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“Keep 1.5 degrees alive” became the mantra of the 26th United Nations Climate Change conference (COP26). This simple phrase demonstrates how difficult it has become at this point to reach the goals set in the Paris Climate Change Agreement.
While the agreement of the new Glasgow Climate Pact isn’t perfect, and the critique about insufficient momentum from leaders and governments to increase 2030 climate targets was loud and clear, it does leave room for hope. An analysis by Climate Action Tracker shows that if all the announced net zero commitments or targets under discussion are implemented, it would bring the temperature estimate down to 1.8°C by 2100, with peak warming of 1.9°C. This is the “optimistic scenario” – with the current pace of policy implementation, the more “realistic scenario” estimates an end-of-century warming of 2.7°C.
While the agreement has a strong focus on the protection of precious natural habitats, it doesn’t talk much about the handling of other natural resources that are key to all kinds of industries. It is fact that the world is plowing through its natural resources at a stunning pace. According to the Global Resources Outlook 2019 report, half of total greenhouse gas emissions come from natural resource extraction and processing. Also, while the world’s population has doubled in the past 50 years, we have more than tripled our use of natural resources.
The need for a circular economy
That’s the reason why, as an example, the European Green Deal is calling on all countries – and not just the largest producers – to make considerable progress to achieving a circular economy. It is essential in order to achieve climate neutrality by 2050. The most recent point on the circular economy action plan of the European Commission is the adoption of an initiative that will require companies to substantiate claims they make about the environmental footprint of their products and services by using standard methods for quantifying them.
This push towards embedding sustainability into the design of a product is sorely needed, as the Circularity Gap Report 2021 shows. Instead of growing, the circular economy is actually declining with only 8.6% of the global economy being circular in 2020, down from 9.1% two years previously.
This is because the transformation towards circular economy is very hard to achieve for individual companies. For example, it requires a costly and complex transformation of the entire design and development process to ensure that the components used in production are more durable and suitable for repairing, reconditioning, and – ultimately – refurbishing.
As-a-Service – breaking patterns of mismatched supply
At the same time, circular economy requires a shift in the way we do business. Instead of purchasing and installing huge amounts of equipment that are underutilized, industry needs to move on to an as-needed model. Adopting a “product-as-a-service” business model is one of the most impactful changes we can make today. It not only makes our economy more circular by breaking established patterns of mismatched supply and demand; it also has the potential to generate significant growth opportunities for any industry.
Companies need to part with the old and commoditized business whereby they sell a product and consider their job done, following a prevalent “out of sight, out of mind” mentality. With as-a-service the producer retains ownership of – and responsibility for – the product throughout its entire life cycle. Whereas the customer has full use of the product for as long as is needed, paying only for when it is actually used, instead of for the product itself or its upkeep.
The producer, in turn, is responsible for building a quality product that lasts, and is energy and material efficient. It is also their role to take the product back and prepare it (or its components) for reuse. This way the product-as-a-service model is a very viable option for companies seeking to achieve sustainability objectives and contribute to a more circular economy.
For example, daa, the company that owns and manages the two largest airports in Ireland, needed to upgrade its servers and storage systems. They decided to leverage an as-a-service offering enabling them to upcycle existing systems, rather than just scrapping its old technology, and purchasing new equipment. This allowed daa to take the residual market value of the old IT and apply it to the cost of the new as-a-service model. Furthermore, by extending the life of old technology rather than it becoming e-waste, daa was able to meet its sustainability objectives.
Using IT as the lens by which to view the as-a-Service model, here are three typical as-a-service outcomes that are making a real difference:
1. The elimination of overprovisioning; a common practice in which companies “overbuy” IT In the average data center, 25% of computer resources are not doing useful work and the remaining resources are operating at a small fraction of their capacity. This means higher costs and unnecessary consumption of power, space, and cooling. Consequently, by switching to as-a-service, costs and energy use will significantly decline.
2. Organizations are freed from being chained to their IT kit for the whole of its lifecycle
Thanks to an as-a-service arrangement, a company’s IT equipment can be rapidly upgraded to the latest, more energy-efficient technologies without worrying about any capital costs. That’s a critical option for companies, as inefficiencies of aging equipment means that 65% of the power used by IT in data centers is used to process just 7% of the work.
3. Taking back IT assets at the end of their use
When looking for as-a-service providers, it is important to consider vendors with refurbishment services in house who can help keep e—waste out of landfills. For example, my company, Hewlett Packard Enterprise (HPE) has state of the art technical renewal centers that processed more than 3.1 million units of technology in its Technology Renewal Centers in 2020. Close to 90% of this equipment was
remarketed and returned to active use; the rest was responsibly recycled. This is the result of 20 years’ experience in the refurbishing business and a consequent shift towards an as-a-service business model.
A global trend
The seeds of as-a-service are being planted across many different sectors. Signify, formerly known as Philips Lighting, sells “light as a service” to customers. The company cites figures of up to 80% savings in energy consumption. Kaeser Kompressoren sells compressed air as a service. Desso, a global supplier of carpets for commercial use, designs carpets according to the cradle-to-cradle principle meaning that the company can lease its carpet tiles – taking care of the installation, maintenance, return and recycling.
However, it’s important not to underestimate the paradigm shift that moving to as-a-service entails for a company, ideally as part of a broader business and digital transformation strategy that embeds sustainability within it.
Offering as-a-service solutions requires the overhaul of a company's business and digital transformation strategy but yields significant benefits for all – most importantly to keep 1.5 degrees alive.