Smartphones make intensive use of precious metals and so called conflict minerals in order to reach their high performance in a compact size. In recent times, sustainability challenges related to production, use and disposal of smartphones are increasingly a topic of public debate. Thus, established industry actors and newly emerging firms are driven to engage in more sustainable practices, such as sustainable sourcing of materials, maintenance services or take-back schemes for discarded mobile phones.
This working paper explores sustainability practices in the smartphone industry from the perspective of the circular economy (CE) and related strategies for slowing and closing resource loops. In order to analyze these new industry arrangements, transaction cost theory (TCT) and the related make-or-buy analysis is used to derive circular value architectures. Combining TCT with the concept of a CE is a novel research approach that enables the empirical analysis of relationships between focal actors (e.g. manufacturers) and newly emerging loop operators (e.g. repair and recycling organizations).
We explore five case studies which stem from the Innovation Network on Sustainable Smartphones (INaS) at Leuphana University of Lüneburg, a living lab in which practitioners, scientists and non-governmental organizations collaborate to develop solutions for circular smartphone production and consumption systems.
Our core findings are four generic circular value creation architectures (cVCAs) for closing the loops in a CE: 1) vertically integrated loops, 2) cooperative loop networks, 3) outsourcing to loop operators and 4) independent loop operators. This work thus provides evidence that circular economy activities do not necessarily have to be managed by focal actors in the value chain. Rather, circular practices can also be put forward by specialized loop operators or even independent actors such as repair shops.
Furthermore, evidence from the case studies suggests that asset specificity for circular practices increases for higher order CE-loops such as maintenance or reuse, therefore long-term partnerships between focal actors and loop operators or vertical integration of CE practices are beneficial strategies to reach a sophisticated CE. Similarly, circular practices that go beyond recycling require a strong motivation, either through integration in the focal firm’s quality commitment or through business model recognition. It is further suggested that the circular design of products and services could reduce necessary transaction costs and thus overall costs of a circular economy.