© Sini Leskinen
The transition from private ownership to the sharing economy requires a major change both in business logic and in people's consumption habits. That is why a sustainable transition requires support and reshaping old structures.
The sharing economy can encourage companies to invest in more efficient use of resources, better technical performance and innovation. On the other hand, the benefits of the sharing economy for the environment, the economy and people's well-being are not always self-evident, which is why the impact of new service concepts must be carefully assessed.
The sharing economy refers to a more efficient use of under-utilised resources in a way that allows multiple users to utilise the same product without buying it for themselves. For example, a power drill on the shelf of your cupboard is an under-utilised resource. The inputs needed to produce it would be used more efficiently if, instead of long storage periods, many people could use it if needed instead of each person owning their own power drill.
The concept of a product as a service means that some good which previously would have been purchased as a physical product or good is now purchased in the form of a service. This way, the ownership of the physical product is not transferred to the user, but the user only enjoys a service that meets their needs. The physical product itself, such as a power drill, lamp or dress, remains the property of the vendor.
The benefits and drawbacks for business of the sharing economy concept of product as a service were studied in eight example cases in a survey by EPA network (Network of the Heads of the Environmental Protection Agencies). The survey included companies of various sizes from several sectors in four different European countries. The companies represented the product as a service concept in the furniture, automotive, chemical, household appliance, tools, carpet and clothing industries.
Chemical management as a service to companies
The chemical management service concept is considered a model example of sustainable services. Chemical management requires a lot of expertise and protective measures from the company. Handling chemical waste is challenging and expensive. Many chemicals are also a source of environmental pollution. On the other hand, for a chemical manufacturer, an increase in sales volume means additional revenue.
When a company purchases chemical maintenance as a service, the service provider is responsible for chemicals throughout their life cycle. The user pays for the comprehensive service and not just for a chemical tin or canister. This way, the aim is to use chemicals as efficiently as possible on behalf of both the seller and the buyer.
For example, the German company SAFECHEM offers a range of solvent services for the metal, laundry and asphalt industries. The service includes precise monitoring, whereby the formation of the total price for chemicals themselves, waste management and guidance is clear and transparent to the customer.
Tools for rent
Leasing large and infrequently used equipment, such as washers, instead of buying them, saves storage space in homes and warehouses. Borrowing a rarely used high-quality tool for a short period is also easy on the wallet.
Clas Ohlson offers a tool rental service to its consumer customers in all of its locations in Finland. The tools can be rented directly from the store. In addition, the company provides customers with equipment repair services. However, high availability of cheap equipment has been found to reduce customers' interest in repair services.
Service concepts in premises and construction
There are many product as a service concepts in the areas of construction and use of premises. For example, Philips offers lighting and Mitsubishi Elevator Europe elevator rides as a service. In these cases, the customer does not buy bulbs or lift systems, but lighting and lift services, which are paid for according to the light output and the number of rides.
A company called Interface offers companies reusable interior carpet tiles both as products and services. The customer can choose whether they prefer to buy or rent a carpet. The reuse of carpet tiles is more successful than the reuse of traditional indoor floor materials, as carpet tiles are not glued in place, but fastened with Velcro. That is why the interior of the premises can easily be changed if desired, and the carpet tiles can be reused elsewhere after the maintenance round. This way, the life cycle of carpets can be significantly extended through maintenance and reuse.
Clothing as a service
The clothing industry produces more greenhouse gas emissions than aviation (Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion's future, 2017). Clothes are often bought on impulse and on average they are used just a few times. In addition, it is also difficult to assess the quality of clothing and many are no longer familiar with clothing maintenance or repair. The Finnish company Vaatepuu aims to change this.
Vaatepuu offers clothing as a service. With a periodic payment to Vaatepuu, the customer can choose clothes that suit him or her from a brick-and-mortar store, where they also receive guidance related to clothing and its maintenance. When the clothes are returned to the store, the customer can also pick up a new selection to replace the previous one. The user gets a varied wardrobe without the environmental damage of fast fashion. In addition, the Vaatepuu store maintains the high-quality garments carefully in order to keep them in use for a long time.
Vaatepuu stores can be found in five locations in Finland: Helsinki, Jyväskylä, Järvenpää, Tampere and Turku. Worldwide, interest towards clothing lending companies is increasing at least in European, North American and Asian cities. Digital lending companies are also appearing on the market. There are interested customers also in Finland, but the change from owning clothes to using a shared wardrobe requires a change in attitudes and daily habits.
Our attitude towards goods is changing
Sharing requires a change in attitude towards goods both from the service provider as well as the user. A shared-use power drill needs to be made more durable than one optimised for personal use, as it is expected to be used much more frequently than a drill optimised for personal use at a low cost.
In addition, sharing a high-quality drill can encourage it to be repaired compared with the purchase of a cheaper and less durable model that may be difficult to repair. The company that provides the shared-use tool may itself have the capacity to maintain and repair the device. Designing products for durability and repair is at the core of circular economy thinking.
On the other hand, we the ordinary people who use the drill, should get used to the idea that the drill does not sit on our own shelf waiting for us to get a spark for renovation. Instead, we must get used to fetching a drill when we need it and returning it after use.
Estimating the rental price may also require practice, especially with valuable goods such as rental cars. The rental price includes costs, such as repair costs and depreciation, which may be difficult to include in the operating costs of your own car, for example. It can be difficult to compare prices between renting a product as a service and purchasing it for yourself.
Benefits of sharing are not limited to it being the environmentally friendly choice. They also include aspects such as saving the storage space required by unnecessary goods and the possibility of using higher quality products at a more affordable price compared with owning the product.
The pain of giving up
According to the survey, product as a service concepts have progressed in the business-to-business market, but reaching consumers is more difficult. Roadblocks for the expansion of product as a service concepts are both economic and related to changing consumption patterns. Many people are not yet ready to give up their personal ownership of goods. On the other hand, it has been proposed that services of the sharing economy may increase the community spirit their users experience.
It is important to foster assessment of the environmental impact and reliable demonstration in order to promote product as a service concepts in the sharing economy and promote sustainable consumption habits. According to the study, small- and medium-sized enterprises are particularly in need of support for transitioning to sharing economy business models. There is also a need for a wide range of economic incentives to improve the competitiveness of services in comparison with products. For example, in the aftermath of the COVID-19 crisis, there have been proposals for a green recovery that would promote a sustainable sharing economy. It is also very important to invest in demand with measures such as supporting green public procurement.
However, the transition from ownership to shared use requires a major change in people's mindsets, and a crisis such as the pandemic may not be helpful. Perhaps behavioural studies will identify ways to change consumption habits. Would you be prepared to share your clothes, drill or car with others already?
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Further information
- Tiina Karppinen, Researcher, Finnish Environment Institute, firstname.lastname@syke.fi