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strategy and business
 / Winter 2010 / Issue 61(originally published by Booz & Company)


Reduce, Reuse, Recycle…or Rethink

2. Reuse. Shifting a culture from the disposable to the reusable has also worked well in general. The cycle experienced by the bottled water industry offers a great case in point. At the beginning of the new millennium, consumption of bottled water grew at double-digit rates to the point where water became the second-largest beverage category, behind only carbonated soft drinks. After peaking around 2007, however, the industry contracted by 1 percent in 2008 and 2.5 percent in 2009. Environmentally conscious (as well as cash-strapped) consumers had turned to tap water and refillable bottles. Reusable plastic, stainless steel, or aluminum bottles are now common on college campuses and in health clubs across the country, offering an option that is far superior to trying to increase the 27 percent recycling rate for disposable plastic bottles.

In the case of durable goods, the issue of reuse proves a bit more complex. In fact, academics in the field use the terms refurbishment and remanufacturing to clarify the extent of work needed to make a used product serviceable again. Consumer electronics are often refurbished simply by having their software tested and upgraded. But the reuse of products such as automotive parts and toner cartridges requires extensive remanufacturing labor, including such tasks as disassembly, cleaning, and parts replacement.

Reusing durable products can offer substantial economic and environmental improvements. Currently, remanufactured cartridges make up 6 percent of toner sales, and can be produced at 20 percent of the cost of a new cartridge. Lexmark and Hewlett-Packard consider this market such a strategic opportunity that they build microchips into the cartridges to prevent unauthorized remanufacturing, which can degrade print quality (not to mention their profits).

But reuse can also have drawbacks. From a broad environmental perspective it is better, for example, to recycle than to reuse energy-inefficient cars. The recent “cash for clunkers” programs in the U.S. and Europe were designed to stimulate the economy while helping the environment by retiring cars with low fuel efficiency. Other energy-intensive products — such as home appliances and even high-power computer chips — often offer similar benefits if they receive “early retirement” ahead of their functional life expectancy.

3. Recycle. Recycling comes last in the hierarchy of waste management techniques for decreasing landfill disposals, but has generally had the greatest environmental impact to date. Lead acid batteries provide the best case study of recycling of consumer durable products, with a 99 percent recycling rate. At the other extreme, consumer electronics offer one of the biggest areas of opportunity. Americans own an estimated 3 billion consumer electronic devices, about 10 per person. Because product life cycles for electronic gadgets are growing ever shorter, electronics represent a growing component of the waste stream, but currently attain only a 15 percent recycling rate. (Also of note: A substantial portion of electronic waste is exported to developing countries for reuse; instead, however, these devices and parts end up being discarded in countries with minimal environmental oversight.)

Rethinking Durables

Sustainability for consumer durables demands deeper thinking than the simple “reduce, reuse, recycle” framework. And unlike consumables, where the responsibility for rethinking falls on consumers, for durables, the primary rethinking job belongs to business executives and environmental regulators.

A rethinking of the problem should start with an examination of the ecological impact and economics across the full product life cycle — from manufacture through use, reuse, recycling, and disposal. The economic incentives for the various industry players must also be considered, including original equipment manufacturers (OEMs), retailers, service providers, remanufacturers, recyclers, and waste management companies. Every industry has a unique set of players; for each of them, the costs and benefits vary considerably, and are sometimes at odds. This insight provides a starting point for thinking strategically about reshaping the industry value chain in ways that increase profits while reducing environmental impact. Such rethinking can be employed by business executives to seek out new profit pools — or, alternatively, by regulators to alter the profit pools and enhance overall societal benefits.

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