority
of telecom operators see the circular economy as important for their busine

Is the circular economy on the agenda of telecommunication companies? According to EY research on ESG reporting, 39% of telecommunication companies fail to disclose a specific net-zero strategy, transition plan or decarbonization pathway, with a negative trend1. Further, 47% of large businesses think that vendors of 5G or IoT technologies do not address their sustainability ambitions2. Focusing on the circular economy, research by TXO (2022) found that nine in ten telecom operators believe the circular economy is important for their organization3.

While the telecommunications industry clearly has awareness for circularity and sustainability, current ambitions and reporting on them are lacking.

Diving deeper into circular economy ambitions, TXO (2022) research shows that within the next five years 75% of telecommunication operations are planning on recycling their equipment, 52% on repairing their equipment, 49% on reselling their equipment and 44% on buying refurbished equipment4. While the telecommunications industry clearly has awareness for circularity and sustainability, current ambitions and reporting on them are lacking.

1

Chapter 1

Exploring circular challenges for telecommunication companies

Four imperatives shaping the future of the telecommunication industry

Building on awareness for circularity and sustainability in the telecommunication industry, players need to consider the needs and expectations of key stakeholders. We identified important regulatory, economic, environmental, and social imperatives, which are set to have decisive implications for the future of the industry. 

To mitigate these challenges, the industry as a whole will need to look at the product design of devices used within the network infrastructure and the data centers, as well as the electronic devices consumers are using. Furthermore, new business models need to be discovered within an ecosystem of telecommunication service providers, network equipment manufacturers, downstream recyclers, legislators and research institutes.

2

Chapter 2

Embracing circularity for ICT equipment

Spotlight on ecodesign, product passports and re-X of ICT equipment

Within the telecom ecosystem, ICT devices and electronic components play a major role. Looking at the network infrastructure, data centers and user electronics, devices can include switches, routers, servers, or mobile phones. Moreover, as technology develops at speed, advanced technologies are being implemented at a rapid pace, including 5G technology with new beamforming antennas, remote radio units or base stations, or photonics with transceivers amplifiers, or optical switches11. These devices require vast amounts of materials, consume energy and create waste streams.

Ecodesign principles

Aiming for circularity involves looking at the ICT equipment through the lens of product design before the devices are manufactured. It’s important to focus on enhancing the technical performance of the devices and not their end of life. Designing in accordance with ecodesign principles is about considering environmental and social aspects when deciding on the product build and features. In the domain of the telecom industry, this means applying circularity to the system architecture and equipment, as well as the software development. Additionally, considering the fast pace of technological change, it is of key importance to manufacture devices in such a way that they can be easily upgraded.

ICT device designers should consider longevity, reparability, upgradability, durability. In concrete terms, this means extending the length of use of the device and seeking opportunities for standardization and modularization so that technical features can be easily upgraded. Components used should also have the potential for a second life in the same or another device and it should be possible to repair the device.

Within the ICT equipment, as well as the large, material-intensive network infrastructure, dematerialization and material substitution play a large role as well. Dematerialization means excluding materials whenever possible. This can be as part of packaging or unnecessary material used for design purposes. Additionally, replacing critical raw materials with non-critical alternatives is required. Critical raw materials are those materials that, according to the European Commission (2020)13, have a high economic importance while also being associated with high supply risks.

Redesigning equipment and replacing materials can also improve business resilience for telecom companies. For example, tantalum in electronic capacitors can be replaced by aluminum or ceramics to achieve higher resiliency (USGS, 2021)14.

Product passports

As part of the proposal for the updated directive on ecodesign for sustainable products, which should be adopted in 2024, digital product passports are to be implemented for several consumer product groups. These digital product passports help increase transparency of the supply chains. In addition, they will help the public to trace back components or materials of finished products and also support efforts of downstream supply chain partners, such as recyclers or repairers.

For the telecom ecosystem, this means that products such as routers or mobile phones will need to have a digital product passport for transparency reasons. Further, in the longer run other ICT equipment should also be covered by product passports to ensure transparency for all kinds of products.

Re-X of ICT equipment

The design process should also consider that the ICT equipment can be reused, repaired, refurbished and remanufactured. Thus, instead of throwing away end-of-life equipment, it needs to be returned to the producer through take-back schemes and reverse logistics so that care can be taken to disassemble it appropriately. Key is the collaboration between the device producers, telecom service providers, recyclers and the end customer.

Additionally, the purchasing of pre-owned or refurbished equipment can be a strategy for telecom companies. Reliability and high quality can still be achieved even with reused equipment. However, consumers also play a decisive role in returning their old phones or routers.

3

Chapter 3

Innovating in the telecom sector with circular business models

New approaches to benefit the entire telecom ecosystem

As part of the circular economy, companies within the telecom ecosystem need to investigate ways to change their business models. There is potential for value creation beyond the traditional take-make-waste approaches. As of now, value creation traditionally appears by the sole purchase of ICT equipment from the manufacturers.

Looking at potential circular business models, telecom service providers could consider product-as-a-service (PAAS) or pay-per-use models. Taking 5G technologies as an example, the tier 1 suppliers could just rent out the function of a 5G antenna, instead of selling the antenna itself. This would incentivize the supplier to design a 5G antenna in accordance with ecodesign principles and with predictive maintenance, focusing on a balance between long-lasting lifetime, energy and material efficiency. Under this model, ownership stays with the ICT equipment manufacturer and the company would receive a fee based on the usage. At the end-of-use of the antenna, the manufacturer could refurbish it to extend the lifetime, upgrade it to new technology standards or redeploy it elsewhere.15

Another circular business model for telecom service providers could be based on the concept of the sharing economy. More use cases are needed to show how 5G antennas or base stations could be shared between different telecom service providers and used depending on the need.

4

Chapter 4

Creating a circular ecosystem of telecom value chain partners

Roles and responsibilities within the telecom ecosystem

Collaboration is key in achieving a circular transformation. The EY Tech Horizon Study (2022)16 looked at the role of partnerships and business ecosystems in telco transformation, among other topics. Participants were asked what best describes the role of corporate partnerships or business ecosystems in a telco’s transformation.

Collaboration key
of survey participants say scaling a successful partnership is a priority

How EY can help

In response, 39% said that they leverage a partnership in their transformation while 39% said that scaling a successful partnership is a key priority. A further 11% said that they have multiple partnerships as core to their new business model.

Looking at the telecom ecosystem, important players include the telecom service provider, the ICT equipment manufacturer, the datacenter provider, the end-consumer, the legislator and additional players such as downstream recycler or research institutes. There are different angles on how these players work together to achieve circularity.

Collaboration starts with bringing together supply chain partners to exchange knowledge and experience on current challenges in the circularity domain. Roundtables may be a good way to initiate discussion through a greenfield approach of challenges and solutions. Further, standardized language should be used to communicate clearly what is needed to achieve circularity. 

When it comes to redesigning telecommunication equipment, telecommunication service providers should collaborate with manufacturers, research institutes and downstream recyclers. This can have the benefit that future equipment will already be designed together with research institutes considering ecodesign principles such as choosing the right materials and component build-up as well as ensuring recyclability. When incorporated into the design process, recyclers can then also communicate what is easier for them to disassemble and how to upgrade their own technologies. Finally, including logistics providers can help with take-back schemes and the reverse logistics of used equipment.

At the same time, it is crucial not to neglect the role of customers in the ecosystem. How can people be incentivized to participate in the circularity of the entire ecosystem? The ecosystem will need to incorporate rewards or other incentives for take-back schemes and the use of refurbished devices.

With respect to ICT, all stakeholders involved (telecom companies, device manufacturers, users, etc.) should rethink their usage of digital technologies and carefully balance benefits with social and environmental impacts, to deploy new solutions in a smart way that limits over-consumption and an ever-growing footprint.

Summary

Information and communication technology is an important enabler of change as connectivity drives innovative business models across sectors. To be truly sustainable and embrace the potential of the sharing economy, pay-per-use and infrastructure-as-a-service, industry players need to consider circularity at all stages of the business lifecycle, especially considering the significant reliance on equipment and devices. 

Acknowledgements

We would like to thank Vincent Metzler, Ivan Kostakev and Gloria Flik for their valuable contributions to this article.

About this article

A photo of Rainer Zah
Dr. Rainer Zah
Director, Business Consulting | EY Switzerland
Pioneer in life cycle assessment. Sector expert in agro-food, textiles and mobility.
Related topics
Sustainability
Consulting
Telecommunications

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Limited, each of which is a separate legal entity. Ernst & Young Limited is a Swiss company with registered seats in Switzerland providing services to clients in Switzerland.