visser_logo_small.gif (1783 bytes)PRODUCT STEWARDSHIP: 
Increased competitiveness due to a higher resource productivity and a system design

Stahel, page 1 - 2

dot.gif (101 bytes) 1. Introduction dot.gif (101 bytes) 6. The stock of existing goods in the market as central focus for product stewardship and design! Table of Figures
dot.gif (101 bytes) 2. Sustainability dot.gif (101 bytes) 7. Obstacles, opportunities, trends Figure 1. The linear structure of gthe production-focused Industrial Economy
dot.gif (101 bytes) 3. The aftermaths of traditional linear economic thought dot.gif (101 bytes) 8. Conclusions Figure 2. Closing the material loops.
dot.gif (101 bytes) 4. Economics of retake and recycling: resource use policies are industrial policies dot.gif (101 bytes) 9. References Figure 3. Strategies for a higher resource productivity
dot.gif (101 bytes) 5. Can we find the starting point of a sustainable cycle? Figure 4. Resource efficiency and business strategies in the Service Economy


home.gif (503 bytes) index.gif (483 bytes) feedback.gif (656 bytes) glossary.gif (710 bytes) links.gif (499 bytes)

 4. Economics of retake and recycling: resource use policies are industrial policies

The choice of the 'best' waste management strategy is often a self-fulfilling prophecy: The promotion of recycling strategies, such as the 'Duales System Deutschland', has the effect of conserving the existing structures and is thus easy to implement. Unfortunately, the economics of recycling decline with the success of it: an increase in the amount of secondary resources causes an oversupply of materials and depresses the prices of virgin and recycled resources alike; the result is a need to export waste materials, and with it the problem of oversupply (Fig. 2, junction 1).

Future technical innovation in recycling will include improvements in the design for the recyclability of goods, and new recycling technologies, both of which, alas, cannot overcome the basic price squeeze mentioned. Increased recycling furthermore does not reduce the speed or volume of the flows of material and energy through the economy; it does, however, reduce resource depletion and the volumes of waste [Jackson, Tim (ed) (1993)]

Strategies of a longer and more intensive use of products, however, do reduce the volume and speed of resources through the economy, and are thus part of the third pillar of sustainability, as defined at the beginning. One of the keys to switch to these strategies of resource efficiency' are take-back strategies, i.e, closing the product responsibility loops.

An excellent example for the difference between re-using materials and re-using components and products (Fig. 2) is Mr Soichiro Honda, the founder of the Honda Motor Company, the motorcycle and car producer that became a symbol of Japan's post-1945 industrial success. The 'son of a blacksmith, Mr Honda began by fitting second-hand military engines to bicycles, selling them as motorbikes. Today, Honda Motor Co. is number one worldwide in bikes and among the top five car manufacturers. Had Mr Honda gone into recycling the scrap engines, he would be as unknown to Europeans as all the other Japanese scrap metal dealers.

At first sight, closed responsibility loops seem to violate the traditional "task definition" in the economy: industry produces efficiently, consumers use quickly, the state disposes efficiently. Strategies to close the product responsibility loops, such as the voluntary or mandatory take-hack of consumer goods, impose a structural change and are thus more difficult to implement than the recycling of materials. However, as these strategies are based on innovative corporate approaches, they are highly competitive as well as sustainable, and will become even more competitive as the economy develops [Stahel 1994]. Furthermore, future technical innovations can be expected in this field towards technologies enhancing the use of re-manufactured and technologically up-graded components and goods, and commercial innovations to keep goods in utilization as long as possible.

5. Can we find the starting point of a sustainable cycle?

The common denominator of the ideas above is the change in thinking from a linear industrial economy to a service economy in loops [Giarini and Stahel 1989/1993]:

  • loops have no beginning and no ending point! In order to define an economic strategy of sustainability, we should therefore chose the economically most interesting part of the loop as the new economic foam point: The wealth represented by the stock of existing goods in the market and their utilization!
  • long-term ownership of goods then becomes the key to a long-term (rental) income - but long-term ownership also means 'unlimited' product responsibility. Strategies of selling the utilization of goods instead of the goods themselves (e.g. Schindler, Xerox, AT&T, all selling customer satisfaction), and incentives for a bring-back of goods, become keys to long-term corporate success, and enable companies to un-couple manufacturing volume from turnover and profits, and to regionalize their activities, skill pools and responsibilities accordingly [Handbuch (1995)].
  • the adaptability of (existing and future) goods to changes in users' needs (in order to keep them rentable) and to technological progress (in order to keep them up-to-date with technological progress) becomes the new challenge for designers and engineers. This adaptability can best be achieved by a systems design of goods, and the use of standardized components (e.g. Xerox's commonalty principle).

The starting point of a sustainable economic cycle therefore cannot be recycling, i.e. the flow, for reasons of economics and profitability, technological progress and competitiveness, as well as for reasons of resource productivity and sustainability. The starting points has to be the existing goods in the market, i.e. the assets. This means putting utilization into the center of the economic focus, replacing the exchange value as central notion of value by the utilization value, with the main economic objective to optimize utilization while consuming a minimum of resources. Re-take now becomes a key economic strategy, take-back legislation is merely a safeguard against 'bad' products, i.e. mostly those with a heavy environmental cost in the post-use phase of their life.

The economic logic of the loop strategies is simple: the smaller the loop, the higher the profitability of the strategy, the higher the contribution to sustainability. This smallness applies both geographically and in the amount of work involved: do not repair something that can be re-used, do not remanufacture something that can be repaired.

This clearly demands an adaptation' of the industrial structure in order to profit from these new resources (the multitude of existing goods in a dispersed market). Adapting today's economic, legal and tax structures to these new requirements of regionalization may be a precondition for countries in order to attract and breed successful economic players for a sustainable service economy.

The central issue of sustainability, open to innovations by all economic actors, is a more efficient use of resources through a longer, more intensive or better utilization of products, and through multifunctional products and system solutions (Fig. 4: Resource efficiency and business strategies in the service economy). A substantial reduction of the flow of resources through the economy is a feasible proposition for all countries; however, the main impact of a higher sustainability by the means of this strategy will have to come from actions in industrialized countries [Factor 10 club].

6. The stock of existing goods in the market as central focus for product stewardship and design

In order to achieve this economic goal of the smallest possible loops, a number of changes are necessary in the economic thinking of organizations:

  • the industrial structure for manufacturing and re-manufacturing activities will have to be unified, and regionalized in order to be closer to the assets in the market; this means smaller (re-)manufacturing volumes and appropriate methods, which will use more and higher skilled labour, the cost of which is financed through the strongly reduced purchase costs for materials, and a virtual elimination of disposal costs,
  • products will have to be designed as technical systems based on a strictly modular master plan, with ease of maintenance and ease of out-of-sequence disassembly by workers or robots,
  • components will have to be designed for re-manufacturing and technological upgrading, as well as according to the "commonalty principle": probably first used by Brown Boveri Company at the beginning of this century in the design of its revolutionary turbo-compressors, popular with all military equipment, and perfected by Xerox in the early '90s for its copiers, the commonalty principle promotes standardized multi-product function-specific components which are interchangeable between different product lines.

These 'standardized' components, designed with additional new qualities, such as being maintenance-free, self-protecting and fault-tolerant, will greatly reduce the operating costs of complex products (operator and repairman training, spare-parts management), as shown by the example of the standardized Airbus flight-deck. They further enable the conversion of goods and their use in cascades of decreasing sophistication.

  • new technologies aimed at optimizing the resource products and components over long periods of time spareless repair methods, in-situ function-quality cycle-data memory chips.
  • new professions and job qualifications will emerge, such as "operation and maintenance engineers". The 'salesmen' of the past will have to change to consultant-advisors able to optimize 'generic' products for the needs of specific users, and to technologically up-grade existing products according to the wishes of the user and the advances of technology.
  • the user (ex-consumer) will have to learn to take care of the rented or leased products as if they were his own' in order to enjoy the new flexibility in product-use offered to him by a utilization-focussed service economy. Whereas, in the industrial economy, mis-use and abuse of products leads to a punishment in the form of increased maintenance cost for the owner-user, they may, in the service economy, lead to the exclusion of a user from the utilization-focused system.

7. Obstacles, opportunities, trends

Many obstacles will need to be overcome on the way to such a sustainable service economy. But most of these obstacles are embodied in the logic of the present linear industrial economy, such as a supply-definition of quality, based on warranties limited to 6 or 12 months against manufacturing defects only, and on the 'newness' of components in new goods. The logic framework of a functional economy brings with it changes, such as a demand-side definition of quality, based on unlimited customer satisfaction and the guarantee of system functioning over longer periods of time (witness companies such as Xerox, Toyota, Hasselblad).

The signs at the horizon are clearly pointing this way:

  • the EC-Directives on product liability, and more recently on product safety, and the draft directive on service liability, all stipulate a ten year liability period.
  • some car manufacturers offer a total cost guarantee over 3 or 5 years. Which includes all costs except tyre wear and fuel! Some equipment manufacturers offer a similar guarantee including in addition a product exchange at the customer discretion ('the customer satisfaction guarantee').
  • industry shows an increasing willingness to accept unlimited product responsibility - and to use it aggressively in their advertising - through money-back guarantees, bring-back schemes (single-use cameras), exchange offers and other forms of voluntary product take-back!
  • outsourcing and contract manufacturing are rapidly becoming a generally accepted form of buying! selling results instead of goods or services.

Companies and regions that initiate the change towards a more sustainable society, rather than suffering it through the actions of their competitors, will have a head-stand and be able to position themselves in strategically optimal positions. An old, but in the age of market research somewhat forgotten, truth of economics will play its heavy hand again: Real innovation is always supply-sided - the role of demand is one of selection! [Giarini and Stahel, 1989/1993].

8. Conclusions

Recycling is a necessity in order to reduce resource depletion and post-consumer waste, which are both affecting the natural eco-system and the toxicology pillar of sustainability. Recycling has, however, no influence on the speed or volume of the flow of resources through the point-of-sale in the economy. Products will increasingly be made of recycled materials which can again be recycled, thus causing a situation of surplus supply and its economic consequences, in which raw materials may have a price advantage (Fig. 2 junction 1).

Re-take, in many different forms, will become a key economic strategy the context of re-using components and products. Re-take reduces the flow of resources through the economy if it is part of an industrial strategy in favour of a longer and more intensive utilization of products. Products and components will increasingly be designed for re-take and re-use, and thus represent a value rather than a liability. This will create a situation of surplus supply for components and goods, in which re-used components and goods have a price advantage (Fig. 2, junction 2). Take-back legislation will probably be needed to guarantee a level playing-field in the economy (the polluter punishment principle).

For the first time since the beginning' of the industrial revolution, the economy will offer a mobility of the workplace, rather than rely on a mobility of the worker. The more immaterial goods are transported, the higher the feasibility of teleworking. Flexible work organization and part-time work are compatible with, and even a necessity for, providing services and results round the clock, As services cannot be produced in advance and stored, and have to be delivered at the location of the client the economic disadvantages of peripheral zones will partly disappear, as will some of the environmental burden on

9. References and Sources

Allenby, Braden R (ed.) (1994) The Greening of Industrial Ecosystems, National Academy of Engineering, National Academy Press, Washington DC. (Proceedings of the Second Annual Workshop by the National Academy of Engineering on Industrial Ecology, 1993)
Coomer, James C. ed. (1981) Quest for a Sustainable Society. Elmsford NY: Pergamon Policy Studies.
Von Dieren, Wouter (1995) Taking Nature into Account (ISEW), a report to the Club of Rome
Factor 10 Club (1994) Carnoules Declaration; F. Schmidt-Bleek, Wuppertal Institute, D-42103 Wuppertal.
Giarini, Orio and Stahel, Walter R. (1989/1993) The Limits to Certainty - facing risks in the new service economy. Dordrecht/Houston MA: Kluwer Academic Publishers.
Handbuch von Beispielen einer höheren Ressourcen-Efflzienz durch längere bzw. intensivere Nutzung von Gütern und Systemen (1995), Umweltministerium Baden-Württemberg, Stuttgart
Harvard Business School (1994) Xerox: Design for the Environment; case study N9-794-022, January 7, 1994
Jackson, Tim ed. (1993) Clean Production Strategies, developing preventive environmental management in the industrial economy - Stockholm Environment Institute. Boca Raton, Ann Arbor, London: Lewis Publishers.
Schmidt-Bleek, Friedrich (1994) Wieviel Umwelt braucht der Mensch? MIPS - Das Mass für ökologisches Wirtschaften; Birkhäuser Verlags AG, Berlin, Basel
Stahel, Walter and Reday, Geneviève (1976/1981) The Potential for Substituting Manpower for Energy; Commission of the EC, Brussels/Vantage Press, New York, N.Y.
Stahel, Walter R.

1994. "The Utilization-Focused Service Economy: Resource Efficiency and Product-Life Extension". Pp.178-190 in: The Greening of Industrial Ecosystems, Allenby, Braden R. and Richards, Deanna S. (eds.) Washington DC: National Academy of Engineering; National Academy Press.
1993. Life expectancy of goods and future waste. Pp.29-35 in: International Directory of solid waste management 1993/4 - The ISWA Yearbook, Kobenhavn Denmark.
1992. Product Design and Waste Minimization. Pp.91-98 in: Waste Management and Clean Technology: Waste Management Strategies for the Future. Forester, William S., and Skinner, John H. (eds.) New York, Boston: Academic Press Harcourt Brace Jovanovich, Publishers.

Stahel, page 1 - 2            index.gif (483 bytes)

home.gif (503 bytes) feedback.gif (656 bytes) glossary.gif (710 bytes) links.gif (499 bytes)