Circular Economy in the Building Industry

Integrating the the Circular Circular Economy Economy in in the the Integrating Building Industry: Industry: Explorationf Exploration of Building ofHow how Product-Service Systems Systems Could Could Contribute Contribute Product-Service Cyrus Bohn Cyrus Bohn

Thesis voorgedragen tot het behalen van de graad van Master of Science in de ingenieurswetenschappen: architectuur Promotor: Prof. dr. ir. Karen Allacker Assessoren: Prof. dr. ir. Frank De Troyer Prof. dr. ir. Karel Van Acker Begeleiders: Ir. A. Assistent D. Vriend

Academiejaar 2015 – 2016

Master of Science in de ingenieurswetenschappen: architectuur Academiejaar 2015 – 2016

© Copyright KU Leuven Without written permission of the thesis supervisor and the authors it is forbidden to reproduce or adapt in any form or by any means any part of this publication. Requests for obtaining the right to reproduce or utilize parts of this publication should be addressed to dept. Architecture, Kasteelpark Arenberg 1/2431, B-3001 Leuven, +32-16-321361 or via e-mail to secretariaat@asro.kuleuven.be.

A written permission of the thesis supervisor is also required to use the methods, products, schematics and programs described in this work for industrial or commercial use, and for submitting this publication in scientific contests.

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Integrating the Circular Economy in the Building Industry Exploration of how product-service systems could contribute

KU Leuven Master Thesis written by Cyrus Bohn

Foreword

It was in a class on Ecodesign and Life Cycle Engineering taught by Professor Duflou that I was first introduced to the concept of product-service systems (PSS) and the circular economy. Almost immediately I was wondering if this could be applied in the building industry.

A few months later, rather unexpectedly, this idea became the subject of my master thesis.

The year that followed has proved to be an interesting journey through the world of the linear economy and circular economy, PSS, and all its applications in the building industry.

I would like to thank Professor Karen Allacker for the very valuable advice and help she has provided throughout the year. Frequent meetings, constructive guidance, and excellent proof reading have formed the cornerstones of a thesis that was constantly redefining itself.

Lastly, I would like to thank my family, Anneleen, and my friends for the moral support they have provided during this journey.

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Table of Contents

Foreword 5 Table of Contents 6 Abstract 10 Korte Inhoud 11 List of Figures 12 List of Abbreviations 15 Introduction 17 Research Questions 17 Scope 17

Research Approach and Structure of the Thesis 19 1. Defining the Linear Economy 23 Climbing Resource Prices 24 Waste Generation 24

Future Needs 26

Linear Economy in the Building Industry 26 2. Defining the Circular Economy 29

Circular Economy Foundations 29 Biological Nutrients versus Technical Nutrients 30 From Consumption to Use 30 Short Examples 32

3. Economic Advantage of the Circular Economy

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Circular Business Models 35 Circular Economy Throughout Industries 35 The Circular Economy Potential in Flanders (Belgium) 38

4. Ownership versus Product-Service Systems 39

Shift in Mind-set 39 Different Types 41

5. Product-Service Systems as Circular Solution in Buildings

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Product-Service Systems in Buildings and Building Components 44 Six Building Layers of Brand 45 Four Building Layers of Cheshire 48 Internet of Things and Building Information Model 50 Design for Disassembly (DfD) as Facilitator for Product-Service Systems 51

6. Circular Economy Case Study in the Building Industry

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Company: Philips Lighting 54 Philips Lighting 54 Thomas Rau Architects 54 Schiphol 56 National Union of Students (NUS) 56 Technical & Design Analysis 57

Company: Interface Evergreen Service Agreement 64 Interface 64 Evergreen Service Agreement 65 Recovery of Resources 67

Company: Akoestiekfrabriek 70

Company: Turntoo 71 Consulting for Circular Business Models 71

Company: Desso 73

Building: Brummen Town Hall 76 Introduction 76 Energy 76 Materials 77 Product-Service Systems 78

Building: Skilpod #48 80 Mission and Core Values 80

Skilpod Product-Service System (PSS) 80 Leasing Scenarios 86 Pod #48 88 Sustainability Burden Due to Transportation 88 Refurbishment Scenario 90 Dismantlement Scenario 91 Analysis & Conclusion 99

Looking Back on PSS 99 PSS in the Building Industry 101 Suggestions for Further Research 104

Bibliography

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Abstract

Recently, there has been an increased interest for the concept of a circular economy which aims to design out waste and reduce resource usage. A cornerstone of the circular economy is the shift from consumption to use. A way for companies to integrate this shift in their business models is to work with ProductService Systems (PSS).

The research in this thesis explores the definitions of the linear economy and the circular economy. In particular, PSS are studied. Simultaneously these topics are linked to the building industry. Lastly, this thesis focusses on seven cases of PSS in the building industry. These cases are analysed to evaluate their environmental impact and economic potential.

The linear economy and its ‘take-make-dispose’ mantra puts an unwarranted pressure on our environment. It is subjected to climbing resource prices and suffers under its own uncontrollable waste generation. We see that the building industry is also subjected to this linear pattern and is a main producer of waste.

The circular economy provides an alternative to this linear pattern. By looking at the foundations of the circular economy and four small cases outside the building industry, we see that a shift from consumption to use can provide manufacturers with incentives to reduce their waste production and optimise their resource usage. The circular model also generates economic opportunities.

result oriented PSS. We see that in the context of the circular economy and the building industry the use oriented PSS are suited to incentivise manufacturers to reduce their waste production and resource usage. However, this may not be generalised as research has shown that use oriented PSS may not always be the alternative with the lowest environmental impact. By means of dividing buildings into layers as developed by Brand (1995) and

by Cheshire (2014) we explore potential applications of use oriented PSS in the building industry. Design for Disassembly (DfD) is proposed as a methodology to facilitate the incorporation of use oriented PSS in building components.

The analysed cases consist of five companies active in the building industry and two buildings built based on circular concepts.

Because of the scarcity of available and existing information on the environmental impact of these PSS a general conclusion could not be made. However, when looking on a case by case basis we can separate those cases that use the circular economy solely for marketing purposes and those that truly aim to reduce their environmental impact.

The concept of PSS is further elaborated by looking at the different existing types of PSS such as product oriented, use oriented, and

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Korte Inhoud

De circulaire economie en zijn toepassing heeft recentelijk genoten van een toegenomen aandacht. Dit economisch model doelt er op om afval volledig te elimineren door onze huidige manier van produceren en consumeren te veranderen. Ook wordt er gestreefd naar een vermindering in verbruikte grondstoffen. Een van de basisbeginselen van de circulaire economie is het doorvoeren van een verschuiving van consumptie naar gebruik.

Door middel van Product-Dienst Combinaties (PDC) kunnen bedrijven deze verschuiving integreren in hun business modellen.

Het onderzoek in deze thesis bekijkt de verschillende definities van een lineaire economie en van de circulaire economie. Er wordt ook dieper ingegaan op het concept van PDC. Telkens wordt de link gelegd met de bouw industrie. Vervolgens kijken we naar verschillende voorbeelden van PDC in de bouw sector. We bekijken of de voorbeelden hebben toegedragen tot een afval vermindering en een betere omgang met grondstoffen.

zijn als toepassing in de bouw industrie omdat ze producenten er kunnen toe aanzetten om hun afval productie en grondstoffen gebruik te verminderen. Onderzoek heeft aangetoond dat deze uitspraak niet veralgemeend dient te worden aangezien PDC niet altijd het meest ecologische alternatief blijken te zijn. Door vervolgens te kijken naar verschillende gebouw lagen, zoals deze ontwikkeld door Brand (1995) en door Cheshire (2014) krijgen we een idee van het potentieel voor PDC in onderdelen van gebouwen.

Deze thesis analyseert 7 cases bestaande uit vijf bedrijven en twee gebouwen. Door het gebrek aan beschikbare of bestaande informatie over de ecologische impact van deze PDC, is het onmogelijk gebleken om een algemene uitspraak te maken hieromtrent.

Desalniettemin kan er een onderscheid gemaakt worden tussen de bedrijven die de concepten van de circulaire economie promoten voor marketing doeleinden en de bedrijven die trachten PDC toe te passen vanuit een duurzaam oogpunt.

De circulaire economie biedt een alternatief voor het klassieke lineaire patroon dat onze economie momenteel hanteert. Een verschuiving van consumptie naar gebruik kan producenten ertoe aanzetten om minder afval te produceren en beter om te gaan met grondstoffen. Dit wordt aangetoond door 3 korte voorbeelden die buiten de bouw industrie vallen. We zien ook dat de circulaire economie ook zekere economische voordelen met zich mee kan brengen.

Er wordt vervolgens dieper ingegaan op PDC door te kijken naar mogelijke varianten. We zien dat use oriented PDC het meest geschikt

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List of Figures

Figure 1: Cover image. Intertwined resource loops form the base of the circular economy.

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Figure 2: Research approach. 20 Figure 3: The linear economy as repeating pattern of take, make, use, and finally dispose.

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Figure 4: Sharp price increases in commodities since 2000 have erased all the real price declines in the 20th century. (McKinsey Commodity Price Index (years 1999-2001 = 100) (own adaptation of Ellen MacArthur Foundation, 2012, p. 18) 25 Figure 5: Construction and demolition (C&D): A noteworthy opportunity (own adaptation of Ellen MacArthur Foundation, 2012, p. 17) 25 Figure 6: The circular economy aims to eliminate waste and close resource loops of technical and biological materials (own adaptation of Zils, 2014 and Circular Economy System Diagram, 2016). 31 Figure 7: Case study for washing machines in a circular business model (own adaptation of Circular Economy Case Study - In depth - Washing Machines, 2016).

32 Figure 8: Different financial scenarios for power-drill business models (Own adaptation of Zils, 2014).

34 Figure 9: Different sectors have different potentials for circular business models (own adaptation of Ellen MacArthur Foundation, 2012, p. 66 ) 36 Figure 10: The transition and advanced scenario show a high potential amount of material cost savings after the adoption of the principles of the circular economy (own adaptation of Ellen MacArthur Foundation, 2012, p. 67) 37 Figure 11: There are different types of product-service systems (PSS)(own adaptation of Deckmyn, Leyssens, Stouthuysen, & Verhulst, 2014, p. 37) 40 Figure 12: The different drivers and barriers for PSS (own adaptation of Deckmyn, Leyssens, Stouthuysen, & Verhulst, 2014, p. 39). 42 Figure 13: The building layers of Brand ( own adaptation of Brand, 1995).

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Figure 14: Picture of the window that will be disassembled (Quarshire, & Watkinson, n.d., p. 6). 46 Figure 15: The four building layers as proposed by Cheshire (own adaptation of Cheshire, 2014, p. 3).

49 Figure 16: High transformation capacity equal high sustainability (own adaptation of Durmisevic, 2006, p. 94). 51

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Figure 17: Conceptual representation of the shift from fixed towards dynamic assemblies (Paduart, 2012, p. 189). 53 Figure 18: Effective systems management resulted in a total energy reduction of 55% – 35% as a result of the LED installation, but also through optimisation by Philips; another 20% reduction was achieved ( Ellen MacArthur, 2015) 55 Figure 19: When proposing a PSS the manufacturer has an incentive to reduce its amount of used resources. 56 Figure 20: Philips ‘state-of-the-art’ lighting systems at NUS London Offices (NUS, 2016).

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Figure 21: Osram Parathom Classic A (OSRAM, 2016).

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Figure 22: Cumulated Energy Demand and Global Warming potential of a Parathom Classic A (own adaptation of OSRAM, 2016). 58 Figure 23: LED trends show efficacy increasing based on Haitz’s Law (Kim, 2014).

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Figure 24: Standard MR16 and MR16 with braking seems (Aerts, 2015, p. 7-8).

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Figure 25: Comparison of different Philips lighting products on the circular economy scorecard (Aerts, 2015, p.18). 61 Figure 26: Philips adapted its SL Mini Poly model for the Schiphol leasing contract to strongly enhance its disassembly, maintenance and upgradeability (Aerts, 2015, p. 22).

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Figure 27: Philips is working on an Eco fixture that perfectly integrates the circular ideas. No extra information on this project could be found (Aerts, 2015, p.19).

62 Figure 28: Cumulative savings from global waste elimination activities by Interface (own adaptation of Oliva, & Quinn, 2003, p.14) 68 Figure 29: Through the Carpet Lease PSS Desso aims to close its resource loops (Desso, 2016, p. 41).

73 Figure 30: The Desso Carpet Lease PSS has already been applied in several office buildings (De Bisschop, 2015, p.7) 74 Figure 31: Front view of the town hall and its extension (RAU, 2013, p. 2).

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Figure 32: Inside the extension of the town hall with. The glass roof, CLT strucutre, and welcome desk can be observed (RAU, 2013, p. 4). 79 Figure 33: Model #48 (Vanhertum, 2015). 81

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Figure 34: Floor plan of model #48 (Vanhertum, 2015).

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Figure 35: The living room of #48 has a very spacious feeling (Vanhertum, 2015).

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Figure 36: The #48 has one bedroom (Vanhertum, 2015).

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Figure 37: Two possible scenarios for a pod, refurbishment and dismantlement.

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Figure 38: A simplified representation of the Skilpod PSS.

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Figure 39: The size of the crane has a large impact on the overall price of the installation.

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Figure 40: Mockup of a construction detail. 93 Figure 41: Cross-section of a pod. 93 Figure 42: Frame of wood studs. 95 Figure 44: Close up of the complete building envelope.

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Figure 43: The building envelope without wooden slates.

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Figure 45: The wooden slates are fixed with a nail gun.

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Figure 46: Krinner M-Serie ground screws. 97

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List of Abbreviations

MECE

Mutually exclusive and Collectively Exhaustive

CRM Critical Raw Materials OECD

Organisation for Economic Co-operation and Development

AFAM American Folk Art Museum MoMA Museum of Modern Art PSS Product-Service Systems DfD Design for Disassembly IoT Internet of Things BIM

Building Information Model

NUS National Union of Students LCA Life Cycle Assessment LED Light-Emitting Diode PCB Printed Circuit Board LCC Life Cycle Costing ESA Evergreen Service Agreement PVC Polyvinyl Chloride FASB Financial Accounting Standards Board DLL De Lage Landen CLT Cross Laminated Tinder FSC Forest Stewardship Council ESCO Energy Saving Company DBFM Design Build Maintain Manufacture

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Introduction

Research Questions: How can product-service systems (PSS) as part of a circular economy, when applied to the building industry, contribute to a more sustainable built environment?

What is a linear- and what is a circular economy?

What are existing product-service systems in the building industry?

Are product-service systems in the building industry a sustainable solution for waste reduction and increased resource efficiency?

Our society and way of doing business largely consists of a linear pattern. In combination with an ever globalising market and pressurising investment conditions this has led to a far from optimal way of designing, marketing, and selling of products and services (Ellen MacArthur Foundation, 2012). To understand what a linear economy implies this thesis first explains the core concepts and their consequences related to a linear economy in chapter 1. Within this chapter this thesis discusses how the linear economy reflects itself on the building industry as it implies that projects are built, used, and most of the time disposed at the end of their service life.

However, recently, the idea of a circular economy model has gained traction. The driving forces behind this evolution are partly that of an increased concern for sustainability and the economic profits and opportunities that come with it. Before we can discuss and

apply the core ideas of circular thinking and the circular economy it is crucial to clearly define its intentions and consequences.

Moreover it will be a first opportunity to highlight the main differences between the linear and the circular ideas.

Every ecological innovation needs an incentive.

There are different kinds of incentives at hand but the foremost still remains the economic incentive. Others are forced regulation from a government or environmental influences. A lot of companies do not see sustainability threats as a concern that could disrupt their business models (Deloitte Touche Tohmatsu, 2013). For this reason it is crucial for the circular economy to provide economic advantages to the companies if to be more broadly implemented.

Chapter 3 discusses some economic advantages of implementing circular ideas into business models.

One of the core concepts that supports the circular idea is the shift from ownership towards use. The concept of these productservice systems (PSS) is elaborated in chapter 4. PSS can be seen as a counter movement of the ‘planned obscolescence’ that has been engineered in many consumer goods. There are different types of PSS. This thesis focuses on the use oriented PSS, as the use oriented PSS can have a potential positive influence on the environmental impact of our built environment. Chapter 5 explores the general possibilities of use oriented PSS in the building industry. By dividing up buildings in different layers it becomes easier to grasps the potential of the PSS. We see that to be able to implement PSS into building components, these components will have to be designed for

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disassembly. How this affects PSS is described in the final part of chapter five.

In chapter 6, this thesis elaborates several cases of past, present, and future PSS oriented business models in the building industry.

With the aim of analysing their environmental impact and economic soundness the cases are thoroughly analysed. Many lessons can be learned from the companies and creators that have successfully and unsuccessfully implemented PSS in their business models.

In the final chapter an analysis is made of the insights gained throughout the previous six chapters. Moreover conclusions are drawn and suggestions for further research are made.

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Research Approach and Structure of the Thesis This master thesis and its consequent research is divided in four parts: the explorative part, the literature part, the cases, and the analysis & conclusion. Even though represented in picture 2 as linear, the research process for this master thesis proved ot be rather circular. Through a constant questioning and re-iteration of previously written chapters a high standard of quality is sought.

To increase the comprehensiveness of the document, the different parts of the thesis are composed in such a way to be mutually exclusive and collectively exhaustive (MECE).

The MECE principle is more of an idea to work from than an actual goal. It is inevitable that certain chapters, parts, and cases partly address topics from other chapters, nonetheless the MECE principle is a good idea to keep in mind to make sure the final answer is reached in a clear and comprehensive manner.

The explorative part consists of getting acquainted with the topic to explore the link between the building industry and the circular economy and its consequential shift from consumption to use. By searching, reading, and studying different documents and reports on the topic the research questions and scope of this thesis are established.

The literature part is sub-divided in four different sections that cover the first and second research questions in five chapters.

These are developed through an extensive literature review of existing definitions and documents. It should be mentioned that

many of the documents found online, in libraries, and in scientific databases remain quite superficial. Documents that present the hard numbers behind the proposed solutions and ideas remain rare. However, some very comprehensive documents by the Ellen MacArthur foundation, the European Commission, and others are available and provide a deep and substantiate explanation of the linear economy, the circular economy, and product-service systems (PSS). Besides the literature study, conferences and lectures were attended that could potentially provide more details on PSS in buildings. However, the professionals present at these events were not able to provide specific information on the topic but often guided me to closely related research such as Design for Disassembly.

Through this literature study of the circular economy, the linear economy, PSS, and PSS in buildings in general, a compilation of existing ideas in the building industry is found. One of the main observations while researching is that there is a plethora of useful ideas present but these are all scattered throughout different sources and documents. The cases part, developed in chapter 6, provides an overview and analysis of several examples of PSS in the building industry.

The cases were selected based on available documentation, sustainability potential, and overall appeal of the idea. Once the selection is made the cases are developed with the available information that can be found in libraries, the internet, and databases. When possible, extra information is obtained through e-mails, interviews, site visits, phone calls or internal document transfer.

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Explorative Study: - Literature - Online - Classes

Research Questions

Linear Economy - Literature - Online

PSS

Circular Economy

- Literature - Online

- Literature - Online

PSS in Buildings: - Literature - Online - Conferences

Cases Companies Philips - Literature - Online - Internal documents - Personal communication

Buildings

Interface

De Akoestiekfabriek

Brummen

- Literature - Online

- Literature - Online - Personal communication

- Literature - Online

Desso - Literature - Online - Internal documents - Personal communication

Turntoo - Literature - Online - Personal communication

Skilpod - Literature - Online - Internal documents - Personal communication

Conclusion Figure 2: Research approach.

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With the aim to investigate if the PSS proposed by the companies and buildings are sound solutions for waste reduction and an increased resource efficiency the cases are introduced, analysed, and critically discussed.

As economic interest is of crucial importance to companies and the development of new PSS in the building industry, some of the cases also include information on their respective business models and how they do or do not contribute to the success of the PSS. Lastly, the conclusion part reflects on all the insights and information obtained in the three previous parts. The conclusion groups the different design-, business-, and management measures for building components that can facilitate the development of PSS found in the second and third part. Finally, the conclusion also proposes several ideas for further research on the topic of PSS in the building industry and extra cases that can be analysed.

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Defining the Linear Economy

Short: This chapter explains the basic concept of a linear economy and its implications. It then goes on by looking at possible problems due to climbing resource prices, waste generation, and other future needs. To conclude this chapter explores the linear economy in the context of the building industry.

Chapter 1

For the purpose of defining the linear economy in a clear and concise manner some simplifications are needed. The most straightforward one would be to describe the linear economy as a system relying on a ‘takemake-dispose’ pattern as it has been called by McKinsey, a management consulting firm, in a recent report in association with the Ellen McArthur Foundation (2012) and by the European Commission (2014) in a document

on the potentials of the Circular Economy. In this ‘take-make-dispose’ pattern raw materials are first extracted. By adding energy they are then upgraded to become a manufactured product. Lastly the product is sold to the end consumer who disposes it when the product is partly broken or when it no longer fulfils the consumer’s purpose, without taking the residual value into concern. This, of course, is an over-simplified version of reality, as a lot of progress has been made towards systematic recycling and increased resource efficiency.

Nonetheless, there is still a fundamental loss of resources and money throughout this linear chain. As a consequence it puts an unwarranted pressure on the environment and is thus inherently unsustainable (Ellen MacArthur Foundation, 2012).

Recycle (?)

Take

Make

Resources

Use Waste

Distribute

Dispose

Recycle Refurbish Reuse Figure 3: The linear economy as repeating pattern of take, make, use, and finally dispose.

Technical Materials

Maintenance

Take Resources

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Use

Parts Product Distribute

Waste

Dispose

Several observations can be used as arguments to prove that the linear model is not sustainable in the middle- and long-term future. The following paragraphs highlight some of the unsustainable aspects to which the linear model is exposed.

Chapter 1

Climbing Resource Prices

Within this linear economic model the 20th century has been marked by economic growth in surging economies which has been supported by declining resource prices. In contrast with surging labor costs, the low prices to acquire input materials and their cheap disposal has led to a system where economic efficiency gains have come from using more raw materials, and energy for less labour costs (Dobbs, Oppenheim, Thompson, Brinkman, & Zornes, 2011).

Raw-material markets are increasingly volatile and the security of supply of these so called Critical Raw Materials (CRMs) has become a high-priority topic in the agenda of the European Union. Companies are increasingly exposed to the risk of higher resource prices as they are rising and become unpredictable.

Moreover, when sources of easily reachable resources are fully depleted the extraction of harder to reach resources means more energy intensive mining and refining, resulting in higher greenhouse gas emissions and higher prices (Tomellini, and Alming, 2013). Because of urbanisation, an increasing population, and increasingly convoluted resource extraction, unpredictable volatility and high prices of resources is a possible scenario for the future. If products could be designed to be disassembled, refurbished, and reused, the dependency of

new raw material input can be decreased.

In contrast with recycling, which focusses solely on the repurposing of select remains of products after their end of life phase, a circular economy of disassembly, refurbishment, and reuse would require decisions on design of products to be made from the very first phases of extraction and production to benefit from the advantages of a circular system (Mancini, De Camillis, & Pennington, 2013).

Waste Generation

Along the life cycle of products in the linear economy many forms of waste can be observed. A high amount of material is lost in the life cycle chain between mining and manufacturing (Ellen MacArthur, 2012). It is estimated that every year in the OECD countries 21 billion tonnes of resources are consumed that aren’t physically incorporated into products (Materialflows., n.d.). This means that these materials are discarded before they can enter the economic system. Of the materials that make it into the consumption chain only 40% is at its end of life stage reused, recycled, or composted and digested (UNEP, 2011). In the building industry rubble that is produced during the construction and demolition of building accounts for 26% of the total non-industrial solid waste produced in the United States while construction waste accounted for 33% of the total EU-28 waste production in 2012 (Eurostat, 2012). These often consist of many recyclable materials such as steel, wood and concrete. In the US, of the total construction and demolition waste only 20 to 30% is recycled or reused (US E.P.A., 2009, p.6). This number could significantly be increased if buildings were to be designed for

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Figure 4: Sharp price increases in commodities since 2000 have erased all the real price declines in the 20th century.

(McKinsey Commodity Price Index (years 1999-2001 = 100) (own adaptation of Ellen MacArthur Foundation, 2012, p. 18)

Chapter 1

Figure 5: Construction and demolition (C&D): A noteworthy opportunity (own adaptation of Ellen MacArthur Foundation, 2012, p. 17)

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disassembly, refurbishment and reuse.

Chapter 1

When a material or product is discarded in landfill the residual energy it possesses is lost. When landfill is avoided, recycling or incineration can only recover a small part of the energy that could be saved if the product or material was reused (Ellen MacArthur Foundation, 2012). Landfilling can cause long-term risks for human health and the environment. Gases produced by landfill can consist up to 50% methane, a gas with over twenty times more greenhouse effects than CO2 (Tomellini, and Alming, 2013, p. 2).

Another problem that arises from our linear economy is the erosion of ecosystem services.

These are the indirect services provided by ecosystems that support human wellbeing, like forests, food provision, ecological control of pests and diseases, etc. (Ellen MacArthur Foundation, 2012). In a report called the Millennium Ecosystem Assessment it is demonstrated that 15 out of 24 Ecosystem Services are being used unsustainably and human consumption is thus reducing Earth’s natural capital (DeFries, Pagiola, et al., 2005).

This of course has tremendous economic repercussions.

Future Needs Demographic challenges will also occur in the near future. McKinsey estimated that by 2030, through economic growth in countries like China, India, and other emerging markets there will be 3 billion new middle-class consumers (McKinsey Global Institute, 2011).

These people will need bigger and better housing and that at a demand pace that will be

steadily increasing. This underlines the need of circular ideas to be implemented into business models for the building industry.

Other challenges that will speed up the need to move towards a circular economy are: Infrastructure needs for a larger population and harder-to-access resources. Political risks, as throughout history political decisions have had a big influence on commodity prices.

Globalised markets, this means that regional price shocks can have global consequences and thus a more resilient system is needed. And, finally, climate change. Variations in regional climates will possibly disrupt many resource industries, this again has a huge potential to drive up prices and an increased volatility (Ellen MacArthur Foundation, 2012).

Linear Economy in the Building Industry In a 2014 communication to the European Parliament, the European Commission stated that the construction industry accounts for about half of all of the European extracted materials (European Commission, 2011), half of the energy consumption (European Commission, 2007), and about a third of the water consumption (European Commission, 2007). The construction industry also accounts for about one third of all the generated waste in the EU (Eurostat, 2012). The European Commission also believes that there is a lot of room to increase the efficient use of resources consumed by new and renovated commercial, residential, and public buildings and to reduce their overall environment impacts throughout the life cycle (European Commission, 2014).

The U.S. Environmental Protection Programme

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has calculated that in commercial construction an average of 19 kg waste per m² of building area is produced. Moreover, the demolition of buildings generates on average 756,8 kg of waste per square meter of building area (Modular Building Institute, 2010, p.9). These high amounts of waste once again demonstrate the resource inefficiencies that exist within the building industry.

While the origins of planning legislation relate to the control of pollution, subsequent planning policies relate more to economic factors and social planning with a more recent move to recognise current environmental issues. In addition, the decisions relating to the siting, design and construction of buildings may be distorted by governmental actions such as subsidies and investment grants, or tax regimes which favour maintenance costs over capital investment influences; commercial influences such as land and property prices, possibly distorted by planning zones; and marketing policies which do not permit comparison of the “real cost” of materials or construction techniques based on sale price. Current structures, therefore, do not favour the promotion of ecologically sound

Besides the lack of sustainability and resource inefficiencies in the sector there are examples of different cases where we can observe buildings that have been constructed 10-20 years ago that are already in such a state that renovation is not an economic option and total demolition is the only solution. We are all familiar with the dusty construction rubble that looks like an inert mass of highly unusable waste. This rubble goes into landfill and its resources are lost.

Chapter 1

Improving the sustainability and resource efficiency of a building is often seen as an extra cost burden for the operator. These operators will either absorb these costs or pass them on to the customer if they want to maintain their profit margin and competitive edge (Ball, 2002). The linear model is enshrined in our current public planning policies. Ball puts in the following way:

development. Environmentally conscious buildings still tend to be noted as exceptions rather than the commonplace (Ball, 2002, pp. 421-422).

‘We’re playing a game of monopoly where everyone is losing’ says Graham Hilton, director of the Alliance for Sustainable Building: People can’t afford the homes they want, builders can’t afford to deliver the quality of buildings we want; there’s a huge gap in what’s designed and what’s delivered.

Buildings don’t last as long as they should and banks don’t feel confident enough to secure loans against them (Hilton, 2014).

After the London Olympics, a 10.000 tons steel roof from one of the buildings built for the occasion was offered to Yooz, a company that focuses on building waste reuse. Yooz could have used it for a large sports centre for disabled people in Glasgow but unfortunately due to deconstruction and transporting costs buying a new roof turned out to be cheaper than repurposing the old one. It is astonishing that a building that is constructed for a 12-day event is not designed in a way that its parts can easily be deconstructed and reused. This

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Chapter 1

example shows the state of mind that currently rules many construction projects (Cahalane, 2014). Another example of unfortunate resource inefficiency and early obsolescence of a building is the recent commotion concerning the American Folk Art Museum (AFAM).

The MoMA (Museum of Modern Art) has decided to follow Diller Scofidio + Renfro’s recommendation, a leading architecture practice, to demolish the AFAM, just thirteen years after its official opening (Zeiger, 2014).

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Defining the Circular Economy

Short: This chapter explains the basic premises behind the concept of a circular economy. The foundations, principles, and characteristics of the circular economy are explained and the difference between biological and technical nutrients is pointed out. Consequently, the aspect of the circular economy on which this thesis focuses, namely the shift from consumption to use, is introduced. Finally, four short examples of circular business models are given. These examples include: Ricoh printers, washing machines, power drills, and Michelin tires.

Circular Economy Foundations The ultimate –yet logically unattainablegoal of the circular economy concept is to completely eradicate waste through design.

The Ellen MacArthur Foundation explains that the circular economy aims to keep products, components and materials at their highest utility and value at all times. The theory is based on the observation that we live in a world where nature does not create landfill. One’s waste is another one’s food. Our manmade society however, as explained in chapter one, has adopted a linear pattern where waste goes (most of the time) into landfill. The circular economy aims to break this line and tries to ensure resources are not lost by creating cycles.

The Ellen MacArthur Foundation proposes three principles on which the circular economy is based. The principles are a way to address the challenges and resource problems our industries face today (“Circular Economy Principles”, 2016).

Firstly, a circular economy aims to preserve and enhance our planet’s natural capital by controlling finite stocks and balancing renewable resource flows. This means that we need to control the finite stocks of resources by adjusting and balancing the resource flows.

This starts with reducing the amount of needed resources that are extracted. In the cases where resource extraction is inevitable this should be done through energy - and resource efficient technologies. Another way to reduce the needed amount of retracted resources is to encourage models that enable resources to stay within their respectable systems which create more opportunities for waste reduction (Ellen MacArthur Foundation, 2015).

Chapter 2

The circular economy is often said to be a congruence of different schools of thought.

The concept has its roots in these different revolutionary ideas: Cradle to Cradle, Performance Economy, Biomimicry, Industrial Ecology, Natural Capitalism, Blue Economy, and Regenerative Design (“Cradle to Cradle in a Circular Economy - Products and Systems”, 2016)

Loops that make the goods of today become the resources of tomorrow (Ellen MacArthur Foundation, 2016), (“The Circular Economy Concept - Regenerative Economy”, 2016).

Secondly, resource yields need to be optimised.

This is achieved by circulating products, components, and materials in cycles where they can retain utility and value. By designing for reuse, remanufacturing, refurbishing, and recycling the product, components, and materials can thus form inner loops within the system. Moreover, extension of product life is encouraged as it makes the completion of loops slower (Ellen MacArthur Foundation, 2015).

29

Thirdly, effectiveness of the systems must be ensured and negative externalities should be designed out (Ellen MacArthur Foundation, 2015).

Chapter 2

Biological Nutrients versus Technical Nutrients There are two types of cycles that are considered within the circular economy.

The biological cycle encompasses the flow of renewable nutrients. These nutrients are biologically regenerated after their consumption. The biological nutrients are the nutrients often called biodegradable. The technical cycle refers to these materials that are not biodegradable. These technical nutrients can be recovered and reintegrated in the technical cycle. Besides the three principles, the Ellen MacArthur Foundation brings forward five key characteristics of the circular economy.

The first characteristic is as mentioned before the aim to design out waste. Biological nutrients are non-toxic and can be composted or digested through anaerobic processes, thus creating no waste. The technical nutrients must be designed to be recovered, refreshed and upgraded to make sure they retain a high value without requiring too much energy input to do so. The second characteristic focuses on resilience and strength. This can be achieved through diversity. Small and big businesses are needed in this process. While the big ones provide volume and efficiency, the smaller ones can offer alternatives in times of crisis (Ulanowicz, Goerner, Lietaer, & Gomez, 2009).

The third characteristic is that the economy should be powered by energy coming from renewable sources. This will decrease resource dependence and increase system resilience.

Walter Stahel, a researcher from the Swiss Federal Institute of Technology ZĂźrich (ETH Zurich) and one of the instigators of the circular economy, proposes a shift in taxation models to promote this: Shifting taxation from labour to energy and material consumption would fasttrack adoption of more circular business models; it would also make sure that we are putting the efficiency pressure on the true bottleneck of our resource consuming society/economy (there is no shortage of labour and (renewable) energy in the long term) (Stahel, 2012, p. 28).

As fourth characteristic the Ellen MacArthur Foundation brings forward the need to think in systems. The fifth and last characteristic is the need for prices and feedback mechanisms to reflect real costs (Ellen MacArthur Foundation, 2015).

From Consumption to Use The circular economy makes a distinction between use and consumption of materials.

One of the main ideas that the circular economy proposes is the ‘functional service’ model where manufacturers retain ownership of their products and therefore act as service providers. Consequently these manufacturers would sell the use of theirs products and not the definite one-sided consumption of the product. If this shift is to take place manufacturers need to adjust the development of their products. As the manufacturers retain ownership over their products it is in their own economic interest that the product is durable, can be easily disassembled and refurbished,

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Recycle (?)

Take

Make

Resources

Use Waste

Distribute

Dispose

Recycle Refurbish Reuse

Technical Materials

Maintenance

Resources

Use

Parts Product Service

Waste

Distribute

Dispose

Cascades

Biological Materials

Restoration

Figure 6: The circular economy aims to eliminate waste and close resource loops of technical and biological materials (own adaptation of Zils, 2014 and Circular Economy System Diagram, 2016).

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Chapter 2

Take

Washing machines: leasing durable can be beneficial for both parties

Customer’s net present costs of washing machine usage over time USD per customer -26%

-38%

-32% 1,714

1,227 935

1,158

905

582

5 years

10 years

26%-38% customer cost savings through leasing schemes

20 years

Purchase of low-end machines leasing model for high-end machine

High-end machine manufacturer’s profits from primary sale and leasing USD per customer 970

660

-35% 173

Chapter 2

Sales price (pre-VAT and retail)

COGS

OPEX

137

185

Profit

NPV from leasing

35% increase in producer profits through leasing arrangements

Primary sale of high-end machine 5- year leasing model for high-end machine

Figure 7: Case study for washing machines in a circular business model (own adaptation of Circular Economy Case Study - In depth - Washing Machines, 2016).

and finally reused by the consumers. Walter Stahel explains it in the following way: The linear model turned services into products that can be sold, but this throughput approach is a wasteful one. [...] In the past, reuse and servicelife extension were often strategies in situations of scarcity or poverty and led to products of inferior quality. Today, they are signs of good resource husbandry and smart management (Stahel, 2012, p.22).

Short Examples The core ideas behind the circular economy can best be demonstrated through examples.

Different companies have independently

designed systems that allow them to include circular ideas in their business models: washing machines, power drills, Michelin tyres, and Ricoh printers.

A normal washing machine has a cyclerange from about 2000 cycles up to 10.000 cycles for high quality machines. Somewhere in between the machines usually breaks of due to problems in the motor, the pump, and the plumbing. While customers are often incentivised to buy the low-cost machines, it has been calculated that on average high-end machines cost 12 cents per cycle, while their low-end counterparts cost about 27 cents per cycle. Over a 20 year period, research has shown that it is more cost efficient to own one high-end machine than several

32

economic benefits this system entails material and energy savings as more customers will use the high end machines (“Circular Economy Case Study - In depth - Washing Machines�, 2016).

Markus Zils of McKinsey & Company, a global consultancy, has worked out an example for power-drills manufactured in China. He argues that business opportunities are easier to capture the closer the loop stays to the original product because typically more partnerships and distribution networks are already in place that allow products to be returned to the market. Zils elaborates on 4 scenarios for the power drills (see figure 8 for corresponding numbers). First there is the status-quo scenario where 1000 power drills are made in China and sold in the EU. The second scenario is the refurbishment of the power drills. 800 drills are sold and 200 are refurbished and sold at 80% of their original price. Moreover the customers receive a 10% refund for returning the drills as incentive. The recycling scenario encompasses the selling of new and refurbished drills, moreover 700 end-of-life drills are returned by customers (at a 5% refund of the original price). This results in about 80% saved materials. The last scenario looks at selling refurbished and recycled power drills and an extra of 700 drills are recycled (Marcus Zils, 2014).

Chapter 2

low-end washing machines to do the same amount of washes over this 20 year period.

This also has implications for material and energy consumption. Calculations show that there is potential saving of 180 kg of steel and 2.5 tonnes of CO2e to replace five low-end machines with one high-end machine over a period of 20 years. Of course these savings should also be held against missed energy efficiency improvements that are available in newer machines. However, energy efficiencyenhancing measures can often be reintegrated into machines in the post production phase without having to substantially change their structure. This opens the door for updating and upgrading programmes for washing machines that don’t require customers to replace the entire machine. This of course requires washing machines manufacturers to change their designs and business models. These programmes would enable more customers to use high-end machines that have a lower cost per cycle. For example, a five year leasing agreement removes the high initial cost and distributes it over a certain period of time accompanied by a certain service provided by the manufacturer. The Ellen MacArthur Foundation has calculated that a 10.000 cycle machine worth USD 950 that is leased over a five year period with an interest rate of 11% by a family with approximately 500 cycles per annum could economically benefit the customer and the manufacturer. Over four different leasing terms the washing machine can be reconditioned in between for a limited amount of costs (USD 105). This includes system upgrades, software upgrades, quality checks, cleaning, and cosmetic changes.

Figure 7 shows the economic benefits for the customers and the manufacturers. Besides the

In 2011 Michelin had 290,000 vehicles spread across 23 countries leasing tires under its payper-kilometer programme set up in the 1920s.

This programme offers tire management like upgrades, replacement and maintenance to optimise the efficiency and performance of large truck fleets. Through this programme

33

Four scenarios: Power-drill example

Initial market size= 1000 drills, $ thousand

Status quo Refurbishment

Recycling Additional Sales

Margin

Material Labour Costs Costs

Other Costs

Revenue

26

13

27

11

9

20

67

5

10

22

67

31 38

10

6

70

21

12

25

81

Chapter 2

Figure 8: Different financial scenarios for power-drill business models (Own adaptation of Zils, 2014).

Michelin retains ownership of the tires and can easily collect them at the end of the lease and reintegrate them into its production cycle (Ellen MacArthur Foundation 2012, p. 28)(Stahel 2010, pp.122-123) (European Commission, 2014, p. 35) Through its Total Green Office Solution programme, Ricoh efficiently minimises the environmental impact of the products it leases to its customers. The copiers and printers are inspected, dismantled and refurbished before they re-enter the market to be leased to new customers. By retaining the ownership of its products Ricoh has been able to reduce the constant need of producing new components and has reduced the total amount of waste produced as a result of the use of their products. Ricoh’s goal is to reduce the input of new resources by 25% by 2020 and by 87.5% by 2050 compared to the level of 2007 (Ellen MacArthur Foundation, 2012, p. 29) ( European Commission, 2014, p. 50 (annex 1)).  

34

Economic Advantage of the Circular Economy

Short: This chapter looks at possible economic advantages that can result from the adoption of the circular economy. This is done by looking at business models, industries, and regional adoption of the circular economy.

Circular Business Models

1) Fast moving consumer goods such as fashion, food and cosmetics.

2) Medium-lived products such as smartphones, vehicles and home-appliances.

3) Long-life products like structures of buildings.

These different categories of products have different circularity potentials. The sector of services is left out as it is not considered as a resource-intensive sector. Nonetheless it can provide motivation for change within the industries and the circular economy itself would ultimately create a bigger need for services. All three of the above mentioned categories have a circularity potential. It is generally believed that the medium-lived products have the biggest potential for circularity and its economic advantages (Ellen MacArthur Foundation, 2013). The circularity

Circular Economy Throughout Industries By implementing circular principles companies can obtain significant savings through cutting material and energy costs. Through the elimination or significant reduction of waste in the value chain companies will reduce their dependency on material prices and reduce the overall input energy. Through

35

Chapter 3

On the product level the adoption of circular business models provides advantages such as reducing the material bill and the expense of waste disposal. This can compete against products designed for mass production backed by low labour costs and economics of scale.

Within this product level a distinction between different resource intensive products can be made:

potential of long-lived assets such as buildings and road infrastructure remains untapped.

This has resulted in a large loss of resources and value. A pilot initiative in Riverdale, USA has shown that deconstructing rather than demolishing houses built in the 1950s and 1960s could prevent 76% of the rubble resulting from demolition from going into landfill (Lund, Yost, 1997, p. 22). Brian Milani author of Materials in a Green Economy: Communitybased strategies for Dematerialisation says that, “If deconstruction were fully integrated into the U.S. demolition industry, which takes down about 200,000 buildings annually, the equivalent of 200,000 jobs would be created�

(European Commission, 2014, p. 52 annex 1).

Different leading construction companies such as BAM, Skanska and Kajima Construction Corporation have already integrated circular concepts in their deconstruction methods. The core materials of a building like its structural concrete or steel body are definitely long-life products. Nonetheless all buildings consist of many elements that have a medium-lived lifespan and require replacement every few years. Furthermore there are different elements of buildings that can be shifted from longlived to medium-lived elements like façade components that can be replaced to alter its aesthetic appearance.

Chapter 3

Figure 9: Different sectors have different potentials for circular business models (own adaptation of Ellen MacArthur Foundation, 2012, p. 66 )

the circular principles companies can create new flows of income and gain a competitive advantage. This benefit for the companies will automatically be translated in a benefit for the consumers as service quality will go up and premature wearing of products will not be the self-evidence it is now. It is safe to say that the circular economy is still in its early phase and that a significant value scale-up is possible. Once a tipping point is reached circular principles will be able to gain general acceptance. By comparing the total absolute cost savings on materials and energy (net of the required materials and energy used in the respective reverse cycle) for selected products with the total input costs for each respective product McKinsey & Company and the Ellen MacArthur Foundation have estimated the net material cost savings that would be expected in several industries if all manufacturers were to adopt circular principles. In this analysis

the construction industry comes out as one with a high potential for circular business practices. The conclusion of this analysis was made through their ‘Circularity Calculator’ and expert indications gathered during interviews (Ellen MacArthur Foundation, 2012).

One of the main advantages of the circular economy is the substantial material savings.

In a report made in collaboration with the World Economic Forum it is estimated that for medium-lived complex product industries the circular economy could represent a net material cost saving of US$ 340 to 380 billion per annum at a European level. This number is for what is called the conservative ‘transition scenario’. The more positive ‘advanced scenario’ estimates the total cost saving on materials used in reverse-cycle activities at US$ 520 to 630 billion per annum at a European level.

In the advanced scenario the automotive,

36

machinery, and equipment sectors would enjoy the highest benefits. Moreover, as stated before, the circular economy could result in a mitigation of price volatility and supply risks for various raw materials (Ellen MacArthur Foundation, 2012) (World Economic Forum, 2014).

Figure 10: The transition and advanced scenario show a high potential amount of material cost savings after the adoption of the principles of the circular economy (own adaptation of Ellen MacArthur Foundation, 2012, p. 67)

Chapter 3

Rethinking our linear way of producing goods into fully circular systems will require a great amount of innovation and new ideas. These innovations will spur the development of new technologies and new business models.

This unexplored territory makes room for many forms of entrepreneurship and startups thus creating economic development and employment. Of course the full effects on the labour markets still need to be explored. The way markets will be reorganised and regulated will strongly influence the creation or loss of jobs. Nonetheless, there are signs that the circular economy might empower local employment, more specifically in entry-level and semi-skilled jobs which is a market that is facing serious issues today in developing countries (Ellen Mac Arthur Foundation, 2013).

The circular economy can transform economies as to make them more resilient to market volatility and black swan events (unexpected and impactful events, more on black swan events and their impacts in Black Swan by Nassim Nicholas Taleb). By reducing the dependency on resource markets and exposure to resource price shocks that can be caused by unanticipated events, the economies that have adopted the circular principles can benefit. The circular economy is expected to generate economic benefits on every possible

37

level: for customers, for businesses, and for societies.

Chapter 3

The Circular Economy Potential in Flanders (Belgium) In a study of the Steunpunt Duurzaam Materialen Beheer, a research coalition between the universities of Leuven, Hasselt, Gent, and Antwerp and the research institute Vito, two different methods to estimate the possible economic benefits of the circular economy in the European Union (Ellen MacArthur Foundation, 2012) and in the Netherlands (TNO, 2013) are analysed.

The methodologies of the studies are then extrapolated to the case of Flanders (Belgium) based on the Flemish Input-Output tables.

However, the results must be viewed with caution as they are highly hypothetical and based on several uncertainties. In the ‘transition scenario’ method developed by the Ellen MacArthur Foundation the calculations show that Flanders could save 3,4 billion € in material costs by implementing and supporting the circular economy (2% of the Flemish GDP).

In the advanced scenario (also by the Ellen MacArthur Foundation) this number could rise to as much as 6,1 billion € (3,5% of the Flemish GDP). When using the TNO method it is calculated that the circular economy can create up to 2,3 billion € of added value for Flanders and create 27.000 new jobs (1% of Flemish employment) (Dubois, Christis, 2014).

38

Ownership versus ProductService Systems

Short: This chapter explains the idea behind going from a product to a service. First a broad approach to the concept is given. Then this chapter focuses on the different types of productservice systems (PSS) that exist.

Shift in Mind-set

In our current economic system companies play a delicate game with the products they sell and the consumers they sell it to. On the one side they need to be able to sell their products for an attractive price and a competitive quality. On the other side they need to be able to sell enough products to keep making profit and increase their market value and market share. Common sense would make one think the better the quality of a product that can be bought for a competitive price, the better

Chapter 4

Our society is focused towards consumption.

For goods that come and go that are dependent on fashion trends this high-pace consumption may be obvious and unquestionable. One can argue that fashion trends are just a mean to stimulate the consumer attitude, but on the other hand it can be said that an insatiable desire for new possession may be a basic human instinct. Of course this thesis will not elaborate on what may or may not be intrinsic human consumer behaviour as this belongs in a sociological or psychological study. However, when products that are supposed to last for a long time start falling into the same patterns as these fashion-bound products, something is clearly wrong. When a dishwasher starts failing after a year, when your laptop suddenly crashes right after the warranty has expired, or when you once again have to change a lightbulb that has popped.

a company will perform. Several examples have shown that this is not correct. Once the consumer market for a certain product is saturated, in a simplified way this means that all the consumers who would buy your product have bought it, you must be able to make them buy a new product from your company. In that aspect resides the problem: if the product that is sold is of superior quality the product will not break or wear out, hence consumers will not be prone to buy a new item from the same company and sale numbers start to drop. Companies like Nokia, famous for its ‘never breaking’ cell phones and Kelvinator, famous for its high quality refrigerators, have experienced the severe economic consequences of this pattern. In other words, in our current market system companies get punished to make the quality of their products too high.

The way companies have reacted to this phenomenon is by engineering what is often called ‘planned obsolescence’. In the 2010 documentary ‘The Light Bulb Conspiracy’ the example is used of a printer that fails and when brought into reparation the salespeople advice the consumer to just buy a new one as this would be cheaper than having it repaired. A counter example is a light bulb that has continuously been lightened since 1901 in the Livermore Fire Station in California and is still burning to this day. In the documentary it is said that in the 20’s light bulb manufacturers have decided to form a cartel and start producing light bulb that would fail prematurely (going from 2500 hours to 1000 hours burning time) as this would create an economic advantage. Many manufacturers apply this principle of planned obsolescence in a way that products last long enough as to

39

ProductBased Value

Product-Service Systems (PSS)

ServiceBased Value

Pure Product

Product Oriented

Use Oriented

Result Oriented

Pure Service

Product Sale

Product Related Service

Product Lease

Outsourcing

Service Providing

A third party owns the product and provides a product related service

An activity is provided without the use of any product

The ownership of the product changes

Selling a product combined with a product related service (ex.: maintenance contract)

Product Related Advice Selling a product with a use related service (ex.: course on ecologic use)

Exclusive use of a product without being the owner

Product Sharing/Renting Functional Result Non-exclusive use of a product.

Consumer is owner (sharing) or provider is owner (renting)

A service provider delivers a specific result. The type of product is secondary

Product Pooling The product is simultaneously used

Chapter 4

Pay-per-unit Service The user pays for the output of the product according to the use level

Potential Environmental Impact of PSS - Lower material and energy consumption during production and use phase - Potential for environmental benefits through economies of scale - Leaner manufacturing as products are more valuable - Greater producer responsibility - Sharing, renting, pooling, ... and other PSS lower the total stock of product required to satisfy a specific need - More professional care of the product results in a longer product service life and higher residual value - Manufacturer does not have an incentive so sell excess material - Reclaiming of end-of-life product becomes more accessible thus increasing the amount of reclaimed products - Easier upgrading to more energy and material efficient products Figure 11: There are different types of product-service systems (PSS)(own adaptation of Deckmyn, Leyssens, Stouthuysen, & Verhulst, 2014, p. 37)

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As illustrated by the Dutch architect Thomas Rau in the VPRO Tegenlicht documentary (2015) one of the key ideas behind the circular economy is the shift from ownership towards leasing. You do not own your refrigerator but you rent cooling space. You do not buy new tires but you pay per driven kilometre. You do not buy a lamp but you rent light instead. This shift of ownership towards the manufacturer gives the manufacturer an incentive to make its products as durable as possible so as to reduce replacement and maintenance needs. Once the product needs to be replaced the manufacturer will reclaim the product while providing a new one. The advantage for the manufacturer is that he can use the materials and components of the reclaimed product and reintegrate them into its

production cycle. Two key points can be noted within this thought: 1) Because of the leasing principle it becomes economically interesting for the manufacturer to reduce the replacement frequency as this is cheaper and this can be achieved by making the product as durable as possible by improving its quality.

2) Because of the lower replacement frequency and because when the product is replaced it goes back into its original production cycle a drastic reduction of waste is achieved.

When the shift of ownership is made we clearly see the evolution from a linear consumption pattern towards a circular consumption pattern. As manufacturers remain responsible and owners of the goods they rent out, they will completely rethink the way they engineer and design their products. This redesign will be aimed at profitability, but this time the environment and the consumer will not suffer from it. The manufacturer will redesign the product to make it last longer, will probably try to use the least possible amount of material, and will design it in such a way that it can easily be replaced, refurbished, and reintegrated in the product life cycle. This system is beneficial for the manufacturers, the consumer, and the environment.

Chapter 4

keep the consumers ‘happy’ with the product while making sure that they need to replace it regularly. This concept is engrained within our consumer industry and therefore gives manufacturers incentives to make products that perform below their quality capacities.

This consequently leads to more consumed goods and more waste. One can easily see that this is a far from sustainable solution. The circular economy, more particularly through product-service systems (PSS) and its resulting shift of ownership to the manufacturers, can increase the sustainability of many products and the waste that comes along with their disposal. This extra sustainability can be achieved all the while retaining an economic advantage for the companies as leasing deals can result in more financial return as they also incorporate the extra services. Moreover, manufacturers can gain extra financial benefits by exploiting the residual value of the reclaimed products.

Different Types Formulas where products are leased out as services are called product-service systems (PSS). Plan-C, the Belgian hub for the promotion of the circular economy, published an e-book that elaborates on the PSS concept

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Drivers Manufacturer

Barriers

Consumer

- Remaining owner of materials in product - Material is not lost and residual material value can be retrieved - Improved competitive position

Manufacturer

- Life Cycle Costs may drop

- Higher set up costs

- Products with longer service life and easier to repair

- Investments in new infrastructure, personel, ...

- Possibility to upgrade and access to latest technology

- Product needs to be adapted to new business model

- Less unexpected costs

Economic Factors

- Maintain and gain new market shares, customers and profits

- Immaterial values of owning a product, such as status - Incertainty about saving potential

- Lack of public demand - Unknown total cost of ownership - Potential higher transaction costs due to more complex contracts

- Green Image

- Discontinuation of ownership, responsibility, and risk

Chapter 4

Consumer

- Long term contracts could improve manufacturer-customer relationship

- Dependency on high amount of partnerships

Manuf. Client Relation

- Fear of loss of control over product - Risk of underperformance

- Less control over product - Level of trust needed from both sides - New potential risks

- Innovative public procurement guidelines

Government

- Regulations that favour PSS - Internet of things allows to monitor products in service contracts

- Traditional public procurement guidelines - Regulations that hinder PSS

- Webplatforms make it easy for consumers to share - Webplatforms make it easy for customers to interact with product-service providers

- Lack of awarenness and priority towards resource-efficiency

Other

- Not all products are appropriate such as products with long, unpredictable service lifes - Inertia towards change due to internal resistance to change, traditional business models

Figure 12: The different drivers and barriers for PSS (own adaptation of Deckmyn, Leyssens, Stouthuysen, & Verhulst, 2014, p. 39).

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client pays a third party for a certain service but does not disclose the type of product that is required to fulfil this service. The functional service is where the provider offers a certain (abstract) result such as light, comfort or mobility. The provider is then free to obtain this result in the manner he deems preferable (Deckmyn, Leyssens, Stouthuysen, & Verhulst, 2014).

PSS can have a potential ecological benefit as it spurs better usage of resources through design optimisation and more possibilities for maintenance, reuse, refurbishment, and recycling. The PSS provide a perfect way to combine efficient and innovative business models with the ecological benefits that resource efficiency can bring. However, there still remain certain barriers that inhibit the development of more PSS in our economy.

Figure 12 gives an overview of the drivers and barriers that are associated with the development of PSS as a part of the circular economy (Deckmyn et al., 2014).

Chapter 4

and explores several business cases such as those explained in chapter 2. There are eight main types of PSS (figure 11). They range from pooling and sharing to leasing and outsourcing. The categorisation in the image is developed by SusProNet, which is an association that performed research on sustainable product service development from 2002 until 2004. It distinguishes three main categories: product-oriented services, use-oriented services, and result-oriented services. The product-oriented services still rely on the sale of products but provide an extra service with the sold good. This can be product related, such as maintenance and takeback or it can be advice related, providing guidance for the optimal use of the product.

The use-oriented services revolve around a product that is not sold but made available to the consumer through different business models. There are four different options within the use-oriented services. The first is leasing where the manufacturer retains ownership but the user has unlimited and exclusive use of the product. Then there is the sharing option, here again the product remains in the ownership of the manufacturer and different consumers can use the product in a sequential manner. The third alternative is pooling. This is where the different users simultaneously use the same product that is still owned by the manufacturer. The fourth and last alternative is the pay-per-unit option. Here the user pays for a certain result, the output that is linked to the product and not for the product itself. In the result-oriented services the two parties have an agreement on a certain goal. How this goal is fulfilled, by means of which products isn’t defined. There are two types of result-oriented services. The outsourcing option is where a

43

Product-Service Systems as Circular Solution in Buildings

Chapter 5

Short: This chapter explores the possibilities of product-service systems (PSS) in buildings.

More specifically in building components. First, a general introduction to PSS in buildings is given. Consequently, we explain and illustrate the different layers of buildings in which a PSS could be possible, as developed by Brand and Cheshire. To finish, this chapter introduces several applications of PSS in buildings that already exist. Some of these examples are further developed in chapter 6. The last part also introduces the notion of design for disassembly (DfD) and how it can facilitate the development of PSS in building components.

Product-Service Systems in Buildings and Building Components The definition of what ‘building industry’ entails varies according to which source is consulted (Alaerts, D’Haese, and Vanassche, 2012). The definitions always encompass on one side the actual act of building and the production processes that come along with it and on the other side the phase where the building is actually used.

PSS can be used during the manufacturing of building materials, PSS can be used during the actual construction of a building, PSS can be used during the use phase of a building, and PSS can be used during the demolition/ dismantlement of a building. Of course, certain PSS can and should span different phases of the building lifecycle.

This thesis looks at those building components that are physically present and ‘active’ during the use phase of the building and to which a PSS is applicable. Generally, this means a PSS

of the use-oriented category as described in chapter 4. In the scope of the circular economy we seek to create loops and aim for waste and resource usage reduction for components in the use phase. For example, renting out an apartment or a house is also a type of PSS but is not considered in this thesis.

In their most straightforward sense useoriented PSS take the form of a product lease, in which the consumer does not acquire ownership over the product but leases it from the manufacturer only to return it to the manufacturer once the product is not needed anymore or requires replacement (Schoolderman, et al., 2014).

Within the leasing scheme the customer has exclusive usage rights over the leased product. This makes sense since one building material, component, or other material object cannot simultaneously be at two different places in space. Besides product lease, product sharing/renting, product pooling, and pay-per-service units are viable options. Within buildings, PSS can be applied to every component that is in reasonably measures demountable and thus provides a possibility to facilitate the creation of circular loops for reuse, refurbishment, or recycling. Of course not every layer of a building is equally fit for a PSS solution.

The theories of Brand and the definitions

by Cheshire aim to make a differentiation within these layers (Brand, 1995) (Cheshire, 2014). The layers of Cheshire and Brand are simplified version of the international coding system CI/SfB, developed in 1990. The BB/ SfB, the Belgian version of the international coding system, is very elaborate and covers

44

Stuff Space Plan Services Skin Structure Chapter 5

Site Figure 13: The building layers of Brand ( own adaptation of Brand, 1995).

many different aspects of buildings in detail to which PSS are not applicable (such as detailed structural elements) (De Troyer, 2002). For simplicity reasons we therefore focus on the layer of Brand and Cheshire to explore the PSS potential of buildings.

Six Building Layers of Brand A building consists of an enormous amount of different components that are interlaced with each other throughout different layers. It is obvious that some layers are more ‘mobile’ than others. This relates to the ease with which they can be disassembled and replaced during

the course of the building’s lifecycle. Brand introduced his framework todivide buildings into layers in 1995. These functional layers each have their own typical service life. It is in the intersections of these layers that disassembly will occur during the buildings life cycle. The six shearing layers of Brand allow layers to be replaced, changed or removed without affecting other layers (Brand, 1995) (Paduart, 2012).

When taking a closer look at office buildings we can evaluate the different levels and their circular potential. Working from the inside out, there is first the stuff layer. These are the objects that fill a space and make it functional;

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furniture, office tools such as printers, computers and screens, decoration and other replaceable objects. These objects are all very well suited for circular concepts – which in this case would mean PSS – as they are rarely fixed to the floor or a wall and have a mediumlived life span. Some objects are more receptive to a circular model than others but they can all be categorised as consumer goods that may be subjected to planned obsolescence or far from ideal and sustainable design. On the other side today’s offices have a fast pace of change following fashion and the next big thing in IT (David Cheshire, 2014). This often results in products to be replaced in batches due to the uniformity that is usually wished within offices. This high pace implies that the argument for an improved quality due to a PSS and the resulting longer life cycle does not hold anymore. However, the aim of longer life cycles is still attainable as the materials of the product are reused and repurposed and thus remain in a circular pattern that extends their life cycle and reduces waste. The quality can be regarded as implicit as it does mean the product in itself must have a very long life span but the components must hold the inherent quality of being easily reusable within new products which thus prolongs their individual life spans.

For example, a certain company wishes that all the furniture in its offices stems from the same brand or line of products. To prevent high amounts of waste of used goods that may not have reached their traditional life span but are thrown away due to tenant changes or company rebranding, a PSS where these elements are recuperated by the manufacturer, refurbished, and afterwards reintegrated in the consumer chain can have

Figure 14: Picture of the window that will be disassembled (Quarshire, & Watkinson, n.d., p. 6).

an impact on waste production but also on income for businesses. For customers it is also interesting to be able to rent these elements for a fixed yearly cost through a product lease instead of having to invest large amounts of money in furniture they will probably not use until the end of its normal service life.

The manufacturers should also consider this shortened service life when designing the ‘stuff ’ that will fill offices as they need to be easily altered and upgraded. Cheshire of AECOM, a global building engineering firm, proposes a differentiation between ‘consumable’ and ‘durable’ components at the ‘stuff ’ level. The durable components (such as fans) should have a maximised service life and the consumables (such as carpets) must be easy to recycle, reuse, refurbish into new products (Cheshire, 2014).

The second layer of an office building consists of all the elements present in the space plan that are neither in the façade or structural

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The third layer is the skin of the building.

This layer includes façade elements, roofing elements, and other long-lived elements that form the outer aspect of the building. These elements have to resist weather changes and fluctuating conditions and are therefore installed in a very fixed manner. Consequently, these elements are difficultly demountable and require a significant amount of work to

be replaced. A document published by Arup, a leading building consultancy, and Frener & Reifer, a façade builder, explores the recycling options for façade elements and how this fits within the whole design for disassembly idea.

In the study the engineering team of Arup carefully demounts a sample façade element and lists up every separate piece. While doing this the time needed to separate each element was carefully written down. The team of engineers concluded that for the disassembly of one approximately 3x3m façade element a team of three people would need about 100 to 120 minutes. The façade element has a 15year life span and the majority of the elements in the unit could theoretically be reused.

They do stress the importance of changing customer style requirements, improvements in materials and construction techniques and developments in building regulations which make the reuse of any of the components very unlikely. As an example they state that a standard stainless steel cap head screw is difficultly reused as regulation asks it to be strength tested to ensure that no degradation has happened. Furthermore, the report states that the reuse and reclamation market is very fashion cycle dependent. In Italy for example there is a thriving market for Victorian building artefacts. The report questions if such a market for façade elements from the 2000’s would be as successful. The estimated interval between the creation of an original design and its reappearance as fashionable product is estimated at 80 years. Several other points of discussion are furthermore mentioned in the document. The Arup team estimates that prefab façade systems that are manufactured in a factory and delivered on site do require more protective packaging for transport (which is

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elements such as non-bearing partition walls, sanitary elements, doors, and lighting installations. These are replaceable but require a certain amount of ‘destructive’ measures before they can be removed. Following the circular idea, architects should try to design floor plans in a way that they are as adaptable as possible.

In this regard the choice of connections plays a crucial role. Connections that are reversible should be used. The applicability of reversible connections is strongly dependent on the type of materials and the service life (Debacker, 2009 in Paduart, 2012). With destructive is meant all final damage to the element that requires substantive measures to repair. The non-bearing inside walls can be glass panels for meeting rooms but also double cardboard wall systems with sound insulation between them. As long as the panel is designed in such a way that it is easily demountable, with easy pertaining to the number of manhours needed and the destructiveness of the operation, the adaptation of the floorplan should be conceivable within certain extents.

As discussed before these elements can then be recuperated by their manufacturer so as too further dismantle or refurbish the element and to prevent any unnecessary waste production.

Design for disassembly (DfD) is elaborated in the last subchapter of this chapter.

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usually majorly recyclable) but are also easier to remove from the façade to be recycled or reused. Other points of consideration for façade elements stated in the document are - (Quarshire, & Watkinson, n.d.):

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1) The possible lack of original plans for the identification of separate pieces of a 40-yearold façade system when it is demounted. It can also be added that the inclusion of plans when the system is demounted is needed for security reasons.

2) The commercial irrelevancy for doubleglazed units because of the rapid technological evolutions and new techniques that are developed for these elements.

3) Composite materials can only be reused as a whole.

4) Façade elements are often designed for a certain climatic zone and their respective demounted parts are only usable in these markets.

It must be noted that the document solely talks about the dismantlement of façade elements that are currently deployed in our building stock. In most cases these elements are indeed not designed for disassembly and are often influenced by aesthetic fashion trends. If façade elements are to be leased out through a PSS the manufacturer will obviously adapt its design to increase disassembly potential and reusability.

There are currently no examples existing of façade elements that use PSS. The last layer we consider is the structural layer. This layer forms the core of the building

and can be a steel-, concrete-, or wooden frame. As this layer is structurally crucial to the stability of the building the elements of this layer cannot easily be removed without consequential and destructive interventions.

Moreover, the structural core of a building is normally designed in such a way to have a long life span and be non-replaceable. This doesn’t mean that the demolition waste of such components automatically needs to go into landfill as they can be recycled and reintegrated in another consumer cycle. What it does mean is that structural elements are probably not well suited for PSS as their replacement and refurbishment as a whole would probably be too costly and time-consuming. A solution for structural elements and the materials used in them are takeback guarantees by the manufacturer. All the while the customer becomes full owner of the product, the manufacturer legally binds himself to take back the product once it is discarded by the owner.

Four Building Layers of Cheshire David Cheshire, regional director at AECOM, proposes a system of four different layers. His layers are much alike Brand’s but have been conceived with circular ideas in mind. The Cheshire layers look at the different lifetimes and characteristics of the different layers. The shell needs to be designed in such a way that it can accommodate changing circumstances by being as adaptable and flexible as possible.

This translates in spaces with long spans, generous floor to ceiling heights, and flexible and spacious cores and risers. The shell in itself is unlikely to be fit for a PSS such as leasing or pay-per-service units. However, the shell can be a part of a flexible office sharing scheme

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Figure 15: The four building layers as proposed by Cheshire (own adaptation of Cheshire, 2014, p. 3).

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that falls under the product pooling category or a takeback guarantee of its materials as mentioned earlier. The services layer needs to allow simple upgrades of the plug-and-play kind accompanied with PSS. These services should be easily demountable or upgradeable due to their accessibility. This layer has a non-negligible potential for PSS. However, building services, such as HVAC are often hidden for aesthetic reasons which make a non-destructive intervention difficult and thus decreases the circular potential. New design approaches and inventive solutions will have to solve this issue in the future. In the scenery layer re-locatable modular partitions should be used. For example, making partitions in polymers that have a very long lifecycle is inappropriate as the partitions are likely to be replaced within five years. Working with manufacturers that provide modular products that can be dismantled and adapted within a PSS is preferable. The scenery layer also has a high circular potential and therefore elements such as partition walls need to be designed for disassembly. The setting layer is a combination of consumable and durable products composed of items such as fans, furniture, and equipment.

This layer can also accommodate different PSS (Cheshire, 2014).

Internet of Things and Building Information Model The recent report of the Ellen MacArthur foundation on Intelligent Assets (Ellen MacArthur Foundation, 2016) discusses the potential of the Internet of Things (IoT) within a circular economy. The report states that connected building elements will reshape asset utilisation and material management.

This connectivity will also improve the opportunities for PSS in buildings, or as the report calls them: ‘performance contracts’.

A digital library of connected materials will provide better and predictive maintenance schemes. Moreover, assets will easily be located and their condition can be monitored. The report states that a significant part of our construction waste that goes into landfill is miss-appropriated because of a lack of knowledge on the exact composition and value of the deconstructed or demolished materials, thus resulting in inefficient resource usage, an estimated 54% of demolition waste in Europe is landfilled (Ellen MacArthur Foundation, 2015) (European Commission, 2011).

IoT technology is already used in the building sector by companies such as Honeywell and Johnson Controls to monitor energy performance in large scale buildings to help their tenants reduce their energy bill.

By integrating connected building assets in Building Information Model (BIM) technology the transition towards a more sensitised and connected built environment can be made, especially within the first layer of a building such as furniture, lighting, etcetera. In a later stage other levels will follow as the increased flexibility and the better resource management of the building assets might reform the building sector. The sector will probably move towards shorter usage cycles for building elements and become more suited for leasing systems, cheaper repurposing to adapt to the ever changing and fashion sensitive market, and faster turnover of usage through hyperflexible interiors (Ellen MacArthur Foundation, 2016).

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Transformation Capacity

Flexibility

Environmental Impact

Sustainability

High

High

High

High

Low

Low

Low

Low

Figure 16: High transformation capacity equal high sustainability (own adaptation of Durmisevic, 2006, p. 94).

Design for Disassembly (DfD) as Facilitator for Product-Service Systems

1) The Circular Lighting pay-per-unit service

by Philips for lighting.

2) Skilpod that rents out small living spaces.

3) The Interface Evergreen Service Agreement for carpets.

4) The acoustic panels of Akoestiekfabriek that are leased.

5) The services of Turntoo which is a consulting agency for developing PSS in buildings.

Other companies that are involved in the building sector offer products that incorporate several circular ideas but do not fully work with PSS. Often a Cradle-to-Cradle approach is followed:

2) Steelcase, a global office furniture manufacturer proposes its customers with alternatives for landfilling their products and works with Cradle-to-Cradle certified products.

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Currently different PSS relating to buildings already exist or are being developed. However, most of them have not yet been applied on a large scale:

1) Carpet manufacturer Desso tries to make their products completely Cradle-to-Cradle compliant.

In the Netherlands different buildings have been built with circular ideas in mind. They all incorporate circular concepts but unfortunately the use of PSS is limited. The Brummen town hall is a good example of a building with a high level of circularity: 1) The town hall of Brummen design focuses on reusability and dismantling of its elements.

A take-back guarantee of the material is included in the contracts. Without necessarily working with PSS the building is designed as a material ‘depot’ and has a material passport.

This facilitates the reuse of its materials (UNEP, 2015). In principle the use of PSS is not necessarily needed as long as the building materials return to the manufacturer thus extending their life cycle.

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Some of the aforementioned examples are further elaborated in chapter VI. It can be remarked that all the examples share a common denominator. They are all made possible due to the fact that they have been designed for disassembly. In this regard design for disassembly plays a crucial role as facilitator of possible PSS in buildings. Rios, Chong, and Grau define DfD as a practice to ease the deconstruction processes through planning and design. They see deconstruction as the demolition of a building all the while restoring the use of demolished materials. Through DfD the traditional waste management process can be changed drastically. They propose five key principles of DfD (Rios, Chong, & Grau, 2015): 1) Buildings need to be properly documented.

This can be done through material passports and methods for deconstruction.

2) Connections need to be accessible and easily dismantled, non-destructive. This can be achieved through usage of modular and prefabricated structures.

3) Ensure the separation of non-disposable materials such as mechanical, electrical, and plumbing systems.

4) Design simple structures. This allows more standardisation of components and dimensions.

5) Design in a way that reflects labour practices, productivity and safety.

In a doctoral dissertation on Transformable Building Structures (2006) Durmisevic states that the disassembly potential of a building

has a direct relation with the building’s sustainability. If in the future disassembly is adopted as a common design practice it could become the primary source of material for new constructions which would save considerable amounts of resources from being extracted (Durmisevic, 2006). PSS for building components can spur this evolution as they motivate manufacturers to design for disassembly, thus generating financial savings.

To show the potential economic benefits of design for disassembly Durmisevic uses the example of the LUMC Research Centre in Leiden (a medical research centre in the Netherlands), which is a building of 8676 m² usable space with very dynamic changing processes in its laboratory units which form the main part of the building. The life cycle cost analysis of the project shows that incorporating design for disassembly guidelines in the building initially gives a higher cost but also yields a higher return on investment in the long run. Interventions such as rail systems in sub-ducts, light switching systems, demountable system walls, additional space for air-handling units, and other measures increase the disassembly potential of the building. By comparing the cost of renovation of a similar building with the cost of renovation of the LUMC Research Centre that incorporates the design for disassembly guidelines, the breakeven point would be reached after 6 years if 10% of the research centre is renovated each year. For a building that lasts 30 years, this would amount to up to 25 million euros of saved investments due to renovation for an initial investment of 5 million euros to incorporate the design for disassembly measures (Durmisevic, 2006).

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sound insulation Paduart proposes gypsum fibreboards as they are much more appropriate for reuse than gypsum plasterboards. The different thermal, acoustic, fire resistance and structural demands often clash with the design for disassembly principles that enhance opportunities to prevent waste production through reuse of components. This is where manufacturers who develop PSS will have to find compromises between these performances and the potential material saving that comes through the reuse of components.

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Different documents have explored the possibilities, benefits, and frameworks for design for disassembly (Durmisevic, 2006) (Paduart, 2012) (Debacker, 2009). These research initiatives have resulted in design recommendations that companies can use when designing building components that function within a PSS. Paduart (2012) highlights for example the reuse potential of wood based boards in dry walls if reversible connection methods are used. However, the bad properties for fire protection and room acoustics make it difficult to use the wooden boards while being in accordance with building standards. As an alternative with good characteristics for fire safety and acoustic

Figure 17: Conceptual representation of the shift from fixed towards dynamic assemblies (Paduart, 2012, p. 189).

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Circular Economy Case Study in the Building Industry

Company: Philips Lighting

2014).

Thomas Rau Architects

Short: This subchapter explores a product-service system (PSS) by Philips officially called Circular Lighting but often referred to as ‘Pay-per-lux’.

A short introduction to the context in which Philips operates, is followed by different cases where this PSS has been applied. The last part of this chapter looks at some technical and design aspects of this PSS and how this impacts the recycling and reuse of its products followed by some general remarks on the PSS.

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Philips Lighting Philips was founded in 1891 in Eindhoven, the Netherlands and is now world’s largest lighting supplier. About 70% of its revenue stream in its lighting department comes from businessto-business sales in the form of lighting installations and services. As a major player in the lighting business, Philips has an important role in our built environment as many of the lighting products we encounter in offices, schools, etc. are sold by Philips (NZWC, n.d.).

The lighting supplier Philips has not gone through history without any controversy.

Philips is known to have been part of the so called Phoebus cartel, founded in 1924, among other companies such as Osram and General Electric. This cartel is believed to be behind wat is now called the lightbulb conspiracy that first introduced the concept of planned obsolescence in lightbulbs. The Phoebus cartel was dismantled a few years later. Even if the cartel was short lived it marked the start of an economic pattern that promotes the linear economy of ‘take-make-dispose’ (Krajewski,

In 2012, Philips Lighting has committed itself to become a sustainable company through innovation of their lighting systems.

Throughout the European Union, Philips collaborates with 22 collection and service organisations that are responsible for the collection of 40% of all mercury-containing lamps, with a recycling rate of more than 95% (Ellen MacArthur Foundation, 2014).

The company is now fast-tracking several recycling and refurbishment programs and aims to adopt circular economy concepts by closing its materials loop (NZWC, n.d.). This commitment has been spurred by the initiative of Rau Architects in 2009, a Dutch Architecture practice based in Amsterdam led by Thomas Rau. Rau approached Philips with the wish to substitute its lighting system: I need 500 lux for 1860 hours per year on my desk. You figure out how to do it. If you think you need a lamp, or electricity, or whatever – that’s fine. But I want nothing to do with it. I’m not interested in the product, just the performance. I want to buy light, and nothing else (Rau, 2012).

This bold statement gave birth to the ‘Payper-lux’ concept which is now called Circular Lighting by Philips. In this system Philips provides the lamps, the luminaries, cables, and controls. Moreover, Philips is responsible for paying the energy bill that accompanies the electricity consumption of the lighting.

In exchange Rau pays a monthly leasing fee and Philips retains ownership of its products.

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Figure 18: Effective systems management resulted in a total energy reduction of 55% – 35% as a result of the LED installation, but also through optimisation by Philips; another 20% reduction was achieved ( Ellen MacArthur, 2015)

1) Reduce energy consumption.

2) Reduce the amount of material required.

3) Increase residual value at the end of the leasing term.

1) Creating a minimalist light plan to reduce the overall needed amount of resources.

For the Rau office there were also different advantages:

2) Installing motion and daylight sensors and controlling to optimise and reduce the number of lighting hours. These sensor turn brighter or dim the light in response of motion or daylight.

1) Cutting edge technology with no high upfront capital investment.

3) Working with LED lamps that consume less energy.

3) A contract in which the maximal default ratio (number of failed lamps during a certain term), lighting performance in terms of lux, energy savings, and maintenance frequencies are set.

4) Reduce the amount of material needed in the product.

5) Improve reusability and recycling potential.

6) Minimise need for maintenance.

All these measures were taken by Philips to:

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By becoming a stakeholder in the lighting of the Rau offices, Philips was incentivised to install measures that would reduce the cost and thus increase their profit margin. Philips directly implemented several measures (Ellen MacArthur Foundation, 2015) (NZWC, n.d.)

(Rau, n.d.):

2) No recycling or demolition costs.

The project resulted in an initial 35% energy saving in lighting electricity consumption.

Later, Philips installed smart energy meters that monitor the energy usage per space. These led to an extra energy saving of 20%, resulting

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Product

Service

Figure 19: When proposing a PSS the manufacturer has an incentive to reduce its amount of used resources.

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in a total of 55% saved energy.

In the 2015 VPRO Tegenlicht documentary Rau explains the shift in attitude Philips went through when they started working together on the ‘Pay-per-lux’ model. At first Philips thought the project was just a regular lighting project and proposed a lighting plan to Rau architects.

Once Rau had told them he only wanted to pay for the service light and all the other cost had to be covered by Philips they came with a completely skimmed down lighting plan. This shows how companies change their mindsets and selling techniques when they remain owner of their product (Meerman, & Romeijn, 2015). For Philips the tipping point came from the fact that they realised that a PSS in itself generates a sufficient amount of return. This is without looking at the extra financial benefits that would result from the reuse of products.

By looking at the available reports on the economic opportunities within the circular economy and by developing several pilot projects, Philips gained enough insights in the potential value of the PSS. Philips calculated the potential of the Circular Lighting project in the following way: Number of potential clients * potential contract value * penetration rate = total opportunity for Philips (Raaijmakers, personal communication, May 11, 2016).

According to Philips the reduced energy usage and reduced need for maintenance and

replacement comes from the fact that the product-service program allows them to use very high quality products that are often too expensive for the regular market (Raaijmakers, personal communication, May 11, 2016).

Schiphol The Dutch airport of Schiphol decided to adopt the Circular Lighting system in one of its terminal halls. The Schiphol group worked together with Philips and Cofely, a French energy servicing company, to develop the leasing scheme suited for the airport. Internal documents of Philips Lighting show that it has been calculated that through the PSS with a contract term of 5 years and by using cutting edge LED technology the airport could save up to 50% of electricity consumption for the lighting of the hall (Raaijmakers, 2015).

Together with the Dutch architecture firm Kossman.dejong, Philips developed a custom type of fixture for the airport. Moreover, different parts of the fixtures can be replaced separately which spurs saving in maintenance costs and resources (Schiphol Group, n.d.)

(Faithfull, 2015). Philips refused to disclose more specific details on the project, its partnerships, and the models developed for the PSS in Schiphol apart from some information on the fixtures as explained later in the technical and design analysis part.

National Union of Students (NUS)

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Figure 21: Osram Parathom Classic A (OSRAM, 2016).

The National Union of Students is a confederation of 600 student unions which represents the interests of more than 7 million students throughout the United Kingdom. The NUS employs about 220 members of staff in their London office (NUS, n.d.). In October 2015 the NUS signed a 15-year leasing contract where Philips has committed to ensure that the lighting will be kept at an L70 standard (giving at least 70% of its original output). Through this contract Philips provided a £100k, 7kW lighting system. The energy consumption is measured against a baseline that is calculated after a few months of operation. Philips and the NUS are rewarded if the energy consumption level of the lighting dips below the set baseline.

However, if the consumption is more than expected Philips is penalised. This penalty incentivises Philips to keep providing the NUS with state of the art and efficient lighting systems. The contract also entails an annual health check of the lighting system as well as preventive maintenance measures through online monitoring and on-site maintenance (Faithfull, 2015) (ASBP, 2015).

Philips cooperated by providing an amount of publicly available documents that show the broad lines of the technical and design aspects of the Circular Lighting program while additionally providing only a very limited number of internal documents that provided this thesis with new insights.

Technical & Design Analysis The technical and design analysis of the products that work within the Circular Lighting program are based on information found in documents provided by Philips.

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Figure 20: Philips ‘state-of-the-art’ lighting systems at NUS London Offices (NUS, 2016).

Through a life cycle assessment (LCA) of the Osram Parathom Classic A LED lamp (not a Philips product) we get an idea where the biggest environmental impact of this product is situated and if PSS such as the one proposed

by Philips can help reduce this impact. The Parathom is a classic LED lamp that emits about 345 lumens and has an average service life of 25.000 hours to 50.000 hours. LED is the abbreviation of light-emitting diode which is a semiconducting diode that emits narrowspectrum light. The type of phosphors used in the LED can change the colour of the light. By putting different small LEDs together a classic bulb shaped form can be obtained (Schlösser, 2014) (OSRAM, 2016).

The LCA of the Osram Parathom Classic A shows the Cumulated Energy Demand and the Global Warming Potential of the use phase (50.000 functional hours) and of the production phase. It must be noted that the end of life phase of an LED is not mentioned in the information provided by Osram. Of

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Parathom Classic A

2368.8

35.6

CED 0

1000

500

1500

2000

2500

Cumulated Energy Demand in MJ

GWP

113

2.4 0

20

40

60

80

100

120

Global Warming Potential in CO2 equivalents Production

Use

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Figure 22: Cumulated Energy Demand and Global Warming potential of a Parathom Classic A (own adaptation of OSRAM, 2016).

Figure 23: LED trends show efficacy increasing based on Haitz’s Law (Kim, 2014).

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course different LED lamps have different environmental impacts during the production phase. Nevertheless it seems to be a constant between different LED models that the use phase is the most influential life cycle phase (Osram, 2016).

From the findings of Schlösser, Kim, and Osram we can differentiate two parts in the technical aspect of an effective lighting leasing

1) Reduce operational energy use through short-cycling of LED technology.

2) Reduce resource usage in production phase through reuse of components.

To make the short cycling economically viable the replacement of the lighting systems needs to be easy and non-destructive. This can be achieved through proper design that enables the replacement of the lighting and the reuse of recuperated resources in the production of new LED lighting technology. Even though the manufacturing phase of a LED doesn’t pollute as much as the use phase the importance of resource scarcity cannot be neglected.

Previously LED technology was primarily used in the market for consumer goods such as mobile phones, flat-screens, television, etc.

However, forecasts show that LED technology is growing very fast in the market for street and space lighting. A penetration in the EU lighting market of 46% in 2016 and up to 72% by 2020 is predicted (McKinsey & Company, 2012).

Logically a growing demand for LEDs has spurred a consequential growth in the critical raw materials used to manufacture them. The Joint Research Centre (2013) - the European Commission’s in-house science service published a report identifying, among others, gallium and yttrium as materials with a high critical rating which could form a bottleneck in the future supply chains of low-carbon energy technologies that use them. Gallium and yttrium are materials used in the production of LEDs. The rise of the usage of LED technology in lighting and solar photovoltaic panels will increase the demand for these materials with

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Research by Schmidt MacArthur Fellow and UC Berkeley alumni Antony Kim (2014) states that if the environmental performance (Kim does not disclose which impact categories are considered within this environmental performance) is a priority for LED lighting systems, ‘short-cycling’ every 3 to 5 years is better than waiting to replace the LEDs after their full 20+ years of usage. This conclusion is based on the fact that every 3 to 5 years energy efficacy of LED lighting systems doubles and because operational energy use is by far the biggest environmental impact category (Kim, 2014) (Osram, 2016). These findings show the advantages a leasing scheme can entail.

Due to the fact that the manufacturer is a stakeholder in the amount of consumed energy by the lighting systems he is incentivised to replace the LEDs with newer and more performant systems. As Schlösser puts it in his presentation on innovative business models for LED products: ‘Technology alone will not reduce the resource needs, nor the energy needs’ (Schlösser, 2014, p.5) He then explains that through new business models, such as Circular Lighting and other PSS, we can incentivise manufacturers to optimise resource consumption and minimise operational energy use.

scheme:

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8% per year for the rest of the decade. This high demand consequentially entails a risk of a market deficit to supply these materials.

A solution to this problem is increasing the efficient use and reuse of resources in the production of LEDs for lighting technology.

CycLED is an organisation financed under the European Commission’s Seventh Framework Programme and ran from 2012 until 2015. The project focuses on optimising resource flows for LED products and identifies opportunities to reduce resource losses in the production, use, and recycling of LEDs lighting. Lastly CycleLED focuses on closed-loop resource management of LED products (SETIS, 2016) (JRC, 2013).

Within the Circular Lighting program Philips has been developing different products and has

been performing assessments to see which of their products are best suited for the leasing program. Philips uses a three way approach to improve the circularity of their lighting systems as explained by Aerts in a presentation within the scope of the CycLED project (2015): 1) Materials a Exclusive usage of recyclable materials. b. No forbidden materials (obliged by law). c. Try to reduce overall weight by using the least amount of material possible. d. Avoid Coatings. e. Reduce the number of different materials used. f. Be consistent with the materials you use by composing preference lists. g. Make use of ‘pure’ materials (no composites). h. When recycling electronics these need to be considered as a homogeneous material.

2) Connections a. Avoid fixed connections (only separable through destructive measures).

Figure 24: Standard MR16 and MR16 with braking seems (Aerts, 2015, p. 7-8).

b. Only separable materials can be recycled with a decent profit margin.

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Figure 25: Comparison of different Philips lighting products on the circular economy scorecard (Aerts, 2015, p.18).

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Figure 26: Philips adapted its SL Mini Poly model for the Schiphol leasing contract to strongly enhance its disassembly, maintenance and upgradeability (Aerts, 2015, p. 22).

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Figure 27: Philips is working on an Eco fixture that perfectly integrates the circular ideas. No extra information on this project could be found (Aerts, 2015, p.19).

c. Connections need to be reversible. d. Easily decomposable in relatively large sizes (>1cm). e. Avoid folding and breakage at disassembly. f. If breakage is unavoidable components need to break through tear seems/ fault lines. i. Example of the need of tear seems/fault lines: The Standard MR16 lamp damages the Printed Circuit Board (PCB) when dismantled. The adapted version with tear seems ensures the safe recuperation of the PCB. The MR16 is 90% recyclable (figure 24).

a. Make sure the PCB comes of in one piece. b. Ensure fast and easy material detection.

Philips has also used a circular economy scorecard developed by CycleLED that shows the score on different circular aspect of a certain product. The scorecard used by Philips is divided in five different categories that help assessing the circular potential of a product: 1) Upgradeability: how well the lighting solution will be able to adapt itself to future conditions.

2) Maintenance: How reliable is the product and what is the technical life expectancy.

3) Electronics

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3) Modularity: How much modular systems have been used.

4) Disassembly: How easily can it be disassembled.

5) Recycling: How easily can the original resources be retrieved.

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Philips also stresses the circularity of the fixtures in which the LEDs are placed. The fixtures for the Circular Lighting program are designed in such a way that the amount of maintenance needed, is as limited as possible.

Philips also engages itself to actively reuse the fixtures as a whole in other leasing contracts before they are disassembled (Raaijmakers, 2015). Through the circular economy scorecard Philips was able to upgrade the SL Mini Poly model for the lighting of the Schiphol airport that operates under the Circular Lighting program. The level of recyclability of the new model is the same as the old one but it performs much better on key elements such as disassembly, maintenance and upgradeability which further enhances the advantages of the leasing scheme. The fixture used in Schiphol is said to last twice as long as its non-adapted counterparts and will be introduced in the regular market in 2017 (Raaijmakers, personal communication, May 11, 2016).

(Raaijmakers, 2015). The scarce information available on the development of fixtures and LEDs, which are specially developed for the PSS shows that Philips has grasped the need to design for disassembly and tries to benefit from the PSS concept. Only if more data is released in the future on the operational energy use of the LEDs in a Circular Lighting program, and data on the amount of reused resources due to the PSS, then its true ecological advantage can be explored. At this point we can only take note of the shift in mind-set the company is going through and the early-stage initiatives it has undertaken to realise the full potential – both financially as ecologically – of the Circular Lighting program. Jesse Putzel, head of sustainability at BAM UK stated the following challenge for Philips during a personal Q&A at a conference in Brussels (Putzel, personal communication, May 3, 2016): The challenge for Philips Lighting will be to get the subsidiaries that manufacture the parts of the LEDS to adapt their production methods as Philips does not build its own components.

We see that Philips Lighting is clearly trying to develop its Circular Lighting program. For the moment it is strongly focused on the Benelux as this area is a frontrunner in the field of circular economy. Philips considers its Circular Lighting program as one of its most important developments and is actively searching for partners and new clients for the project

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Company: Interface Evergreen Service Agreement

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Short: This subchapter tells the story of the Interface Evergreen Service Agreement (ESA) that lasted from 1995 until 2002. Interface ESA was an ambitious product-service system (PSS) for carpet tiles developed from a sustainability viewpoint. Unfortunately the project failed due to different factors and was halted. Nonetheless, it spurred different innovative recycling initiatives at Interface and serves as a great case study for the development of new PSS in the building industry.

Interface The production of carpets largely relies on petroleum-based nylon. The carpet industry is responsible for a production of about 2.14 billion kilograms of waste every year of which 96% goes into landfill and will sit there for the coming 20.000 years (Olivia, & Quinn, 2003).

In the EU-27, consumption of carpet tiles is estimated at approximately 200 million m² per year. The European Commission wishes to move towards a 30% recycling rate of carpet tiles by 2030 (PE INTERNATIONAL, 2013).

Interface is the world’s largest provider of carpet tiles for commercial use and manufactures and sells more than 40% of the carpet tiles used in commercial buildings (Fishbein, McGarry, & Dillon, 2000) (Interface, 2016). Interface was founded in 1973 by Ray Anderson, a CEO with a passion for sustainability. By 2020 the company wishes to have a zero environmental impact and thus be a completely environmentally sustainable company (Toktay, Sekhat, & Anderson, 2006).

The Interface ESA fits perfectly within this goal. The Interface ESA is a PSS where carpet is leased as “long-term floorcovering service” instead of sold. As explained before, within this PSS Interface remains the owner of the carpet and thus the reclaimed carpet can possibly be reused or recycled by Interface. Within ESA, Interface also provides maintenance services such as deep professional cleaning of the carpets. In 1995 Interface developed its ESA motivated by the idea that they could gain financial profit from the residual value of the products that were reclaimed all the while decreasing their virgin resource usage and waste generation. Unfortunately the project failed due to the inability of Interface to recover the expected value from the reclaimed carpets (Agrawala & Toktay, 2012) (Toktay, et al., 2006) (Oliva & Quinn, 2003).

The carpet tiles consist of three layers. The top layer is called the face layer and is made out of nylon 6.6. The bottom layer called the backing layer is made out of a recyclable PVC polymer. The third layer is an adhesive that joins the two layers. In the 90’s, Interface was unable to recover the expected value from the reclaimed carpets because no technology was known to Interface that could separate the face fibre from the backing of the carpet. Moreover, Interface was unable to recycle the face fibre which consisted of nylon 6.6 (nylon 6.6 is not easily recyclable but has a very high durability and sustains its appearance in busy office environments). Later however Interface worked together with companies such as DuPont that have the technology to recycle nylon. Besides technological problems, ESA also failed to gain foothold in the market. Companies and public instances were too reluctant to embrace the

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initiative. For example, in 1999 the University of Texas at Houston, that had committed itself to become more sustainable suddenly changed its plan to sign a long-term lease with Interface and instead opted to buy the carpets instead of leasing them (Agrawala & Toktay, 2012) (Toktay, et al., 2006) (Oliva & Quinn, 2003).

Evergreen Service Agreement

Between 1995 and 2002 Interface actively tried to expand its ESA and sign new contracts.

Championed by its CEO Ray Anderson and CFO Dan Hendrix who pitched the programme in their different speeches and in their extensive business networks, Interface was able to start negotiations for ESA contracts with a large amount of companies including Procter & Gamble, General Motors, and the Federal Reserve Bank. Unfortunately in the majority of the cases the companies would end up by purchasing Interface carpet as opposed to leasing it (Oliva & Quinn, 2003).

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Inspired by the book The Ecology of Commerce, Ray Anderson got the idea to launch the ESA in 1995. The book by Hawken proposes to develop long-term service licenses with customers instead of selling products.

Anderson started thinking about how Interface could provide ‘floorcovering services’ instead of just selling floorcovering. The aim of the ESA would be to ‘close the loop’ (Hawken, 1993) (Oliva & Quinn, 2003). Obviously, the idea of closing the loop and designing out waste is one that precedes the conception of the broader idea of a circular economy. The ESA was developed to provide the following services:

advantage for Interface was based on the fact that during commercial use of carpet tiles, 20% of all tiles receive 80% of the wear. Interface argued that replacing only the worn tiles could reduce the overall carpet tile consumption by 80%. This would generate a fivefold saving in material costs over the term of the lease.

Driven by its leitmotif ‘Doing well by doing good’ Interface was convinced that the PSS would take over from conventional carpet sales (Oliva & Quinn, 2003).

1) Carpet tiles and installation.

2) Carpet maintenance.

3) Selective replacement of tiles.

4) Carpet removal at the end of the term.

The first question a company such as Interface then needs to ask is how a PSS such as the ESA can create economic value for the company.

The model relies on the favourable economics of service provision that are supposed to provide high margins, stable revenue, and long-term customer relationships. Another

One of the difficulties faced by Interface when trying to conclude deals for the ESA had to do with United States federal legislation on leasing agreements. The lease was structured in such a way that it would qualify, under Financial Accounting Standards Board (FASB) 13, as an operating lease and not as a capital lease. When classified as an operating lease, clients of ESA did not have to record the transaction in their balance sheets which has a positive impact on the return on assets and on the debt-to-equity ratio. Shortly, Interface believed that if the ESA could be qualified as an operating lease it would have positive financial reporting benefits

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for their customers. To be qualified as an operating lease, however, the contract needed to make sure it did not qualify for one of the following criteria (“Summary of Statement No. 13”, 2016) (Oliva & Quinn, 2003):

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1) The lease transfers title to (ownership of) the property or equipment to the lessee by the end of the lease term. Meaning that Interface had to keep the title of owner of its products.

2) The lease contains a bargain purchase option. Interface could not strike a deal with the purchaser to buy the product at a discount at the end of the lease term. This forces Interface to reclaim the product at the end of the lease term.

3) The lease term is equal to at least 75% of the estimated economic life of the property or equipment. Interface estimated a life span of 10 years for its carpets. This means the contract could not exceed 7 years and 6 months. To be sure to not exceed the term Interface drafted its lease agreements for 7 year terms.

4) The present value of the minimum lease payments is at least 90% of the original cost (fair market value) of the leased property or equipment (“Summary of Statement No. 13”, 2016) (Oliva & Quinn, 2003). This means Interface needs to calculate the present value of all the future lease payments. This value cannot exceed 90% of the market value the product would have if sold normally.

Tailoring the ESA as an operating lease was a strategic decision as it could potentially attract new clients for Interface, considering the aforementioned fiscal reporting benefits.

The rules associated with the operating lease

however formed a drawback for Interface.

Firstly, the third rule forces Interface to take back the carpet tiles after 7 years. At this point the tiles are too worn out to be sold on the secondary market and the material is too ‘young’ to be recycled in a cost effective way. Secondly, the last rule essentially forces Interface to lease their carpet tiles at a discount as compared to the price it would get for simply selling the tiles (Totkay et al., 2006).

Between 1995 and 1998 the price of an oil barrel did not rise above 50$. Because of this low price recycling nylon – even though the technology was available – was not economically viable given the availability of cheap crude oil, which is needed in the production of nylon. Because of these conditions there was no existing infrastructure for recycling nylon nor was there a market for used carpets. This means that in that time the reclaimed carpet tiles have a residual value of nearly zero. This factor combined with rule four of the FASB amounts to selling the product at a 10% discount all the while financing it over a period of seven years (Oliva & Quinn, 2003). The executives of Interface quickly realised that the source of revenue needed to come from the extra ‘services’ (maintenance, replacement, and reclamation) that come with the leased carpet tiles. However, the margins on servicing turned out to be quite low as external maintenance service providers are cheap and most likely do not cover the discount granted under rule four (Totkay et al., 2006). Nonetheless, through establishing 80 licensing agreements and the acquisition of 29 carpet dealers throughout the United States and creating a separate company called Re:Source Americas, Interface strongly

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developed its network for carpet related services (Oliva & Quinn, 2003).

After 7 years, in 2001, Interface had only been able to sign six Evergreen Service Agreements.

Different arguments were presented to explain the failure of the project. Some argued that the combination of lease agreements, the bundling of services, and the required reclamation was too complex for customers to grasp as it often required customers to transfer funds from capital to operating expenses. An Interface executive put it in the following way (Oliva & Quinn, 2003):

The main reason that limited the market penetration of ESA that all Interface executives agreed upon was the fact that customers have no idea of how much it costs to maintain carpets. They have an idea of regular market prices for carpet tiles but were always flabbergasted when they were presented the prices proposed by the ESA. This is because

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As soon as we book a large number of ESA sales, we will immediately have incentives to make further innovations to reduce life-cycle costs. For instance, I believe we can still reduce maintenance costs [possible by applying chemical finishes], lower the number of tiles we replace, and pursue further innovations for recyclability. For example, create easier ways to dissemble, reduce materials, and decrease the diversity of materials.

However, today incentives for these product innovations are low because there are so few sales—yet sales are inhibited because of a lack of these features (Oliva & Quinn, 2003, p. 11).

carpet maintenance costs were buried in general janitor budgets which also encompass many other services and those involved in the purchase did not have a notion of the real costs of maintenance. Combined with the fact that Interface provided deep professional cleaning which is more expensive than classic maintenance contracts this inhibited the signing of new deals (Oliva & Quinn, 2003).

Unfortunately, the Interface Evergreen Service Agreement project was put to a halt and Interface went back to fully selling its carpet tiles in the regular way. Interface however was and still remains a frontrunner in increasing the sustainability of their products and manufacturing processes. To this day they still aim to innovate with new manufacturing techniques and recycling processes. It can only be hoped that in wake of a future rise of circular economy adoption by companies Interface relaunches its ESA project.

Recovery of Resources Interface launched its ESA project with a goal of becoming more ecological and closing its resource loop. Moreover, it was thought that the project could be combined with a reasonable profit for the company.

Unfortunately, the project faced different problems due to US tax regulation and a difficulty to sign enough lease contracts. As mentioned earlier the project was halted and Interface went back to fully exploiting its classic business model. Amid this failed initiative Interface still aims at making its production process greener and has heavily invested in recycling technology and infrastructure.

For example even amid low oil prices and unfavourable market conditions, Interface

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$250

Cumulative Saving from Global Waste Elimination Activities $185

Million USD

$200

$165

$150

$125 $87

$100 $50 $50 $10 $0

1995

$24

1996

1997

1998 Year

1999

2000

2001

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Figure 28: Cumulative savings from global waste elimination activities by Interface (own adaptation of Oliva, & Quinn, 2003, p.14)

developed new recycling techniques to increase the residual value of its carpet tiles at the end of the lease term from 0% to 15% during the time that the ESA project was running.

Through Re:Source Americas, the company created to support the ESA programme, Interface has reclaimed 362.043 m2 of carpet tiles from its customers and customers of other carpet manufacturers. This represented about 2% of their yearly produced surface of new carpet tiles. Interface did not make profit out of the carpet tiles recuperated from its ESA agreements as it charged its customers the costs of transportation and leasing in the lease agreement (Fishbein, McGarry, & Dillon, 2000).

Another initiative of Interface is that it provided its ESA customers with the guarantee that none of its reclaimed carpet tiles would be sent into landfill. For example, Interface donated cleaned carpet tiles to non-profit organisations. Usually this was done with the carpet tiles models that were difficult to recycle.

Another part of the reclaimed carpet tiles were recycled by the Interface facilities or other

nationwide Nylon recyclers such as DuPont (Fishbein, McGarry, & Dillon, 2000). Interface also claims it has redesigned its carpet tiles to maximise the ease and efficiency of reclaiming and end of life processing during and after the life of the ESA programme. Even though Interface did not make a profit out of the reclaimed tiles it still claimed to do as much as it could to prevent the material from going into landfill. By adapting its designs, developing new products, and by introducing new recycling techniques this goal was achieved.

For example, a model called Solenium Floor Covering was developed and designed in such a way that 100% of the face fibre and 100% of the bottom fibre could be recycled. Interface also developed the DĂŠjĂ Vu Carpet, this model has the highest content of recycled material in the carpeting industry. It is made from 72% of recycled material. Through these types of design measures Interface was able to reduce its need for new nylon in the production of carpet tiles by 1.13 million kilograms. Interface claims also to have saved about $185 million in materials expenses since 1994 when it started to design out waste in its product and

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processes (Fishbein, McGarry, & Dillon, 2000).

In 2007 Interface made a big step towards increasing the amount of recycled material of their carpet tiles. They were introduced to an Italian company specialised in manufacturing ultra-precision leather cutting machines. By customising the technology for carpet recycling it had become possible to separate the face fibre from the backing. The material is then melted into pallets that can be reintegrated in the manufacturing process of new carpet tiles. This marked the start of the Re-Entry 2.0 project that sets up recycling facilities for reclaimed carpet tiles (Agrawal, & Toktay, 2009). Through this project Interface has reclaimed and recycled more than 117900 tons of carpet tiles from 2007 to 2013 (Interface, 2013).

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Company: Akoestiekfrabriek

Chapter 6

Short: This subchapter shows the Dutch company Akoestiekfabriek as an example for companies that make use of terms and claims from the circular economy but who do not show proof of the circularity of their products.

The Akoestiekfabriek is a Dutch company that specialises in providing acoustic solutions for office spaces. They have a broad portfolio of products with which they can provide on demand tailored acoustic solutions. The Akoestiekfabriek tries to find the perfect balance between providing on demand services while operating with a high amount of modularity and standardised formats of panels. By doing so the Akoestiekfabriek hopes to minimise its environmental impact.

Moreover, it is actively engaged to only work with suppliers and clients that have this same aim. The Akoestiekfabriek claims to only use durable materials and sustainable construction techniques. The company also likes to promote its ‘pay per use’ system which is a form of PSS. However, the Akoestiekfabriek declined to provide any further information about this programme (“De Akoestiekfabriek”, 2016) (“Circulaire Economie”, 2016) (Besteman, personal communication, April 11, 2016).

The company claims to have different clients that use the PSS and that all their products except the Greenwall 1.0 and 2.0 (because they have a residual value of nearly zero) can be leased out through their pay per use service.

The Akoestiekfabriek however declined to provide more information on how this pay per use system works, how and where it has been applied, and how it enables them to close

their material loop to reduce waste production (Besteman, personal communication, April 11, 2016).

The Akoestiekfabriek is an example of a company that uses terms such as ‘circular economy’, ‘closing the loop’, ‘pay per use’, etc. when describing its modus operandi and products. However, once one tries to find more information on how this is translated into practice through their website and personal communication it seems that there is no information available on these matters. The question can be asked whether this is because there is no actual existing information or if the company does not want to share it for competitive reasons. If the first hypothesis reveals itself to be true this would mean that companies use the terms to describe the circular economy as a marketing tool to profile themselves as ‘green’ companies rather than to really make their products and production/recycling processes more ecological by reducing waste production and resource usage. In the case of the Interface Evergreen Service Agreement as described earlier in this chapter we see that a great deal of different factors play a role in the economic and ecologic soundness of a PSS and it may not always be as straightforward as it seems. Making claims such as being part of the circular economy revolution because we offer a PSS in our product portfolio doesn’t automatically mean the amount of waste generated by a company is lowered. The competition argument can be reasonable if indeed competing companies are looking at developing their own PSS to reduce the amount of produced waste while gaining economic advantage out of it by copying another PSS. This argument of corporate

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Company: Turntoo Short: This subchapter briefly discusses the activities of Turntoo, a consulting company founded by architect Thomas Rau. Turntoo guides companies in the development of circular business models and has already realised different projects. Unfortunately, Turntoo remains very careful on the information and scientific proof it releases about its sustainability claims.

Consulting for Circular Business Models The Dutch Architect Thomas Rau founded Turntoo in 2010 together with economist Sabine Oberhüser as a separate entity of his architecture practice RAU. Turntoo is a consulting company that acts as advisor for companies or in the development of construction projects. Through its services, Turntoo helps companies with the incorporation of circular business models in their portfolios. The idea to found Turntoo in 2010 came after the completion of the Pay per lux project with Philips analysed earlier in subchapter 6.1 (van der Kils, 2013).

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espionage can be countered with the fact that the amount of graphs, data, and examples that need to be made public to back the claims of adopting the principles of the circular economy are not revealing enough for other companies to make use of them. As shown by Interface ESA a graph showing the cumulative saving from global waste elimination activities (figure 28) can already be sufficient. Another counterargument for keeping such information secret is that making it public can spur other companies to adopt PSS in the building industry which could potentially expand the market demand for such solutions in buildings.

As an example in another industry: Tesla, an automotive company, has retracted a part of its electric battery patents in the hope it will help other automotive companies to develop electric vehicles which in turn would fast track market acceptance of electric vehicles and increase their sales (Musk, 2014).

Turntoo promotes what they conveniently call the ‘Turntoo model’. Rau argues that his Turntoo model is much more than just promoting companies to lease out their products. He takes the example of cars where a car is built by a manufacturer and then sold to a leasing company who will then lease it out to its customers. What can be observed in this example is that the original producer of the product does not retain ownership and thus has no responsibility in regards to its 71

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produced car (van der Kils, 2013). In fact, the Turntoo model is very similar to the models explained in the previous chapters. Its primary aim is to ensure that ownership is retained by manufacturers to reduce resource usage and waste production by closing material loops.

Turntoo has already worked on many different projects. For example, Turntoo developed a business model for Bosch and Eigen Haard, an Amsterdam based social housing company, where for 10â‚Ź/month people can get a washing machine for which maintenance, upgrades, water, and electricity are provided by the aforementioned companies. As explained in the case presentation of chapter 2, these types of programmes offer customers the opportunity to benefit from the advantages of high-end washing machines all the while being more energy and resource efficient (European Commission, 2016).

Thomas Rau sees objects, buildings, and other consumer goods as resource banks. Temporary holders of different resources while they are waiting to be reused somewhere else. For this reason Turntoo promotes the inclusion of material passports in objects, buildings, and other consumer goods. By doing so it becomes easier for manufacturers and stakeholders to have an overview of the geographical position of materials, the age of a material, and more importantly its residual value.

Pay per lux model which Philips has now rebranded as Circular Lighting, he is the architect of the extension of the Brummen town hall (discussed in subchapter 6.5) which acts as a material bank, and he is also the architect of the new Alliander headquarters which also functions as a material bank.

However, when trying to obtain more information on the actual calculations and scientific arguments behind his different projects it is very difficult to find in depth material. Turntoo and RAU both declined to provide more details – such as data, life cycle assessments, life cycle costs, design plans, etc. – on why their approach is more sustainable than its classic counterparts. Asking if they had more proof than just common sense for their sustainability claims always resulted in the answer that they do not have enough time to provide these answers. Thorough research revealed more information on two projects Turntoo has worked on. The first project is Desso, a Dutch carpet manufacturer that tries to incorporate circular concepts in its business model (subchapter 6.4). The second project is the Brummen town hall, an extension of the existing town hall designed by Thomas Rau and Turntoo (subchapter 6.5).

Thomas Rau profiles himself as a circular economy messiah by going around the world and giving up to 60 lectures per year. Through his initiatives different buildings have been built that incorporate concepts from the circular economy. He was the initiator of the

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Company: Desso Short: This subchapter discusses the Carpet Lease programme of Desso, a Dutch carpet tile manufacturer. The programme started in 2014 and has already been applied in several office buildings. Due to the small amount of available details on the performance of the Carpet leasing programme it has proved difficult to verify its specific impact on the waste production and resource usage of Desso.

Figure 29: Through the Carpet Lease PSS Desso aims to close its resource loops (Desso, 2016, p. 41).

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Desso is a Dutch carpet tile manufacturing company that has over 80 years of experience and operates in more than 100 countries. Desso is actively engaged to embrace and implement the principles of the circular economy and has a full Cradle to Cradle commitment since 2008. It tries to do so by working on four main aspects within their business model.

Firstly, Desso has made the transition to using

recycled materials in their production process all the while keeping the whole process cost efficient. Secondly, Desso conducts an extensive amount of research to find new techniques and technologies to increase the recyclability rate of its products. Thirdly, Desso has replaced the oil-based bitumen backing of their carpet tiles with the Cradle to Cradle Silver certified EcoBase backing. This backing which is a polyolefin based layer has been designed to ensure easy disassembly and recycling in Desso’s production process. Lastly, Desso works with a take back programme for used carpet tiles produced by Desso but also by other companies which through the programme are reclaimed and recycled. An infographic developed by Turntoo claims the carpet tiles produced by Desso through respecting these four circular engagements has reduced the CO2 emissions of their tiles by 20%. This conclusion is based on an assumption of 50% recycled content within the carpet tiles (The

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Figure 30: The Desso Carpet Lease PSS has already been applied in several office buildings (De Bisschop, 2015, p.7)

Benefits of the Circular Economy, 2014). Once again, for confidentiality reasons Turntoo and Desso refused to back these claims with actual data or numbers.

What Interface has tried in the past with the Interface Evergreen Service Agreement (ESA), Desso is trying at the moment through the Desso leasing programme. In 2014 Desso has teamed up with De Lage Landen (DLL), a leasing, business, and finance solutions provider, to develop a leasing service programme called Carpet Lease. This programme was the logical next step in the transition towards a circular economy for Desso after they had already started with following Cradle to Cradle principles and operating a carpet tile take back programme.

The PSS offers a full service to the customers with elements such as installation, cleaning, maintenance and reclaiming of the carpet tiles.

The president of De Lage Landen Financial

Solutions sees this initiative as a steppingstone for more PSS in our economy (Desso, 2013): This tailor made, full service lease solution fits perfectly in our aim to further develop our concept of life cycle asset management: reducing waste and recycling raw materials by reusing predesigned parts in the value chain.

In the long run, we hope to see service models like this grow and shift the world economy to a much more innovative and sustainable position, enabling economic growth to take place within the means of the planet (Wijckmans, Desso, 2013).

The Carpet Lease programme, just as did the Interface ESA, is having difficulties to get enough clients on board. Unfortunately, the current incentives for consumers are not big enough to make the extra cost that the leasing programme entails acceptable. Desso believes

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that landfill bans or landfill taxes could help in this regard. Of course, this is a decision policy makers need to take (Desso, 2015). In a presentation De Bisschop, a Desso employee, stresses the importance of the fact that through the Carpet Lease programme companies avoid making big initial investments and can spread their costs over a longer term. Moreover, Bisschop claims that the costs are fiscally deductible for companies. Desso works with a lease term of 7 years as this is the economic life expectancy of carpet tiles in Belgium, the Netherlands, and Luxembourg. Desso outsources the placement and maintenance to external contractors. In practice the Carpet Lease program of Desso costs companies between 0.48₏ and 1₏ m²/month depending on the type of tiles and covered surface (figure 30) (De Bisschop, 2015).

As often, not much information was released on the details of this PSS. The Carpet Lease programme clearly fits within the sustainable mind-set that Desso pursues but due to the low amount of information it is difficult to assess the impact of the programme on the overall waste production and resource usage of the company. Nonetheless, common sense and examples from other industries dictate that this type of initiatives should only be encouraged.

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Building: Brummen Town Hall

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Short: The Brummen town hall extension has been designed by RAU architects and Turntoo.

It incorporates many different circular concepts and is built based on the concept of design for disassembly. Due to their potential for disassembly and the fixed life of the extension (20 years) many building components would have been ideal candidates for a product-service system (PSS). Unfortunately, public procurement laws have made it difficult for the designers to incorporate such systems in the building.

Introduction In the Dutch town of Brummen, architect Thomas Rau and his consultancy office Turntoo have designed an extension for the current building that functions according to circular principles. The extension is conceived as a material depot and has a material passport.

The Brummen administration clearly asked to design the extension with a service life of 20 years and with a maximal amount of sustainability within the available budget. The ultimate goal is that in 20 years the original villa (which was built in 1890) can stand alone in the park because the extension has completely been disassembled (RAU, 2013) (Hoorntje, 2013). With this life span in mind Rau and Turntoo made a design that is made for disassembly, is consistent in its use of reusable and durable high-quality materials, and is supposed to use PSS oriented contracts (United Nations Environment Programme, 2015).

Energy

In a sustainability note published by BAM, the main contractor of the project, the different efforts to increase the sustainability of the building are noted. In terms of the energy reduction of the building, the design prioritises the reduction in the operational energy use and in second instance in the use of renewable energy sources (which eventually was not carried out because a Life Cycle Costing analysis had shown that investing in energy coming from renewable sources would be too expensive for the city administration).

The third part of the Trias Energetica states that after one has tried to reduce the energy consumption of the building, after one has tried to get the needed energy from renewable sources, one has to try to get energy from fossil fuels with a highest efficiency possible.

The designers applied this third rule by incorporating technical installations with a high efficiency in their design (Rademacher, 2012).

To reduce the operational energy consumption the building extension is designed in a compact way which results in less energy transmission through the building envelope (Rademacher, 2012). However, a great amount of glass was used in the design of the building with among others a large glass roof. One can argue that this considerably increases the amount of heat transmission through the building envelope but as the architects have used three layered glass panels with very low heat-transmission coefficients this negative effect is compensated.

Moreover, through the extensive use of glass in the design the need for artificial lighting is reduced and so is also its energy consumption.

They also argue that during winter the sunlight

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Materials The architects have followed a specific strategy when choosing the materials for the building: 1) The building needs to be adaptable in the future to extend its economic and service life expectancy. a. To achieve this, a column grid is used which allows a high amount of variations in partitioning. b. The building is designed with the four layers of Cheshire in mind, which increases the adaptability of the building (Rademacher, 20102).

out of cross laminated timber (CLT). The wood used in the structure is produced in a sustainable way. This is ensured through an FSC (Forest Stewardship Council) certification. Moreover, the CLT structure can be disassembled and reused. b. The structural elements of the curtain walls are also (where structurally possible) made out of wood. Where wood was structurally unusable the traditional aluminium curtain walls were used. c. The inner walls are dry walls that can be disassembled.

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that comes through the glass roof reduces the heating demand of the building. The majority of the glass is oriented towards the north thus preventing overheating in the summer. This contradicts the extra sunlight during winter argument as an orientation towards the north reduces the amount of incoming sunlight.

Overheating in summer is also minimised through the use of sun screens that are installed in front of the curtain wall at the exterior of the building. The glass roof has no separate sun screens but is equipped with sun blocking glass type. As a Life Cycle Costing analysis (LCC) has shown that it was not financially feasible to use energy from renewable sources in the project the architects have made sure the equipment is of a high quality and has very high energy efficiency (Rademacher, 20102).

d. Several inside elements such as the welcome desk were fabricated out of cardboard, produced out of recycled paper. The cardboard can be reused and recycled in a local paper factory (Hoorntje, 2013). e. Several outside non-bearing walls are made out of gabions filled with debris from old buildings (Rademacher, 2012).

3) The amount of used material needs to be minimised. a. The wooden structure is optimised and has thus a minimised weight. All the connections of the structure are designed to be detachable without destructive measures.

2) The chosen materials need to be sustainable. a. The structure of the building is made

b. The building envelope is non-bearing and is thus designed as light as possible

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while still respecting the thermal, acoustic, and constructive constraints. c. All the elements of the scenery and settings level are designed for disassembly and reuse. This holds for the floors (plasterfloor panels), the inner walls (dry wall systems), and the ceilings (suspended ceilings) (Rademacher, 20102).

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4) The building components need to be designed for disassembly.

at all. In fact, not even one PSS agreement was signed for the Brummen town hall extension.

Ellen Hanzens, project leader of the venture explains that the procurement rules for public buildings that are bound by different Dutch laws did not allow the use of PSS in this building competition (Hoorntje, 2013).

As explained before, Rau and Turntoo have tried to maximise the reuse potential of the building and to tried to increase manufacturer responsibility by designing for disassembly and by making a material passport for the building.  

a. The supporting structure, building envelope and floors are made from wood in pre-fabricated components with a specific focus on disassembly potential. Moreover, the use of concrete has been minimised (United Nations Environment Programme, 2015). b. The designers claim that 90% of the town hall extension can be disassembled (United Nations Environment Programme, 2015) (RAU, 2013). c. Turntoo has intervened in the negotiations with the material and component providers of the building to negotiate PSS based contracts. However, the use of PSS has seemed impossible in the context of the Brummen town hall extension (Rademacher, 20102).

Product-Service Systems Even if the initial idea of Turntoo was to incorporate as many PSS as possible in the building it turned out that this was not the case

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Figure 31: Front view of the town hall and its extension (RAU, 2013, p. 2).

Figure 32: Inside the extension of the town hall with. The glass roof, CLT strucutre and welcome desk can be observed (RAU, 2013, p. 4).

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Building: Skilpod #48 Short: This subchapter delivers a study of a potential Product-Service System (PSS) developed by Skilpod. Skilpod is a Belgian building company that designs and constructs small scale housing units. Because Skilpod is a stakeholder in the whole construction process of the pods it could potentially gain a lot of advantages from a PSS. We look at model #48 which according to Skilpod is a perfect model for a PSS. Different scenarios for a possible PSS are explored such as the refurbishment and dismantlement scenario. A conceptual analysis investigates the advantages and disadvantages of these possible scenarios by looking at building materials, modularity, adaptability, etc. Lastly, a critical analysis is made of the current state of Skilpods ambitions to develop a PSS for its products.

Mission and Core Values Skilpod is a Belgian company founded by Jan Vrijs and Filip Timmermans and is located in Geel, Belgium. Skilpod designs and builds small-scale living pods. The sizes of the pods that Skilpod fabricates differ from model to model but they can all be categorised as small scale houses. The pod analysed in this subchapter is a model which has a surface of 48m², hence the name #48. The pods have many different possible applications such as home extensions, pool houses, offices, etc. Skilpod offers a wide variety of different models and sizes of pods. All the pods are pre-fabricated and directly transported as a whole to the customer (Skilpod, 2013) (Vrijs J., interview, April 6, 2016).

There are four strengths that Skilpod mentions to promote its pods. Firstly their mobility, the pods are easily transportable and easily placeable without having to perform consequential construction interventions on the site. Secondly they are ‘eco-smart’, this means that the pods are designed and built with a focus on sustainability through the use of high quality materials and by designing towards passive-norms with the final aim of reaching the zero-energy and energy-plus standards. Thirdly the pods are modular; in this regard the pods can for example easily be coupled to an existing building. Lastly the very adaptable design of the Pods is one of its main characteristics. By using cross laminated timber (CLT) structures different design combinations and detailing can be applied within the same framework. Skilpod does not work with a standardised package but adapts its products to the wishes and needs of its clients (Skilpod, 2013) (Vrijs J., interview, April 6, 2016).

By completely fabricating the pods in its own atelier in Geel (Belgium) a high quality product and high building speed are reached. Through this prefabrication procedure Skilpod aims to bring their customers a ‘plug-and-play’ experience as the pods are easily transportable and placeable. Skilpod has already realised different projects of different sizes and purposes. Currently, Skilpod hosts its offices in several of their own Pods (Skilpod, 2013) (Vrijs J., interview, April 6, 2016).

Skilpod Product-Service System (PSS) Currently, Skilpod sells its Pods with a 2-year warranty but is not involved in the later phase

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Figure 33: Model #48 (Vanhertum, 2015).

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Figure 34: Floor plan of model #48 (Vanhertum, 2015).

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of its products’ life cycle. In the near future the company wants to develop a PSS for its Pods that could enable them to recover the pods at the end of their service life or at the end of the leasing term. Skilpod is different from the Circular Lighting, Desso, and Akoestiekfabriek solutions as Skillpod provides a full package.

Skilpod entirely builds the small scale houses and not just a (small) component of it and thus would benefit from a product that is easily reusable. To fully develop the potential of a PSS the pods need to become more easily moveable, adaptable, recoverable, dismountable and reusable (Skilpod, 2013) (Vrijs J., interview, April 6, 2016).

By providing a PSS the initial investment becomes smaller for the client as he can spread the payments, thus making it easier to invest in a Skilpod project. On the other side once the lease term is completed the total amount payed by the client will be higher than if it would have bought the pod as a product. The financial surplus comes from the services that are included in the leasing scheme such as: placement and retrieval of the pod, maintenance and repair, insurance, and other associated services (Vrijs J., interview, April 6, 2016).

When discussing the potential idea with Jan Vrijs, co-founder of Skilpod, he immediately pointed out the fact that consumers need to be willing to adopt a PSS. For example Mr. Vrijs mentioned the Brussel Social Housing Company that for budgetary and legislative reasons wasn’t open for a PSS but preferred buying and thus owning the Pods. Nonetheless, social housing is a sector of the building industry where Skilpod sees a lot of potential

for leasing programmes. However, we notice that the current Belgian legislation for public procurement makes the usage of PSS in social housing projects difficult. A change in policy for this type of capital allocations in public projects may make a PSS in that context possible. Skilpod is convinced that building companies need to become bigger stakeholders in the whole construction story through PSS. To date there is a scattering of responsibilities to such an extended degree that this results in inefficiencies that causes suboptimal solutions and losses of time and money. Skilpod believes that the private market will first adopt the PSS and that the public sector will follow later.

Besides demand from the market Skilpod also needs to make internal changes to its design to make a PSS for pods financially viable. This is achieved through design changes that increase modularity and enable easy disassembly and facilitate refurbishment or reuse. The question remains if these design changes do not interfere with the wishes and taste of the clients. This modularity entails the usage of certain recurring design rules and standards throughout the pods that make the reuse of certain parts of the pods easier. We can notice a trend that is twofold within the practicality of the leasing scheme (Skilpod, 2013) (Vrijs J., interview, April 6, 2016) (Vrijs J., interview, May 18, 2016): 1) Optimisation of material and component reuse through: a. Modularity. i. Skilpod has developed a modular kitchen and bathroom system for its #48. In principle

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Figure 35: The living room of #48 has a very spacious feeling (Vanhertum, 2015).

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Figure 36: The #48 has one bedroom (Vanhertum, 2015).

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they can completely be replaced without consequential destructive measures to the pod. Skilpod acknowledges however that to this date the modular kitchen and bathroom are not fully optimised and there is still a lot of room for improvements in the practicalities of the dismantlement and replacing of the kitchen and bathrooms (Vrijs J., interview, May 18, 2016).

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b. Standardised measures. i. As Skilpod keeps growing as a company they move towards standardised measures for faรงade openings (at the moment mostly 2.5m x 3.4m openings are used) and inner walls. A fully integrated system of standardised measures will facilitate the reuse of building components (Vrijs J., interview, May 18, 2016). c. Compatible and interchangeable building parts. i. This part is very intertwined with the modularity part and the standardised measures part.

It pertains to for example the ability of a pod to be extended or cut into pieces. A client wants to upgrade his pod with for example a second bedroom extension; through the modularity and standardised measures this can easily be achieved. This could

also be included in the PSS provided by Skilpod. It opens possibilities to replace or extend certain components of the pod during its life cycle. For example, for informal care (mantelzorg) housing in a Skilpod flexible leasing terms and adaptable interiors are needed. The elderly have very specific and ever changing needs that can easily be provided through the adaptability of the pods. Moreover, a possible combination of leasing pods and healthcare services could be provided through specific programmes (Vrijs J., interview, April 6, 2016).

2) Reduction of material and workhours required for dismantlement or refurbishment of the pod through: a. Reduction of overall weight for easier transportation. b. Adapting construction techniques to make disassembly easier. c. Avoiding components that require destructive interventions when replaced.

Besides the economic and sustainability advantages, a PSS also has marketing advantages. Skilpod is worried about the organic creation of a second hand market for its pods. This happens when owners who bought a Skilpod decide to sell the pod to a third person. Skilpod prefers to keep this market within its own hands as this enables

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Skilpod PSS Two Scenario’s

Reclaimed Pod

Refurbishment

Dismantlement

Cleaning

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Input

Resources

Replacing Modules New Pod New Client

Same Pod New Client

Figure 37: Two possible scenarios for a pod, refurbishment and dismantlement.

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them to reuse the materials, recycle effectively and ensure exclusivity of their high quality product. Coupled to the whole circularity concept of a PSS, Skilpod also strongly believes in the power of BIM and enhanced material cataloguing systems that will facilitate reuse and repurposing of building materials (Vrijs J., interview, April 6, 2016).

2) Skilpod proposes a pod model and adapts it to the clients design wishes.

Leasing scenarios

5) Start of the leasing period and monthly payments by the client.

To assess the advantages and disadvantages of a PSS for Skilpod, different scenarios must be explored. As explained before; clients would from henceforth lease the pods instead of buying them. The leasing term could for example be 10, 15, or 25 years depending on the clients’ wishes and the estimated service life of a pod. It may be useful to calculate the optimal leasing period so Skilpod can assure an optimal amount of residual value of the components. Currently, Skilpod has no insight in the potential residual value of a Skilpod as a whole or its individual components. Skilpod is however working on the development of a material passport for its pods in which a residual value calculation could be incorporated. This would be done through the usage of BIM software. Besides a fixed leasing, flexible leasing schemes could also be proposed as explained earlier.

The start of a PSS follows the same steps as the classic product selling method and then continues with the client paying a monthly fee for the exclusive usage of the pod: 1) Client approaches Skilpod with budget and wishes.

3) The pod is built in the Skilpod hangar in Geel, Belgium.

4) The pod is then delivered and placed at the client’s wished location.

After this step two different scenarios can be entertained: 6) a. Refurbishment: Through the PSS the product returns to Skilpod before its full service life has elapsed due to the termination of the leasing contract by the client, unexpected circumstances, etc. This could for example happen after 7 years. In this scenario Skilpod can retrieve the product and quickly refurbish the pod as a whole to lease it out to a new client because of its potentially high residual value. In this scenario Skilpod does not need to build a new pod. It just reuses an existing element thus preventing unnecessary waste.

6) b. Dismantlement: Once the service life of the pod has elapsed (e.g. after 25 years), the pod is reclaimed by Skilpod. By dismantling the pod certain separate elements can be refurbished and reused in the fabrication of new Pods thus creating a reduction in waste and needed resources. The materials that cannot be reused in a new Skilpod can then be recycled in a controlled and responsible way.

In both scenarios the pods needs to be retrieved at the clients’ location to bring them

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Operational Phase

Transportation to the Client

Resources

Refurbishment

Waste to be Recycled

or

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New Pod

Reclaiming the Pod

Dismantlement

Landfill

Figure 38: A simplified representation of the Skilpod PSS.

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back to the Skilpod hangar. Once the pod is correctly retrieved the refurbishment or dismantlement of the pod can start. After this is done a refurbished pod or a new pod will be ready to be leased out again. It is obvious that there will always be waste generated from the refurbishment or dismantlement of a pod, but it is expected that this amount will be much lower than when the pod would be demolished or recycled by somebody who was an owner of the pod. Once the leasing scheme will have penetrated the market there will be a constant cycle of material recuperation for the construction of new pods.

The refurbishment scenario enables a product that normally has a service life of 25 years (Skilpod estimate) to be recuperated before the end of its service life to make it re-enter the market (Vrijs J., interview, April 6, 2016).

Logically the sustainability asset of this measure is that it enables the pods to fully realise its supposed service life. However, changing technologies and aesthetical wishes of the clients must be taken into account while refurbishing the pod. The dismantlement scenario is more complicated as is explained later in this chapter.

Pod #48 The model used in this analysis is Skilpod’s most popular pod: model #48. This 48m² multi-purpose pod provides a perfect mix between comfort, affordability, and flexibility.

It is 4m wide and 12m long and incorporates a bedroom, bathroom, kitchen, and living room (Skilpod, 2013).

Transportation A significant part of the price of a pod results from the placement and transport of the pod. If the client requests the pod to be positioned in a place which is difficult to access, such as in the back of a garden, a larger crane is needed than in an easy to reach location. The high price of a large crane strongly influences the end price of the pod, sometimes demotivating potential buyers. Skilpod is trying to find an answer to this issue by: 1) Building lighter pods that require smaller cranes.

2) By working with coupled modular components which require smaller cranes to place. These parts are then put together on site.

3) Spreading the extra costs of large cranes needed by some customers throughout all customers by introducing a fixed transportation and placement fee. This fee would be underestimated for the very hard to access operations and overestimated for the easy to access jobs which thus leads to a net compensation.

One of the issues that must be considered when creating a PSS for Skilpod products is the financial cost and the ecological burden that the transportation induces for reclaiming the pods. For simplicity reasons we can assume that the recuperation of a pod is in fact the reverse exercise of the initial placement of a pod (Vrijs J., interview, May 5, 2016). The transportation phase for reclaiming the pod is divided in two phases:

Sustainability Burden Due to

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Front of Garden

Back of Garden

$$$

$

Figure 39: The size of the crane has a large impact on the overall price of the installation.

2) The actual transportation of the pod by a truck to the Skilpod hangars in Geel, Belgium.

The estimation of the CO2 emissions that would result from reclaiming the pod is done by using an average number of gCO2/km.

A report composed by Simpson and James commissioned by the European Commission in 2008 estimates a CO2 emission of 1195gCO2/km for long distance freights for heavy-duty vehicles (Simpson, James, 2008, p. 10). Another document by the European Federation for Transport and Environment, an NGO campaigning for cleaner transport, states a number of 900gCO2/km for heavy-duty vehicles (Calvo Ambel, 2015, p.2).

We assume that the emission caused by the heavy weight vehicle and the crane are similar. There are many different possible transportation scenarios. For this case-study

we will work with a crane renting company located in Noorderlaan 175, 2030 Antwerpen (in Belgium) called Heros Antwerpen/Leemans (http://www.heros.eu/). The transportation company that provides the truck is located in the Klaus-Michael Kuehnelaan 7 in Geel (in Belgium) (http://www.be-trans.be/).

The location of the Skilpod that has to be reclaimed is in the Groenendaalsesteenweg in Hoeilaart (which is more or less in the centre of Belgium). The Skilpod hangar is located in the Acaciastraat 17 in Geel. The crane does not need to go to the Skilpod hangar in Geel as Skilpod has its own material to take the reclaimed pod of the truck.

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1) Getting the pod from its location, for example a garden, onto a truck

1) Crane: a.Antwerp -> Hoeilaart: 67.1km

b. Hoeilaart -> Antwerp: 67.1 km Total Crane: 134.2 km 2) Truck: 89

a. Geel -> Hoeilaart: 94.7 km b. Hoeilaart -> Skilpod: 102 km c. Skilpod -> Geel: 16.2 km Total Truck: 212.9 km Total transport: 134.2km + 212.9km = 347.1 km Total CO2 emissions:

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1) 347.1 km * 1195gCO2/km = 414.8 kgCO2 2) 347.1 km * 900gCO2/km = 312.4 kgCO2 These numbers give an idea of the potential ecological burden that the transportation of a reclaimed pod could entail. Of course these numbers depend on many factors such as the location of the pickup site, the weight of the pod, the type of truck and crane used, etc. These numbers should be compared to a scenario where Skilpod does not reclaim the pod in order to understand the additional CO2 emissions. Jan Vrijs sees two possible scenarios. Either, the pod is sold by the owner to a third person and this would mean that the same transportation exercise is made as when Skilpod would reclaim the pod. Or, the owner decides to demolish the pod. It is highly unlikely that this would be done in a controlled way where the different materials are properly separated and recycled. Demolishing the pod normally requires a container, transport for the container and the demolition works.

Again, one can argue that Skilpod will also use containers in its hangar in Geel while

dismantling the pod. However, Skilpod is engaged to do this in a controlled way so as to reuse, sort, and recycle as much material as possible (Vrijs J., interview, May 18, 2016).

Refurbishment Scenario There are many different imaginable scenarios that would involve an early end of the lease term of a pod. For example a customer leases the #48 for several years as a home extension to accommodate an elderly person. An undisclosed lease term can be beneficial in cases were the need for extra living space is no longer required due to illness or death. If this would happen before the full service life of a pod is reached it can easily be reclaimed

by Skilpod to be then refurbished and leased to a new client without having to dismantle the whole product. This is beneficial for the former client and for Skilpod. The new client of the refurbished pod can also benefit from a reduced leasing or selling price.

The benefits are double. On one side the client is liberated from the tiresome and expensive exercise of getting rid of the pod. On the other side Skilpod benefits from the potential high residual value that the pod still has (to be calculated by Skilpod). This value could result from the fact that the same pod will re-enter the market after a quick refurbishment.

The scope of measures that need to be undertaken to refurbish the pod strongly depends on the number of years the pod already served. If we assume an average of 7 years before a pod is returned to Skilpod for refurbishment the scope of reparations could be the following (Vrijs J., interview, May 18,

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2016): 1) Painting the inner walls.

2) Changing the façade material.

3) Replacing the kitchen or bathroom.

4) Replacing the technical installations.

5) General indoor cleaning.

6) General outdoor cleaning.

Intuitively we see that the refurbishment scenario considerably reduces the amount of waste generated by Skilpod. Every Skilpod

Dismantlement Scenario Once a pod is reclaimed it can be either dismantled or refurbished according to how much of its potential service life has already been completed. If the pod is too advanced in its service life then Skilpod might opt for a complete dismantlement. The dismantlement of a pod can be undertaken because of two reasons.

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We see that the measures undertaken by Skilpod for the refurbishment of the pod will be mostly cosmetic as this makes the pod more appealing to new potential clients. Replacing the kitchen and the bathroom should be easy as they are designed to be modular and easy replaceable. This of course depends of the client’s wishes and budget. The technical installations could possibly be replaced if calculations show that replacing them with newer, more efficient technology results in a significant amount of energy savings without causing a consequential ecological and financial burden. A 2004 study by Årskog, Fossdal, and Gjørv has shown that for concrete structures, from an ecological point of view, it is a very good strategy to undertake maintenance measures to prevent irreversible deterioration of the structure. However, it is unclear if this can be extrapolated to the maintenance of small scale living pods that do not make use of concrete.

that is reclaimed, refurbished, and then leased or sold to a new customer, delays the waste generation due to the demolition of that same Skilpod and prevents the resource usage that building a new pod entails.

Firstly, dismantlement ensures proper sorting and recycling of the materials and components of the pod. This prevents the pod from becoming one inert mass that goes into landfill. This option however does not yield any financial advantage for Skilpod and would therefore be highly unlikely. The only way it might be conceivable is if the extra cost of dismantling and recycling the pod would be incorporated in the leasing price of the pod.

However, this would increase the price of the pods and make customers less likely to lease one.

Secondly, dismantling the pods can be interesting for Skilpod as a part of its materials and components can be reused in the fabrication of other pods. If the materials have sufficient residual value and are fit to be reused in a new pod this could potentially have financial advantages for Skilpod. It must of course be investigated if the costs to dismantle the pod do not outweigh the financial

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advantages from material savings in the new pod. Besides the financial advantages there is a potential for waste reduction and resource savings if components of the reclaimed pod can be reused. This forms a potential combination of financial gains with waste reduction. The problem however is that Skilpod at this moment does not have material passports for its pods and thus has no clear overview of the residual value when the pod is reclaimed.

Moreover, Skilpod does not know how much time it would take and how much it would cost to completely dismantle the pod (Vrijs J., interview, May 18, 2016).

The outer walls of the pods are composed as follows (from the outside to the inside): 1) Building envelope. a. This depends on the clients wishes.

This can be wooden plates or polyester composites.

2) Frame of timber studs.

3) Betonplex, coated wooden studs.

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4) Delta Fassade, a watertight membrane.

By looking at the composition of the pods we can already get an idea of how easily the pods could be disassembled. There are no construction detailed drawings available explaining how the pods are constructed (Vrijs J., interview, May 18, 2016). However, we can get a pretty clear idea of the used building techniques and details from pictures taken in the Skilpod hangar where the pods are constructed. We observe rather straightforward and simple construction details. This is favourable for possible dismantlement.

The structure of the pod is composed of CLT boards and doesn’t make use of any structural steel elements. CLT is known for its structural capacities and is marketed as a very sustainable building material. The true environmental impact of using a CLT frame instead of for example a steel frame should be analysed for a pod by means of a Life Cycle Assessment (LCA). The use of CLT instead of steel strongly reduces the weight of the pod. This reduced weight makes it easier to transport and retrieve the pod.

5) PIR Insulation (10cm).

6) CLT bearing structure, 5 layers total of 10cm.

7) Fermacell gypsum fibreboard painted in white.

Different pictures taken at the Skilpod hangar (pictures 40, 41, 42, 43, 45, 46) illustrate the use of these materials. Skilpod says that a minimal amount of glue was used to fix the components of the Skilpod. One of the only places where glue was used is in the corners of the structural CLT boards that are fixed with a combination of screws and glue. The Delta Fassade and Betonplex elements are fixed with construction tape. The insulation boards are fixed to the CLT boards with screws. These can thus manually be removed. Looking at the disassembly and reuse potential of the different elements we see that most of the elements can be easily dismantled and could potentially be reused:

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Figure 40: Mockup of a construction detail.

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Figure 41: Cross-section of a pod.

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1) Façade material: In picture 45 we see that the wooden slates are fixed to the underlying wood studs with a nail gun. This method is not ideal when designing for disassembly.

When retrieving the nails the wooden slates can irreversibly get damaged. Moreover the nails are probably going to bend during the removal process which makes them impossible to reuse. A possible solution could be the use of a suspension system for the wood studs. This would facilitate the removal of the façade material and allow reuse. However, when confronted to this information Jan Vrijs directly pointed out the steep price increase that results from the usage of such systems (Vrijs J., interview, May 18, 2016).

2) The frame of wood studs (pictures 42, 43) can easily be disassembled and reused if a consistent system of screw fixing is used. By this is meant the recurrent spacing between the different screw holes must be compatible with a new Skilpod façade.

3) The Betonplex coated wood studs (picture 42, 43) can also easily be disassembled as they are used as spacing devices and are fixed to the Delta Fassade with an adhesive tape and the screws used to fix the frame of wood studs.

Different documents state that Betonplex can be reused over the years. However, these statements are not well-argued and do not mention the specific usage of the Betonplex (Duurzaam MKB, n.d.) (CRAS, 2012). Paduart (2012) mentions in her doctoral research that Multiplex board products are very suitable for reuse. Betonplex can be seen as a variant of Multiplex.

4) The Delta Fassade watertight membrane is

fixed to the underlying PIR insulation with construction tape (picutre 40) and can thus easily be removed. The tape can of course not be reused. The website of the manufacturer of the Delta Fassade membrane claims that it has a service life of more than 25 years (“DELTA®FASSADE S”, 2016). This means that if the pod returns after 10 or 15 years the material could be reused if disassembled carefully. Of course the potential reuse also depends on the use of standardised measures.

5) According to several studies Rigid Polyurethane foam (PUR/PIR) insulation has a service life of more than 50 years (BING Federation of European Rigid Polyurethane Foam Associations, 2006). Different other documents mention the possibility and preferred scenario of reusing PIR panels in the right conditions. However, they do not provide argumentation or explanations of how and why this can be done. Although difficult, PIR can also be recycled if it can’t be reused (Kingspan, 2008) (“Building insulation materials 4: Oil based polymers”, 2016) (Abate, 2009). Paduart (2012) also classifies PUR, a variant of PIR, as very suitable for reuse.

6) The bearing CLT structure can be reused.

There are two possibilities: either, the structure is reused as a whole which is quite straightforward. Or the CLT boards can be separately dismantled and reused or recycled separately. This would be more difficult than reusing it as a whole as the CLT structure is fixed with screws and glue in the corners (Vrijs J., interview, May 18, 2016).

7) Fermacell gypsum fibreboards are according to Paduart (2012) very suitable for reuse. The

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Figure 43: The building envelope without wooden slates.

Figure 44: Close up of the complete building envelope.

Figure 45: The wooden slates are fixed with a nail gun.

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Figure 42: Frame of wood studs.

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boards are moreover completely produced with recycled materials and its production process is accredited with the Low Emissions Product Eco Certificate (“Environmental”, 2016).

We thus see that a large part of the façade composition could be disassembled as almost no glue is used and because the composition is rather straightforward. Several of the façade components also have a clear reuse potential while the others can definitely be recycled. Due to the composition of the wall with 10cm of PIR insulation Skilpod believes that it fulfils all current and future Belgian insulation norms (Vrijs J., interview, May 18, 2016). Jan Vrijs does not believe the windows and glass front door could be reused after a service life of more than 10 years as technologic advancements make the usage of new windows and glass front doors more energy efficient (Vrijs J., interview, May 18, 2016).

The roof is composed of a classic combination of the CLT structure, PIR insulation, and an EPDM covering. EPDM is glued onto its supporting surface and is therefore inappropriate for reuse after dismantlement (Vrijs J., interview, May 18, 2016). As long as the glues used to fix the EPDM do not come in contact with the structural CLT plates it does not compromise the reusability of the CLT structure (Vrijs J., interview, May 18, 2016).

Throughout its different models, Skilpod uses the same spectrum of materials. This makes a possible reuse of materials more likely. Inside the pod the finishing is mostly done in wood and painted plasterboard. The wood is perfectly reusable as are the plasterboards. The kitchen and bathroom are built in a modular way and

should in principle be easily replaceable and easily disassembled. This is in theory and has yet to be demonstrated in practice. As we can see in the pictures 35, 36, and 41 one of the main materials that reappears in all the Skilpod models is wood. These wooden elements could thus potentially be reused in future models. Moreover, all the Skilpod models are constructed with the same techniques such as a CLT structure. Ideally the reuse of materials would stay within the same model, being model #48 in this analysis. By staying within the design of the same model reuse of materials can become easy and time-efficient as the measures of elements coincide.

When a pod is placed at its location it is placed on a number of ground screws (picture 46).

These screws act as foundation for the pod. The pod is directly placed onto the screws but is not fixed to it; due to the weight of the pod and the high amount of screws, simply placing the pod onto the screws is sufficient. This also facilitates the reclaiming of the pod as it can just be lifted and removed. The screws can then be removed from the ground and reused in a different project (Vrijs J., interview, May 18, 2016).

The dismantlement scenario is again still a theoretic exercise that even in its current form is far from complete. Before Skilpod can start putting the dismantlement idea into practice it needs to develop its material passport to have a clear idea of which materials are present in a certain model and in which quantities they are used. This would allow to calculate the residual value of a pod. Once the system for a material passport is developed Skilpod can start with the optimisation of the design of its pod to facilitate disassembly and optimise

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a disassembled pod the construction time can considerably be reduced. Skilpod is however convinced that reusing materials is the responsible choice as it reduces their waste production and also reduces their resource usage (Vrijs J., interview, May 18, 2016).

Figure 46: Krinner M-Serie ground screws.

residual value for reuse. Different measures can be taken to make disassembly quicker, less destructive, and ensure that a high amount of reusable materials are present. Skilpod of course needs to find a balance between systems that facilitate disassembly and reuse (such as suspension systems for façade elements) and between not creating a substantial financial burden that can’t be compensated by the residual value of the reusable components.

Currently, it takes about two months to build a #48 pod. The first month is spent on the design and waiting on the building components and materials. The actual construction of the pod takes 3 to 4 weeks and is done in the Skilpod hangar in Geel, Belgium. Skilpod does not believe that through reusing components of

As many other examples have shown, Skilpod has the right intentions of reducing its waste streams and resource usage through a PSS but currently has no system in place that makes the creation of such a PSS possible. At this moment Skilpod is situated in what is called a Catch 22 (a requirement that cannot be met until a prerequisite requirement is met, however, the prerequisite cannot be obtained until the original requirement is met) (Urban Dictionary, 2003). Skilpod needs the residual value of its reclaimed pods to make a PSS viable but to do so it needs to lease out a pod.

However, as no pod is leased out the residual value of a reclaimed pod is non-existent and leasing out a pod becomes difficult to finance, hence the Catch 22. Besides this tricky situation Skilpod also has to invest in the development of a material passport, a financial model, and the design improvements that would facilitate refurbishing, dismantling and reusing the pod components before it can start with a PSS. In spite of these difficulties Skilpod has the right mind set and drive that will help them develop a PSS in the future.  

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Analysis & Conclusion

Short: This final chapter looks back on the analyses and observations made in the previous parts of the thesis. By reflecting on productservice systems (PSS) in general and PSS which are applied in the building industry we can formulate several conclusions and answers on the research questions. Moreover, we look at how PSS could possibly be integrated in buildings and which drivers and stakeholders can play a role in this process. To finish, several research topics are suggested that could further explore the environmental impact and profitability of PSS in the building industry.

Analysis & Conclusion

In this master thesis the concept of a linear economy and a circular economy are studied.

We see that the circular economy can provide an alternative for the waste production and bad resource management we have today. One of the key aspects of the circular economy is the shift from ownership to use by means of PSS. The different forms in which a PSS can occur were studied and this was then extrapolated to the building industry.

PSS, as a part of the circular economy, are a good way to move away from our traditional linear economy that puts us at danger for climbing resource prices, uncontrollable waste generation, and of course a dependency on an ever shrinking stock of natural resources.

PSS incentivise manufacturers to create better products that can be reclaimed, disassembled, refurbished, reused (by re-introducing them into the market), or recycled. But in the end, do these PSS effectively have a lower environmental impact than there linear counterparts? Common sense and statements by countless documents written by organisations and institutions such as the Ellen MacArthur Foundation, the European Commission, Circle Economy, Philips, Turntoo, McKinsey & Company, and many others cited in this thesis support the statement that PSS are indeed ‘greener’ than their linear counterparts (Ellen MacArthur Foundation, 2012, 2013, 2014, 2015, 2016) (Alaerts, et al., 2012) (Deckmyn, et al., 2014) (European Commission, 2014) (UNEP, 2015) (Zils, 2014)

Looking Back on PSS This thesis investigates the role of PSS in buildings as a circular approach to reduce waste production and increase resource efficiency in the building industry. Besides shifting from ownership to use through PSS, there are other aspects of the circular economy that can be applied to the building industry. Elements such as circular supply chains, recovering and recycling, product use extension, and sharing platforms also form circular strategies (Ridley & Kruk, 2015). These strategies of course are intertwined and rely on each other.

PSS are also advocated as potential business opportunities as they can create a substantial amount of revenue for companies and governments (Ellen MacArthur Foundation, 2012, 2013, 2014, 2015, 2016) (European Commission, 2014) (Deckmyn, et al., 2014) (Dubois, & Christis, 2014). Even amid the economic acclaim for circular business models companies are often reluctant to integrate PSS in their business portfolio. In his doctoral dissertation, Van Ostaeyen (2014) has developed a methodology to evaluate the business potential of a PSS. This methodology can help companies with the development

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Analysis & Conclusion

of new PSS for applications in the building industry (or other industries). There are different examples of companies that have successfully developed PSS such as Ricoh, Michelin, and Philips. On the other side, as the example of the Interface ESA has shown, PSS are not always successful.

dryers, refrigerators).

Now the question still remains if besides the potential economic gains (or losses) a PSS can also incentivise companies to reduce their waste production and increase resource efficiency? As mentioned earlier, different documents agree with this idea. They argue that by reclaiming products manufacturers can refurbish, reuse (through remarketing), or recycle the products, thus extending their life cycles and avoiding waste production and resource usage. It also incentivises manufacturers to design products of higher durability that are more resource and energy efficient. However, some literature suggests that this might be a misconception. A paper by Agrawal, Ferguson, Toktay, & Thomas (2012) makes a threefold division in their conclusion on whether leasing is always greener than selling:

The paper then goes on by stating that the higher durability/quality of products that are designed for leasing models and the ability of these products to be reclaimed, refurbished and make the products re-enter the market, are not good indicators of their environmental impact. For example, the authors explain that leasing may prompt the manufacturers to remove the products from the market to keep the demand for new products high. To conclude, the authors warn for generalisation of the sustainability claims of leasing and state that the environmental impact is very dependent on the product type and should thus be investigated case-by-case. It must be noted that the paper only discusses product lease and no other types of PSS such as pay-per-unit, etc.

For these other types of PSS it may be that the profitability and environmental impact differs.

1) Leasing can be profitable and a green strategy for products that have a high ecological impact during their service life (as opposed to their production and end-of-life impacts) and a low durability (such as printers and photocopiers).

We thus see two different camps in the discussion about PSS. On one side there are those that are very optimistic and see PSS as a go-to solution. On the other side, there are those that use a more careful approach.

While the arguments of the two sides are definitely sound we can conclude that the arguments for PSS perfectly make sense and provide incentives for waste reduction and resource efficiency. However, they should not be generalised and the environmental soundness of a PSS must be investigated case-

2) Leasing can be profitable and a green strategy for products that have a high ecological impact during their service life (as opposed to their production and end-oflife impacts) and a high durability (washers,

3) Leasing can be profitable but environmentally worse for products that have a higher product and end-of-life impact than during the service life (such as carpets and laptops).

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by-case. Moreover, it must not be forgotten that companies most of time, if not always, make the lease-versus-sell choice based on the potential profitability of the model.

Therefore the environmental impact of the lease model must be investigated as a result of a profit-maximising strategy of the companies (Agrawal, Ferguson, Toktay, & Thomas, 2012).

PSS in the Building Industry The application of PSS in buildings has been elaborated in chapter 5. Chapter 6 analysed seven cases of realised and possible PSS in the building industry. In general, we saw that most of the cases were advertised as a greener alternative to their linear counterparts.

Alongside these claims the companies often provide general information on the PSS. However, a general reluctance or incapability to provide proof for these claims, or more details on the actual proceedings of the PSS by companies is noted. Due to the lack of data and information on the environmental impact of the cases, a specific statement on the environmental impact of these PSS in the building industry cannot be made, especially in regards to waste reduction and resource efficiency, but also in regards to total environmental impact throughout the product life cycle (production, use and end-of-life).

This observation enforces the arguments of Agrawal et al. (2012) that the environmental impact of PSS cannot be generalised and must be investigated case-by-case.

Analysis & Conclusion

Besides companies and consumers, policy makers play an active role as facilitators or as obstructers of the profitability of a PSS on one side and a low environmental impact of a PSS on the other. These policy makers and government agencies can provide manufacturers with incentives to decrease the environmental impact of their products through landfill bans, by encouraging remanufacturing, and imposing higher durability. Agrawal, et al. (2012) argue that this kind of measures only result in a lower environmental impact for products with low use impacts such as laptops, carpets, and cell phones. Besides incentives to reduce the environmental impact of PSS, policy makers must also realise that current laws and regulations inhibit the profitability and even the de facto creation of PSS by manufacturers.

For example, the Skilpod (Belgium) and the Brummen town hall (The Netherlands) cases have pointed out that current public procurement laws for buildings make the incorporation of PSS legally very difficult.

In the United States, financial reporting legislation makes operating leases, as opposed to capital leases, the adequate legal form for PSS (Fishbein, McGarry, & Dillon, 2000).

However, to qualify as operating lease, a PSS must fulfil four criteria as developed in the case on the Interface ESA. These criteria can inhibit

the profitability of a PSS and make it thus harder for companies (in the US) to start such ventures.

Despite this lack of information on the environmental impact of their PSS, it must be highlighted that the companies in the analysed cases do make efforts to reduce the environmental impact of their products in general and operate with a certain green mindset (without forgetting profit-maximising of course). Within this positive mind-set we see that the companies in the building industry

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that currently propose a PSS in their business portfolio have not been doing this for so long. Because of this reason the companies may themselves not yet be completely aware of the environmental impact or the financial outcome of their PSS as the project is rather new. However, this should not be an excuse for claiming to be part of the circular economy and stating that their PSS is ‘greener’ than its linear counterparts.

manufacturer that works a lot with design for disassembly and reuse of its components (United States Chamber of Commerce Foundation, 2015).

7) Acoustic panels such as those provided by Akoestiekfabriek.

8) Appliances.

Analysis & Conclusion

9) Technical installations.

In an ideal world, where all PSS in building components have a very low environmental impacts and are profitable, a building composed of many different PSS can be imagined: 1) A façade composed of wood, steel, or brick plated panels attached to the structure with a suspension system. The panels are engineered in such a way that they can easily be reclaimed and replaced. In such a system a building could get a fresh and clean look by replacing the panels.

2) Window systems that can be replaced when better performing technology is available.

3) Lighting systems as proposed by the Philips Circular Lighting PSS. 4) Floor covering that is periodically changed such as carpet tiles through the Desso Carpet Lease PSS. Other materials may also be suitable for a PSS for floor covering.

5) Sanitary such as toilets and water taps.

6) Office furniture such as desks, tables, etc. Steelcase is an example of a furniture

10) Elevators.

11) Partitioning walls. DIRTT, a Canadian company, specialises in creating customisable architectural interiors. The company uses 3D software to create sustainable modular interiors that can easily be assembled and disassembled (Vaughn, 2014).

12) Doors.

13) …

Of course this is a rather utopian representation of reality. As mentioned before, the environmental impact and profitability of PSS in the building industry must be analysed case-by-case to see if the mentioned applications have a chance at becoming reality. Aside from the in-depth analysis of the profitability and the environmental impact of a PSS its greater purpose should be held in mind. A PSS, as part of a circular economy, aims to increase the responsibility of manufacturers over their products. This affects the manufacturers in many different ways.

They need to adapt the design of their products as to maximise the benefits of the product

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Integrating PSS in the building industry is difficult due to the large amount of involved parties in the process of constructing and managing a building. There are the product manufacturer, the client (can be a project developer), the architect, the contractors, the facility managers, and the tenants. To see the legal and practical complexity in which a PSS has to operate if it wants to be integrated in a building we can do a quick thought experiment. A project developer works with an architect on the design of a new office building.

The architect first needs to incorporate the PSS in the design of the building. Then the project developer needs to make sure the shift of funds from capital to operating expenses can be made to pay monthly fees that are related to the PSS. In other words the developer needs to adapt the pro forma of the construction project (document with the net present values of all

the expected cash flows). This already implies that the architect has the knowledge of an existing PSS for building components and that the manufacturer already has the necessary knowledge, technology, and infrastructure to operate the PSS. Once the architect has integrated the PSS in the design and the project developer has made sure the capital has been transferred to operating expenses, the product still needs to be placed. Traditionally, the architect works with a contractor that is granted a budget with which it has to construct the designed building. But if the funds for the PSS are listed as operating expenses they are not included in the budget granted to the contractor. A solution for this issue is that the manufacturer of the product is responsible for the installation of the product as part of the PSS. If multiple PSS are used in one project this can complicate the logistics of the construction site. Once the project is finalised it are the tenants that will use the product. But then who will be responsible for the whole coordination of the services provided by the manufacturer that will come with the PSS. This responsibility could be carried by a facility manager.

Analysis & Conclusion

for the manufacturer in every step of the life cycle. This can result in a design focused on durability to increase the service life and reduce the maintenance needs of the product.

This can result in the reduction of energy consumption of the product during use in a pay-per-unit service as the company benefits from low energy consumption. This can result in a product that can be adapted, disassembled, and replaced to soothe our insatiable urge for new possessions. This can result in a product that is designed in such a way that when it is reclaimed by the manufacturer it can be reintegrated in its original production chain.

This can result in the elimination of waste and a decrease in virgin resource usage. Again, the environmental impact of all these results should be assessed case-by-case as companies will strive for profit maximising in their PSS.

We see that the integration of PSS in a building project can quickly become very complicated and that responsibilities within the whole process need to be clearly defined. A report compiled by Vito, a Belgian research facility describes different settings in which the use and development of PSS in the building industry could be facilitated (Alaerts et al., 2012). The report mentions Energy Saving Companies (ESCO’s) as a form of PSS that can spur the introduction of PSS in building components. ESCO’s make use of a result oriented PSS contract with building owners

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Analysis & Conclusion

to increase the energy performance of a building. Through renovations and installing new building components the ESCO’s reduce the energy consumption of the building. These new building components can come in the form of use oriented PSS. The authors also see opportunities in DBFM(O) constructions (Design Build Finance Maintain Operate).

They argue that DBFM contracts can mitigate the scattering of responsibilities in building projects. Through the contract the project developers or contractors become bigger stakeholders in the service life phase and endof-life phase of the building. This increased responsibility can increase the likelihood of a PSS being used in building projects. Another type of business model that could incentivise the use PSS in buildings is the emerging trend of coworking space. Companies such as WeWork and Regus have business models that are a form of pay-per-unit PSS. Customers can use working space and its associated facilities for a certain membership fee that can be paid by the hour, day, or month. Because of the nature of coworking spaces it could be beneficial for the companies that operate them to use PSS based building components as it ensures them maintenance and replacement of their lighting systems, furniture, carpet tiles, etc. Moreover, by working with PSS for energy consuming building components the companies can reduce their energy expenditures.

Suggestions for Further Research The environmental impact of the investigated PSS in the building industry remains quite unclear due to a lack of available or existing data that can be provided by the companies on

their PSS. For this reason this thesis concludes with several recommendations and research suggestions that could provide more clarity: 1) A unification of the used terms to describe PSS. Currently, many different denominations are used. Throughout the available literature denominations such as leasing, services, performance contracts, and circular systems can be found. This makes gathering information on the topic difficult and cluttered.

Because of this cluttering, manufacturers wishing to develop a PSS for their products can get a false impression of the existing market and get demotivated.

2) The development of a methodology to thoroughly evaluate the environmental impact of a PSS for the building industry. Parallel to the methodology of Van Ostaeyen (2014) that evaluates the business potential of a PSS an assessment of the environmental impact of a PSS can provide companies with precious insights on their product.

3) The establishment of a platform that accommodates all existing PSS that are connected to the building industry. The platform provides extensive information and examples of applications on each of them.

Such a platform can encourage the use of PSS by architects and project developers. Not only PSS for building components used during the service life of a building should be included but also those PSS that directly and indirectly have a connection with the building industry (for example PSS for construction tools used by contractors).

4) The in-depth elaboration of a case. With the

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cooperation of a company (for example Philips for the Circular Lighting PSS) a full life cycle assessment and profitability study of the PSS could be made.

Analysis & Conclusion 105

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