Dr. Aleš Mihelič the Head of Pre-development of R&D Laundry Care Competence Centre was invited by the United Nations Industrial Development Organisation (UNIDO) to hold a lecture at the meeting entitled Circular Economy: Greening Designs for Inclusive and Sustainable Development that took place in Vienna on 1 April. At the meeting, he introduced the Gorenje eco circle and our endeavours regarding circular economy. When the word was about introducing the service-based circular business model he emphasized the Resource-efficient Circular Product-Service System (ReCiPSS) project co-financed by the European Union with Gorenje being the lead partner. In the period 2020-2021, we are going to provide more than 300 pay-per-use washing machines to end customers.
Gorenje received 1 million EUR of non-refundable funds for the ReCiPSS project from the EU and our partners received another 3.5 million EUR to assist Gorenje in implementing the project. Why is this project so interesting for the EU?
Most producers see the circular economy as introducing recycled materials into new products and labelling the latter to facilitate recycling at a later stage. However, the problem with this is that the added value acquired with recycling does not stick with the producer. This reduces the producers’ interest in circular economy especially because recycled materials are more expensive in general and have poorer physical characteristics. In addition, compared to traditional materials more recycled materials are required to manufacture a product. By introducing the pay-per-use system and manufacturing products that last longer than usual product a producer/lessee may earn much more. It is common knowledge that the manufacture of a device that lasts ten times longer does not cost ten times as much. And this is the required manoeuvring space for both the producers to generate profit and consumers to receive the better appliance for a reasonable price in the long run.
The European Commission is very proud of the project and has been monitoring it very closely. Thus, last October I received an invitation from the European Commission to talk about our work at the WCEF 2018 – World Circular Economy Forum in Yokohama in Japan.
Who else is a partner to the project?
Apart from Gorenje that initiated the project there is also Robert Bosch GmbH as an automobile demonstrator and a range of IT and logistics companies, as well as three universities (TU Delft from Netherlands, KTH from Sweden, and Masaryk University from the Czech Republic) that participate in the project.
What is it in the framework of this project that Gorenje sees as a new opportunity?
With two large-scale industry-focused demonstrators (one engaged in the production of household appliances and the other in the manufacture of automobile components) being involved in the project the latter will try demonstrate that new service-based models allow to generate more profit than traditional approach.
For the duration of the ReCiPSS project, a pay-per-use concept will be introduced to four test markets with a demonstration sample of 300-400 Asko washing machines. In the framework of the ReCiPSS project Gorenje and their partners are going to adjust the washing machines accordingly, develop user interfaces, logistic infrastructure as well as IT supporting environment necessary to implement the pilot project. Gorenje will be able to use the infrastructure developed as well as the knowledge gained also once the project ends. In the framework of a previous project a group of Swedish scientists conducted a survey among buyers of washing machines and as much as 60% of them preferred leasing of a washing machine over buying it. Together with their partners Gorenje will try to demonstrate that new service-based business models allow to generate more profit than traditional approach.
Could you please explain why leasing an appliance is more sustainable than buying one?
If we take a consumer who buys a traditional product we see that their ecological footprint is 9-times the footprint of a consumer who buys a product lasting 10-times longer. For the manufacturer this means they are going to manufacture the products with increased added value. Given the fact that we are the first ones attempting to develop this approach at international (i.e. global) level this means the market is relatively unsaturated and the growth potential is huge. We are aware, however, that many physical obstacles will need to be overcome, and many more obstacles existing in people’s minds.
A study from 2015 conducted by the Ellen MacArthur foundation has shown that the circular development path may bring about profits in the amount of up to 1800 billion a year by 2030 (compared to 900 billion EUR following the existing path) and an increase in GDP by 11%. Despite such huge economic and environmental advantages the research has shown that circular manufacturing environment is way underdeveloped.
You have mentioned obstacles. What is the biggest challenge in this project and what issues have remained unsolved?
The biggest challenge is to build and develop all back-end systems and adequate logistic support. For the time being we are in the phase of preparing the specifications for the IT system which will be programmed by our partners in Romania and Sweden.
Preparing an adequate marketing strategy and advertising campaign promoting the lease of the washing machines will also be a challenge. Since we are dealing with service-based business activity we still need to learn how to change the consumers’ perception and convince them into leasing our premium appliance instead of buying some cheap counterparts from our competitors.
Who is the main target group for the aforementioned business model? Who is to lease our appliances?
The ReCiPSS project will operate within two specific segments, i.e. for business clients (the so called B2B) and for individual clients (the so called B2C).
We, however, target several groups such as: private users, owners of apartments or lessors, owners of multi-residential buildings (especially for first interior design projects), investors, retailers and laundry service providers. In short, there is a wide range of end users. In the initial phases of the project we, however, plan to focus on the first two groups of users.
Our products are also environment-friendly. Could you please list a few examples pertaining to washing machines where innovative technologies contributed to environment-friendly operation of our appliances?
Every new generation of washing machines tends to be more environment-friendly than the previous one as this is our policy founded on our ECO circle that forms the pillar of all our R&D activities. Asko washing machines are made of natural materials, metal, glass, and were designed to last longer. Consequently, their ecological footprint is among the lowest in the industry. Given the weight of an individual appliance almost 95% of it can be recycled.
Our appliances have slightly more plastic components which decreases their environmental soundness. On the other hand, they have a range of functions that contribute to their efficiency, for example:
- IonTech: removes 30% more stains with less detergent required
- IonRefresh: removes odour without having to wash the clothes
- SteamRefresh: ironing is not necessary
- DoseAid : dosage recommendation
- EcoEye: facilitates decision-making
- Optimized cool washing cycles
How successful do you believe the project will be?
As a relatively small company engaged in the activity of manufacturing washing machines Gorenje has a long tradition of developing new trends and is as such in great shape. Perhaps the time has come to challenge the competition also in the area of services, ecology and circular economy.
Source: Vesna Petkovšek from Gorenje