Product-Service Systems for Sustainable Businesses

This is an excerpt from my latest paper: Camilleri, M. A. (2018). The circular economy’s closed loop and product service systems for sustainable development: A review and appraisal. Sustainable Development. https://onlinelibrary.wiley.com/doi/pdf/10.1002/sd.1909

Many academic commentators claim that product-service systems (PSS) are moving society towards a resource‐efficient, circular economy (CE) (Tukker, 2015; Piscicelli et al., 2015; Yuan et al., 2006). PSSs shift the businesses’ focus from designing and selling only physical products, to selling a marketable set of products, services, supporting networks, and infrastructures, by including repair and maintenance, updates/upgrades, help desk, training and consultancy, and disposal‐services such as recycling and take‐back (Gaiardelli et al., 2014). Therefore, PSS consists of tangible products as well as intangible services that are combined so that they are jointly capable of satisfying the consumers’ demands (Hockerts & Weaver, 2002).

PSS providers are in a position to design need‐fulfilment systems with lower impacts to the environment, by either replacing an alternative product‐service mix or by influencing the customers’ activities to become more eco‐efficient. Tukker (2015) suggested that firms have an incentive to prolong the service life of their products and to make them as cost‐ and material‐efficient as possible. Moreover, PSSs would typically extend beyond purchase, affecting the use and disposal of resources. Hence, these systems could lead to the minimisation of material flows in the economy whilst maximising the businesses’ service output and their users’ satisfaction (Tukker & Tischner, 2006). There are three types of PSSs that prescribe different product service components and ownership packages:

(a) a product‐PSS that adds extra services but the ownership of the product(s) is transferred to the consumer(s);

(b) the results‐PSSs that would involve both parties agreeing to achieve target results, as they recast product(s) as utilised materials;

(c) in use‐PSSs, the provider(s) lease, share or pool their product(s); however, they retain the ownership of the product(s).

For instance, Koninklijke Philips N.V. (Royal Philips, commonly known as Philips), a diversified technology company utilises the use‐PSS approach, as it provides a lighting service to customers and is responsible for its technology risk. The Dutch company installs its lighting equipment (including street lighting), maintains it, and ensures that it runs for a very long time. Eventually, it reclaims back its equipment when it is the right time to recycle materials. This property rights are distributed amongst Philips and its clients, over the life time of the products. Philips has recognised an untapped opportunity to retain ownership of its products, as it has committed itself to dispose of the infrastructure and its constituent parts at their end of life. At the same time, customers (including the government) do not have to pay high upfront costs for their lighting equipment. Interestingly, Philips is also adopting a similar PSS within health care environments where it has established leasing relationships with clients for its medical infrastructure. Again, the company will eventually reclaim back its equipment and upgrades it when necessary. When the medical equipment is refurbished with the state‐of‐the art technology, the multinational firm will reuse it for another customer; it provides a warrantee cover and guarantees its products as new.

The idea of shared ownership is conspicuous with the results‐ and use‐PSSs. These systems have led to upstream effects (through sustainable designs) and increased throughput. As a result, they are sustainable in the long run, as there are less externalities, in terms of waste and emissions.

References

Camilleri, M. A.(2017). Corporate sustainability, social responsibility and 
environmental management: An introduction to theory and practice with 
case studies. Cham: Springer Nature.

Gaiardelli, P.,Resta, B., Martinez, V., Pinto, R., & Albores, P. (2014). A
classification model for product‐service offerings. Journal of cleaner 
production, 66,507–519.

Hockerts, K.,& Weaver, N. (2002). Are service systems worth our interest.
Assessing the eco‐efficiency of sustainable service systems. Working document, INSEADFontainebleau, France.

Piscicelli, L.,Cooper, T., & Fisher, T. (2015). The role of values in collaborative
consumption:Insights from a product service system for lending
and borrowing in the UK. Journal of Cleaner Production, 97, 21–29. https://doi.org/10.1016/j.jclepro.2014.07.032

Tukker, A. (2015). Product services for a resource‐efficient andcircular
economy—A review. Journal of Cleaner Production, 97, 76–91. https://doi.org/10.1016/j.jclepro.2013.11.049

Tukker, A., &Tischner, U. (2006). Product‐services as a research field: Past, present and future. Reflections from a decade of research. Journal of 
Cleaner Production, 14(17),1552–1556. https://doi.org/10.1016/j.jclepro.2006.01.02

Yuan, Z., Bi, J.,& Moriguichi, Y. (2006). The circular economy: A new development strategy in China.Journal of Industrial Ecology, 10(1), 4–8.