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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

(c) The Sustainable Business Edit

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.



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The Circular Economy and the Sustainability Agenda

This is excerpt from my latest paper that was accepted by ‘Sustainable Development’ (Wiley).

How to Cite: Camilleri, M.A. (2018). The Circular Economy’s Closed Loop and Product Service Systems for Sustainable Development: A Review and Appraisal. Sustainable Development. Forthcoming.

The Brundtland Report (WCED, 1987) defined sustainable development as; “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (p. 43). Its underlying assumption is that the world’s physical resources are not finite, therefore, they have to be managed responsibly to sustain future generations. Subsequently, the United Nations (UN) Conference on Environment and Development has put forward Agenda 21 that dedicated a chapter that was focused on unsustainable patterns of production and consumption. This document recommended that the UN’s member states ought to intensify their efforts to reduce the use of scarce resources during production processes, whilst minimising the environmental impacts from generation of waste and pollution (Agenda 21, 1992).

In 2002, the UN Report of the World Summit on Sustainable Development also made reference to unsustainable patterns of production and consumption. The UN’s member states were urged to manage their natural resources sustainably and with lower negative environmental impacts; by promoting the conservation and sustainable use of biodiversity and ecosystems, whilst reducing waste (WSSD, 2002, p 13). Moreover, in another resolution, entitled; “The future we want”, the General Assembly at the UN Conference on Sustainable Development has reaffirmed its commitment to implementing green economy policies in the context of sustainable development. The Heads of State and Government or their representatives have agreed to continue promoting the integrated and sustainable management of eco-systems; whilst facilitating their conservation, regeneration and restoration of resources (UNCSD, 2012). Furthermore, during the UN’s General Assembly Resolution of 25 September 2015, entitled; “Transforming our world: the 2030 Agenda for Sustainable Development” the world leaders have agreed to adopt the Sustainable Development Goals that replaced the previous millennium development goals that were established in the year 2000. Specifically, the Sustainable Development Goal (SDG) 12 of the 2030 agenda, namely; “Sustainable Consumption and Production” explained that there is an opportunity for business and industry to reap economic gains through resource and energy efficiencies. It also raised awareness on the use of sustainable infrastructures and urged the UN member states to address air, water and soil pollution to minimise their environmental impact (UNDP, 2015). Moreover, the Paris Climate Agreement (COP 21) and Resolutions 1/5 and 2/7 on chemicals and waste, and 2/8 on sustainable production and consumption, as adopted by the 1st and 2nd sessions of the United Nations Environment Assembly (that was held in Nairobi, Kenya on the 27th June 2014 and the 27th May 2016), are also considered as important policy instruments for many stakeholders, as they have paved the way for the transition toward the circular economy strategy.

These intergovernmental policy recommendations on sustainable consumption and production have led to increased regulatory pressures on business and industry toward controlled operations management and environmentally-responsible practices. In 2014, the European Union (EU) Commission anticipated that, “new business models, eco-designs and industrial symbiosis can move the community toward zero-waste; reduce greenhouse emissions and environmental impacts” (EU, 2018). Eventually, in March 2017, the EU Commission and the European Economic and Social Committee organised a Circular Economy Stakeholder Conference, where it reported on the delivery and progress of some of its Action Plan. It also established a Finance Support Platform with the European Investment Bank (EIB) and issued important guidance documents to Member States on the conversion of waste to energy.

Other EU Communications on this subject, comprised: “Innovation for a sustainable future – The Eco-innovation Action Plan“; “Building the Single Market for Green Products: Facilitating better information on the environmental performance of products and organisations“; “Green Action Plan for SMEs: enabling SMEs to turn environmental challenges into business opportunities“; “Closing the loop –An EU action plan for the Circular Economy” and the report on its implementation, and “Investing in a smart, innovative and sustainable Industry – A renewed EU Industrial Policy Strategy“, among others (EU, 2017). Recently, the EU commission has adopted a set of measures, including; a “Strategy for Plastics in the Circular Economy” that specified that all plastics packaging will have to be recyclable by 2030; It released a communication on the interface between chemical, product and waste legislation, as it explains how they relate to each other. Moreover, the commission launched a Monitoring Framework that may be used to assess the progress of its member states towards the implementation of the circular economy action plan. This framework is composed of a set of ten key indicators, comprising; 1) EU self-sufficiency for raw materials; 2) Green public procurement; 3a-c) Waste generation; 4) Food waste, 5a-b) Overall recycling rates, 6a-f) Recycling rates for specific waste streams, 7a-b) Contribution of recycled materials to raw materials demand, 8) Trade in recyclable raw materials, 9a-c) Private investments, jobs and gross value added, and 10) Patents. Furthermore, (EU, 2018) published a report on the supply and demand of critical raw materials that are used in mining, landfills, electrical and electronic equipment, batteries, automotive sector, renewable energy, defence industry as well as for chemicals and fertilizers.


References

Agenda 21. 1992. United Nations Conference on Environment & Development. Rio de Janerio, Brazil, 3 to 14 June 1992. United Nations Sustainable Development. https://sustainabledevelopment.un.org/content/documents/Agenda21.pdf [6 July 2018].

EU 2017. Council conclusions on eco-innovation: enabling the transition towards a circulareconomy. European Council of the European Union, Brussels, Belgium. http://www.consilium.europa.eu/en/press/press-releases/2017/12/18/council-conclusions-on-eco-innovation-transition-towards-a-circular-economy/#[5th July 2018].

EU 2018. Implementation of the Circular Economy Action Plan. European Commission.  http://ec.europa.eu/environment/circular-economy/index_en.htm[5th July 2018].

UNCSD 2012. The Future We Want – Outcome document. Resolution adopted by the General Assembly on 27 July 2012. United Nations  General Assembly. http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/66/288&Lang=E [25 June 2018].

UNDP 2015. Transforming our World. Resolution adopted by the General Assembly on 25 September 2015. http://www.un.org/en/development/desa/population/migration/generalassembly/docs/globalcompact/A_RES_70_1_E.pdf [25 June 2018].

WSSD 2002. United Nations Report of the World Summit on Sustainable Development. Johannesburg, South Africa, 26 August- 4 September 2002.  http://www.un-documents.net/aconf199-20.pdf [29 June 2018].

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