Thursday, 19 July 2012

From Products to Performance

At a recent Aldersgate Group panel session on the Circular Economy, hosted at BASE London,
Douwe Jan Joustra, Managing Partner of One Planet Architecture Institute, argued that “we do not have an energy problem”. The world has plenty of energy and nature has functioned for three billion years on solar-based energy systems, so “we have an intelligence problem that we are not able to get our energy systems up and running [and] solar based.”
Mr Joustra argued that instead of energy, the planet should focus on finite resources, given that “we will never get any new materials on this earth”, so shifting the economic system from a linear model to a circular one is paramount. The circular economy offers the opportunity for “a real systems innovation”. For example by changing the focus from product ownership to paying for performance: “do you want all the chemistry that you have in a television set or do you want to see the news?” In a circular economy, customers will pay for the service of a product, rather than the product itself.

This type of business model is not so controversial - it has been commonplace in some markets for decades. But the trick lies in converting more businesses to a performance-based model - and perhaps reviving it in some markets where it has fallen from favour. Just a few decades ago, it was almost unheard-of for a household to own a TV - all but the very wealthy rented them. Yet now, I can't think of a single businesses that routinely rents brown goods and most consumers don't even consider it. Outright purchase has become the norm, and if the purchase price is more than they can afford all at once, consumers sign a finance agreement or put it on their credit card. In fact, easy access to credit has done more to fuel consumerism than any other single innovation. Even the current economic conditions haven't changed our relationship with credit all that much.

There are some industries where the performance-based model is gaining ground - managed print or managed document services is one. Increasingly, companies are not buying printers and copiers but instead entering into a contract for the consumption of print and copies with a supplier that retains title the equipment which it maintains and manages for an agreed contract period. There is a good business case for this; it removes risk, offers tax advantages and provides management information on consumption which in turn can help to reduce print volumes, cutting both cost and environmental impact. Yet the attempt of Interface to introduce a similar service for office carpet - with equally compelling financial and environmental benefits - finally had to be abandoned because customers were not prepared to do anything other than purchase carpet outright.

As the saying goes, we can't solve our problems using the same level of thinking that created them. The concept of the Circular Economy provides opportunities to rethink business models, revisit ideas that were successful in the past and transfer business models from one market to another. And it starts with reframing the question "what do I want to buy?" as "what do I want to achieve?"

Wednesday, 11 July 2012

EPEAT exit bites back at Apple

Only yesterday, it was reported that Apple had withdrawn from the EPEAT eco-label, apparently because it didn't want to comply with the design for disassembly criteria in the EPEAT standard. It's gratifying to see how quickly that decision has begun to influence procurement decisions. Today, the city of San Francisco has dropped Apple as a supplier.

Environmental standards play a valuable role by excluding the worst performers and rewarding best practice. If public bodies pledge to buy only products that meet a credible standard, it encourages suppliers to manufacture to that standard in order to secure their share of a massive revenue opportunity. That in turn makes more environmentally preferable products readily available to private consumers and businesses. Their combined purchasing power makes public procurers a powerful agent for change - they have more influence over suppliers than any other single vertical market.

Apple makes aesthetically beautiful products that offer an excellent user experience, but its business model relies on exploitative offshore manufacturing, massive margins and forced upgrades. Its products are designed to minimise manufacturing costs to the bone and discourage repair. It may think that its massive brand equity and fierce customer loyalty puts it above the influence of policymakers and standards bodies, but enough organisations follow San Francisco's lead it may be forced to reassess its strategy. This could actually mark a tipping point in the ability of eco-labels to set product norms.

Monday, 9 July 2012

Fairtrade - like charity - should begin at home

I have been pondering the implications of the spat between the British dairy farmers and the supermarkets. For those who missed it, on BBC Radio 4's Today programme last week a spokesman for dairy farmers claimed that three of the large supermarkets have driven down they price they pay for milk to the point where it's no longer possible for the farmers to make a profit. Note that not all supermarkets are implicated: Tesco, Sainsburys and Waitrose are apparently playing fair. But there's more than a little irony - and perhaps even a smattering of double standards - in the list of those named and shamed.

Morrisons was not a big surprise - it has a price-led brand strategy and makes no particular claims of leadership on either the environment or ethics. Asda is equally price-conscious, but given that its name is a contraction of Associated Diaries and it was originally farmer-owned, might be expected to defend farmers' interests. However, it's now wholly owned by Wal-Mart and the name is the only remnant of its heritage. Wal-Mart does make strong claims for its supply chain ethics. The big surprise for me was Co-op - with its strong and long-standing emphasis on fairtrade, I would have expected a fair deal for its suppliers at home as well as overseas.

Co-op has responded to the criticism with a commitment to increase the price paid to dairy famers from 1st August - a commendable move that is consistent with its brand values. It has also emphasised the other ways in which it supports farmers, like contributing to veterinary costs and funding efficiency and carbon reduction programmes. Morrisons has defended its milk pricing model and plans to stand by it, and Asda has remained silent.

Judging by the comments under The Grocer's story on this issue, many consumers intend to vote with their feet, switching their entire supermarket shop to stores whose policies they view as fairer. As a vital component of most people's diets, milk seems to have become the new yardstick used to judge price competitiveness in these economically-constrained times. But we shouldn't forget that livelihoods depend on the fair treatment of suppliers - perhaps the gross profit made by supermarkets is a more equitable metric for demonstrating the value for money they offer?

Tuesday, 3 July 2012

The paperless office?

I’m no apologist for the pro-paper lobby – as with most things, thoughtful use and moderation would be my recommendation – but I had to chuckle at these brief videos published by PaperBecause. While their intention is to ridicule the concept of a fully paperless office, they do provoke thought and discussion about how we can manage without paper and how reluctant staff might be to reduce their consumption. Too many employee engagement tools fail because they lack humour – that’s certainly not an accusation that could be applied here!

Have a look and make up your own mind – do you think you could use them in your organisation, or do they miss the mark?

New eCat from the EC

A new system has been introduced by The European Commission to replace its Green Store catalogue. The new Ecolabel Catalogue - "Ecat" for short - allows any consumer or business to search for sustainable products. The UK now has the third highest number of Ecolabel products licensed in the EU, so it should be relatively easy to find a domestic supplier. You can find Ecat here: