Apple, Partners Look to Clean Up Supply Chain

Sustainability is not a term commonly associated with metals and mining. Historically, the sector has been characterized as dirty and un-environmental businesses. But Alcoa (AA) and Rio Tinto (RIO) are joining forces to clean things up.

In May, the two metals companies announced a joint venture to commercialize carbon-free aluminum. Their technology has the potential to revolutionize the 130-year-old smelting practice of one of the world’s most widely used metals. In 2017, global consumption of primary aluminum, which is produced directly from mined ore rather than recycled, amounted to 63 million tonnes.

Located in Montreal, the joint venture (JV), Elysis, will replace all direct greenhouse gas emissions from the traditional smelting process. Since 1886, the aluminum industry has relied on a production process that uses large pots, lined with black carbon and connected to an electrical current. The carbon burns during the smelting process, releasing greenhouse gases. The new technology applies a strong electrical current to alumina (an oxide of aluminum) which replaces the black carbon with an advanced conductive material, releasing oxygen instead of carbon dioxide. Elysis plans to retrofit existing smelters in addition to developing new facilities. The technology is projected to be available for larger-scale production and commercialization by 2024.

Direct Consumer Impact

The partnership has significant repercussions for consumers of aluminum and other metal goods at various stages along the supply chain. In addition to the investment by Alcoa and Rio Tinto, Apple (AAPL) has invested $10 million in the JV's research and development, as have the governments of Canada and Quebec, for a total of $144 million.

Apple first began using aluminum to encase its PowerBook laptops in 2003 and has expanded its use of the material ever since. Aluminum serves a key environmental purpose for Apple. In 2017, Apple announced its commitment to a closed-loop supply chain. The company seeks to manufacture all of its products from responsible recycled or renewable materials and to return an equivalent amount of material back to the market, either through recycling or regenerating supply. According to Apple’s 2018 Environmental Sustainability Report, aluminum represents almost 25% of the company's manufacturing emissions.  Apple also looks to remove toxins from its manufacturing and recycling processes, which protects the people who make and take apart their products and keeps pollutants out of the land, air and water.

In 2015, three Apple engineers approached their aluminum vendor, Alcoa, seeking a cleaner approach to the mass production of aluminum. By 2017, Apple diverted 71% of its total waste from landfills through recycling and composting efforts. The team tapped Rio Tinto, the world's second largest miner, to the table to expand its abilities, acknowledging Rio’s worldwide presence and deep experience in smelting, international sales and commercialization. Rio executive Vincent Christ will lead Elysis.

Alcoa and Rio Tinto’s new approach to manufacturing aluminum could eliminate direct greenhouse gas emissions from the smelting process globally.  With the Trump administration renegotiating the North American Free Trade Agreement (NAFTA), it may also strengthen the closely integrated Canada-United States aluminum and manufacturing industries.

Focus on Supply Chains

The news follows Apple’s broader announcement in April that it intends for all of its facilities to run on 100% clean energy. In response, 23 of its suppliers have committed to do the same. Apple also recently debuted Daisy, a robot that can more efficiently disassemble iPhones to recover valuable parts for high-tech recycling, as part of the company’s goal to eventually make all of its products from recycled or renewable materials. 

While Apple is one of the most visible consumer companies to make such radical changes, value chains are shifting around the world. Due to increased media and public focus on sustainable business practices, companies have increasingly focused on cleaning up their supply chains. That means sourcing from sustainable vendors, incorporating responsible waste management and recycling initiatives, and quantifying the results of their sustainability initiatives. Companies in the metals and mining sector, along with other industrials vying for capital, are reluctant to be left behind.

Recycled scrap has increasingly replaced primary resources as a production material. The amount of aluminum produced from old scrap has grown from one million tonnes in 1980 to 17 million tonnes in 2016, according to the International Aluminum Institute. In fact, extracting metals from e-waste has long made financial and environmental sense to manufacturers. And while recovering gold, copper, and other metals from electronic waste is already sustainable, it’s actually 13 times cheaper than extracting metals from mines.

PCs and other electronics are complex products, but also a source of various value streams, either for reuse into similar products or into other sectors. Dell recently released a limited edition, U.S.-produced jewelry collection called the Circular Collection by Bayou in conjunction with actress Nikki Reed. The Collection, named after the “circular economy,” uses gold recovered from Dell’s recycling programs. Since 2012, the company has turned more than 50 million pounds of post-consumer recycled materials into new products.

Elysis, Daisy and the Circular Collection are the latest of many examples of how innovative technology can drive future sustainability gains across supply chains, even in some of the so-called dirty industries.