This article first appeared on ‘Supply Chain Strategy’ here

Neil Pein, CEO at BNP Paribas Leasing Solutions explains why Europe’s farmers have been dealt a tricky hand, battling economic pressures, population growth, climate change, and rising sustainability demands. He argues that embracing Product-as-a-Service (PaaS) models can democratise access to cutting-edge technology with financial flexibility, paving the way for a resilient and circular future for farming. 

‘Empty shelf syndrome’ has become all too familiar for shoppers across Europe. Shortages are an almost everyday occurrence in food supply – from olive oil, to honey, and more recently, cauliflower and broccoli. But this empty shelf space is more than just a supply chain hiccup: this is a symptom of deeper-rooted problems in farming. 

The farming community is no stranger to hardship – braving unpredictable weather, tight finances, rising production costs, and the demands of the land. Incomes are dropping, and many are being forced to close shop altogether. The European Union (EU) has seen a huge 37% drop in farms since 2005, with 5.3 million farms disappearing over just 15 years.  

At the same time, farmers are facing growing heat to invest in more sustainable farming practices, while many are struggling to make ends meet. 

Tightening regulations, new policy changes, and green subsidies are changing ways of working on farms. Many are racing to play their part in building a more sustainable future – and the stakes are far greater than just keeping shelves full. 

A PaaS-ing trend? 

Farmers are now looking in other directions to manage business risks and costs, while having to tighten their belts. Product-as-a-Service (PaaS) business models are stepping in as a solution to respond to the challenges of modern farming. PaaS models allow customers to pay for the services and outcomes a product can provide, rather than paying for the ownership of the asset itself. For farms, this opens the door to modern, sustainable, and expensive assets which may otherwise be out of reach – such as ground-based sensors, drones, autonomous tractors, or GPS technology. These costs are spread over the contract’s duration, providing financial flexibility, predictable expenses, and the freedom to reinvest in growth. 

PaaS is a win-win for manufacturers, too. Offering PaaS contracts can unlock predictable revenue streams for manufacturers by offering services that span the entire lifecycle of farm machinery. It’s a well-known fact that machinery, like combine harvesters and tractors, comes with a hefty price tag. With long asset lifespans, moving away from one-time sales helps manufacturers to diversify their revenue opportunities and build long-term relationships with farmers.  

The future of farming is circular  

Traditionally, the high cost of equipment has made it tough for farmers to modernise and invest in new, sustainable tools, with steep upfront costs being a major barrier. PaaS solutions are emerging as a way to democratise access to the tools they need to adapt and succeed. The EU’s ‘Farm to Fork’ (F2F) strategy, introduced under the European Green Deal, has added urgency to updating outdated farm machinery and lean into circular economy principles. The F2F strategy aims to shift the current EU food system towards a sustainable model, with ambitious goals to halve the use of pesticides and fertilisers, reduce food loss and waste, and promote more sustainable production and consumption habits.  

Under these goals, pay-per-use contracts for advanced equipment like seeders and sprayers can add real value for farmers. By keeping upfront costs low, PaaS enables farmers to use precision farming methods that comply with the F2F strategy, help manage rising fertiliser costs, as well as protect water, soil, and air quality.  

What’s more, PaaS agreements support sustainability aims by letting manufacturers reclaim valuable materials at the end of a machine’s life. They can also offer options like maintenance and spare parts. This not only supports the circular economy, but also provides a buffer against raw materials price fluctuations and supply chain disruptions. 

Giving farmers tools at their fingertips 

Farmers are familiar with the risk and disruption facing the sector. Across Europe, farmers have been taking to the streets to protest issues like EU subsidy delays and bureaucracy, while in the UK, thousands marched against upcoming inheritance tax changes on agricultural assets over £1mn starting April 2026. 

Pinching pennies, compounded by the growing impacts of climate change – like natural disasters and unpredictable weather patterns – are pushing the adoption of digital tools to the forefront, promising to lower operating costs and improve precision and accuracy. PaaS models leverage digital asset management, giving farmers the data insights to monitor equipment usage and performance like never before. This can span soil moisture levels, temperature fluctuations, and livestock behaviour – offering data at their fingertips to better manage crops, minimise waste, and weather the challenges ahead. 

The future of farming is rooted in a combination of financial flexibility and sustainable practices. With access to cutting-edge tools without the burden of high upfront costs, farmers can meet more stringent sustainability regulations, meet the food security needs of a growing population, and reduce operating costs – ensuring stocked shelves become the norm, rather than the exception.  

The Heavy-Duty Vehicle (HDV) industry plays a crucial role in global logistics, supporting supply chains and meeting the rising demand for deliveries fuelled by e-commerce growth. However, HDVs contribute significantly to greenhouse gas (GHG) emissions, accounting for over a quarter of road transport emissions in the EU. As sustainability pressures mount, the industry must adopt new solutions that balance growth with environmental responsibility.   

A New Approach: Truck-as-a-Service 

Truck-as-a-Service (TaaS) is an innovative business model that shifts the way fleets are procured and managed. Rather than purchasing trucks outright, businesses pay for vehicle usage through flexible contracts, often based on mileage or operational needs. This eliminates the need for high upfront capital investment, making fleet modernisation more accessible.   

TaaS contracts often include value-added services such as maintenance, repairs, and fleet management solutions. By bundling these services, operators can reduce operational costs, improve efficiency, and focus on core business functions. This shift not only benefits fleet owners but also allows manufacturers to generate recurring revenue through long-term service agreements.   

A Rapidly Evolving Industry   

Technological advancements are reshaping the HDV industry, introducing innovations that enhance fleet performance and safety. Digital solutions optimise vehicle usage, reduce fuel consumption, and help prevent collisions. TaaS enables fleet operators to integrate these technologies without the financial strain of purchasing new vehicles.   

One key innovation is telematics, which allows manufacturers to monitor vehicle performance in real time. This data-driven approach enables predictive maintenance, minimizing downtime and reducing unexpected repair costs. By integrating telematics into TaaS contracts, operators gain greater visibility into fleet health, while manufacturers benefit from long-term service engagements.   

A Transition to Net Zero HDV Fleets 

Truck electrification is also becoming an urgent priority for the industry as it seeks to meet ESG compliance requirements and tackle market challenges, such as volatile oil and gas prices. TaaS models can increase demand for electric vehicles, as they help operators to avoid the upfront capital investment of buying a new fleet, by spreading the costs over the lifetime of the vehicles. 

TaaS contracts can also simplify the EV transition by bundling EV batteries, charging infrastructure, installation, and maintenance into one end-to-end contract. Some manufacturers are even extending their TaaS services to offer installation of hydrogen or electric powertrains in existing vehicles as part of innovative refurbishing programmes that extend the life of vehicles and reduce their impact. 

Toward a Circular Economy 

While still evolving, TaaS shows tremendous potential to improve efficiency, reduce costs, and enhance sustainability. By embracing service-based models, fleet operators can modernise their assets, decrease emissions, and align with circular economy principles – creating a more sustainable future for the transportation industry. 

The agricultural sector is undergoing a profound transformation. Driven by technological advancements, environmental pressures, and evolving consumer demands, farmers are facing unprecedented challenges and opportunities. From climate change and labour shortages to the need for increased productivity and sustainability, the modern farmer must navigate a complex and dynamic landscape. 

A new era of agricultural technology 

The past decade has witnessed a surge in agricultural technology, with innovations like: 

• Automation: Autonomous tractors, drones, and robotic systems are automating labour-intensive tasks, improving efficiency and reducing reliance on manual labour. 

• Data analytics: Ground-based sensors, satellite imagery, and AI-powered platforms are providing farmers with real-time data on soil conditions, weather patterns, and crop health, enabling more informed decision-making. 

• Precision agriculture: Technologies like GPS and variable-rate application allow farmers to optimize resource use, minimize waste, and maximize yields. 

• Sustainable practices: Renewable energy sources, regenerative agriculture techniques, and precision livestock farming are gaining traction as farmers seek to minimize their environmental impact. 

The rise of Product-as-a-Service (PaaS) 

In this era of rapid technological change, access to cutting-edge equipment and technologies is crucial for farmers to remain competitive. However, the high upfront costs of many modern agricultural technologies can be a significant barrier to entry. 

PaaS offers a compelling alternative. Instead of purchasing equipment outright, farmers can subscribe to use it on a pay-per-use or subscription basis. This model provides several key advantages: 

• Improved cash flow: By spreading costs over time, PaaS models free up valuable capital for farmers to invest in other areas of their operations, such as seed, fertilizer, or labour. 

• Access to the latest technology: PaaS enables farmers to access the latest technologies, such as autonomous vehicles and precision agriculture tools, without the burden of a large upfront investment. 

• Predictable costs: Subscription models provide predictable monthly expenses, making it easier for farmers to manage their budgets and plan for future investments. 

• Reduced maintenance burden: Many PaaS agreements include maintenance, repair, and support services, eliminating the need for farmers to invest in costly maintenance infrastructure and reducing downtime. 

• Data-driven insights: PaaS providers often leverage data analytics to monitor equipment usage, performance, and maintenance needs, providing valuable insights to farmers and optimizing equipment utilization. 

Benefits for manufacturers 

PaaS models also offer significant benefits for agricultural equipment manufacturers: 

• Predictable revenue streams: Recurring subscription revenue provides a more stable and predictable income stream compared to traditional one-time sales. 

• Increased customer engagement: PaaS models foster closer relationships between manufacturers and farmers, enabling them to provide ongoing support, gather customer feedback, and identify new product development opportunities. 

• Enhanced customer loyalty: By providing comprehensive service packages, manufacturers can build stronger customer loyalty and foster long-term relationships. 

• Improved resource utilization: By optimizing equipment utilization and extending the lifespan of assets, PaaS models can contribute to a more sustainable and circular economy. 

The future of agriculture 

The PaaS model holds immense promise for agriculture. By lowering barriers to advanced technologies, it empowers farmers to meet the growing global demand for food in a sustainable way. Additionally, the model aligns with broader efforts to create circular economies by extending equipment lifespans and maximizing material use. 

As the agricultural sector evolves, embracing models like PaaS could be the key to unlocking long-term growth, sustainability, and resilience for farmers and manufacturers alike. It’s a win-win approach that not only supports rapid technological advancements but also drives a future-ready farming landscape. 

The circular economy is no longer just a concept; it has reached “megatrend status,” according to The Circular Economy Foundation. Over the past five years, discussions and reports about the circular economy have nearly tripled, reflecting its growing significance. Companies are recognizing the potential of this economic model to align with their ESG (environmental, social, and governance) goals, optimize operations, and drive sustainability and profitability. 

One innovative way organizations are embracing circularity is through product-as-a-service (PaaS) finance models. These models offer a streamlined, sustainable approach to managing assets, minimizing waste, and maximizing resource efficiency. Here’s a closer look at how PaaS works and how it can help achieve your ESG goals. 

What is Product-as-a-Service? 

In PaaS models, customers pay for the outcomes or services a product delivers rather than owning the product outright. Instead of making a large upfront purchase, businesses pay a subscription fee, while the provider retains ownership of the product throughout its lifecycle. 

These contracts, often structured as operating leases, typically include value-added services such as procurement, maintenance, and end-of-life management. When the lease ends, the asset is returned to the provider, where it can be repaired, refurbished, or recycled, reducing waste and preserving valuable resources. 

Now, let’s explore three ways PaaS models support ESG objectives. 

1. Accelerate your investment in green technology 

Transitioning to greener operations is a cornerstone of ESG strategies, but high upfront costs can be a barrier to adopting sustainable technologies like electric fleets, renewable energy systems, or battery storage. PaaS financing eliminates this hurdle by spreading costs over manageable monthly payments, enabling faster adoption of green tech. 

PaaS contracts often come with additional services, such as training and maintenance, helping organizations improve operational efficiency and lower resource strain. For manufacturers, this approach also enhances customer relationships. 

Collaboration between manufacturers and financial institutions further strengthens these contracts, enabling manufacturers to scale PaaS offerings without impacting their balance sheets. PaaS is also a great way to gather customer insights and enhance marketing strategies. This win-win approach benefits businesses and boosts industry-wide sustainability efforts. 

2. Leverage data insights to optimize sustainability 

PaaS models often incorporate advanced asset management tools that provide real-time insights into product usage, location, and health. These data-driven systems empower businesses to maximize efficiency, reduce waste, and minimize emissions. 

Take the agriculture industry, for example. Farmers use precision sensors and software embedded in PaaS contracts to automate operations, optimize resource use, and reduce the environmental impact of chemicals and fuel. Similarly, other industries benefit from better asset utilization, which enhances productivity while driving sustainability. 

By integrating these data-driven tools, organizations can make smarter decisions about asset deployment, renewal, and disposal, directly supporting their ESG objectives. 

3. Ensure sustainable end-of-life management 

One of the standout benefits of PaaS models is the built-in circular management of assets. Since ownership remains with the provider, manufacturers are incentivized to extend product lifecycles through repair, refurbishment and recycling. 

This approach not only reduces environmental impact but also shifts the responsibility of sustainable disposal away from businesses. Many PaaS providers include services like reverse logistics, data sanitization, and compliance with local recycling regulations in their contracts, making it easier for organizations to meet their ESG goals without additional burdens. 

A circular future 

Meeting ESG expectations from investors, regulators, and customers is now a top priority for organizations worldwide. The circular economy provides a practical roadmap to grow sustainably, and PaaS models are a powerful way to integrate circularity into your business operations. 

By embracing PaaS, organizations can eliminate the complexities of traditional asset ownership, access cutting-edge green technologies, and create long-term value for all stakeholders. At BNP Paribas Leasing Solutions, we are committed to helping our partners and clients advance their sustainable transition, promoting circular economy principles, and driving innovation through PaaS business models. 

Let’s work together to build a more efficient, sustainable future. 

The European Union’s ambitious goal of becoming the first climate-neutral continent by 2050 has spurred industries to transform their product offerings, leading to the development of numerous green technologies, from electric vehicles to battery-powered solar storage systems. As a significant contributor to greenhouse gas (GHG) emissions, the manufacturing sector plays a pivotal role in driving the transition to a low-carbon future. 

In this challenging environment, product-as-a-service (PaaS) models can empower manufacturers to strengthen their businesses, diversify their revenue streams, and deliver more sustainable outcomes for both their customers and the planet. 

A rich and diverse service offering 

The energy transition is driving significant business transformation, with organizations across industries adopting smart, green tech solutions on a large scale. From wind and solar power systems to energy-efficient heat pumps and electric vehicle charging infrastructure, businesses increasingly require sustainable solutions to future-proof their operations. 

PaaS models enable manufacturers to shift from single-product sales to a service-based approach. This encompasses multiple customer touchpoints throughout the asset’s lifecycle, including deployment, maintenance, and product renewal. 

A prime example of this approach is Schiphol Airport’s partnership with Signify (formerly Philips Lighting) to implement a circular lighting solution. This comprehensive lighting-as-a-service contract includes design, installation, maintenance, replacements, and sustainable end-of-life handling. The connected lighting system allows for immediate identification and repair of failures, enhancing efficiency and improving the customer experience. 

By adopting PaaS models, manufacturers gain numerous opportunities to engage with customers throughout the contract period, fostering trust and loyalty. Instead of shouldering the upfront investment, customers pay for the service they use or the agreed-upon outcomes. This creates a more dynamic and continuous sales cycle, reducing reliance on one-time product sales. 

Fulfilling producer responsibility 

The EU has implemented several regulations establishing Extended Producer Responsibility (EPR) frameworks, requiring producers to manage the entire lifecycle of their products, including end-of-life disposal. 

PaaS models are valuable tools for fulfilling EPR requirements. They allow manufacturers to retain ownership and track their assets. When an asset reaches the end of its useful life, it is returned to the manufacturer, enabling them to close the loop on materials and contribute to a circular economy. By retaining ownership and accountability, manufacturers are better positioned to meet their sustainability commitments. 

In a world increasingly focused on sustainability and circularity, PaaS models not only make sound business sense but also help pave the way for a greener, more resilient future. 

In a world grappling with resource scarcity and environmental challenges, the circular economy emerges as a groundbreaking approach to economic development. As the European Union sets its sights on becoming carbon neutral by 2050, the circular economy is a a transformative model that promises both environmental stewardship and economic opportunity. 

What is the Circular Economy? 

Traditional economic models follow a linear path: take resources, make products, use them, and discard them. The circular economy flips this script entirely. It’s an innovative approach designed to maximize the value of resources, minimize waste, and create a regenerative economic system. The core principle is simple yet powerful: keep resources in use for as long as possible, extracting maximum value while minimizing environmental impact. 

The statistics are stark. Currently, global resource consumption exceeds the Earth’s regenerative capacity by 1.7 times annually. Shockingly, about 90 percent of worldwide resources end up as waste. But the circular economy offers a compelling alternative, with analysts predicting it could unlock $4.5 trillion in economic growth by 2030. 

Enter Product-as-a-Service (PaaS) 

One of the most exciting innovations driving the circular economy is the Product-as-a-Service (PaaS) model. Instead of traditional ownership, customers pay for the service and outcomes a product provides. This approach fundamentally reimagines how we think about assets and consumption. 

In a PaaS model, responsibility for the asset remains with the provider, and customers pay periodic fees to use the product. This approach comes with significant benefits: 

• Reduced waste through extended product lifecycles 

• Incentives for manufacturers to create more durable, repairable products 

• Better asset tracking and management 

• Improved data collection for optimization 

How businesses can benefit 

Two primary financial solutions are emerging to embed circularity: 

1. Operating Leases: Provides access to assets with additional services, without the option to purchase 
2. Subscription-Based Services: Flexible contracts with recurring fees for product access 

These models introduce innovative billing approaches like pay-per-use and pay-per-outcome, creating more flexible and sustainable business relationships. 

The broader impact 

The circular economy isn’t just an environmental strategy – it’s a comprehensive business transformation. By simplifying product acquisition, maintenance and disposal, companies can: 

• Optimize operational and financial performance 

• Minimize waste 

• Make more informed decisions about asset management

Looking ahead 

As ESG reporting and environmental consciousness grows, businesses that embrace circular economy principles will gain a significant competitive advantage. The transition requires reimagining product design, business models, and customer relationships. 

The European Union’s ambitious carbon-neutral goal by 2050 is driving this change, but the opportunity is global. Companies across sectors – from construction and agriculture to IT and healthcare – can leverage product-as-a-service models to meet new environmental expectations while unlocking economic value. 

The circular economy represents more than a trend. It’s a fundamental shift in how we understand resources, consumption, and economic growth. For forward-thinking businesses, it’s not just about reducing environmental impact – it’s about creating more resilient, efficient, and innovative business models. 

Are you ready to close the loop? 

The transition to a circular economy is no longer a distant aspiration; it’s a pressing reality. The EU’s ambitious target of a fully circular economy by 2050 demands a fundamental shift in how we design, produce, distribute, and consume goods. This necessitates a systemic overhaul, requiring the development of new technologies, processes, and innovative business models. 

One of the most promising tools in this journey is Product-as-a-Service (PaaS). This innovative business model offers a pathway for organizations to adopt and embed circularity into their operations effectively. At BNP Paribas Leasing Solutions, we explore this opportunity in depth in our latest report, Harnessing the Power of Product-as-a-Service, which examines the role PaaS can play in transitioning from a linear to a circular economy. 

What is PaaS?

PaaS reimagines how goods and services are delivered and consumed. Traditionally, consumers or businesses purchase ownership of a product outright. Once it reaches the end of its lifecycle, it is often discarded – characteristic of the linear, single-use economy. 

In contrast, PaaS shifts the focus from ownership to access. Instead of purchasing the asset, users pay for the value or benefits the product provides. The manufacturer or financier retains ownership throughout the product’s lifecycle, offering value-added services – such as maintenance, upgrades, and eventual recycling – on a subscription-style basis. 

Is PaaS relevant to your sector? 

The potential of PaaS extends across a wide range of industries, offering unique advantages for both businesses and the environment: 

• Agriculture: Farmers can access high-value equipment like tractors and harvesters through flexible subscription models, reducing upfront costs and improving cash flow. Manufacturers benefit from predictable revenue streams and the opportunity to optimize equipment utilization through data analytics. 

• Green Tech: PaaS simplifies the adoption of sustainable technologies like electric vehicles (EVs) by bundling vehicle purchase, charging infrastructure, and maintenance services into a single, predictable subscription. This reduces upfront costs for consumers and accelerates the transition to cleaner transportation. 

• Transportation: Truck-as-a-Service models, where operators pay per kilometre travelled, optimize vehicle utilization, reduce fuel consumption, and improve driver safety through advanced telematics and predictive maintenance. 

• Healthcare: PaaS models for medical equipment, such as MRI machines, ensure optimal utilization and reduce the burden of upfront capital investment for healthcare providers. Manufacturers can optimize equipment maintenance and extend the lifespan of assets through data-driven insights. 

• Information Technology: Device-as-a-Service models provide businesses with access to the latest technology while minimizing the risks associated with hardware obsolescence. Manufacturers can recapture value through device refurbishment and remarketing, extending the product lifecycle and reducing electronic waste. 

• Construction: PaaS models for heavy equipment allow construction companies to access the latest technology without significant capital outlay. Manufacturers can optimize equipment utilization, improve maintenance efficiency, and recapture valuable materials at the end of the equipment’s lifecycle. 

Key PaaS challenges 

While the potential of PaaS is significant, several challenges must be addressed to facilitate widespread adoption: 

• Developing robust data infrastructure: Collecting, analyzing, and sharing data across the value chain is crucial for optimizing PaaS models and measuring their environmental impact. 

• Building trust and transparency: Establishing clear contracts, ensuring data privacy, and fostering open communication between providers and consumers are essential for building trust and long-term relationships. 

• Addressing regulatory and legal frameworks: Adapting existing regulations and developing new frameworks to support circular business models and facilitate the transition to PaaS. 

• Investing in skills and training: Developing the necessary skills and expertise within the workforce to design, implement, and manage circular business models. 

Product-as-a-Service represents a powerful tool for driving the transition to a circular economy. By shifting the focus from product ownership to value delivery, PaaS models can unlock significant economic and environmental benefits. As businesses and policymakers embrace this innovative approach, we can move closer to a future where economic growth is decoupled from environmental degradation, creating a more sustainable and equitable future for all. 

BNP Paribas Mobility today announced a new offering to simplify and accelerate the transition to electric vehicles for both companies and individuals across Europe. This comprehensive package, launched on a European scale, tackles a key barrier to electric vehicle adoption: convenient and affordable charging points, primarily where a majority of recharges* occur – at home and in the workplace. The initiative actively promotes the transition towards sustainable mobility.

The solutions, Arval Charging Services and Leasing Solutions Charge & Lease, cater to diverse needs:

• Arval Charging Services: Individuals leasing an electric vehicle through Arval gain access to a hassle-free home or office charging solution. This all-in-one package includes station installation, maintenance, and even removal and recycling if needed. For corporate clients, optional employee home charging reimbursement adds further value. Arval Charging Services combines perfectly with the existing Arval public charging offers, allowing customers to have access to charging everywhere they need.

• Leasing Solutions Charge & Lease: Corporate fleet managers can tailor a charging infrastructure package for their companies with various power levels, electric infrastructure, signage, and installation support. Shade huts and energy storage options are available as optional add-ons. This solution seamlessly integrates with existing fleets or alongside Arval’s electric vehicle leasing solutions.
  This offer can be combined with Arval’s existing Public Charging Card for convenient on-the-go charging, and with Arval’s SMaRT consulting approach to assist in selecting the right equipment (electric vehicles and charging stations) based on customer needs.

With Arval, a key player in long-term vehicle leasing and specialist in mobility solutions, and BNP Paribas Leasing Solutions, European leader in corporate equipment finance, this new offering reflects BNP Paribas Mobility’s commitment to a more sustainable future. Arval aims to have 350,000 battery electric vehicles in its global fleet by 2025, lowering CO2 emissions by 35% to an average of 93g per vehicle per kilometer. BNP Paribas Leasing Solutions, meanwhile, plans to finance €240 million in charging infrastructure across Europe by 2025, empowering companies on their path to net zero carbon emissions.

Arval Charging Services is launched in France since January 11, 2024, in collaboration with EDF Group** under the name Arval Charging@Home. It complements existing on-the-go and office charging solutions available within the broader Arval Charging Services and Leasing Solutions Charge & Lease framework.

With this innovative and timely offering, BNP Paribas Mobility is charging headlong into the future of electric mobility, making the switch easier, more convenient, and more affordable for everyone.

Alain VAN GROENENDAEL, Chairman and CEO of Arval, said, “As an international player in long term vehicle leasing and new mobility services, energy transition is at the heart of our strategy. We are proud to help accelerate and promote technological innovations that complement our electric vehicle leasing offer.” He added, “This solution sustains the global increase of electric vehicles in fleets, making accessible to their users convenient and more accessible charging points at home or at the office, cheaper than public charging.”

Isabelle LOC, CEO of BNP Paribas Leasing Solutions, said, “At BNP Paribas Leasing Solutions, our mission is to support the real economy by facilitating access to financing of less polluting equipment and helping our partners and customers transition to electric mobility. Switching to electric cars creates a massive need for charging infrastructure. A successful ecological transitionwill require a network of reliable charging infrastructures.”

*Demand for EVs is soaring. Is Europe’s charging station network up to speed? | Euronews

**Through its IZI by EDF and IZIVIA subsidiaries.

#BNPParibasMobility

About Arval :

Arval specialises in full-service vehicle leasing and new mobility solutions, leasing close to 1.6 million vehicles as at the end of June 2023. Every day, more than 8,000 Arval employees in 29 countries offer flexible solutions to make journeys seamless and sustainable for its customers, ranging from large international corporate groups to smaller companies and individual retail clients.

Arval is a founding member of the Element-Arval Global Alliance, a world leader in the fleet management industry, with more than 4.4 million vehicles in 56 countries. Arval was founded in 1989 and is fully owned by BNP Paribas. Arval is positioned within the Group’s Commercial, Personal Banking & Services division.

www.arval.com

When the European Commission launched the landmark EU Green Deal in December 2019 it set out a bold plan for the continent to transition to a sustainable economic future. Described as “Europe’s man on the moon moment”, in broad brush strokes it outlined its ambition to be the world’s first carbon neutral continent by 2050.

Four years on and the road map outlined in the Green Deal has delivered significant change, and today, Europe undoubtedly leads the world in the transition to a low carbon, circular economy.

But as climate change accelerates and we inch ever closer to the 2050 deadline, one thing is clear – unlike the moon landing, Europe’s final destination is still unknown and if the Green Deal is to be an equally historic success, the devil will be in the detail.

WHAT IS THE EU TAXONOMY? HOW DOES IT LINK TO THE TRANSITION TO A CIRCULAR ECONOMY?

The EU Taxonomy, Europe’s sustainable finance framework, is the place to dig into that detail. It underpins the Green Deal by setting a standard for economic activities that can be classified as environmentally and socially sustainable. It includes the transition to the circular economy as one of its key objectives and could help to unlock the trillions in finance needed to make circularity mainstream.

A recent taxonomy policy development has circular economy enthusiasts talking, with new guidelines that set out criteria to determine whether certain economic activity makes a “substantial contribution to the transition to a circular economy” – a transition that could be worth €1.8 trillion to the EU economy by 2030.

FROM A SIDE NOTE TO A KEY THEME

What caught my attention is that product-as-a-service (PaaS) has re-emerged as a key theme for the EU and an important lever for achieving the circular transition.

In 2020, PaaS was given just a passing mention as part of the 35 actions set out in the Circular Economy Action Plan (a major building block of the EU Green Deal), but through this taxonomy update the EU has signalled that it will prioritise PaaS as a mechanism to achieve the circular economy and, crucially, give organisations the criteria they need to implement it successfully.

The new technical guidance defines product-as-a-service models as “providing customers with access to products through service models, which are either use-oriented services, where ownership remains with the provider and the product is leased, shared, rented or pooled; or result-oriented, where the payment is pre-defined and the agreed result is delivered (i.e. pay per service unit)” (pg. 67).

It goes on to list a range of manufactured product groups that fit the bill, including textiles, electronics, furniture, and more (pg.67). This alone is a welcome step towards acknowledging the breadth of possibility that PaaS models can deliver.

However, the list is far from exhaustive, with medical tech, agricultural machinery, construction equipment, and automotives all notable omissions. Most, if not all, manufacturing sectors are being transformed by digitalisation at a rapid and increasing rate, meaning products become obsolete overnight and extracting the maximum value from resources, via circular models like PaaS, is paramount. The guidance will surely be broadened in future updates to capture the endless opportunities that as-a-service models can offer a multitude of industries.

The guidelines also set out criteria PaaS models must meet to be considered to be making a substantial contribution to the circular economy. First and foremost, the activity must “provide the customer with access to, and use of product(s), while ensuring that the ownership remains with the company providing this service, such as a manufacturer, specialist or retailer” (pg. 67).

THE LEASING INDUSTRY’S ROLE IN CIRCULAR TRANSITION

This is a call to arms for the leasing industry, which has an important role to play in helping organisations to implement systems that aid the circular transition. There is an opportunity here for lessors to build on our expertise in offering customers residual value pricing on assets (which inherently fosters the preservation of assets and their value) to offer a broad range of services covering the full lifecycle of an asset from asset management tools to data analysis to in-life maintenance support and sustainable end-of-life disposal.

Interestingly, the guidance also states that both a longer useful economic life through, for example, repair/refurbishment, and greater usage intensity (i.e. ride share services) are positive outcomes to be derived from PaaS models that will promote the transition to the circular economy (pg. 68). Clearly, the results for each of these approaches is very different because the more intensely a product is used, usually the shorter its life will be.

This is a powerful motivation for organisations to move away from traditional ownership models and work with lessors, who advocate for an optimum life of an asset rather than sweating an asset beyond its useful life, resulting in low value components with little opportunity for reuse. When managed properly, assets can deliver maximum value for organisations in their first lifecycle, be sustainably and securely refurbished and go on to fuel the second-hand market with high-quality products. These are the hallmarks of a truly circular economy.

Only three years after PaaS was just a side note in the EU Green Deal, it is now explicitly included in EU taxonomy, which is a hugely positive step forward. There’s still lots to do to create a framework that supports a truly circular economy and give investors and businesses the tools they need to implement circular solutions.

Setting these parameters will help the EU scale up sustainable investment, prevent greenwashing, and support organisations to transition to a more sustainable, future-proof way of doing business. Get this detail right and the sky really is the limit.

BNP Paribas Leasing Solutions receives Vendor Finance Provider and Best Energy Transition Financing Programme(s) awards at the Leasing Life Conference & Awards 2023. The ceremony, hosted on 9th November 2023 in Budapest, Hungary, marked the 20th anniversary of the prestigious awards which recognise the achievements of the key players in the European asset finance industry.

Scooping not one, but two fiercely contested awards, the accolade of Vendor Finance Provider is in recognition of BNP Paribas Leasing Solutions’ enduring commitment to its extensive network of equipment manufacturers and suppliers across Europe and beyond – supporting investment in essential business assets to boost growth and drive innovation.

The Award for Best Energy Transition Financing Programme(s) reflects BNP Paribas’ dedication to supporting partners and clients on their journey to net-zero.

Commenting on the two awards, Pascal Layan, Deputy CEO at BNP Paribas Leasing Solutions said: “To be recognised as Vendor Finance Provider highlights our unwavering commitment to partnerships, a core company value that drives us forward. To win the Award for Best Energy Transition Financing Programme(s) for the second year in a row emphasises our dedication to supporting our partners and their clients in their sustainable transition.”

“I want to thank our teams whose hard work fuels our success, and to our partners and clients who consistently place their trust in us. Together we are contributing to a sustainable and prosperous future.”

The awards ceremony was preceded by a conference at which Pascal Layan hosted an insightful and panel discussion with key members of the BNP Paribas’ team on a wide range of topics including business growth, new business models, digitalisation and sustainability.

Our joint venture partner, 3stepIT, also enjoyed well-deserved success on the night, securing the Best ‘ESG/Sustainability’ Initiative of the Year.