Towards Resource Efficiency via Business Model Innovation

The modern consumer economy has a fundamental flaw that promotes unsustainable consumption: the more companies sell, the more they earn. Turntoo, a Dutch company, has been building its business model based on an alternative system in which products are not sold by the producer to the consumer, but remain the property of the producer throughout their lifecycles. The Turntoo model fits into the broader trends of product service systems or extended producer responsibility which integrate services into a product offering.

One example is the use of photocopiers or printers by businesses: companies lease the office equipment and pay per print, while the supplier of the printer or photocopier guarantees that the facility will be constantly available. Companies in effect lease products to consumers or to other companies, though lease contracts are likely to be based on the usage of the product, rather than simply the temporary possession of the product by the lessee.

This approach promises several environmental benefits:

• Because producers retain ownership of a product and derive their profits from its use rather than its sale, they have an incentive to make the product as durable and efficient as possible, so that it can be used as many times as possible before it has to be replaced.
• Producer ownership means that once a product reaches the end of its life, the producer will collect it and reuse it. In effect, this will prevent products from becoming waste. Instead they can be disassembled and re-enter the production loop, reducing the demand for virgin raw materials.
• Because products will be disassembled and reused at the end of their lifecycles, producers have an incentive to make them as reusable as possible. Ideally products should be designed to be broken down into easily-reusable components or raw materials.

Turntoo in action
Sabine Oberhuber, one of Turntoo's founders, cites the example of an agreement signed in June 2012 that Turntoo organised between German precision engineering giant Bosch and Eigen Haard, an Amsterdam social housing provider. Bosch will provide washing machines to Eigen Haard tenants, who will initially pay €10 per month for the washing machine service (including energy and water). Later, tenants will pay per wash.

There will be several benefits from the scheme when it is implemented, Oberhuber says. Tenants will receive top-end washing machines with the highest energy efficiency ratings. Eigen Haard will be faced with fewer tenants who cannot pay their rents because of rising energy costs. Eigen Haard said in a statement that “very few tenants in the social sector use appliances with an energy rating of A or higher. It is assumed that the average tenant cannot afford the higher purchase costs. However, assuming continued use of conventional appliances, they will be the first to notice rising energy prices”.

The full environmental benefits of the scheme have not been quantified, but because the washing machines are high quality, energy and water savings, and greenhouse gas emission reductions, are expected, compared to the lower standard washing machines that tenants might otherwise have. The scheme is also resource efficient: the washing machine parts and embodied raw materials will ultimately be reused.

Oberhuber argues that Bosch will also benefit – the project is not just part of their corporate social responsibility strategy. For companies, “ultimately a recurring business model is more interesting,” she says. It will smooth out the peaks and troughs of demand cycles and make companies more stable. It will help them manage their resources better, because they will know how many washing machines have been leased out and therefore what recyclable and reusable materials will come back to them.

Oberhuber concedes that the lessee receiving the service embodied in the washing machine might have less of an incentive to maintain the washing machine and use it responsibly than would be the case if they owned it. However, she argues, this can be dealt with through the contract between the washing machine provider and, in this case, the housing association. Clauses can be inserted requiring responsible use.

Resource banks
The agreement between Bosch and Eigen Haard provides a good illustration of the Turntoo business model. The company was started in November 2010 by Oberhuber and architect Thomas Rau, according to whom products should no longer be regarded as commodities to be bought and sold. Instead, they should be considered “resource banks,” with the resources that they contain being constantly reused. “The idea that goods are owned by consumers is outdated,” Rau has said. “As a consumer I am only interested in the performance of a product, not owning it. Sufficient light, comfortable seating, good audio and vision, that’s what counts”.

Turntoo is exploring the “resource bank” concept through a small number of early-stage projects that connect with Rau's architectural practise. For the office space for Thomas Rau's architecture practice, Turntoo brokered agreements for the use of carpeting, tiles, furniture, lighting and power monitoring. The companies involved include Dutch carpetmaker Desso, which is committed to taking back and recycling or reusing its products as much as possible, and is thus already working in a way that is aligned with the Turntoo approach. In Dordrecht,Turntoo is working on a higher education centre.

In the town of Brummen in Holland, Turntoo will go even further. It will provide a municipal building designed to last 20 years for which, says Turntoo, the “building’s components can be disassembled and reused at the end of its lifespan”. To facilitate this, the building will be constructed of natural materials such as wood as much as possible, and will minimise the use of concrete.

Oberhuber says that demand for Turntoo's services as an intermediary in “resource bank” projects is increasing. The current focus is business-to-business agreements, and on products that have medium to long-term lifespans, such as carpeting or furniture. “It is much more complex than business as usual, but there is really a big potential,” Oberhuber says.

Source: Envirocentre.ie - Towards Resource Efficiency via Business Model Innovation

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