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The digital economy is booming. Annual smartphone shipments have more than doubled since 2010, hitting 1.2 billion in 2023. Internet of things (IoT) devices are projected to surge 2.5 times from 2023 to 39 billion by 2029. New data from 43 countries, representing about three quarters of global GDP, show business e-commerce sales grew nearly 60% from 2016 to 2022, to reach $27 trillion.

This growth is taking an increasingly heavy toll on the environment.

The digital economy is resource intensive. A two-kilogram computer requires 800 kilograms of raw materials. A smartphone, from production to disposal, requires about 70 kilograms.

While the production phase is the most impactful – generating some 80% of smartphone greenhouse gas (GHG) emissions – environmental harm occurs throughout the lifecycle of devices and ICT infrastructure, including through e-commerce.

Digital waste is growing faster than collection rates. Waste from screens and small IT equipment rose 30% between 2010 and 2022, reaching 10.5 million tons. Improper disposal leads to pollution and other health and environmental hazards.

Increasing demand for data transmission, processing and storage for new technologies like blockchain, artificial intelligence (AI), fifth generation (5G) mobile networks and IoT is boosting emissions. For example, the ICT sector emitted an estimated 0.69 to 1.6 gigatons of CO2 equivalents in 2020, corresponding to 1.5% to 3.2% of global GHG emissions.

Addressing these issues requires policy reforms, technological innovations and action from all stakeholders – policy makers, businesses, and consumers – to make business models more circular, logistics more energy efficient, packaging more sustainable and consumption more responsible.

As digital devices become more complex, they require more mineral resources. Phones used 10 elements from the periodic table in 1960, 27 in 1990 and 63 in 2021.

As a result, demand for critical minerals critical for both digital and low-carbon technologies is soaring. For instance, demand for cobalt, graphite and lithium is expected to increase by 500% by 2050, according to the World Bank.

Securing access to critical minerals is increasingly a strategic priority for many countries, intensifying global competition and raising the risk of geopolitical challenges in a highly concentrated market.

In 2023, the Democratic Republic of the Congo produced 74% of the world’s cobalt, Australia and Chile accounted for 72% of lithium production, and Gabon and South Africa produced 59% of manganese. China handles over half of global processing for aluminium, cobalt and lithium, and nearly 100% for natural graphite.

For resource-rich developing countries, rising mineral demand presents economic opportunities. However, to fully capitalize they must advance up the value chains rather than just supplying raw materials. Otherwise, their commodity dependence could deepen, increasing economic vulnerabilities and preventing benefits from reaching local communities.

Mining these critical minerals also raises environmental and social concerns.

Addressing these challenges requires international cooperation, sustainable sourcing, and policies that balance the needs of all stakeholders to ensure a stable and ethical supply chain for critical minerals.

A pressing concern is digitalization’s increasing energy and water needs.

From 2018 to 2022, electricity consumption by 13 of the largest data centre operators more than doubled. Worldwide, data centres are estimated to have consumed as much energy as France in 2022 – 460 terawatt-hours (TWh) of electricity. Their energy consumption is expected by the International Energy Agency to double to 1,000 TWh in 2026.

Such consumption can strain local electricity grids. For example, data centres in Singapore accounted for around 7% of the country’s electricity demand in 2020, and in Ireland that share was as high as 18% in 2022.

Cryptocurrency technologies are also energy intensive. For example, Bitcoin mining's global energy consumption rose 34 times between 2015 and 2023, reaching an estimated 121 TWh.

Digitalization’s water consumption is also growing, which is cause for concern in a world where two billion people still lack access to safe drinking water.

In 2022, Google’s data centers and offices consumed more than 21 million cubic meters of water. Newer technologies, such as generative AI, also require more potable water for cooling servers.

In the United States, one-fifth of data centre servers’ direct water footprint reportedly comes from watersheds that are moderately to highly water-stressed.

Addressing the energy and water footprints of digitalization requires coordinated efforts from tech companies and policymakers to improve energy efficiency and reduce water use.

Developing countries bear a disproportionate share of digitalization’s ecological costs while reaping fewer benefits.

They generate less than 1 kilogram of digitalization-related waste per person compared to 3.25 kilograms for developed countries. For the least developed countries, it’s just 0.21 kilograms.

A significant portion of digital waste created in developed countries is sent to developing nations, where formal collection and recycling systems are often inadequate. In 2022, only 7.5% of digital waste in developing countries was formally collected, compared to 47% in developed countries.

However, higher-value parts of digital waste for processing or treatment (such as printed circuit boards) are mostly exported from developing to developed countries. As a result, developing countries remain locked in the low value part of the waste value chain.

The production phase of digitalization creates ecological costs in developing countries that are rich in the required minerals. Extracting and processing raw materials often lead to environmental degradation, pollution and competition for local resources like water between mining, agriculture and local households.

Developing countries are also disproportionately affected by climate change yet lack the resources to leverage digital technologies to mitigate the effects.

Addressing widening digital ecological inequalities requires concerted international efforts to ensure fairer practices such as promoting sustainable mining approaches, enhancing digital infrastructure, curbing illegal digital waste exports, and support capacity-building in developing countries.

To tackle the environmental challenges of digitalization, we must transition to a circular and inclusive digital economy. This involves adopting sustainable practices throughout the entire lifecycle of digitalization – from design and production to usage and disposal – while ensuring equitable economic benefits.

The digital economy currently generates excessive waste, reinforced by programmed obsolescence – the built-in reduction of a product’s lifespan due to technical, functional or psychological reasons – in modes of production.

A circular economy minimizes waste and maximizes resource use through reusing, refurbishing, recycling, and extending product lifespans.

However, only 7.2% of the global economy is estimated to be circular, and this share is declining due to increased material extraction and use. As of 2022, only 24% of digital waste was formally collected globally, with much lower rates in developing countries.

Shifting to a circular and inclusive digital economy addresses environmental concerns while promoting economic opportunities and job creation. For example, the global market for electronics recycling is expected to grow from $37 billion in 2022 to an estimated $108 billion by 2030, led by the United States and China.

By optimizing resource use and reducing waste, businesses can lower costs and create new market opportunities. Sustainable practices can also lead to technological innovations that benefit people and the planet.

The report calls for a shift away from the “extract-make-use-waste” approach. Besides more appropriate policies, key strategies include designing for durability and repairability, promoting recycling and recovery, encouraging responsible consumption and supporting sustainable business models.

Moving towards sustainable digitalization will require those that are overconsuming to moderate their consumption of devices, so that the parts of the world that are insufficiently connected can continue to digitalize for development.

Collaboration among governments, businesses, consumers and civil society is crucial for success. Inclusive solutions require diverse perspectives.