A circular economy is a fundamentally different way of approaching products and resources. By becoming more efficient and focusing on gaining the most value possible from goods, resources, and “waste,” we can assure a more sustainable future and reduce the exploitation of our limited resources.
This blog post is the first of several to explain the various business models that provide ways of expanding the circular economy when we encourage businesses to reduce, reuse and recycle waste in new and innovative ways. This blog will focus on the first model: Product as a Service.
Many of the structures that have evolved for creating products have become outdated, as we recognize that resources are finite, and we need to identify ways of reusing and recycling products and their components. Our overall business models haven’t changed significantly since manufacturing processes originally developed and expanded. It’s time to make those changes now.
We’ve become more efficient, products have improved, goods have become cheaper, but the fundamental practices have remained the same. Even in 2020, most companies operate within a take, make, waste production framework: we collect raw materials, transform them into products, then use the products until they are discarded as waste.
The original manufacturer isn’t concerned with what happens to their products after they are sold, and any residual value remaining once they are discarded simply goes to waste. Business owners and employees have become used to putting the economics of production first. But is making, using, discarding the most cost effective way of producing goods?
It’s time to ask whether there are other ways to organize production, waste disposal, and entire businesses, so that we can avoid unnecessary waste and focus on reusing any resources until they are truly spent to obtain the full value of all of our resources.
Let's take a look at how the Product as a Service business model can help us think differently about our waste.
We have traditionally focused on selling the maximum number of products. The Product as a Service business model provides the same products to the maximum amount of people, over and over again.
This model is an alternative to the established “buy and own” approach and includes leasing, renting, or pay-for-use agreements. It allows customers to purchase a service or desired result, rather than buying the product itself.
The Earth’s resources are finite. As those resources become closer and closer to running out, they become more and more expensive to obtain. Transitioning to a Product as a Service model is one way that businesses can shield themselves from rising costs and difficulties of producing an endless stream of new products.
By reducing quantity and increasing quality, products last longer and are used by more people, allowing a company’s original investment in materials to go much further. Additionally, Product as Service delivers a consistent revenue stream because companies can keep a single product in circulation and “sell” their goods over and over again.
The Product as a Service model exists all around us already. Think about any time you pay to use a product instead of buying the product itself. Some examples include:
In each of these examples, a business is selling services or outcomes instead of an actual product. They’re not selling a car; they’re selling transportation services. They’re not selling you a power washer; they’re selling you a clean deck. They’re not selling you a copier; they’re selling you the copies themselves. The company that would have normally sold you a product is now selling you access to it, while maintaining ultimate responsibility for it.
Implementing a Product as a Service business model creates some key advantages for customers, businesses, and society as a whole.
It’s imperative that we all work together to determine the best ways of developing solutions for our current more wasteful approaches to using products. We need to create ways to reduce or eliminate our dependence on virgin resources that become our standard ways of operating going forward, to reduce concerns about resources disappearing or becoming prohibitively expensive.
For any business we all need to look at new approaches and take steps to implement a circular business model. If your business manufactures goods that could be rented or paid for per use, then developing a Product as a Service model might be the answer.