Climate Change

A technology-driven circular business model is essential to reach climate change goals

Adopting a “product-as-a-service” business model is one of the most impactful changes we can make today

By Som Satsangi
Published: Thursday 11 November 2021
A tech-driven circular economy is key for climate change adaptation. Photo: baranozdemir / iStock

The novel coronavirus disease (COVID-19) pandemic has accelerated digital transformation for most of the industries and organisations today. We can accelerate progress to meeting global climate change commitments with advanced digital tools at our disposal. And there is no time to waste. 

The 26th Conference of Parties (CoP26) to the United Nations Framework Convention on Climate Change taking place in Glasgow had set “keep 1.5 degrees within reach” as its goal for all the countries to deliver on the promises of the Paris Agreement of 2015. 

Circular business models, an economic approach aimed at eliminating waste and the continual use of resources, offer a new paradigm that emphasises on the need to take a comprehensive view of products and processes. 

The Indian government is taking ambitious actions in energy efficiency measures, biofuels, sustainable transport, e-vehicles, enhancing green cover and sustainable agriculture, Union Minister of Environment, Forest and Climate Change, Bhupender Yadav, said at a climate meeting recently. 

Prime Minister Narendra Modi announced the target of generating 450 gigawatts of renewable energy by 2030 early this year. As of July 2021, India had 96.96 GW of renewable energy capacity and represented 25.2 per cent of the overall installed power capacity. He also launched the National Hydrogen Mission for the generation and export of green hydrogen in order to meet climate targets.

India has the third-highest number of unicorns in the world after China and the United States. It also has various climate tech / climate intelligence startups working on the mission to accelerate climate action using new age technology. 

India ranks ninth in the list of top 10 countries for climate technology investment over the past five years and Indian climate tech firms received $1 billion in venture capital (VC) funding from 2016 to 2021, according to a recent report.

The global market is moving towards the next leap where technologies such as 5G, artificial intelligence, blockchain, machine-to-machine and robotics can be applied to any services in any sector. In other words, we are taking the leap by making technology the common denominator. 

In this scenario, businesses need to place the tech bets and nurture a growth mindset guided by sustainable goals like combating climate change, adopting renewable energy solutions and using digital platforms.

The transformation towards a circular business model is very hard to achieve for individual companies. For example, it requires a costly and complex transformation of the entire design and development process to ensure that the components used in production are more durable and suitable for repair, reconditioning and ultimately refurbishing.

More importantly, a circular economy also requires a shift in the way we do business, from purchasing and installing huge amounts of equipment that are underutilised to an as-needed model. 

Adopting a “product-as-a-service” business model is one of the most impactful changes we can make today. It not only makes our economy more circular by breaking established patterns of mismatched supply and demand but also has the potential to generate significant growth opportunities for any industry.

As-a-service is a radical departure from a commoditised business model whereby companies sell a product and consider their job done. Instead, the producer retains ownership of and responsibility for the product throughout its entire life cycle. 

The customer has full use of the product for as long as is needed, paying only for when it is actually used, instead of for the product itself or its upkeep.

The producer, in turn, is responsible for building a quality product that lasts and is energy- and material-efficient. It is also their role to take the product back and prepare it (or its components) for reuse.

The product-as-a-service model is a viable option for companies seeking to achieve sustainability objectives and contribute to a more circular economy. 

Using IT as the lens by which to view the model, the World Economic Forum predicted three typical as-a-service outcomes that can making a real difference: 

  1. The elimination of overprovisioning; a common practice in which companies “overbuy” IT: In the average data center, 25 per cent of computer resources are not doing useful work and the remaining resources are operating at a small fraction of their capacity. This means higher costs and unnecessary consumption of power, space and cooling. Consequently, by switching to as-a-service, costs and energy use will significantly decline.
  1. Organisations are freed from being chained to their IT kit for the whole of its lifecycle: Thanks to an as-a-service arrangement, a company’s IT equipment can be rapidly upgraded to the latest, more energy-efficient technologies without worrying about any capital costs. That’s a critical option for companies, as inefficiencies of aging equipment means that 65 per cent of the power used by IT in data centres is used to process just 7 per cent of the work.
  1. Taking back IT assets at the end of their use: When looking for as-a-service providers, it is important to consider vendors with refurbishment services in house who can help keep e-waste out of landfills.    

It’s important not to underestimate the paradigm shift that moving to as-a-service model entails for a company, ideally as part of a broader business and digital transformation strategy that embeds sustainability within it.

A circular business model is not a new concept. From a very young age, we are taught about the importance of using our resources and money wisely, with an eye on the future. We must continue this practice in our lives to invest in initiatives that positively impact our future generations by becoming more environmentally conscious and responsible.

Som Satsangi is the managing director of Hewlett Packard Enterprise, India. 

Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth.

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