Making services greener: can suppliers take more responsibility?
Posted on 12 June 2012 by Wouter Kersten in Blog
In an effort to push the discussion about a “green” economy many a case has been made for focusing on services instead of products. The reason for this is that services are much less resource intensive than products. However, if these “green” services still stimulate the use of unsustainable products, or unsustainable behaviour, the total gain is limited.
Simple examples include: renting out light intensity (lux) instead of selling light bulbs but not offering energy saving or bulbs or other good options. Offering lease or rental of cars, but not looking at fuel consumption. What about offering good maintenance contracts and then forgetting about improving the longevity of parts?
Business models, the next level
The idea of providing maintenance in lieu of quality parts makes sense from the suppliers perspective and a traditional-economic mindset but, does this business concept hold up under scrutiny? Through ignoring the full power of providing Service the supplier is losing out on many opportunities to assist clients become (more) sustainable, or stimulate sustainable behaviour. Can a way be found to tweak established business models so that better designed services result in better business and sustainable impact?
Well-known examples can be found in ESCO’s or, Energy Service Companies. Very simply put, these companies sell energy ‘performance’ contracts: the more energy their clients save, decreasing overall operating costs, the more money the ESCO makes. If an ESCO’s products and services do not save energy efficiently, they get paid less. The same happens if clients do not make the best use of ESCO products. Likewise, if clients behave more sustainable, save more money, AND are more sustainable then the savings are shared with or channeled to the ESCO provider. Everybody wins, even the planet.
Ideas to get you started
ESCOs are specific instances, can more examples be thought of? Here are a few ideas to challenge you to think of improvement and build your own.
1. Functional resource efficiency: A copier manufacturer offers a deal where customers pay a service fee inversely related to the energy use per 10,000 copies. The supplier of the copier can provide additional advice how to do this as part of the contract. That contract might include additional options- the use of functional recycled parts instead of new ones.
2. Offering options: clients can buy a ‘regular’ product, OR a more sustainable version with better payment conditions
3. Fuel efficiency contracts: if clients can prove, through tracking distance and fuel use, sustainable car usage discounts can be offered on total fuel consumption fees. This should indirectly stimulate the use of more fuel efficient cars and economical driving. In addition, the fuel provider can give tips on fuel efficient driving
Hitting a hole in one- real service
All of this is not about thinking outside the box, it’s about inventing a new box, or triangle, or circle. In my opinion, with sustainability as the driver, companies can put the Serve back in Service… Who’s up for hitting some aces?
Note: this post was in part inspired by: ADBI working paper series, no 209. Green Services and Emergence and Recovery from the Global Economic Slowdown in Developing Asian Economies by Mark Stoughton and Anbumozhi Venkatachalam. March 2010. It contains more examples along the lines of the examples above. You can find the original paper here.