Product to Service in Circular Economy

Product to Service in Circular Economy: A critical assessment

Michael, Eleni (TU Delft Civil Engineering and Geosciences)

van Oel, C.J. (mentor)
Chao-Duivis, M.A.B. (mentor)
Ploeger, H.D. (mentor)

Delft University of Technology

Civil Engineering | Construction Management and Engineering

2018-11-07

Many notions are taken the last decades to control production of waste and solve the scarcity of raw material. Circular Economy is a concept, designed to help solve this problem with a financial and environmental agenda. Combined with a Product to Service model, it can offer new opportunities in resetting the way we see ownership and what should be considered waste. As the combination model of circular lease has started being applied in the market, a lot of questions have arisen about its efficiency and risk allocation between owner and user. The main goal of this thesis is to investigate the aforementioned topics, with a focus on cost, duration and legal aspects, as well as evaluating the role of Circular Economy and whether it affects these topics.
Two case studies were done with the help of four interviews, while a literature research on Circular Economy, Product to Service and relevant legal aspects was conducted. The findings of the theoretical and practical research were compared and used to develop an understanding of risks occurring in circular leases.
This thesis investigates the case where ownership model stays with the manufacturer/supplier. The legal strategy to ensure this is through the right of superficies. This model was chosen as responsibility and ownership are strongly connected and by giving the ownership to the manufacturer/supplier also pushes them to extend the lifecycle of products, minimise the waste during production, reduce the use of raw materials and use secondary materials.
The end result of this research is that the main bearer of risks is the owner of the product. First and foremost, owners have to secure that ownership remain on his/her side. Even though having a constant income during the lease, offers a financial security, the owner must be prepared to pay in case of malfunction and any need occurring from the close maintenance offered to the client. The owner must also take care of the after-end treatment of the product and arrange for a new circle for it. Long duration leases require a strong alliance between owner and client, but also trust that both parties will be able to fulfil their responsibilities. On the client side, they may pay to avoid taking risks, but some risks are still there. The ownership issue is affecting both sides as there is always the risk of bankruptcy. Serviceability-wise the client has to ensure that the level of service is constant through the years and can cover the needs of the client. Committing to same level of needs is a risky move, especially if the type of product is a fast-evolving technology or if the needs of the client are not steady. Finally, the price point is also at risk, in case an intermediate is involved.

Circular Economy
Product to Service
Ownership
Cost
Duration

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Student theses

master thesis

© 2018 Eleni Michael