Automobile clubs, self-service bicycles, vacation rentals. As consumers, we are becoming increasingly familiar with sharing or borrowing goods that have traditionally belonged to us, examples of what is known as an “access-based” business model.
Consuming “product access” instead of the products themselves can play an important role in solving environmental problems. However, to meet future environmental challenges, we need to extend the application of access-based business models beyond finished products and rethink the ownership of goods across the entire value chain.
What is an access-based business model?
An access-based business model is based on customers’ access to the function or performance of goods, rather than their possession. Companies that offer consumers access to products are increasingly emerging. In addition to cars, bikes, and houses, the template is available for clothing, power tools, headphones, detergent bottles, and power banks. Offering product access is also common between businesses, traditionally for large expenses such as company cars or heavy machinery, and more recently also for products such as office furniture and lighting.
How does access to finished products modify consumption?
Access-based business models can face resource depletion, waste generation, and other crises. Purchasing access, instead of products, makes consumption behavior more sustainable by default, because it reduces underutilization and rapid replacement of private goods. Unlike conventional linear consumption, incentives to reduce consumption and return goods for reuse and recycling are built in. Car-sharing companies, for example, owned 30% fewer cars than before car-sharing.
Access to finished products can therefore minimize the environmental and economic costs of manufacturing and consumption. Although the potential of access-based business models to address environmental challenges is recognized both economically and academically, the models have been slow to take off and their application – mainly to end products – represents only a small fraction of the impact opportunity. For example, in 2014, the fleet of shared vehicles represented less than 0.1% of the global fleet of nearly one billion cars in circulation.
How could access to semi-finished products reshape manufacturing?
To solve global sustainability issues, access-based business models will soon need to be applied not only to end products, but also to components and materials. This means that future material suppliers will no longer sell semi-finished products such as stainless steel sheets or PET granules. Instead, they will lease them to product manufacturers, effectively selling components and materials as a service and offering their performance.
A supplier will, for example, rent stainless steel sheets from a car manufacturer to form the tubes of a chassis. Rather than owning the sheets, the automaker will be responsible for accessing the volume of material made into the car chassis for an agreed period of time. At the end of this period, the car will be dismantled to allow the equipment supplier to recover the components and recycle the materials.
Such an approach creates a new ownership structure in which the material suppliers own the components and materials, and the manufacturer only owns the value they added by turning them into the final product. In this model, components and materials cannot be physically consumed by the product manufacturer or the end user of the product.
What are the incentives to access semi-finished products?
Just as auto clubs incorporate incentives for sustainable consumer behavior, this approach creates several important positive incentives for material suppliers and finished product manufacturers. Because they retain ownership of their semi-finished products, material suppliers will have an incentive to offer materials that are more efficient and durable and easier to recover at the end of the product’s life, thus facilitating the transition to supply chains. in a closed circuit.
Committing to returning these materials will incentivize product manufacturers to (re)design goods for access-based business models, rather than offering traditional goods for access. This will lead, for example, to the emergence of cars explicitly designed as leased goods instead of privately owned and using materials and components that remain in the value chain and are returned to suppliers instead of be discarded.
To minimize salvage costs, material suppliers will encourage product manufacturers to design for extended asset use. They will also encourage manufacturers to design products with fewer materials and easy to disassemble, which will also facilitate their repair and increase the purity of recycled materials.
More importantly, with time-limited access to materials, product manufacturers will need to anticipate when products will become obsolete, devise plans to intercept them, and reintegrate products into production processes to reuse components and components. constituent materials. This way, product manufacturers will balance the cost of operating the components and materials they rent with the revenue they earn from the products they sell or service. This structure will incentivize them to optimize the use of materials, changing the game in resource management and leading to greater functional value provided by natural capital over a period of time.
How could access to raw materials reshape material supply?
Going a step further, this model can be applied not only to semi-finished products, but also to minerals. Ownership of material resources shall not remain with suppliers of semi-finished products. What happens if organizations upstream of material suppliers start trading raw materials (unprocessed or minimally processed materials) without exchanging ownership?
In the future, mining companies could lease raw materials from material suppliers using access-based business models, thereby offering minerals as a service. Going further, nation states could stop giving exploration or mining rights over certain lands to mining companies – instead, they could provide them with “mining license” permits that allow companies to exploit but not own the raw materials extracted. For example, a nation state might lease iron ore from a mining company, which would then supply it to a steel and iron supplier. Ownership of mined minerals would remain in the country of origin and “mining license” permits would come with the expectation that the mined resources would eventually be returned to nation states in their original or transformed form.
What are the challenges ahead for this sustainable economic model?
In an access economy, the complexity of modern end products will make it difficult to retrieve components, materials and minerals incorporated into products and route them (back) to specific material suppliers. Therefore, current production and consumption systems and goods will have to be redesigned to serve the model. In particular, the goods will have to be optimized for reuse and recycling, and digital information will be integrated into them to ensure traceability.
Infrastructure will have to be created to intercept, separate, sort and recycle materials. Additionally, all organizations in the value chain will need to adopt strategies for creating shared value and investing in ongoing collaborative relationships with partners rather than linear, transaction-driven relationships. Finally, meeting these challenges will not be possible without the development of policies and changes in culture and mentality on the part of governments, companies and consumers.
Chemical leasing is an example of a component-as-a-service business model that provides the function or performance of chemicals in the manufacturing process. However, it lacks the dimension of the return of chemicals at the end of use, which is essential for a true circular solution.
Where are we going to start?
The extension of business models based on access to the entire value chain implies a systemic change in our production and consumption systems. This requires a comprehensive review of resource flows for finished, semi-finished and raw products. Parties with a stake in resource flows must come together to rethink asset ownership – across all three states – to identify opportunities to create commercial value and achieve lasting impact. Simultaneous implementation of multiple access-based models might be appropriate in some value chains. Shifting to new business models with new incentives can ensure that value chains are truly sustainable and help companies play their part in protecting the earth and its resources.