Hi all and welcome back to another blog post of A Circular Victory! Last week we looked into the report by the Circle Economy that identified that 8.6% of the world is already Circular. It then goes on to say that doubling that number to 17% would help us to dramatically decrease the temperature increases we have seen. To find out more go to episode 18 of a Circular Victory.
This week, we are going to talk about the “right to repair”. This is a right that is gaining traction in quite a few countries and it would be a huge step forward towards a more Circular Economy.
Right to repair
Right to repair
The right to repair is simple. In its essence, it is the consumer right that products should be designed in such a way that repairing them is manageable and that information should be made accessible about how to repair a product. However, in a recent vote, the European Parliament set even more ambitious goals for “the right to repair” in Europe. The European Parliament called for measures that would make repairs “more appealing, systematic and cost-efficient, whether by extending guarantees, providing guarantees for replaced parts or better access to information on repair and maintenance”.
However, the most important step towards creating a right to repair is removing obstacles that prevent repair. These obstacles are easy to identify in the smartphone industry, but are commonplace throughout many industries. Many smartphone companies have made it increasingly difficult to open up phones in order to repair anything inside the phone. At the same time, they have prevented people from using non-official spare parts, while also strongly limiting the amount of official spare parts that are available. Actions like these make repairs expensive, difficult and unrealistic. When repairs become such a hassle, it is obvious that the consumers will purchase a new product more quickly. However, just because the phone does not work (properly) anymore, does not mean that all of the parts inside the phone are broken. When a new phone is bought though, all these parts become waste and a whole new phone’s worth of part enters the linear “take-make-dispose” road.
Now, when we allow a right to repair, only individual parts would be replaced. This means that waste is dramatically reused. Of course, this presents challenges to businesses. In the current, linear business models a new sale is usually worth a lot more than repairing an existing phone. Therefore, in order to make this right to repair more sustainable, business models need to change.
Business changes for a repairing economy
Let’s have a look at the usual Circular business models and see which one would be suitable for businesses to adopt in order to thrive in a repair economy. As you may remember from the 3rd blog post, there are five Circular business models.
These models are:
- Circular Inputs - Resource Recovery - Product Use Extension - Sharing Platforms - Product as a Service
The five Circular Business Models
Through the right of repair actions, companies are being forced to engage in Product Use Extension. The increasing repairs of their products will allow the products to be on the market longer. However, as discussed, this is not necessarily in line with their current revenue models. This is why a move to a Product as a Service model with a monthly payment structure would make sense.
In the Product as a Service model, the product can be offered in a package along with insurance, maintenance, repairs and possible additional services and possibly even scheduled upgrades. Rather than purely selling the product, this allows the company to add several other revenue drivers to their offerings. For this package, companies can then charge a monthly payment. If they estimate a fair pricing and accurately predict the time a product can spend on the market, this can be both profitable for the company as well as preferable for the consumer. This recurring revenue also correctly incentivises companies to keep their product on the market longer. The longer they can receive monthly payments on a product, the more money they’ll make on a single product.
This case is another proof that while the economy will undergo dramatic changes in the evolution to a Circular Economy, this doesn’t mean that companies cannot be profitable. They will just have to be creative all around. Creative in their product and service offerings, creative in their pricing and creative in their communication and relationship with their clients and partner.