The Service Economy

“I don’t enjoy the stress factor of car ownership,” says Debelak, who has been a member of Flexcar, a car-sharing service, since 2004. A social science and sustainable development major at Portland State University, Debelak pays $85 per month for about 20 hours of car use—gas, mileage and insurance included. She reserves one of Flexcar’s 75 vehicles on the Internet and picks it up at one of more than 30 locations around the city.

Debelak, who owned a 1972 Ford Econoline van until an unfortunate incident with a deer in Missoula last summer, says she doesn’t mind the minor inconveniences associated with car sharing. “That’s what I like about Flexcar,” she says. “It forces you to think about exactly what you’re using the car for.”

The rapid growth in car-share companies—five have sprouted up in the U.S. since 2000—do more than fill a growing niche market. Car sharing also reflects a green business trend called “product service systems” (PSS), otherwise known by its more ungainly iteration, “servicizing.” Morph a product into a service, so the logic goes, and you reduce the ecological footprint of the product itself. In the Flexcar scenario, for example, consumers don’t buy a car; they buy the service the car provides. This shift in orientation trims mileage driven, eases congestion, and reduces greenhouse gas emissions contributing to global warming.

First proposed by Swiss technology analyst Walter Stahel in the 1970s, product service systems are climbing the rungs of the global sustainability ladder. A major push is coming from the European Union, which will launch a three-year initiative this summer applying PSS insights to the food, transportation and energy sectors. “Sustainable Home Services,” another EU program, catalogues a range of mobility, security and repair services available in European cities.

Fueled by Internet technologies, computer recycling campaigns and new business models such as car sharing, PSS momentum is also building in the U.S., as environmentalists, businesses and product designers rethink the very definition of sustainable consumption.

“PSS is the most interesting idea to emerge in the environmental arena in 15 years,” says Reid Lifset, associate director of the Industrial Environmental Management Program at Yale University. Instead of targeting the design of more sustainable products, said Lifset, PSS asks: “What are the functions that you want the product to accomplish? It’s a genuinely novel way to approach the quest for environmental improvement.” Lifset adds one caveat. “Getting the data to verify the environmental gains from product service systems is pretty complicated,” he says. “How this develops practically is still unclear.”

Despite the jargon—and the acronym—PSS isn’t exactly rocket science. To understand the theory behind the practice, ponder the following philosophical question. Does every household really need its own lawnmower? Or reflect on designer Victor Papanek’s observation—that the average power tool gets used only 30 minutes in a lifetime. PSS begins with the assumption that purchasing products can be wasteful and unnecessary, then gives the notion a positive spin by emphasizing the value of services over the burdens of ownership. As Lifset puts it, “People don’t want a refrigerator, they want a cold beer, the service provided by the refrigerator.”

Libraries, video rentals and taxis are examples of PSS systems. The 21st century angle is to use PSS to advance sustainable design and consumption goals. Consider Interface Carpet, for example, a green business pioneer that operates a product service system known as the Evergreen Lease program. Under this scenario, the Atlanta-based manufacturer retains ownership of the carpet while providing customers the services the carpet offers: color, texture, warmth, acoustics, comfort and cleanliness. At the end of the lease, Interface takes back worn carpet tiles and recycles them—ideally into new carpet to complete a closed-loop manufacturing process.

“We consider the leasing program as part of our journey up Mount Sustainability,” says Scott Landa, Interface vice president of sales logistics. “The program assures us that the carpet tile will not go into a landfill.”

Another PSS business program, Chemical Management Services (CMS), links industrial customers with a provider to supply and manage the customer’s chemicals and related services. Standard industry practice, by contrast, involves purchasing chemicals, not the services to manage them. According to the Chemical Strategies Partnership, a nonprofit organization promoting CMS as a means for reducing chemical use, the environmental and cost savings are significant. After switching to a CMS model, one General Motors assembly plant achieved a 43 percent reduction in the number of chemicals used and total savings of more than $750,000 a year.

“CMS reduces the incentive for suppliers to maximize the physical stuff,” explains Lifset. “The supplier is paid by the task, not the gallon.”

On the consumer side, PSS programs can also encourage more careful use of material goods. “The finding is the average American car is used less than an hour a day,” said Bill Scott, general manager of Flexcar Portland. “Our cars average five to 12 hours a day, extending [the car”s] useful product lifecycle while reducing the number of cars on the road.” A recent Flexcar survey shows that 43 percent of its 30,000 members either got rid of their cars or didn’t buy a car that they would have purchased if the car-sharing service were not available.

Quantifying the environmental value of PSS systems is not always so clear cut. Consider digital music services, which theoretically reduce the environmental impacts associated with production of a CD. According to Digital Europe, a two-year European investigation into Internet commerce and sustainable development, downloading 56 minutes of music is more than two and a half times less resource intensive than driving to a store to buy a CD.

However, such technology-based, product service systems can also have drawbacks, including thousands of tons of e-waste. “You have to balance the resource efficiencies from the product to service with the proliferation of new devices and their short lifetimes,” notes Lifset. “Trying to figure out which is better is the bread and butter of the field.”

As researchers tweak the environmental cost benefit analyses, others tout the emotional appeal of a system that emphasizes social networks over material goods. The EU Sustainable Home Services catalog, for example, lists a variety of old-fashioned community-based enterprises: bicycle repair and gardening services in the Netherlands, grocery deliv

ery in Vienna and household appliance rental in Helsinki. Back in the states, the popularity of online services such as Craig’s List or Mediachest—a service that allows members to exchange books and DVDs—suggests another upside to the system: As products diminish in value, interactions between people increase.

The next step is to stimulate a new array of business and retail product service markets. What if you could purchase the service television offers—watching The Apprentice, for example—minus the actual cathode ray tubes and other electronic components linked to the product itself? Or outsource your canoes, power tools and second cars to a service provider? For savvy consumers, there’s a new environmental slogan at the ready. “Don’t supersize; servicize.”