Tracking Value – Community of Practice (CoP) – Fairphone
A Community of Practice (CoP) is an open innovation, pre-competitive environment where tangible and replicable solutions are co-created to facilitate viable circular business models. Product-as-a-Service (PaaS) entrepreneurs retain ownership of their assets, which requires having more control over the product and hence the need for tracking and monitoring. The mission of this CoP was to tackle the complexities around tracking assets, with a focus on identity, location and condition of the assets. The relevant existing technologies have been explored and the financial and legal implications of tracking assets have been investigated.
The Case Study – Fairphone
Modularity makes the recently launched Fairphone 3 easy to repair for customers and service partners, reducing associated time and material costs. Although Fairphone currently has a for-sales business model in which they lose control and ownership of the devices after the sale, the social
enterprise intends to offer Fairphone-as-a-Service (FaaS) to businesses. This requires tackling a few key challenges:
- Tracking location, condition and corresponding (residual) value of circulating Fairphones and/or modules over their lifecycle.
- Managing the increased organizational complexity associated with providing a service.
- Overcoming financial challenges with respect to, for example, defining value propositions for the different qualities of assets.
- Addressing legal challenges with respect to data privacy
Why Tracking Assets?
Tracking the value of modular assets in a PaaS proposition is of utmost importance. Decision making is improved with regards to the cascading of components (e.g. refurbishing, re-using or recycling) and predictive maintenance, aiding to the circular goals of the entrepreneur to improve future design aimed at increased longevity of the assets and recovery of as much material as possible.
Tracking assets creates ways to optimize the business model by creating intelligence that is needed to provision for future costs and to accurately price the service contract.
Using the FaaS business model as a case study, this white paper focuses on providing answers to:
- What are the possibilities of tracking for intelligent management and monitoring of circulating assets?
- How can asset tracking contribute to an improved business case in circular business propositions?
Designing a Proof of Concept
As part of this CoP, a proof of concept was designed to illustrate the potential of automated tracking of different metrics focused on the condition of the battery. First, a feasibility study was done to understand which tracking techniques worked best on the different modules, including the battery. Secondly, an app was built from which the most important battery-metrics could be read: the charging temperature and the total charge. Lastly, a mock-up software instruction was written that models the condition of the battery from the metrics. This way, batteries can easily be categorized and sorted according to their condition.
- Based upon research of multiple tracking technologies, it was found that QR codes, memory chips and RFID tags are the most suitable tracking technologies.
- Tracking assets provides insight into the location and condition of assets giving the entrepreneur a better grip on the assets. Therefore tracking can help to lower the risk profile of the proposition, making it an interesting business case for financiers.
- Gathering data on the condition of and required maintenance for assets leads to improved estimates of future contractual obligations (provisions) and inventory required, which strengthens the business case.
- Collecting insights about usage and performance of assets enables the entrepreneur to improve the product and further increasing the product lifespan
- The data generated when tracking assets is subject to data protection laws and regulations. The main questions an entrepreneur should ask himself are: How is the data retrieved? What type of (personal) data is collected and processed? Why is this data needed?
- Obtaining consent from a user for gathering (personal) data is the preferred and safest route to choose, however, customers should be able to withdraw their consent. The main question to be addressed is whether the withdrawal of consent is technically feasible.
- For enterprises in need of an infrastructure that provides better grip over their assets, tracking technologies generate insights that are indispensable for a transition to the circular economy. Circular business models can be improved, and track records can be built, which ultimately could provide the comfort for financiers to take the plunge. This pilot with Fairphone paves the way.
Tsunami of e-Waste
- Electronic waste, or e-waste, is the fastest-growing waste stream in the world, estimated at 48.5 million tonnes in 2018.
- If nothing changes, e-waste is predicted to more than double to 120 million tonnes by 2050.
- The United Nations is calling it a “tsunami of e-waste”.
- E-waste includes all electrical and electronic items or equipment that have been discarded as waste without intended reuse. Only 20% of global e-waste is formally recycled, the remaining 80% will likely be incinerated or dumped in landfills leaving a trail of toxic materials and valuable precious metals to waste.
- In addition to being environmentally relevant, e-waste is also important economically. The total value of all raw materials found in e-waste is estimated at 55 billion euros in 2016.
- Next to reducing the consumption of electronics, a circular electronics system needs to be adopted to encourage closing the loop of these materials through better design, reusing and recycling valuable materials and diminishing the need to extract and waste raw materials.
Resource Efficiency Significantly Reduces Carbon Footprint
2018 research by McMaster University in Canada calculated that the IT industry, including devices and servers, is responsible for around three percent of global greenhouse gas emissions. 6 This is two percent more than 10 years ago, with smartphones being the fastest growing IT category in terms of emissions. Notably, more than 80% of the carbon footprint of a mobile phone comes from the production phase. Modularity is an effective design strategy to facilitate repair and upgrades. 7 Next, with proper software support, the lifetime of smartphones can be extended to five years and beyond. An extension to five years reduces 30% of the footprint related to global-warming-related emissions. 8 Therefore, in order to maximize resource efficiency and minimize emissions, it is important for a company to track their assets and have the ability to estimate their condition at key moments in their lifecycle.
“Our planet is reaching its limit of available resources. We urgently need to re-evaluate our future and change our attitudes towards product lifecycles and their obsolescence. By collectively building expertise, we can get the most out of the material resources we use by working towards extending the lifetime of the products we make. We are therefore very grateful to work with partners who share our passion to make this transition, so that we can take the first steps together.”
– Eva Gouwens, CEO Fairphone.
Hilde Sijbring (Circle Economy) Julia Moss (Circle Economy) Elisa Achterberg (Sustainable Finance Lab) Miquel Ballester (Fairphone) Alix Dodu (Fairphone)
COMMUNITY OF PRACTICE PARTNERS
Coen Thomas (Allen & Overy) Nicole Wolters Ruckert (Allen & Overy) Edwin Voskuilen (Avery Dennison) Jasper Zonnenberg (Avery Dennison) Mesbah Sabur (Circularise) Carrie George (Everledger) Lucas Geusebroek (NBA) Henk Kuipers (Rabobank) Diane Zandee (Schiphol Group)
Wiep van Beest-Stienstra (Schiphol Group) Paul Kooijman (Schiphol Group)
Fieke de Haan (Circle Economy) Aglaia Fisher (Circle Economy)