Incentivizing Circular Economy Reuse of Data Storage Drives

Though reuse is empirically beneficial for the environment, calculating its cost value and GHG reporting benefits is complicated by the multifunctional nature of a reused product. That is, the product’s early life-cycle stages (raw material extraction, processing, and manufacture, with their associated environmental impacts) provide a functional benefit to both first and second users, and their end-of-life impacts derive from recycling or disposal of materials that benefited both users during the product’s functional life. Considering a data center with 150,000 or more drives, reuse programs have potential to return significant numbers of drives into the supply chain, improving circularity and directly offsetting production of new materials. 

In the pages that follow, we will explore the challenge of equitably apportioning the environmental impacts of an extended life-cycle product between that product’s first and second users, the various allocation methodologies that could accomplish this, and the benefits of seeking an industry-standard approach.

2. Background: Allocation Methodologies

When a product is used multiple times by different users across its life cycle, LCA uses allocation to partition total emissions or removals among those multiple users. For the purposes of this report, allocation is the process of apportioning the environmental impacts of a product’s material production, recycling, and final disposal between the different users in its life cycle. 

Lack of standardization in allocation methodologies for reuse as recycling has been well documentedxi, with the wide variety of available allocation methods contributing to inconsistency in the published literature and in LCA outcomes. ISO 14040:2006 LCA standards recommend allocating based on (a) a physical property, such as mass; (b) an economic value, such as cost of the recycled material relative to new; or (c) the number of uses of the recycled material^xii. Other standards, such as the International Environmental Product Declaration (EPD) System’s Product Category Rules (PCR)^xiii, may require the use of a specific allocation method. To date, no PCR is available to provide specific guidance on reused or refurbished/remanufactured electronics.

In addition to varied methodologies, there is a lack of harmonization among LCA studies and GHG accounting. The Greenhouse Gas Protocol’s Product Life Cycle Accounting and Reporting Standard (“Product Standard”) supports two allocation methods: closed-loop approximation and the cutoff method, with the cutoff method being more widely used in practice. Based on current accounting guidelines, customers will report emissions based on the cutoff method regardless of what an LCA might show. This leads to an imbalance between the first and second users of a device due to the nature of electronic devices, whose production typically creates significantly greater GHG impact than their late-stage reuse, recycling, and end-of-life. Using the cutoff method therefore results in a greater burden being placed on the first user than the second, giving the first user minimal incentive (from an emissions perspective) to return devices for secondary-market reuse 

Along with this lack of standardization, most allocation practices fail to account for circular economic practices. The Greenhouse Gas Protocol’s Product Standard, for example, handles reuse and refurbishing only as a form of recycling, and ISO standards for LCA do not address reuse and refurbishing directly. As such, there is no specific guidance for allocating impacts across the extended lives of reused or refurbished/remanufactured products. 

As noted in Wynne and Kenny ii, the lack of consistent accounting methods and an established, universal carbon benefit in GHG reporting for reused/refurbished products weakens the momentum toward large-scale adoption of circular economy practices and can even disincentivize such a shift. 

In this paper, we focus on three allocation methods that offer alternatives for apportioning impacts, illustrating their key benefits, trade-offs, and incentives for first and second users. Standardization under one of these methods could support broader adoption of product buy-back and reuse programs, and methods are supported among LCA professionals and industry stakeholders alike. 

Cutoff Method: Using the cutoff method, the first user of a material or product is allocated impacts from all life cycle stages prior to the product being returned for recycling, while the second user is allocated all impacts from recycling to disposal. Users share no impacts, making cutoff a simple, straightforward method frequently used in LCAs and GHG inventories. Electronic products, however, produce significantly higher impacts in their early material production phases than in their end-of-life phase, putting a greater burden on the first user — and also disincentivizing them from returning devices for reuse since they receive minimal GHG benefit for doing so. 

Economic Allocation: This method distributes the impacts of virgin materials extraction, processing, and manufacture between users based on the economic value of the recycled material relative to the virgin material — i.e., the difference in purchase price between the new device and the used/recertified device determines the percentage of environmental impacts assigned to the first and second user. The ease of obtaining price data is an advantage in this method’s favor. A disadvantage, however, is that prices are commonly influenced by external factors that may have little or no relevance to a device’s environmental impacts. 

Circular Footprint Formula (CFF): Developed at part of the EU’s Product Environmental Footprint methodology^xiv, CFF differs from the cutoff and economic allocation methods by considering materials, energy, and disposal through a circularity lens. The materials assessment addresses the need for a consistent method for allocating environmental burdens to suppliers and users of recycled materials based on market characteristics — i.e., manufacturers that enable materials recycling at end-of-life are assigned lower environmental burden during times of low availability and high demand for recyclable materials, but users of recycled material accrue less impact during periods of high availability and low demand. CFF accounts for impacts avoided when recycled materials replace virgin material production, the quality of recycled material entering and leaving the life cycle, and the supply-and-demand balance for individual recycled materials. While all these factors make for a stronger and more detailed methodology, applying it in LCAs requires a greater amount of data that may be difficult to obtain.

3. Case Study

3.1 Goal and Scope

The allocation methods discussed in this paper are presented using a cradle-to-grave LCA for Seagate’s Exos X16 hard drive^xv. The objective of the case study is to present the life cycle environmental impacts for the recertified hard drive over its lifetime, including first use, one recertification cycle, and a second use. The impacts are allocated between users of the hard drive following each method described in Section 2.  

The study’s functional unit is one terabyte-year (TB-year) of the Exos X16. The TB-year unit considers the capacity of the drive (in TB) and the length of use of the drive. The functional unit and the scope of the study are described in Table 2. 

The life cycle of the recertified drive (see Figure 2) begins with production of raw materials and drive manufacturing, followed by testing. Once the drive has passed testing, it is distributed to the first user. User 1 is assumed to keep the drive for its full warrantied lifetime of five years. At the end of that five-year period, the drive is sanitized and sent back to Seagate for recertification. 

Table 2: Description of LCA scope

During the recertification process, Seagate sanitizes data from the drive and performs a verification step to ensure data has been removed. Once sanitized, the drive is tested to ensure its performance meets standards for resale. During testing, portions of the drive may fail to meet standards and are removed, reducing the capacity of the drive in its second life. Details of the drive capacity are shown in Table 3.

Table 3: Drive capacity changes during recertification.

Once the drive completes the recertification process, a wholesale distributor collects it from Seagate for resale to customers in the secondary market. This second use is assumed to be shorter than the first use, comprising two years of operation. After this period, the drive goes to end-of-life recycling or disposal.

The case study considers allocation of new drive production (including manufacturing and testing), the recertification process, and end-of-life impacts. Because use-phase impacts will always be allocated to the customer using the drive (versus being shared among different users), this study excludes those impacts for all allocation methods.

Results are first shown without any allocation to compare the life cycle impacts of recertified drives relative to purchasing new drives. Then, the impacts of recertified drives are allocated between both users using cutoff, economic, and CFF approaches. 

3.2 Life Cycle Inventory and Data Sources

For this case study, we used Seagate’s recently completed LCA for the Exos X16 drive, which examines six life-cycle stages (production of raw materials, manufacturing, packaging, distribution, use phase, and end-of-life) and gauges impacts for a single-use lifetime across four key priorities: GHG emissions, human toxicity, mineral resource scarcity, and water consumption. From here, we expanded the LCA’s scope to reflect the recertification process, using primary data from Seagate regarding energy inputs for drive sanitization and testing, capacity changes in recertified drives (see Table 3), packaging, and the expected lifetime of a recertified drive. We based data for the recertified drives’ distribution and end-of-life phases on first-use data from the Exos X16 LCA.

Life-cycle stages and data sources are described in Table 4.

Table 4: Life-cycle inventory and data sources used in this study

3.3 Allocation Method Calculations

This study presents results from the three allocation methods described in Section 2, allowing for comparison. The calculation approach used for each method is detailed below.

Cutoff Method: Since the cutoff method allocates all impacts of a given life-cycle stage to the user associated with that stage (versus splitting impacts of a life-cycle stage between users), this method does not require calculation.

Economic Allocation: Economic allocation splits the impact of new drive production between User 1 and User 2 of the drive. In this study, economic allocation is based on the price difference between new and recertified drives. The recertified drive is assumed to be sold at a 30% discount relative to a new drive. To calculate the allocation, we assume the full price of a new drive is price P. User 1 pays 100% of P, and User 2 pays 70% of P. The total cost paid for the drives is 1.7P. User 1 pays 1P/1.7P = 59% of total cost, and User 2 pays 0.7P/1.7P = 41% of total cost. These fractions are used to allocate emissions of new drive production; thus, User 1 bears 59% of the total impact of production and User 2 bears 41%.

CFF: CFF is a complex formula accounting for new drive production, certification impacts, avoided production of new drives, and end-of-life impacts, alongside supply and demand of recertified drives. The complete CFF includes terms for energy recovery from incineration of waste. We did not consider energy recovery in the study’s calculations of end-of-life disposal, instead using a simplified version of the CFF (see Equation 1). 

Table 5: Summary of variables used in the Circular Footprint Formula (CFF)

3.4 Impact Assessment Method

The study uses the ReCiPe (2016) assessment method^xvii to gauge impacts in four categories: global warming potential (GWP), human toxicity, mineral resource scarcity, and water consumption. The categories are included to show a holistic view of environmental performance across multiple indicators; however, only GWP is relevant to the discussion of GHG accounting. As such, our results section focuses on GWP. Human toxicity, mineral resource scarcity, and water consumption are included in the Appendix.

4.0 Results and Discussion

4.1 No Allocation

The results of the recertification process are first compared to two single-use drives (see Figure 3), yielding the following observations: Total emissions for recertified drives are 25% lower per TB-year than for new drives. Including all logistics, recertification contributes 0.22 kg CO2e per TB-year; whereas the impact of two new drives (the alternative to first use plus recertified second use) is 0.46 kg CO2e per TB-year. Distribution and end-of-life have higher impact per TB-year for recertified drives because these drives have lower capacity and length of use. Emissions are distributed over fewer TB-years compared to new drives. Despite these increases, recertified drives still exhibit superior total environmental performance. Allocation methods are needed to address how the 0.69 kg CO2 for recertified drives should be split between both users of the drive.

4.2 Cutoff Method

Figure 3 shows results from using the cutoff method to allocate the impacts of recertified drives between the first and second users. This methodology yields the following points:

Under the cutoff method, User 1 is allocated new drive production and distribution. All life-cycle stages after the first user are allocated to User 2, including transporting the drive from User 1 to Seagate for recertification. Under this approach, User 2 is allocated 50% fewer emissions than User 1. Lower emissions per TB-year may help incentivize customers to purchase recertified drives.

User 1 is not allocated end-of-life emissions under the cutoff method, but this represents negligible benefit compared to the impact of new drive production. Thus, there is minimal incentive for User 1 to return the drive for recertification as opposed to linear disposal routes.

4.3 Economic Allocation

Figure 5 shows results from using the economic allocation method to allocate the impacts of recertified drives. This methodology yields the following points:

• Under the economic approach, User 1 is allocated 58% of new drive production and User 2 is allocated 41% (see Section 3.3).
• Relative to the cutoff method, User 1 sees total allocated emissions reduced by 39%, creating an incentive for User 1 to return drives for recertification.
• The emissions taken from User 1 must be allocated to User 2, significantly increasing the emissions for User 2 relative to the cutoff method (74% increase).
• While economic allocation may appear unfavorable to User 2, the total emissions allocated to User 2 are still lower than purchasing new drives (0.40 kg CO2e per TB-year vs 0.46 kg CO2e per TB-year, respectively). However, allocating a larger total share of emissions to the recertified product may reduce customers’ willingness to purchase recertified versus new products.
• Economic allocation may be subject to variability based on the price of recertified drives. Price can be affected by many factors beyond the quality of the drives themselves. 

4.4 Circular Footprint Formula

Figure 6 shows the results of applying the CFF methodology for allocating the impacts of recertified drives. This methodology yields the following points:

• Similar to economic allocation, CFF results in lower allocated emissions to User 1 and higher allocated emissions to User 2 compared to the cutoff method.
  • User 1 emissions are reduced by 24% relative to the cutoff method.
  • User 2 emissions increase nearly 50% relative to the cutoff method, but are still lower than purchasing new drives (0.46 kg CO2e per TB-year).
• CFF results in the most balanced approach between users, with nearly equal emissions allocated to both users. A balanced approach may help incentivize both users to participate, compared to economic allocation which may appear unfavorable to User 2. Alternately, the parity in emissions between first and second uses might disincentivize some potential customers for recertified drives, despite their cost benefit.

Conclusions

Addressing the significant environmental impact of producing and disposing of data drives requires changes in mindsets, business practices, and accounting frameworks. The GHG impacts of a recertified drive may be more equitably allocated among multiple users with methods other than the cutoff method. Doing so would incentivize more companies to participate in circular reuse and refurbishment practices, a key driver in the circular economy and in meeting sustainable development goals, such as the Sustainable Development Goal 12 defined by the United Nations^xviii.

This paper presents a case study that compares the cutoff method to two alternatives: economic allocation and allocation according to the CFF. Based on that study, we reach the following conclusions: 

• Both the economic and CFF allocation methods reduce emissions allocated to User 1 relative to the cutoff method, providing an incentive for first users to return decommissioned drives for recertification.
• Under both economic and CFF approaches, User 2 is allocated more emissions relative to the cutoff method. While this may appear to disincentivize User 2, the emissions associated with drive reuse are still lower than those from a comparable new drive. Therefore, recertification is still beneficial from an emissions perspective.
  • Economic allocation could result in higher emissions allocated to User 2 if the price for a recertified drive approaches that of a comparable new drive.
• Under the assumptions used in this study, the total emissions allocated to User 2 with economic method are greater than those allocated to User 1. The results of economic allocation may also vary based on market factors, including the price difference between recertified drives and new drives.
• CFF results in the most balanced allocation between users, producing a nearly 50/50 split. Given market demand for both return and purchase of recertified drives, CFF offers the best incentive to both users.
  • Seagate supports the CFF as a viable option to allocate emissions for circular systems.
• Cutoff method is best to incentivize the purchase of recertified drives, while economic is best to incentivize return of drives for recertification.

As the case study demonstrates, the choice of allocation method is consequential because it not only influences numerical results, but the results also have the potential to influence a company’s behavior. When recommending an allocation approach, standard-setting bodies should consider multiple factors including the behavior they wish to incentivize, the relative ease of implementation, and the need for consistency across the industry.

Appendix

A1. Supporting Results

Results for human toxicity, mineral resources scarcity, and water consumption are shown in Table 6. While these categories are not included in GHG inventories, they may be subject to allocation methods in LCA studies. The LCA methods described in Section 2 are applied to each of the categories. The following points can be made from Table 6:

• Trends align with those for GHG emissions discussed in Section 4.
• Cutoff method results in the most favorable allocation to User 2. Economic allocation results in the most favorable allocation to User 1.
• CFF is the most balanced approach.
• Impact in these categories is primarily driven by new drive production. Mineral resource scarcity in particular has over 99% of impact from new drive production. Water consumption is also contributed by the recertification process through indirect water consumption from electricity generation. Human toxicity has impact from emissions during all life cycle stages, though new drive production contributes the majority (90%).

Table 6: Allocation results for human toxicity, mineral resource scarcity, and water consumption categories.

References

List of Figures

List of Tables

Abbreviations and Acronyms

Study Undertaken on Behalf of: 


Seagate Technologies LLC

Contact:

Caroline Gaudreault 


Director, LCA Services Lead 


Caroline.Gaudreault@anthesisgroup.com

Callan Glover 


Senior Consultant 

Callan.Glover@anthesisgroup.com

Anthesis Group 


1002 Walnut Street, Suite 202 

Boulder, CO 80302

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Incentivizing Circular Economy Reuse of Data Storage Drives