Circularity: A win-win-win situation for all.
by Alex Lemille
For us as customers, we should be experiencing a drop in retail prices of materials and equipment should we decide to use - and not consume - goods. Obviously we will have the choice in acquiring a domestic apparel, a TV or a mobile phone. But accessing these goods will be offered in such a way that it will only be advantageous and hard to refuse. By accessing apparels sold-as-a-service customers will be guaranteed to receive a performing service. Why? Because it will be in the interest of the manufacturer to maintain the appliance the longest possible way as they will remain the owner of the machine you use at home. Contrary to today’s forced obsolescence goods of tomorrow will be sold-as-a-service according to the type of customer you are – VIP, Corporate, Fashionistas, Easy-going, Low income, Careful, etc. – and will last for several years. Two principles here from the Circular Economy: the longer the product life, the more profitable for the manufacturer and, accessing goods versus buying goods give customers the ability to access diverse goods as they so wish. Should you not be impressed by the latest mobile phone from brand X it will be in the interest of brand X to put forward a new offer you cannot refuse, on the spot. Failure to do so might see you go for another brand (say ‘brand Y’) and not come back for years as service performance will be the highest with brand Y. Purchasing a service per use will also drastically change our lives for the better. In the medium term it will mean a shift from buying at credit to paying for what you just used of the product i.e. the time spent on a particular device, the number of time you switched on your TV or the program you watched – and certainly not paying that TV upfront, or worse on credit! That will have a definite positive effect on our purses while changing our consumption patterns. Paying only for the time of use of the product will diminish our energy consumption as well as water use. If I only pay every time I use the TV or the dishwasher there will be a de-facto effect on my energy and water bill too... The service economy will change your behaviour without asking you!
A supplier of equipment evolving within a Circular Economy means a drastic change of business models, of production set-up, of functions and methods to finance the new model. But advantages – here too – are numerous: - No more end-of-life of a product means that the very same product and its components will generate cost savings (ownership of the product remains with the supplier); - A product sold-as-a-service generates several cash-flows through a much longer lifespan will now be under control. A brand-new high-end dishwasher could be contracted by a VIP customer for - say - two years, while the retailer or producer of the dishwasher comes regularly to maintain it in an immaculate state. A VIP pays R25 for every wash he/she makes. At the end of the two years that item goes to the next customer in line, less interested to access that high-end dishwasher in the first place, only to pay R20 a wash. The apparel is provided with a new product warranty as all critical parts have been maintained or changed. Few years down the line the very same fridge moves to the next customer, for R14 a wash, and so on, and as long as the product can be maintain at a perfect state. Why? Here again it is in the interest of the supplier to satisfy its customers, even in the lower income range. By the time the washer reaches the less fortunate - or people who do not wish to spend much on the service - it will be long paid for! The lower price per wash will still be an attractive model, and therefore its service longevity will be maximized. The Ellen MacArthur Foundation found out that a durable washing machine sold-as-a-service could generate up to 38% in savings for customers and 35% lesser costs for producers.
Finally governments should play their enablement role as a Circular Economy could mean numerous job creation, a healthier national economy with citizens accessing only what they use or need, less waste generation and a system that regenerates intentionally the environment we depend on. Needless to say that such an economy also reduces our CO2 emissions over the long-term. But too, by managing performance, manufacturers will be chosen according to the level of CO2 emitted by their activities monitored live. Take the example of Philips in Washington D.C.. The city handed over the control of its lighting system to Philips for a period of 10 years. Washington D.C. did not pay a cent to Philips and asked the latter to accomplish the service performance as agreed: change the 13,000 bulbs to energy-saving ones, manage lighting wisely and dynamically according to the needs. The objectives of such an agreement speak by themselves: by reducing the city energy bill Philips will be paid on savings achieved by the city (energy, waste, money, etc.), while reducing its carbon emissions. One estimates that Philips is generating hefty commissions!
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