# Principles & requirements

Project developers shall demonstrate that they comply with all principles and requirements outlined in the [Rainbow Standard Rules](https://docs.rainbowstandard.io/rainbow-standard-documents/rainbow-standard-rules/general-eligibility-criteria), and described below with a specific focus on electronic device refurbishment.

{% content-ref url="../../rainbow-standard-documents/rainbow-standard-rules" %}
[rainbow-standard-rules](https://docs.rainbowstandard.io/rainbow-standard-documents/rainbow-standard-rules)
{% endcontent-ref %}

## Additionality

To demonstrate additionality, Project Developers shall perform **regulatory surplus analysis, plus either investment or barrier analysis**, using the [Rainbow Additionality Template](https://docs.google.com/document/d/1gahNR_qj9f_QmxHEEBW-pM1EiycINjt7LeO_pcbBFX8/edit?usp=sharing).

{% tabs %}
{% tab title="Regulatory surplus analysis" %}
Regulatory surplus analysis shall demonstrate that there are no regulations that **require or mandate** collection, refurbishment, and resale of electronic devices. It is acceptable if regulations **promote** or **set targets for these activities**, because the resulting increase in these activities shall be accounted for in the baseline scenario.

At the European Union level, projects automatically pass the regulatory surplus analysis, which has been conducted by the Rainbow Climate Team. The EU has introduced the Waste Electrical and Electronics Equipment (WEEE) Directive ([Directive 2012/19/EU](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02012L0019-20180704)), the Restriction of the Use of Certain Hazardous Substances in EEE (RoHS) Directive ([Directive 2011/65/EU](http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02011L0065-20160715)), Waste Framework Directive ([Directive 2008/98/EC](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32008L0098)), and the [Circular Economy Action Plan](https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en) to prevent WEEE generation and promote re-use, recycling, and other forms of WEEE recovery. **None of these legislations require electronic device refurbishing** at the EU level. Project Developers are only required to provide a country-level regulatory surplus analysis.

Any increase in electronic device refurbishing and WEEE recycling thanks to the support of these regulations is accounted for in the GHG reduction quantification. For example, current rates of WEEE recycling are used in the GHG [#e-waste-treatment](https://docs.rainbowstandard.io/methodologies/ghg-reduction-quantification#e-waste-treatment "mention") section of the baseline scenario, and the current share of refurbished devices sold annually in the project country is considered in the [#aq9a8bw7wcjk](https://docs.rainbowstandard.io/methodologies/ghg-reduction-quantification#aq9a8bw7wcjk "mention")section of the baseline scenario.
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{% tab title="Investment analysis" %}
**Investment analysis** may be used to prove that revenue from carbon finance is necessary to make the project investment financially viable.

{% hint style="info" %}
For example, Project Developers can apply investment analysis to the following situations to prove additionality (non-exhaustive list) :

* the development and launch of a brand new refurbishing project, or
* an expansion to scale up activities, such as expanding device collection capacity, or accelerating the refurbishing procedure with new equipment to be able to process more devices annually.
  {% endhint %}

**Projects shall demonstrate that their Internal Rate of Return (IRR) is below 28.5% in order to meet the financial additionality threshold.** This threshold corresponds to three times the sectoral Weighted Average Cost of Capital (WACC), based on benchmark data from the [Damodaran database](https://pages.stern.nyu.edu/~adamodar/).

The IRR shall be calculated based on the projected net cash flows over the project’s economic lifetime, using the following approach:

\
$${NPV} = \text{discount rate } r \text{ such that } \sum\_{t=0}^{n} \frac{CF\_t}{(1 + r)^t} = 0$$

Where:

* NPV = net present value
* $$CF\_t$$​ = net cash flow in year t
* r = internal rate of return
* n = project duration (in years)

Only projects with an IRR **strictly below 28.5%** will be considered as financially additional under this criterion.

Business plans shall account for any public funding or other financial support received by the project. During verification, audited accounting documents shall be used to demonstrate that the projected net cash flows from the calculation above was reasonable, and that carbon finance was used as initially described.

Note that **for investments in expansion, only the additional carbon reductions enabled by the expansion shall be eligible for Rainbow Carbon Credits**.
{% endtab %}

{% tab title="Barrier analysis" %}
**Barrier analysis** may be used to prove that the project faces financial, institutional, or technological barriers to ongoing operations that can only be overcome using carbon finance.

{% hint style="info" %}
Examples of barriers that could justify additionality include but are not limited to:

* Financial barrier: financial analysis proving that the project is operating at a loss, or not financially viable or stable, and carbon finance would make it financially viable.
* Technological barrier: proof that the project suffers from a lack of skilled workers (since refurbishment is a manual, technical process), which negatively affects the overall quality or logistics of the project. Carbon finance may help overcome this barrier by providing training for employees.
* Technological barrier: Refurbishment in Europe may struggle to be cost-competitive with new device sales, or refurbishment occurring elsewhere. Carbon finance may be used to lower the selling price of the project’s refurbished devices, making them a more attractive and competitive option.
  {% endhint %}

Projects shall demonstrate that their **EBITDA/Revenues is below 9%** in order to pass the financial additionality threshold. The EBITDA shall be calculated using the following formula:

$$
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
$$

All financial analyses shall account for any public funding or other financial support received by the project.&#x20;
{% endtab %}
{% endtabs %}

For any type of barrier analysis, audited financial documents shall be provided as proof. These documents should either demonstrate the financial status to prove financial barriers, or show that the project could not independently fund solutions to overcome institutional or technological barriers.

## No double counting <a href="#gp50rvxdsjp3" id="gp50rvxdsjp3"></a>

Project developers shall sign the [Rainbow MRV & Registry Terms & Conditions](https://drive.google.com/file/d/1Ol88SJX7HWGnZ9pxKfn8cekGU-RmCo6v/view?usp=sharing), committing to follow the No Double Counting requirements outlined in the Rainbow Standard Rules, including not double using or double issuing carbon credits.

No additional measures for double issuance are required because double issuance among actors in the supply chain is unlikely, given that device collectors and marketplaces are not eligible under this methodology.

{% content-ref url="../../rainbow-standard-documents/double-counting-policy" %}
[double-counting-policy](https://docs.rainbowstandard.io/rainbow-standard-documents/double-counting-policy)
{% endcontent-ref %}

## Co-benefits

Projects should support at least two **quantifiable and verifiable** environmental or social co-benefits, aligned with the [UN Sustainable Development Goals](https://unstats.un.org/sdgs/indicators/Global-Indicator-Framework-after-2024-refinement-English.pdf) (SDGs) framework. Any co-benefits claimed by the Project Developer shall be quantified, monitored, and audited for each verification and credit issuance.

Common co-benefits under this methodology are detailed in the table below. Project Developers may suggest and prove other co-benefits not mentioned here.

SDG 13 on Climate Action by default is not considered a co-benefit here, since it is implicitly accounted for in the issuance of carbon credits. If the project delivers climate benefits that are not accounted for in the GHG reduction quantifications, then they may be considered as co-benefits.

*Table 1 Common co-benefits that projects under this methodology may provide are detailed, including types of proof that can be used to justify each co-benefit.*

| UN SDG                                                                                                                                               | Description                                                                                                                                                                                                                                                                                                                                                                                                              | Proof                                                                                                                                                                            |
| ---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **SDG 5.1** - Achieve gender equality and empower all women and girls                                                                                | <p><a data-footnote-ref href="#user-content-fn-1">Women are less likely to work in the technology sector, and when they do they are usually paid less than men.</a></p><p>Electronic device refurbishing projects may promote gender parity in the information and communications technologies (ICT) workplace by having a large female workforce and having equal pay between men and women for doing the same job.</p> | <p>Average hourly earnings of men and women by age and disabilities (if any)</p><p>Standalone official policy for equal pay or current scenario in the sustainability report</p> |
| **SDG 8.5** - Achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities | Electronic device refurbishing projects often hire people with disabilities, who tend to have lower rates of employment (e.g. [55% activity rate of people with some disability in the EU](#user-content-fn-2)[^2] vs 74% overall activity rate).                                                                                                                                                                        | Official record of number of employees with a disability vs total employees of the workforce                                                                                     |
| **SDG 12.2** - Achieve the sustainable management and efficient use of natural resources                                                             | The project’s circularity will be measured by the Material Circularity Indicator (MCI), according to the Ellen MacArthur Foundation's methodology.                                                                                                                                                                                                                                                                       | Primary data collected from the project for the GHG reduction quantification, which are also used in the Circularity Assessment                                                  |
| **SDG 12.4** - Achieve the environmentally sound management of chemicals and all wastes throughout their life cycle                                  | Electronic devices contain precious metals and rare earth elements. By refurbishing electronic devices, and recycling the precious metals and rare earth elements they contain, [projects avoid the destructive mining and extraction of these finite, virgin elements](#user-content-fn-3)[^3].                                                                                                                         | Number of devices refurbished. Amount of rare earth elements avoided calculated in Rainbow life cycle inventory models.                                                          |
| **SDG 12.5** - Reduce waste generation through prevention, reduction, recycling and reuse                                                            | The project diverts e-waste from improper disposal. In the EU, an average of 44% of small IT and telecommunication equipment e-waste is not treated in proper waste management channels. All e-waste collected in the project scenario is properly managed (via refurbishing or recycling).                                                                                                                              | Number and type of waste input devices.                                                                                                                                          |

## Environmental and social safeguards

Project Developers shall prove that the **project does not contribute to substantial environmental and social harms.**

Additional proof may be required for certain high-risk environmental and social problems.

The Project Developer, the Rainbow Certification Team, or the VVB may suggest additional risks to be considered for a specific project.

### ESDNH risk evaluation

Project Developers shall fill in the [Rainbow- Electronic device refurbishing risk evaluation](https://docs.rainbowstandard.io/methodologies/refurbishing-of-electronic-devices/risk-evaluation-template), to evaluate the identified risks of electronic device refurbishing. The identified risks include:

* Improper on-site storage of non-functional e-waste
* Energy intensive processing
* Greenhouse gas emissions from transport for collection
* Greenhouse gas emissions from transport for shipping
* Worker health and safety
* Frequent replacement of devices due to shortened lifetime (rebound effect)
* Frequent replacement of devices due to economic incentives (rebound effect)

{% hint style="info" %}
All risk assessments must also address the [Minimum ESDNH risks ](https://docs.rainbowstandard.io/rainbow-standard-documents/rainbow-standard-rules/general-eligibility-criteria#minimum-esdnh-risks-to-assess)defined in the Rainbow Standard Rules.
{% endhint %}

{% content-ref url="risk-evaluation-template" %}
[risk-evaluation-template](https://docs.rainbowstandard.io/methodologies/refurbishing-of-electronic-devices/risk-evaluation-template)
{% endcontent-ref %}

Project Developers shall assign a likelihood and severity score of each risk, and provide an explanation of their choices. The VVB and Rainbow’s Certification team shall evaluate the assessment and may recommend changes to the assigned scores.

Any identified material risk (defined as issues with a risk score of moderate or higher) shall be subject to a [Risk Mitigation Plan](https://docs.rainbowstandard.io/rainbow-standard-documents/rainbow-standard-rules/general-eligibility-criteria#risk-mitigation-plan), which outlines how Project Developers will mitigate, monitor, report, and if necessary, compensate for any environmental and/or social harms.

Additional proof may be required for certain high risk environmental and social problems.

The Project Developer, the Rainbow Certification Team, or the VVB may suggest additional risks to be considered for a specific project.

{% hint style="info" %}
Note that the **life-cycle GHG reduction calculations account for the climate change impacts of most environmental risks**. Nonetheless, Project Developers shall transparently describe any substantial and sensitive GHG emission risks in the risk evaluation template.
{% endhint %}

## Leakage <a href="#viuf5av97jb8" id="viuf5av97jb8"></a>

{% tabs %}
{% tab title="Activity shifting" %}
Leakage may occur when carbon-emitting activities are geographically displaced or relocated to areas outside the project boundaries as a direct result of the project's implementation. For electronic device refurbishing, this includes:

There is a risk that e-waste is transferred to different countries with less stringent waste treatment standards than their original country. This can occur in the form of:

* non-functioning parts or devices that are discarded at the refurbishing facility, and/or
* the refurbished device itself, which will undergo waste treatment in the country where it is sold and distributed.
  {% endtab %}

{% tab title="Upstream and downstream emissions" %}
Upstream and downstream emissions shall be included by default in the GHG reduction quantification, as part of the life-cycle approach. The upstream and downstream emissions included in the quantification are detailed in the Baseline scenario and Project scenario section
{% endtab %}
{% endtabs %}

{% hint style="info" %}
Project Developers shall transparently evaluate the likelihood of the above leakage risks in the PDD, plus any other project-specific leakage risks deemed relevant by the Project Developer, the Rainbow Certification Team, or the VVB.
{% endhint %}

## Monitoring

Monitoring Plans for this methodology shall include, but are not limited to, tracking of the following information:&#x20;

* Amount and type of devices collected
* Transportation distances of these devices for collection, and for possible secondary transport
* Amount and type of functional and non-functional devices sold
* Number of devices undergoing full refurbishment, light refurbishment, recycled, and saved for spare parts.
* Quantified value of any co-benefits claimed.

See Table 2 in the [Data Sources](https://docs.rainbowstandard.io/methodologies/ghg-reduction-quantification#data-sources) section for more details.

The Project Developer is the party responsible for adhering to the Monitoring Plan.

Monitoring Plans shall include the following information for each monitored parameter:

* monitoring frequency
* emission sources and sinks
* data source
* measurement methods/procedures, and their accuracy and calibration
* quality assessment or quality control procedures
* responsible party for collecting and archiving data

[^1]: International Labour Organization, 2019. Tech’s persistent gender gap \[WWW Document]. ILOSTAT. URL <https://ilostat.ilo.org/techs-persistent-gender-gap/> (accessed 4.11.24). ↑

[^2]: Eurostat 2024. Activity rates by level of disability (activity limitation) and educational attainment level. DOI: <https://doi.org/10.2908/LFSA\\_ARGAEDDL>. Accessed April 2024. ↑

[^3]: Işıldar, A., Rene, E.R., van Hullebusch, E.D., Lens, P.N.L., 2018. Electronic waste as a secondary source of critical metals: Management and recovery technologies. Resources, Conservation and Recycling, Sustainable Resource Management and the Circular Economy 135, 296–312. <https://doi.org/10.1016/j.resconrec.2017.07.031> ↑
