Since its formation in early 1982, the Product-Life Institute (also called Institut de la Durée, and Institut für Produktdauer-Forschung) has been a not-for-profit, independent and virtual organization domiciled in Geneva, Switzerland. It is the oldest consulting organization on sustainable strategies and policies in Europe.
Our main objective is to open new frontiers of economic development towards a Performance Economy (or Functional Service Economy), which focuses on selling performance (services) instead of goods in a circular economy, internalizing all costs (closed loops, cradle to cradle). To achieve this, it combines technical, system design and commercial innovation primarily within a regional economy and develops business models of remarketing goods (reuse), product-life extension of goods and components (e,g. remanufacturing and technological upgrading) in order to create local jobs, increase resource husbandry and prevent waste.
The vision is a sustainable economy and society resting on the following five pillars, which are integrated into a holistic view of a sustainable society detailed in the document following the five pillars:
- The first pillar – 'nature conservation' – recognizes the need to conserve nature and the natural environment as a base for life on earth. Men's life is based on the resources supplied by the global eco-support system for life on the planet (e.g. biodiversity, the atmosphere and the oceans), and the regional carrying capacity of nature with regard to populations and their lifestyle (e.g. the water cycle, land-use patterns, waste assimilation).
- The second pillar – 'limited toxicity' – recognizes the need to conserve the individual health and safety of people and animals, which is jeopardized by man's economic activities. This is a qualitative issue, measuring the presence of toxic agents (heavy metals such as mercury, nickel, DDT or thalidomide) in tiny quantities (nanograms) as well as nature's capacity of absorption .
- The third pillar – 'resource productivity' – is based on the need of industrialized countries to dematerialize their life-style, in order to allow the material development of industrially less developed countries. This is a domain of innovation and creativity, dominated by business strategies that lead to a higher resource productivity over long periods of time. A reduction of resource consumption by a factor ten is needed to prevent the threat of a radical change for the planet towards a re-acidification and/or climate change which could question man's life on Earth. In addition, this is a factor of disequilibrium between over-industrialized countries and less industrialized ones.
- The fourth pillar – ’social ecology’ – encompasses the fabric of societal structures, including peace and human rights, dignity and democracy, employment and social integration, security and safety, the constructive integration of female and male attitudes. Key words here are: the commons, 'prisoners dilemma', sharing and caring, barter economy.
- The fifth pillar – ’cultural ecology’ – encompasses education and knowledge, ethics and culture, attitudes towards risk taking, values of 'national heritage' and other assets, at the level of the individual, the corporation and the State.
We are pursuing these objectives
- through applied scientific research,
- as consultants to industrial companies, government authorities and universities,to promote and coach the realization of the envisioned sustainable solutions and innovations.
A vision of the world in 2030 and a back casting in order to guide actions today
SOCIETAL WEALTH SHOULD BE MEASURED IN STOCK, NOT FLOW
by Professor Dr h.c. Walter R. Stahel, Geneva, The Product-Life Institute, Geneva
1. Societal wealth is measured in stock—equal quality and quantity of stock—and wealth can be increased by intelligently managing / exploiting this stock.
Quantity of stock can be preserved by smart operation and maintenance, continued education and intelligent stock management.
Quality of stock can in some domains be upgraded by integrating the scientific and technological progress into the existing stock (of human capital, health, agriculture, manufactured capital).
Stocks which are part of societal wealth include:
- Natural capital and environment (biodiversity and fish stocks, clean water, arable land (at all levels, local stocks and global commons))
- Cultural capital (physical such as UNESCO world heritage sites, and immaterial cultural goods including crafts, music)
- Human capital including education and health over the full life-span (beyond 60+)
- Acquired human working capital (knowledge and skills, capabilities, science and technology)
- Manufactured capital (infrastructures, buildings and goods; processed raw materials)
- Financial capital
Today, nation states do not have full quantity and quality (Q&Q) statistics of many of these stocks;
hence they do not know their overall wealth (partly because they focus on measuring flows, such as GDP).
2. CARING is the management principle behind successful stock optimization
- Caring is labour intensive and decentralised; it has to be done where the clients are (health services, repair services, organic food); economy of scale may not be the overriding objective and can be difficult to achieve in caring activities.
Today, for two of the domains listed under 1), there is no intelligent stock management (and little caring):
- Manufactured capital—for physical goods, infrastructure, buildings produced in the industrial flow economy the ownership for property and responsibility changes at the Point of Sale,
- Human capital—people, including health, education, capabilities, are not managed as a stock, despite the known links between activity and mental health below the age of 60, and between activity and the absence of Alzheimer/dementia for the age group of 60+.
A circular economy is a proven strategy for an intelligent stock management of manufactured capital. A circular economy is regional, labour intensive, consumes little material and energy resources (compared to manufacturing) and makes best use of human capital of all skill and technology levels. The circular economy is the link to a better stock management of manufactured and human capital.
In 2030, policy makers will fully support a Circular Economy, especially in markets near saturation, triggering a shift from a flow to a stock optimisation for manufactured capital and human capital and speeding up technological progress to the market, as technical systems are now upgraded by including innovative components, instead of replacing whole systems.
3. Today’s political objectives (in industrial countries and in a global ethics’ way) are to:
- decouple resource consumption from wealth
- create more jobs in order to overcome underemployment
- turn end-of-life waste into new products (the EU Waste directive 2008 specifies reuse and service-life extension of goods as priority)
- reduce greenhouse gas (GHG) emissions in order to mitigate Climate Change.
These objectives correspond to the very characteristics of the Circular Economy but are not yet reflected in the political framework conditions. Examples are remarketing and reuse (ebay and second-hand markets), repair, remanufacturing and technological upgrading of goods and components, which are often best done in a regional economy.
In 2030, a sustainable taxation will be part of economic policy:
Sustainable taxation will promote a Circular Economy by reducing the economic cost of labour and increasing the cost of non-renewable resources.
The Circular Economy is competitive; it does not need subsidies; but stopping subsidies of nonrenewable resources (carbon fuels (oil and coal)) will greatly help such a shift. Today, they are subsidised with EUR 56 billion per year in the EU, world-wide by almost half a trillion US$ per year (OECD / IEA). The Circular Economy is competitive; the reuse and service-life extension of the stock of manufactured capital is cheaper than manufacturing equivalent replacement new goods.
A Circular Economy of manufactured capital is social; it substitutes manpower for energy; it is labour and skill intensive and regional, and probably the best approach to keep more people in good health through activity, thus reducing health costs for society as a whole, as well as providing a source of additional revenue for the individuals concerned (reducing the risk of old-age poverty).
A Circular Economy is ecologic; it greatly reduces resource consumption as it preserves to a large extent the embodied water, energy and materials, prevents waste and CO2/ GHG emissions,.
The most profitable strategy of the Circular Economy is selling performance, such as selling goods as services, in the context of a Performance Economy. This business model, in addition to the advantages inherent in a Circular Economy:
- retains the ownership of goods and the embodied resources, thus providing future resource security for companies and nations,
- internalises all costs of risk and of waste over the entire product-life of goods, which constitutes a strong economic incentives for risk management and loss prevention,
- gives a life-long quality and performance guarantee to its customers.
For the economic actors of a performance economy, the retained ownership of goods entails high resource security and competitiveness as “the goods of today are the resources of tomorrow at yesterday’s resource prices”.
To summarise: The only societal wealth not managed as stock (quantity and quality) are the economy (measured as GDP flow) and human capital (measured as a flow of school leavers, active population, retirees). Yet these two stocks are closely interrelated: people’s health depends directly on work/activity. The Circular Economy enables an intelligent combined management of these two stocks; it can be fostered by adapted public framework conditions including sustainable taxation.
Walter R. Stahel, April 2013