Increased competitiveness due to a higher resource productivity and a system design
Stahel, page 1 of 2
by Walter R. Stahel
At the time of the 1995 consultation , Walter R. Stahel was director of the Product-Life Institute, Geneva. The notes which follow were extracted from a slide show presentation which originally accompanied his Keynote paper for the ISWA Conference 1995, session A1 on product stewardship - production and product design, October 17-18 1995, Vienna.
|1. Introduction||6. The stock of existing goods in the market as central focus for product stewardship and design!||Table of Figures|
|2. Sustainability||7. Obstacles, opportunities, trends||Figure 1. The linear structure of the production-focused Industrial Economy|
|3. The aftermaths of traditional linear economic thought||8. Conclusions||Figure 2. Closing the material loops.|
|4. Economics of retake and recycling: resource use policies are industrial policies||9. References||Figure 3. Strategies for a higher resource productivity|
|5. Can we find the starting point of a sustainable cycle?||Figure 4. Resource efficiency and business strategies in the Service Economy|
Product Stewardship: Increased competitiveness due to a higher resource productivity and a system design
Product stewardship which focuses on the complete life cycle of goods from cradle back to cradle will enable the economy to uncouple resource flows from economic success. The key to a higher resource productivity amid to dematerialized products lies in the transformation of the present linear production-focussed industrial economy into a utilization-focused service economy in loops. The result will be an increased regional competitiveness relying on a decentralized economic structure and a "substitution of labour for resources" in the economy.
This trend in the economy towards a more sustainable society and functional economy has started some time ago, yet most experts are unaware of the potentially fundamental change that the signs on the horizon indicate. This is probably due to an interpretation of the signs in terms of the old thinking in terms of the industrial economy.
A functional or service economy needs an appropriate structure, characterized by a regionalization of 'hardware' jobs and skills (mini-mills for material recycling re-manufacturing workshops for products, decentralized services for maintenance and product-life extension), supplemented by virtual 'software' design, research and management centers which commute by means of electronic highways. Such an economy will consume less resources and have a higher resource productivity, it will be characterized by smaller regionalized units using a higher and more skilled labour input. Transport volumes of material goods will diminish and be increasingly replaced by transports of immaterial goods.
The common denominator of the different approaches to product stewardship and an extended producer responsibility is the vision of a sustainable economy within a sustainable society. Such an economy focuses on the optimization of the utilization (or function) of goods and services, and thus on the management of existing wealth (goods, knowledge, natural riches). The economic objective of such a sustainable economy is "to create the highest possible utilization-value for the longest possible period of time while consuming as little material resources and energy as possible".
This paper provides a vision for such a sustainable society, and tries to clarify the key notions that are linked to the shift from a linear industrial economy (and its concept of value-added) to a service economy in loops (and its concept of asset management).
A sustainable economy is based on several pillars, each of which is essential for the 'survival' of mankind on Earth. This means that we cannot argue on priorities, or speculate on which of these pillars we can afford to lose - we cannot take the risk of losing any single one of them:
But the idea of a sustainable economy also contains the 'Quest for a Sustainable Society' [Coomer, James C. (ed) (1981), with a broader objective that includes, besides the natural resource issue, the question of the viability and sustainability of our
This insight was at the base of the movement that coined the English term 'sustainability' in the early '70s, The Woodlands Conferences in Houston, Texas, and the related Mitchell Prize Competitions, had from its beginning, emphasized the quest for a sustainable society. With the growing popularity of the term 'sustainability', this aim has become increasingly confused. But it is vital to keep the wider reference of a sustainable society (including subjects such as quality of life) in mind, in order to understand the importance of the social, cultural and organizational changes involved in a move towards a more sustainable economy.
The first of the above pillars of sustainability is the domain of conservationists (nature parks); the second of legislators (limits and prohibition); the third domain is one of innovative business strategies within the market economy; the fourth mainly a result (but also a precondition!) of the other three.
This paper focuses on the third pillar of flows of matter, or 'resource productivity', and its normally invisible twin brother, the flows of responsibility. Some of the key term here are:
An economic analysis of the implications of a cradle-to-cradle product responsibility will inevitably question the feasibility of producing and selling short-life goods. Alternatives such as producing and selling the utilization of long-life goods, or selling the results of the utilization of goods rather than the goods themselves, might give a strategic advantage and an economic incentive to those economic actors who get the knack of it - and an increased sustainability and competitiveness will directly result from this.
Re-take and recycling both turn a linear economic thinking, where materials as well as product responsibility is transferred from the producer to the consumer at the point-of-sale, into a sustainable economic thinking in loops, where manufacturers retain an extended product responsibility (Fig. 2 Closing the material loops). A higher resource efficiency can be achieved by "a reduction in the speed of the flow of matter through the economy", e.g. through technical and commercial strategies which promote a longer utilization period of goods, and "a reduction of the volume of the flow of matter", e.g. through strategies of a more intensive utilization of goods and the resources incorporated within them.
Increasing the life expectancy of goods is pollution prevention! Doubling the utilization period (or product-life) of goods in markets near saturation cuts by half the need for raw materials and energy in production, and reduces by half the amount of post-consumer waste, without a reduction in wealth and welfare! It reduces mining waste and environmental impairment in extractive industries, waste in manufacturing, in distribution, recycling and waste disposal by 50% with largely existing technology and at the same or a lower price to the user!
Utilization optimization with the option to upgrade systems technologically through the inclusion of new components integrating the latest technology, as soon as they become available, greatly enhances technical, commercial and economic innovation, as well as diminish corporate vulnerability by considerably reducing time-to-market for new products, by being much closer to the customers, and by extending the design process towards continuous product improvement.
3. The aftermaths of traditional linear economic thought
The terms 'added value' in exclusive relation with production, 'waste' at the end of the first (and normally only) utilization period of goods, and 'GNP' as a measure of the monetarized resource flow at the point-of-sale, are notions from the linear industrial economy (Fig. 1), and of little use in measuring the performance of an economy in loops. ISEW, the index of sustainable economic welfare, is a more appropriate measure, and clearly shows 'the inefficiency of the present economic system in most industrialized countries today [Von Dieren, Wouter (1995) Taking Nature into Account, a report to the Club of Rome]
This is due to the fact that cycles, circles and loops have no beginning or ending point - a true 'economy in loops' does not know 'waste' in the linear sense - nor do natural systems, such as the water cycle. Equally, the notion of value added of the industrial economy gives way, in an economy in loops, to the notion of wealth management: Wealth being the sum of existing goods, knowledge and natural riches, of material and immaterial nature, in monetarized or non-monetarized form.
An economy in loops is often referred to as a 'service economy' [Giarini and Stahel, 1989/93], as the key for economic success is no longer the optimization of manufacturing but the optimization of utilization, the management of existing assets. Thus, in contrast to the manufacturing economy, economic success in a sustainable service economy is not linked to fast mass production, but to long-term customer satisfaction, good husbandry and product stewardship. Economic rewards come from minimizing the efforts, not maximizing production volumes (Fig. 3: Strategies for a higher resource productivity).
This corporate strategy of asset management has already been implemented by a number of companies, notably Xerox Corp., [Harvard Business School (1994) and is under consideration by many others, including BRAUN, the German household appliance manufacturer. This strategy is also the base of modern concepts such as 'outsourcing' and B.O.T. 'build-and-operate', as well as the base of network operators (railway companies, airlines, telecom companies), and therefore familiar to most managers [see Stahel (1992 - 1994)].
Stahel, page 1 of 2