Philips chooses lighting as a service

If it’s possible with photocopiers ... Philips turns the ship about and goes for a different, innovative B2B approach - the company offers lighting as a service where customers simply lease the lighting they need. To do this, the company designs products that can be upgraded and maintained, with materials and components that can be recycled.

The linear model of production, consumption and disposal is reaching its limits. A new model - the circular economy - decouples economic growth from the use of natural resources by using these resources efficiently and repeatedly, so that waste is reduced. The benefits of this include innovation, new business models, added value creation, less landfill needed, lower emissions and a better quality of life.

Eco-partnership

More and more companies are seeing the benefits of this model. Philips, too, is joining this movement and aims to create value for the economy and reduce its environmental footprint through innovation. The company is reorganising its lighting and healthcare activities to operate on an economically sound and profitable cyclical basis. This involves creating green products, closing materials cycles and preventing environmental damage. In this way it has been able to realise 47 percent of its sales from green products and recently formed a partnership with the Ellen MacArthur Foundation. Furthermore, the company is looking to increase the energy efficiency of its products by 50 percent and double its use of recycled products and materials.

Philips aims to use the new partnership to exchange knowledge and elicit critical feedback. The move to a “circular economy” business model was a logical next step. Circular innovation starts with a smart choice of raw materials and designs for facilitating maintenance and disassembly. From here, the company needs to evolve from minimising materials costs to maximising value over the whole life-cycle of the product. This required performance and durability to be put at the forefront as the customer is investing in services and functionality in lighting and health care rather than buying new products.

'Light as a service'

Philips has started to sell lighting as a service in collaboration with the Dutch architect Thomas Rau. It helped RAU Architects reduce energy use by a total of 55 percent by optimising the use of natural light, adapting LED fittings for the building and by installing a sensor-and-control system for movement and daylight. Philips retains ownership of and responsibility for the equipment while RAU pays for maintenance and services. It uses the same approach for renovating complex medical equipment in the health care sector via its Diamond Select programme. Seen together, this means that the future lies in robust maintenance contracts in which replacement electronic parts can be easily used in customers’ machines and there is no need for complete disassembly or a new machine. The result – 70 percent of the turnover is now made from B2B sales.

This new approach, however, involves a long-term vision that requires thinking 15 years ahead, an end-to-end way of thinking and the involvement of both suppliers and sales.

The circular economy

According to the report 'Towards the Circular Economy' (login required) a fully circular world economy could bring about enormous savings. In a circular economy manufacturers are responsible for designing products that can be recycled, re-used or re-worked in a non-toxic closed cycle. This works better if the customer pays for the service rather than owning the goods, while the manufacturer remains responsible for them, as is now often the case, for example, with office printers and photocopiers. The manufacturer provides maintenance during the period of use and removal at the end.

Would you like to know more about the circular economy and how Philips is approaching it? During the ‘How to truly eco-innovate in the lighting industry?’ workshop on 11 February, the keynote speaker Anton Brummelhuis, Senior Director of Sustainability at Philips, will expand on this topic in his lecture 'From design for recycling to circular economy strategy at Philips'.

Topics like these are also covered in the 'Succesvol ondernemen in een veranderend klimaatseries about the hows and whys of new business strategies in the light of climate change - theory, practical tips and a detailed case study (login required).