Circular Performance Economy: Benefitting people, profits and planet
Lead contributor: Dr. Walter R. Stahel
This chapter analyzes the multitude of opportunities for economic and political actors hidden in selling the use or function of objects, such as the renting and operational leasing of “products as a service,” and providing energy and water, health, education, and other services, besides extending the service-lives of infrastructure, buildings, durable objects and molecules.
Original equipment manufacturers (OEMs) and fleet managers of objects and molecules are key innovators of the Performance Economy, finance institutions and systems design teams its promoters, policymakers its facilitators.
After an introduction situating the linear industrial economy, the circular industrial economy and the Performance Economy, the chapter explores many successful and some failed examples of industrial, financial, and political actors in different sectors.
Some examples show how synergies between policymakers (authorities) and businesses (global manufacturing players) allow “shaping and implementing sustainable economic growth and inclusive prosperity,” to quote the “report on delivering the SDGs.” Others show that innovative SMEs can be highly competitive and profitable.
The Performance Economy is about:
- Economics: producing, selling, and maintaining the function or performance of assets over extended periods provides corporate resilience against black swan events and resource security at low cost: “the goods of today are the resources of tomorrow at yesteryear’s commodity prices.”
- Innovation: the business models of the Performance Economy enable the exploitation of sufficiency and systems solutions, besides the traditional efficiency ones, and will profit from future advances in circular sciences. Multi-skill education, training, and novel long-life components will further increase the Performance Economy’s feasibility and profitability.
- Competitiveness: maintaining the ownership of the materials embodied in physical assets over the longest time possible needs a combination of technical and commercial innovation, saves the compliance and transaction costs of supply chains, and will profit from governmental carbon credits and water preservation bonuses.
Within today’s discussion of zero carbon emissions, the Circular Industrial Economy plays a key role. Several studies have shown that it will reduce national CO2 emissions by 66% if implemented. The remaining 33-plus percent must come from radical innovation in circular sciences and policymaking:
- Circular energy led by green hydrogen and possibly micro nuclear fusion, combined with the recovery of clean steel scrap fractions, will enable the production of zero carbon (green) steel, without which there can be no zero carbon products.
- Innovation into circular chemistry has identified plastic monomers which can be recovered and reused ‘endlessly.’
- Innovation into circular metallurgy to de-link alloys is progressing rapidly.
- Radical changes in policymaking such as Full Producer Liability and protection of the resources embodied in the stocks of infrastructure, buildings and manufactured objects are needed to ‘close the liability loops’ of the Circular Industrial Economy and will give producers a strong financial incentive to change their business models to those of the Performance Economy.
Only reducing carbon emissions ‘below zero’ in the North will enable LDCs to increase their quality of life sustainably.
What is Performance economy?
A growing number of economic actors are producing, selling and maintaining performance. The objects range from infrastructure to building and objects or molecules as a service and include performance guarantees for pharmaceuticals and the functioning of technical systems such as lifts.
What is the importance of knowledge and skills?
People and their creativity, skills and knowledge are the foundation of a successful performance economy. Researchers identifying new energies, materials, molecules and processes to enable a fully circular performance economy with closed material and liability loops are its architects.
How can producers selling performance play a key role in performance economy?
Producers selling and maintaining the performance of infrastructure, objects or molecules as a service over their full service life are key actors. By designing objects for maximal use-value and function and minimal risks, liabilities and maintenance costs they reap long-term profitability.
What is the impact of Systems performance design teams?
Multi-disciplinary systems design teams innovate novel solutions for complex problems which deliver an integrated performance of a quality superior to the separate objects, products and services they replace. Systems performance solutions are designed to deliver fail-safe, fool-proof and competitive results.
What is the role of fleet managers as performance providers?
Fleet managers produce, sell and maintain the performance of complex systems, infrastructure and objects or molecules as a service. Maximising use-value and function over the full-service life while minimising costs and liabilities of operation and maintenance guarantees long-term profitability.
What is the role of various users?
A caring attitude and stewardship of users prevents hazard of use and abuse. Users profiting from flexibility in use and known costs per service unit are the main beneficiaries of the performance economy; but their carelessness and abuse are its biggest obstacle.
What is the role of public Performance Procurement Manager?
By buying the desired performance of infrastructure, technical systems and objects instead of buying the hardware, public procurement managers reduce their capital expenditure and give industrial actors strong incentives to innovate efficient system solutions that profit the environment and their balance sheet.
What role play Private Finance Initiatives in the Performance economy?
Explore how by financing performance economy solutions, private investors, banks, insurance companies, and leasing companies interested in stable long-term investments encourage the activities of actors of the performance economy, create new investment opportunities for themselves and reduce the risks of their investments.