5 Roads to Circular Economy Part II: Product as a Service
In a circular economy, the intention is to produce no waste or pollution. Instead, products, parts and materials are used, cared for, repaired, reused and recycled as much as possible. This requires new and innovative approaches to business, and assessment methods such as LCA to measure the effect. In our circular economy miniseries, we’ll address five ways to apply the circular economy and lca in your business. Today: product as a service.
Circular economy is a concept with many aspects. Of course, it is wise to try to reuse materials as much as possible. But one could also wonder how to avoid using the materials in the first place. In other words, can companies do good business and decrease their impacts (as measured with LCA, for instance), while de-materialising their product portfolio? One idea is to shift from offering physical products to offering services, or a combination of the two.
Farmers Do Not Want To Buy Pesticides...
Sometimes, it’s good to take a step back and ask the obvious questions. Do companies really need a product? Or do they need a solution? Does a farmer really need pesticides, for instance? Does a company really need a photocopier? ‘Yes, of course!’ you could argue. But if you think one step further, you will see that the answer is that actually, no.
… They Want To Buy A Pest-Free Crop
Just as farmers want a pest-free crop, what the company really needs is copies. The pesticides and the copiers are just the means. The photocopier example actually has a long history: photocopier manufacturers Xerox and Océ realised a long time ago that the photocopies were the actual product, and they started selling copies instead of copier machines.. They still put a copier in the company, but the company only paid for the copies, not for the machines. This meant that companies no longer had to care whether they got a new or a refurbished machine. Indeed, Xerox and Océ started to refurbish used machines on a large scale, leading to significant cost savings and big benefits for the environment.
This old and well-known example has since been copied by many businesses. In the nineties, we already made a database of such examples in a Product Service Systems project for the Dutch Government (download link at the bottom of this page). This database was later developed further in an EU-funded research project called Methodology For Product Service System Assessment or MEPSS (www.mepss.nl). This included the development of a comprehensive toolset.
Some Examples Of Product As A Service
The pesticide example is also real. Koppert, a pesticide company, switched to selling a pest-free crop. They take care of spraying and the proper application of the pesticides. Because of this, they were able to switch to organic pest controls, which are more cost effective if you have the skills to apply them. So this is a double win: Koppert hired staff specialising in organic pest control and developed a really good business case. They did especially well with greenhouses, of which we have so many in the Netherlands.
There are many more examples of companies selling products as a service:
- Philips is changing from selling lamps to selling light.
- Michelin does not only sell truck tyres, they also offer truck-tyre management.
- Car sharing is becoming very popular.
While it is our intuitive feeling that these examples can indeed be an effective strategy to reduce the impacts of a product, we should of course wonder how we can assess this quantitatively. In the Dutch and European projects mentioned earlier, we developed a service-enabled LCA approach to do just that. One of the key difficulties is determining how to compare a ‘pure’ product offering to offerings that combine product and service.
LCA And Circular Economy: Assessing The Impacts Of A Products As A Service
While LCA is an established method to assess the impacts of physical products and their disposal or reuse, it is not trivial to do an LCA of a product being offered as a service.
We can distinguish a few cases:
- The product as a service influences which products provide the functionality. A clear example is the Koppert case: providing the product as a service stimulates the use of organic pesticides and reduces the use of synthetic pesticides.
- The product does not change, but providing the product as a service stimulates a more efficient use of the product. For instance, when customers buy photocopies rather than copier machines, they don’t really care if they get a refurbished machine. The photocopier machine manufacturers now disassemble and reassemble machines to refurbish them. The providers and customers are only interested in performance and reliability, not in the question whether the product is new. The same goes for the truck tyre example.
- Purchasing the product as a service does not change the product, but it changes the behaviour of the user. In the case of car sharing, people who do not own a car will probably drive more, while people who have a car but share it will probably drive less.
In the first two cases, LCA can assess the benefits. In the third case, some more thinking is needed. If we compare the impact per kilometre of driving, LCA will tell you there is no difference. Like any car, shared cars will most likely not be used beyond about 150.000 km, and their fuel consumption and emissions are the same. What you need to do here is to look at the broader scope. The key question is: will people indeed end up driving less? In the Product Service System main report that we wrote for the Dutch government in the nineties, we elaborated on an approach how to assess this category of products sold as a service (download link at the bottom of this page).
The Exact Benefits Of Product As A Service, Measured By LCA
Introducing a product-as-a-service approach is a very clever circular economy strategy. This approach focuses on switching from physical products to immaterial products, and therefore is the best way to avoid using and recycling materials.
Not all product-as-a-service systems will have an environmental benefit, though. Ordering a pizza from a delivery service will have more impact than making your own. Selling your car and switching to taxis is not a good idea either, as taxis spend a lot of their time driving around empty or idling. Delivery services can cause much extra transport; they require offices and desks, etc.
The environmental impacts of these activities can easily outweigh the benefit of reducing the use of materials in the product they provide as a service. Keep the concept of the circular economy in mind - selling a product as a service is a way to reduce material use, not a goal in itself.
In summary: providing a product as a service can offer many benefits to customers and to the environment. As with all sustainability approaches, whether related to the circular economy or not, caveats apply: it is a great concept, but be aware of the trade-offs. The best way to map the impacts is to try to make the trade-offs tangible with methods such as LCA.
Learn More About Circular Economy and LCA - Product As A Service
If you want to learn more about the topic, please contact Mark Goedkoop. Or download the report and annex of the Product System Services project mentioned in this article.