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.