Philips’ transition from linear to Circular Economy
A far more effective use of materials enables greater value creation. This approach revolves around innovation in materials and reuse of components and products.
Today’s economy relies heavily on extracting raw materials from the earth and processing these into parts and products, which are eventually discarded. As the raw materials and the energy required for production become more scarce and costly, an alternative approach to the traditional ‘linear’ economy is required.
The Circular Economy aims to decouple economic growth from the use of natural resources and ecosystems. A far more effective use of materials enables greater value creation. This approach revolves around innovation in materials and reuse of components and products.
The Circular Economy drives new business models, solutions and services, shifting from ‘transactions’ to ‘relationships’ via service and solution models. Products are designed for disassembly and serviceability. Furthermore, the conventional model of customer ownership of the product is replaced by customer access to the product, ‘paying for performance.’ An example of how Philips is applying this new approach is its ‘pay per lux’ lighting model, which allows customers to use the best lighting solution for their needs without owning the hardware. At Philips Healthcare, sustainability is an integrated part of Refurbished Systems.
Philips’ innovation skills
As Philips CEO Frans van Houten recently said: “Philips has made sustainability an integral part of its activities. We don’t regard this as a cost factor, but as a contributor to our bottom line and competitive position. Just by rethinking designs and processes, many products can be made more eco-friendly, and even be equipped with additional features, at no extra cost. We believe in a process of ongoing improvement, in which the bar is constantly raised. As the world increasingly demands safe and environmentally sound products and services, the companies that have already made a conscious decision to be sustainable today will be the most competitive. These are the winners of the future!”
The Guardian Sustainable Business Partner Zone is sponsored by Philips:
Strategic partnership Ellen MacArthur Foundation
From a brand and innovation perspective, the Circular Economy gives Philips the opportunity to show thought leadership in an area closely related to the company’s mission and vision and its innovation skills. To benefit from existing knowledge, apply best practices and develop learning materials, Philips has become a strategic partner of the Ellen MacArthur Foundation, the leading organization on the concept of Circular Economy. Philips is also a member of Circle Economy Netherlands, which aims to accelerate the transition to the Circular Economy by providing an open platform where knowledge and experience is exchanged and collaborations are formed.
“The Circular Economy doesn’t provide any ‘one size fits all’ approach solutions,” says Jamie Butterworth, CEO of the Ellen MacArthur Foundation. “We believe that the best way forward is to present the concept to businesses and allow them to work out what it could mean to them.” Philips is committed to supporting this in the most efficient, productive way possible.
An example of how Philips is applying ‘paying for performance’ is its ‘pay per lux’ lighting model, which allows customers to use the best lighting solution for their needs without owning the hardware. At the end of the contract period, Philips lighting products can be taken back into their production process again and raw materials be reused.
- Ellen MacArthur Foundation
- Video interview with Frans van Houten by NuZakelijk (Dutch, September 2013)