The current linear economic model, based on mass production and unsustainable consumption, has led to an unprecedented environmental crisis and an accelerated depletion of resources. The circular economy emerges as a strategy to rethink production and consumption, ensuring that resources remain in use for as long as possible. However, for this transition to be viable at an industrial and commercial level, businesses must fundamentally change how they generate value.
This is where Product-Service Systems (PSS) can play a key role. This new business model integrates products and services to provide value without relying on traditional product sales, enabling resource optimization, waste reduction, and minimizing environmental impacts.
Can PSS become the dominant model in a truly circular economy? What barriers must we overcome to make this approach mainstream?
- What are Product-Service Systems (PSS) and how do they relate to the Circular Economy?
A PSS is a business model that combines a product with an associated service, allowing consumers to access the value of a good without the need to own it. For instance, instead of purchasing a car, an individual or business can rent it for a period of time; or instead of buying a washing machine, they can use it for a number of washes.
Some of the services offered by PSS can make use of strategies such as repairing, reusing and recycling and thus contribute to a more circular economy. At the same time, a well-designed PSS can generate benefits for businesses, consumers, and the environment by:
✅ Optimizing product use, reducing overproduction and waste.
✅ Encouraging durability and repairability, since manufacturers have incentives to design long-lasting products.
✅ Reducing pressure on natural resources and CO₂ emissions.
✅ Improving product traceability, facilitating reuse, remanufacturing, or recycling.
- Types of Product-Service Systems and their impact on Circularity
Product-Service Systems can be categorized into three main types, each with varying degrees of integration between product and service.
2.1. Product-Oriented PSS
This model still relies on selling a product, but incorporates additional services such as maintenance, repair, or product upgrades.
🔹 Example in Electronics: Dell and HP offer IT equipment leasing with maintenance and upgrade services, extending hardware lifespan and ensuring proper disposal at the end of its cycle.
🔹 Example in Automotive: Manufacturers like Volvo provide predictive maintenance and software updates for their electric vehicles, ensuring long-term performance.
Impact on the Circular Economy:
✔️ Promotes repair and refurbishment.
✔️ Reduces premature obsolescence.
✔️ Maintains product value for a longer time.
📉 Barriers:
🔸 The customer still owns the product, making efficient material recovery at the end of its lifecycle more difficult.
🔸 Requires a robust logistics network for maintenance and technical support.
2.2. Use-Oriented PSS
In this model, products are not sold but rented, shared, or provided through subscriptions. The company retains ownership, and thus an incentive to design products that are more durable and repairable.
🔹 Example in Mobility: Lynk & Co offers cars on a subscription basis, reducing the need for every user to own a personal vehicle.
🔹 Example in Home Appliances: Miele and Electrolux have developed washing machine rental models, with maintenance included and product recovery at the end of its lifecycle.
Impact on the Circular Economy:
✔️ Reduces the number of products manufactured, as a single item can serve multiple users over time.
✔️ Enhances reuse and recycling, as the manufacturer retains control over the product.
✔️ Promotes resource-efficient consumption.
📉 Barriers:
🔸 Cultural shift needed, as many consumers still equate ownership with status and security.
🔸 Requires reverse logistics infrastructure for product recovery and redistribution.
2.3. Result-Oriented PSS
Here, the consumer does not pay for the product itself but for the outcome or function it provides.
🔹 Example in Lighting: Signify (Philips Lighting) offers “Light as a Service,” where customers pay for the amount of light used rather than purchasing light bulbs.
🔹 Example in Printing: HP Instant Ink provides a subscription-based printing service, where users pay per printed page, and the company manages cartridge recycling.
Impact on the Circular Economy:
✔️ Aligns economic incentives with resource reduction.
✔️ Minimizes waste, as businesses are incentivized to optimize product efficiency.
✔️ Supports decarbonization in energy-intensive sectors.
📉 Barriers:
🔸 More complex billing and service management.
🔸 Requires a shift from traditional business models to pay-per-use structures.
- Challenges and Opportunities for Implementing PSS in the Circular Economy
Despite its advantages, large-scale adoption of Product-Service Systems faces significant barriers:
- Regulatory and Taxation Issues: Current laws and tax systems are still designed for product sales rather than service-centered models.
- Consumer Behavior: Many people still perceive ownership as a symbol of status and security.
- Reverse Logistics Development: The collection, refurbishment, and redistribution of products require new logistical capabilities.
- Alternative Financing Models: Companies must rethink how they generate revenue without relying on one-time product sales.
However, the opportunities are vast:
✅ Stricter environmental regulations could drive these models forward.
✅ Digitalization and artificial intelligence are making it easier to implement efficient, personalized services (the own PSS-Pass project aims to make a contribution in this regard).
✅ Younger generations are more open to access-based consumption rather than ownership.
Is PSS the Key to a Truly Circular Economy?
Despite the hurdles on the path towards large-scale implementation, the Product-Service System (PSS) are to become a key element of circular economy systems and a critical factor to reduce pressure on natural resources, minimize environmental impacts and meeting global sustainability goals.
The key question is: Are we ready for a world where ownership is no longer the norm and access to services becomes the new way of consuming?
Author: Hector Viniegra
