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At Firmhouse we believe that Product-as-a-Service is one of the most important business models that can help in the transition to a circular economy. However, circular economy is dependent on couple of aspects. The Ellen MacArthur Foundation states that a circular economy is; ‘based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems’.
This means that material loops are closed, and that companies intend to keep the product in circulation as long as possible while regenerating the environment. In this blog we will explain why design for reassembly (which is more than disassembly) together with modularity, are key for circularity.
How circular is the world currently?
There has been a lot of talk about the need for a transition towards a circular economy. Both the European Union and countries like the Netherlands have set very ambitious goals. In the Netherlands we want to be 50% circular by 2030, and fully circular by 2050. However, the current state of the circular economy is that only 8,6% of the world is actually circular (year 2019). This means that we actually have a long way to go.
Several business models have been proposed that actually enable the transition towards a circular economy; from product-life extension to recovery and recycling. However one of the most prominent business models that takes a more holistic system-thinking approach to the circular economy is the Product-as-a-Service (PaaS) model or Product-Service System (PSS) [ia].
The circularity potential in PaaS, and especially performance-based PSS models, is one of the highest among all circular business models. It is a bit hard to quantify this, but PaaS or PSS have the potential to make for a 100% sustainable and circular model. Having said that, it is currently very hard to pinpoint any company or business model that has actually achieved 100% circularity.
In essence, we need to close material loops in a way that takes a system thinking approach into account, which often requires a change in mentality among the whole supply-chain. PaaS or PSS can enable this, but one of the biggest prerequisites is the modularity of the product, and the corresponding design for reassembly.
We have a long way to go
We have shown to still have a massive gap in our circular ambitions, even more concerning is that the circularity decreased with 0.5%-point since 2018 (Circularity Report, 2018). In 12 months, since the launch of the first Circularity Gap Report, the upward trend in resource extraction and greenhouse gas emissions has continued and key indicators confirm that the problems of a linear economy are 'baked in' to the global economy.
In short; we are heading in the wrong direction. This emphasizes the challenge that lies ahead of us. We can only hope that the current world-wide crisis will help to revalue what we find important in the economy.
We enable companies to launch their Product-as-a-Service, and enable those companies to accelerate the circular economy in a quick & easy way. So collectively we can actively make our circular ambitions reality.
Modularity is key in retaining the highest value of a product as long as possible. To provide an example we show the Value Hill (figure 1) developed by Circle Economy [i]. This provides a good visualization of how value is created and how it is normally destroyed in a linear economy. However, in a circular economy we retain value as long as we can. We do so by keeping the product in the smallest loop as long as possible. This way, companies are able to get the maximum long-lasting value and get insight in which collaborations they have to engage in.
This brings us to the another circular economy framework which is called the 10 R’s hierarchy [ii] [iii] [iv]: Refuse, Rethink, Reduce, Reuse (Resell), Repair, Refurbish, Remanufacture, Repurpose, Recycle, Recover, Re-mine [vii]. This can be seen in figure 2:
This framework provides a hierarchy in what steps should be taken first to enable a circular economy. To start we talk about not using a material at all, or using a lot less of it (refusing, rethinking, and reducing). This can have impact on design considerations in general, but not so much the modularity. Because modularity is about the components that are included in the product. In essence; modularity mostly enables R3-10.
What is true modularity?
Modularity can only be reached through design considerations that increase the utilization period, or that enable reassembly. True modularity is achieved by enabling easy separation; by using no glues or adhesives that cannot let the components be separated anymore without demolishing the product.
Modularity helps facilitate durability (longevity), repairability & maintainability, recyclability, sharing, and upgradeability. Most often modularity requires design changes, or for new products, design considerations. This then needs to be compensated by reaping the circular economy benefits of a modular design. In other words; a higher likeliness of getting a broken device repaired, or by extending the lifetime through hardware upgrades and refurbishment. Again, keeping the product in circulation as long as possible.
Although there are many types of modularity, standardization and multi-functionality are often key-components of good circular design. Sometimes modularity can require more material input, but it will pay off in the long term as a longer lifespan can be achieved, and customers or consumers are starting embracing the possibilities of modularity [viii].
If we take the previous R10-framework into account; not all R’s enable the circular economy. If we take a look at mainly the technical cycle of the butterfly diagram (figure 3) by the Ellen MacArthur Foundation, we see that most of the circularity loops are again enabled by modularity. The shorter the loop the better for the circular economy (figure 4).
Examples of modular products
One of the most prominent examples to date is Fairphone. Over time there have been quite a lot of initiatives that have tried to put a modular phone on the market, none of them succeeded. Fairphone chose a more pragmatic and feasible route, and managed the first modular phone. They built a phone with longevity in mind, and designed it for repairability. They offer broken parts and the instructions to replace broken parts. This fits with the Right-to-Repair philosophy that is currently gaining traction in Europe.
A second lesser known example is bedzzzy (Auping); they have built the first circular mattress and bed. In the Netherlands alone every year more than 1.2 million mattresses are thrown away and incinerated, because companies have not put circular practices in place. The product was developed by Auping together with DSM Niaga and every component can be put back into the material cycle.
They used adhesives from DSM that can be taken apart and reused. Furthermore, they have added the Circularity Passport in which they can trace the origin of every part for circular reuse. bedzzzy itself has developed a sleeping-as-a-service proposition in which they remain the owner of the bed and are responsible for the components until the end-of-life. Thus, they have developed a product with a long lifespan, modular parts and high circular value.
The last well known example of modularity is Gerrard Street, which is a circular music experience on a subscription basis. They use no glue, so repair, refurbishment, upgrade (adding hardware) or disassembly is easy. The components are standardized and made durable, this way they can loop 85% of their components.
Due to the Headphones-as-a-Service proposition Gerrard Street remains responsible for the product, and so guarantees a working headphone. Even better; if upgrades are available they can also easily be given to customers due to the design of the product.
By combining a modular and durable design together with a product-as-a-service business model, Gerrard Street is able to increase its revenue by maximizing the use-cycles of every pair of headphones. At the same time they do not need any virgin (new) materials, get access to materials for the price they bought it for, and they actively built a close relationship with their customers. Which gains them a more reliable (recurring) income streams, enables value tracking (residual value) and a predictable supply chain. All together, this provides them with a competitive advantage for the future.
Modularity can lead to Circularity
This blog outlines why modularity is key for circularity and how it can accelerate the transition to a circular economy by keeping products in its highest value as long as possible. Want to know more about how product-as-a-service can help your company gain a competitive advantage? Read our other blogs, or get in contact with us.
[ia] = Lewandowski, M. (2016). Designing the business models for circular economy—Towards the conceptual framework. Sustainability, 8(1), 43.
Nußholz, J. L. (2017). Circular business models: Defining a concept and framing an emerging research field. Sustainability, 9(10), 1810.
Bocken, N. M., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.
[ib] = The Value Hill was developed by Circle Economy together with partners in 2016.
[ii] = Reike, D., Vermeulen, W. J., & Witjes, S. (2018). The circular economy: new or refurbished as CE 3.0?—exploring controversies in the conceptualization of the circular economy through a focus on history and resource value retention options. Resources, Conservation and Recycling, 135, 246-264.
In this article they also coin the term: Re-servitization; given centrality to ‘functionality’ in a Circular Economy(CE). The latest articles stress the importance of ‘re-servitization’ – rethinking and adapting services and the development of product-service systems (PSS) – as part of CE business models.
[iii] = Allwood, J. M., Ashby, M. F., Gutowski, T. G., & Worrell, E. (2011). Material efficiency: A white paper. Resources, Conservation and Recycling, 55(3), 362-381.
[iv] = Den Hollander, M. C., & Bakker, C. A. (2012). A business model framework for product life extension. In 17th International Conference Sustainable Innovation 2012, Bonn, Germany, 29-30 October 2012.
[v] = Kirchherr, J., Reike, D., & Hekkert, M. (2017). Conceptualizing the circular economy: An analysis of 114 definitions. Resources, conservation and recycling, 127, 221-232.
[vi] = Potting, J., Hekkert, M. P., Worrell, E., & Hanemaaijer, A. (2017). Circular economy: measuring innovation in the product chain (No. 2544). PBL Publishers.
[vii] = Sidenote: Re-mining or urban mining is in fact a super sustainable practice for material and value extraction. Designing out (of) waste, as one of the prerequisites of the circular economy according to the Ellen MacArthur Foundation, or materials that have been dumped on landfills or are part of construction sites that will be demolished are in fact key to a circular economy.
[viii] = Moreno, M.; de los Rios, C.; Rowe, Z.; Charnley, F. A Conceptual Framework for Circular Design. Sustainability, 2016, 8, 937
All photos of the modular examples are taken from their respective website.