Product-as-a-Service: The Circular Phone Report

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In the beginning of 2018, Circularise together with Sustainable Finance Lab, Circle Economy, Fairphone, PGGM, ING, ABN AMRO, NBA,  Allen & Overy, have teamed up within a Community of Practice to launch the report “The Circular Phone” that provides practical answers to common financing pitfalls for circular businesses, using Fairphone as the real-life example. All learnings and contract templates created during the project are now available open-source and ready for other companies to apply to their products.

What is “Product-as-a-Service”?

Manufacturers and businesses have typically focused on selling physical products in a one-time transaction. However, with the circular economy gaining momentum all around the world, alternative business models started gaining traction. One of the most promising ideas to bring circularity to life, is the Product-as-a-Service model. Product-as-a-Service fuses physical products, accompanying services and monitoring software to enable new offerings where the buyer may no longer own a physical thing—instead of a one-time-transaction the customer subscribes to the product and pays a recurring fee.

To help propel businesses in their journey to implement circular business models Circularise together with other frontrunning companies and organisations have teamed up within the Community of Practise to solve the barriers encountered by these companies. This report will give companies the tools to jumpstart and run their circular business, especially those, that have built models of retaining ownership of their products. This incentivises companies to create high-quality and durable products, while customers enjoy the performance of a product without the hassle.

The Report

So far, businesses striving to implement “Product-as-a-Service” models have had the challenge of reconciling the need to find financing parties with the complexities of their own business model. This report highlights the learnings generated during a six month project with the Amsterdam based company Fairphone, known for its ethical sourcing and circular practices, as the real-life example. Through the creation of a legal template – a 1st Circular Service Contract- and a financial cash flow tool, the group has proven that the gap between the businesses and financiers can be bridged. One of the other concrete and practical outcomes was a 5-year cash flow projection that enables financiers to assess the benefits and risks of their investment.