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Function replaces product in a circular economy

Many products are manufactured with a defined working life in the interests of forcing us to buy a new product more often. However, if we are to resolve our environmental and climate problems, our lifestyles need to change. If companies can earn money from renting and repairing products rather than manufacturing them, in future we will be able to live more sustainably.  

Are you one of those who occasionally find themselves saying, “things where better before” as you see technical products all too often breaking down? Your mobile phone slows down, your temperature in your refrigerator fluctuates and your vacuum cleaner gives up the ghost after only a couple of years. This raises the question of whether the ambition of manufacturers has changed to producing products that break down. 

“I don’t believe that companies are necessarily driven by other forces than they once were, or that they really want to see their products break down. That said, we have become better at precision design; we are able to calculate working life and design a product to last a given number of years,” explains RISE research manager Mats Williander, who works in the field of circular economy. As an example, Mats points out that, despite everything, there is an awareness of the issue of working life. 

“A car is designed to run for 250,000 kilometres, while a lorry should be good for 1,600,000 kilometres – even though there is no reason why a car shouldn’t be able to run for that long.” 

We are overconsuming

In many sectors – the electronics, automotive, clothing and furnishing industries to name but a few – a company’s profitability is based on a linear economic model in which we consume as much as possible. 

“Of course, trends are also a factor in something like kitchens. Few people replace kitchen equipment because it has broken down; they refurbish because they want to improve it aesthetically. We consume more than is justified,” says Mats Williander. 

For environmental and climate reasons, we need to refocus on what is known as a circular economy, which among other things means that we return and recycle products to a greater extent. A circular economy implies a need for companies to change their business models and to be driven by something other than manufacturing new products. This may be a matter of transitioning to renting goods and providing services to customers, with companies taking responsibility for delivering a function, rather than simply a product. 

“One additional motivation for companies to change their business model is that a circular model will allow them to create a relationship with the customer. In a linear economy, customer contact is generally curtailed once the product is sold. It is by no means certain that a customer will return to the same shop or company when they want to buy accessories or a new product. Renting makes it easier to create a relationship between the company and customer, making it less attractive to make incremental design and production changes in order to entice people to buy new. Instead, the company will develop products that can be upgraded, both technically and aesthetically,” explains Mats Williander.

The public sector must lead the way

All kinds of products can be incorporated in the circular economy; everything from microwave ovens and vacuum cleaners, to clothing and mobile phones. According to Mats Williander, the private sector has a role to play in driving companies to transition from a linear to circular economy. 

“In Sweden, the public sector’s annual consumption is equivalent to 27% of GDP. If municipalities decide to adopt circular procurement, then this transition will occur much more quickly. I don’t believe that legislation is the answer, it will take too long. In my opinion, the change will come quickly once market forces kick in.”

The circular economy brought to you by digitalisation

Another vital parameter for the circular economy is digitalisation. If manufacturers are to retain ownership, they will also want to maintain control of their products so that they can provide service and maintenance. Digitalisation makes it possible to equip products with sensors that provide data on their current state and when a service is required.  

“Thanks to digitalisation, it will be much easier to sell a service instead of a product than it was say 20 years ago.” 

The circular economy combined with digitalisation will also make it possible to create entirely new services for the market. 

“One example is Volvo facilitating the delivery of groceries or packages direct to your car boot while you’re at work. The technology allows Volvo to distribute digital keys to delivery services without the need to give away your physical key. This creates new business value and opportunities. The circular economy and digitalisation were quite simply made for one another,” concludes Mats Williander.

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Mats Williander

Research Manager

mats.williander@ri.se

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