Bob Trebilcock: Welcome to The Rebound where we'll explore the issues facing supply chain managers, as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now, to today's episode.
Bob: Welcome to today's episode of The Rebound, the Circularity Report, how one company is enabling the circular economy. I'm Bob Trebilcock.
Abe Eshkenazi: I'm an Abe Eshkenazi.
Bob: Joining us today is Jeff Jones. Jeff is the CEO of Apto Solutions, an ITAD Company. ITAD, ITAD Company. Jeff, welcome.
Jeff Jones: Thank you. Thanks for having me.
Bob: Now, don't worry if you don't know what an ITAD is. I didn't. We're going to ask Jeff about that in a moment, so we're all going to learn something. Last month, I had a conversation with Sumit Dutta, who is the North American Supply Chain practice leader at EY. When we were talking about trends, one of the things he identified is sustainability, as one of the five key trends his firm's customers are asking them about.
His second point, we're in the midst of an evolution from sloganeering to engineering, those are my terms, as companies struggle just to get a handle on what's happening in their own supply chain operations, let alone their extended supply chain, and to move beyond marketing. Apto Solutions took on that challenge a few years ago, and that's what we're going to talk to Jeff about. Let's get started. Jeff, first just tell us a little bit about what you do at Apto and just what is in ITAD.
Jeff: Thanks, Bob. First, I love Sumit's quote, taking your ESG initiatives from sloganeering to engineering because that's exactly what we try to do and enable our customers to do the same with data. The reality is, in our business, ITAD stands for IT Asset Disposition and everybody in this market has essentially been doing the same thing since the first computers were refreshed.
We take computer systems in from corporations’ and OEMs’ leasing and take back programs. We resell working systems and components when we can and we recycle everything else responsibly.
As electronic waste is becoming the world's fastest-growing waste stream, it's now gotten the attention, of the media and it's under a spotlight. Since IT Asset Dispositions and electronics recycling companies are the ones doing the work, we're now part of that ESG initiative and narrative and seen as part of the global environmental supply chain, from a sustainability perspective, which is a good thing.
We're happy about the spotlight on our industry because it's shining a light on something we've always been doing, but now we're able to take data from what we're doing and give it back to companies, so that they can use it in their ESG reports.
Abe: Jeff, really interesting that historically you've been in the recycling business, so this isn't new. We've seen organizations focus on recycling electronics for years. But as you're referencing, and I think as we're all realizing, there's been a lot of focus on sustainability recently and circularity. Are your customers asking for this or are you pushing it to them? Give me a sense of where the impetus is coming from. I know there's been a lot of rhetoric, but the action hasn't followed. Where do you see most of the momentum here?
Jeff: Well, I think it's really coming down, you've got organizations in the United States like the SEC that's mandating ESG metrics on publicly traded organizations. Now that they're being asked from the top to tell us what you're doing for your environmental and social governance goals, we're obviously the 'e' part of that.
They've got to document their carbon emissions, but also what they're doing on the other items. I think that the sustainability folks at these organizations not only do they have to document their emissions, you know, their pollution in the environment, but they also have to document the other side of what they're doing to offset that.
When we came up with our circularity report and we're obviously everybody in this industry's always been doing what they've been doing, nobody was really asking those questions. Now we're actually getting questions from the sustainability organizations within our customers and asking us, "Hey, can you tell us what happened? Can you tell us what those activities did in terms of offsetting our carbon emissions so that we can say that we're good corporate citizens?" That's put us in the spotlight, which as I said, is great.
Bob: Jeff, you and I had a chance to talk a little bit about what you're doing there. I want to take you back to 2019 because that was a pivotal year for your company's own sustainability journey. Before you talk about exactly what you're doing, describe what things were like then and what you thought was missing or where you thought Apto could do something different.
Jeff: Sure. Again, why I love that term sloganeering to engineering, I think at the time, we were looking at the first sustainability reports coming out at scale, I would say, across many organizations. There were obviously some that were ahead of the curve and doing it well before that time, but you were starting to see it become more pervasive.
When we looked at it, not only within our industry, but across industry, there was a lot of sloganeering. People were saying what they were going to do to be good to the environment and what they were going to do to cut their carbon emissions. We really wanted to shine a spotlight on what we were doing with our engineering, because at the core of it, our business is sustainable in nature, but it's really the circular aspect of what we're doing.
Returning used materials back into the supply chain to make new products, which is really something not only the core of what we're doing, but also what we need to do as a society, instead of continue strip mining those plastics and metals from the earth, when there's tons of it available today that nobody was really re-using.
We wanted to really put a spotlight on that and show the world, how we're doing it, so maybe we could create a framework for everybody else to do it as well.
Abe: Jeff, it seems like there are a couple of major steps on the journey that you're describing here. Obviously, the circularity report was a key, the output of that, but give me a sense internally. Did you have to re-engineer some of your internal processes so that you can get the right output? Give me a sense of how the changes internally affected the external reporting or the relationships that you're developing?
Jeff: Thanks, Abe. After the light bulb went off in my mind to say, "Hey, we don't want to just do a sustainability report. Everybody's doing that and they're talking about all these things. Let's just focus on what we do at our core, which is really the circularity aspect." I went to Caroline Allman, our Chief Compliance and Sustainability Officer, and the idea was met with both enthusiasm and hesitation.
She looked at me and said, "That's great. I would love to do that, but due to our size, our material goes through multiple POPs before it gets to the end smelter." All computers are made up of some combination of plastics and metals, the metals from basic aluminum and steel, all the way to the precious metals that everybody wants to mine out of electronic waste.
Because as an ITAD, between 70% and 80% of the material we take in, we're trying to resell, the amount of material that actually gets recycled through our facilities is not really giant compared to somebody that's a pure shredder or a recycler.
What that means is there are aggregators between us and the actual end smelter. What we were looking for is data. What happened to the material that we sent to you? Gosh, I'll go back to like 2009 when R2 and e-stewards came out and we wanted to ask, we just needed to know where it went through those POPs? Where did our material even go?
That was like pulling teeth because, where the aggregator sent the material at that time, 13, 14 years ago, was their intellectual property. They felt like if they shared that information with us, we were going to go around them. It was really difficult for the first companies like us that got those certifications.
Now it was really a volume consideration. We basically had to figure out how much the end-smelter needed, which for us, we would ship recycling loads in small quantities out every two to two to four weeks. We had to aggregate material.
We got in touch with the end-smelters for every type of metal and plastic that we produced, and we had to aggregate material and basically reinvent our supply chain over six months, to finally get to them and try to get the data that we needed.
Abe: Jeff, let me follow on to that because it's one of the areas that's been a hot topic in a couple of areas for us in terms of the visibility that you're describing, necessary to provide a much more comprehensive report. As we become much more transparent and visible within our supply chain, we seem to be creating more problems for the compliance officers. I'm glad you brought up your compliance officer, Caroline. This has been, from the supply chain side, beneficial because we now have an understanding who is in our extended supply chain, but it's also causing significant compliance concerns because of the extended supply chain and the lack of awareness or data, as you're pointing out. How did you resolve this?
Jeff: Well, it's funny. In 2019, none of them had really been asked for their customer data before. In other words, "What raw materials are you producing out of our electronic waste that we sent to you and who did you sell it to, and what did they make?" Because the smelters are producing the raw material. A metals example, they're selling it to a kitchen and bath manufacturer who are putting it into new faucets and things like that, but they didn't want to tell us which manufacturer it was. We ultimately got them to tell us. I think that was a copper material, that it was going to a manufacturer of kitchen and bath products, but they were very hesitant to provide that information, initially, as they were back in 2009 when we needed to know where it went. That was a requirement of the recycling standards. A lot of them said, "Oh, this is the first time anybody's ever asked us that information." Which is good because it let us know that we were ahead of our competition in that regard.
Now it's funny, we had a meeting recently with our downstream recycler for circuit boards and they said, "Oh yes, everybody's asking us for that information now." Fast forward five years and it's become the norm. That's a good thing. We weren't trying to create this as intellectual property for ourselves because we felt like it's what's needed to go forward as a society and do the right thing with our e-waste.
Bob: Jeff, I want to ask you a question about what you were just talking about in terms of the information from your shredders and smelters. First, can I just back you up to the process because you mentioned aggregating and volume. To get that volume so that you weren't now hanging onto stuff for like four months, did you reach out to any manufacturers who would also be generating e-waste to try and aggregate some of their material? How did you get that volume?
Jeff: Well, that six months-worth of volume was just our regular rate, so we just held it back. Instead of sending it out every two to four weeks, we held it in our warehouses until we met that volume. To your point, what we really wanted to do in order to gain market share for our business, was distribute that circularity report out to some of the major creators of volume, the larger OEMs and data center customers afterwards. We were pretty successful at that point after showing them what we did and having conversations and taking sustainability officers and procurement officers from some of these large companies through what we did. They were like, "Wow, this is exactly the type of information that we want from our suppliers and thank you for sharing it with us."
In some cases, we were able to gain them as customers, and so increase that supply to where we don't have to aggregate stuff for six months at a time now. We we're still not as frequent as we were because we do have to take that aggregation process, but our loads are a lot more frequent and thanks to those initial efforts, we were able to gain market share.
Bob: One question about all that information you were gathering. I understand that the smelters and the shredders were a little reluctant at first, but, can you give some examples of the things you learned? I remember talking about our stuff went into 73 washing machines or examples like that. Just an example or two of the things you started learning as a result of this.
Jeff: Yes, well we broke everything down and we created some nice marketing charts, but we were able to really define exactly what happened to all the materials. For example, the iron base metals in chassis for servers or desktops go back into construction materials. We send our batteries to a smelter that basically separates the lithium ion and cobalt cake and make new batteries out of it. The circuit boards actually get smelted down and go right back into electronics manufacturing. The copper and aluminum go into plumbing supplies, and plastics, they were initially used through the supplier when we started, into fenders and car bumpers. A lot of computers have fire retardant material in the plastics and they can't be used everywhere, but it turns out that companies like General Motors like to put them in their car bumpers.
We learned a lot of stuff like that. Now a lot of the plastics go into the rolling spools for receipts in point of sale machines. Not super sexy, but that's what happens to them, because the companies that make those plastic spools found out that they can use recycled plastics and I think that's a good use for them. That company has a reverse supply chain where you can send those plastic spools back and they continue to use them over and over again.
One of the other things that happened, customers really like the data. Our corporate customers like the data that they're using in their sustainability reports today. They can show that as whether they're flying airplanes or manufacturing other products. They can say they're responsible with their e-waste.
OEMs are using the data to create closed loop plans, so we're working with a couple OEMs where we're trying to take their very specific e-waste from their Take Back Programs to build new computers. We produced two static reports in '20 and 2021 that are PDFs that I think we shared with you. This year we wanted to take it a step further, so we've built a fairly comprehensive client reporting tool that we call AptoPulse, where our clients can go in and they can see the status of all their assets. They can see their data erasure and destruction certificates, which are important for data security, obviously.
Last year we integrated with the e-Stewards carbon reduction tool. We put that into our system so that it tabulates all the computers that were resold and recycled and tells you how many carbon emissions were offset with the program.
This year, instead of creating a static report for circularity, we want to take all that data that we've used for the past two years and we're going to integrate it directly into the AptoPulse, so our customers can see the circularity data real time. We're super excited about that.
Abe: Jeff, really interesting. Let me follow up on one of the areas that you're pointing out here in terms of not only aggregating the information, but disseminating it through the various reports. Give me a sense of what your customers are asking for. Are they pushing you or are you pulling it out of them in terms of the information flow? Are there areas that you need additional content or are they asking you for content areas that you're going to be expanding on in your reporting? Give me a sense of where the push and pull is for the content and the reporting.
Jeff: Well, it's a little bit more of a push at this point, I would say, because companies and people within those companies aren't necessarily aware that an ITAD program or recycling program has an emissions offset benefit. We're still in the education phase, I think, in a lot of cases. Look, it really depends on how many IT assets your company has and whether or not it's going to be a meaningful metric or not. Companies that have 30,000, 50,000 employees and several data centers, they have a lot of IT assets and it can make a difference in the carbon emissions. Smaller businesses, maybe not so much. Even the larger companies, you've got the sustainability officers that are more focused on those top level scope one, two, and three emissions that they're creating in their forward supply chains and transportation and all the things that companies do that they're not really aware that they're able to get that carbon offset from their ITAD activities.
For the most part, we're still in that education phase, but more people are talking about it. A lot of OEMs are making it front and center, and so that helps us get the message out. Yes, I think it's still a push and we're trying to do our part to educate everybody and provide them with the data they need for their sustainability reports. I think it's coming around.
Abe: That is interesting that we're having this discussion because as we've gone through our research as well, sustainability and circularity come up almost on top in every question about how you build more resiliency in your supply chain, but yet the awareness and the implementation of it, doesn't seem to match the rhetoric of it. I think you guys are doing an extraordinary job in really forcing everyone to take a look at circularity in a very different way, and you've created the system that's beneficial for the organizations. Obviously financially, but more importantly, that this is good for the ecology and the environment. Congratulations to you and to your entire team.
Jeff: Oh, thanks, Abe.
Abe: That is all the time that we have today. A special thanks to our guest, Jeff Jones, CEO of Apto Solutions. Finally, a special thank for you for joining us today on this episode of The Rebound. We hope that you'll be back for our next episode of The Rebound. I'm Abe Eshkenazi.
Bob: I'm Bob Trebilcock.
Abe: All the best, everyone. Thanks.
Bob: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and cmr.com. We hope you'll join us again.