PUBLIC PROCUREMENT NEWS

  

Deep dive

27 April 2019

Changing the (product-service) system

“The future is not in low cost production. In making things with finite components. The future is in providing services that then materialise in products, instead of the other way round. Products that are used and reused time and time again.” These are the words of First Vice president of the European Commission Frans Timmerman, at one of the “defining moments” in the development of a circular economy in the EU. While the EU has made progress with Green Public Procurement (GPP), the adoption of circular economy business models has been slow, despite proven performance. But product-service systems (PSS) or product as a service (PaaS) could be key to the transition to a service-based economy and public procurement can play a key role as enabler of this transition.


The ‘performance economy’,

Was developed by Walter Stahel in the 1970s, who insisted on the importance of selling services rather than products. Via his method, “manufacturers can retain greater control over the items they produce and the embodied energy and materials, thus enabling better maintenance, reconditioning and recovery. Customers benefit too, as they only pay for the service they require and use, and often receive a better service as the manufacturer has a greater interest in providing a product that lasts.”


New business models

To ensure circularity will require cooperation of product life-extension, recovery and recycling and product-as-a-service business models. Although not by definition sustainable, by leasing or paying for a service instead of paying for the product outright, customers can pay per use, while ownership and life cycle costs of a product remain with the producer, setting incentives for resource efficiency along the complete life cycle. The energy embedded in the products at production is retained at the highest possible level.


WEEE and PaaS

Incorporating PaaS, e.g. for lighting, into the public procurement framework holds great potential for minimising waste, especially E-waste. Where eco-design and circular economy directive requirements can be costly in terms of collection and regulation for producers, Danish research suggests that Product-as-a-Service and Product Life-Extension are particularly relevant concepts to improve value chain performance, resource efficiency and waste electrical and electronic equipment (WEEE) directive compliance while at the same time offering an attractive commercial potential. They can, at least in part, support ecodesign, WEEE prevention, re-use and help official collection systems to better compete with the unregistered WEEE collection channels.


IoT to maximise efficiency

The company Bundles employs Internet of things (IoT) to turn use of appliances into a service, reusing materials to make new appliances to avoid creating waste. Starting with washing machines, they supply a plug measuring energy use which gives feedback on how to use it more efficiently. “What is actually innovative and really new to this economic model is the way different people, parties and institutes collaborate to deliver a whole different experience to the consumer which much less impact on the future of our planet.” says Marcel Peters, CEO.


Lighting as a service

A collaboration between Philips and Turntoo is a showcase for the pioneering ‘pay-per-lux’ model. Philips created a purpose built minimalist LED light plan that maximised use of a building’s natural sunlight while minimising costs. With a combined sensor and controller system dimming or brightening lighting in response to motion or daylight, the bespoke, intelligent lighting system can supposedly cut energy bills by 30-40%. Furthermore, by moving to a model in which the light provider maintains ownership of the materials, the client benefits from maintenance and service, as well as the option to adapt or upgrade the setup, with the manufacturer able to recover the materials when necessary.


Designing for disassembly

Brummen town hall in The Netherlands was looking for a temporary construction with a consistent use of reusable and renewable high-quality construction materials. “The first building in the world conceptualised as a raw materials depot”, their contractual approach guarantees circularity at the end of the intended use period. Minimal concrete and prefabricated wooden components mean over 90% of the materials can be easily dismantled and reused. Price and sustainability were placed on par during the procurement process.


Considerations and conclusions

Along with a clear vision/ objectives, inserting life cycle costing, extensive dialogue during tendering process and training on performance based (functional) specifications, a  UNEP report, co-authored by ICLEI Local Governements for Sustainability, suggests payment in terms to ensure service performance. PaaS is new, and may need more research, but holds much potential to decouple consumption from economic growth, by meeting needs with lower material and energy requirements.