It's wasteful (contributes to e-waste). It also drives up costs or drives down quality at the lower end.
Phones are digital devices, so they produce digital audio. Audio is analog, so you have to have a DAC somewhere in the chain.
Before the removal of 3.5mm ports, there was a DAC in the phone. Earbuds could be relatively simple devices. No on-board processing, just wires and speakers. Even cheap earbuds ($20) could have decent sound quality.If it was a good phone, it was probably a decent DAC. If your phone had a shit DAC you couldn't correct for that though.
Now the phone sends digital audio over USB C. The earbuds, or your dongle, have to contain a DAC. In theory, if you buy an expensive standalone DAC and use good 3.5mm earbuds, or buy good USB C earbuds, this could be an improvement from the previous situation. On the cheap end of the market, it's now harder/more expensive to make earbuds at the same quality as before.
Given how disposably people treat earbuds (understandably, since they're easy to lose and easy to break), this all isn't great.