This CEO has seen the future and it is round and full of re-used goods

RASHMEE ROSHAN LALL February 15, 2014

Quartz has called attention to the “circular revolution” recommended by Frans van Houten, CEO of Royal Philips. It is a philosophy that believes companies shouldn’t sell goods, but services based on the use of goods.

That, says Quartz, will encourage re-use and recycling.

Quite so. Mr van Houten’s suggestion is startlingly simple but a great leap for mankind in conceptual terms. As he says in his Project Syndicate article, it constitutes a “paradigm shift”, which seeks to transform the world economic model from linear to circular. From producing and consuming goods as cheaply as possible, the model would turn to re-use of everything. “Instead of selling products, businesses would retain ownership, selling the use of the goods they make as a service. Selling a product’s benefits instead of the product itself would create a powerful incentive for producers to design for longevity, repeated reuse, and eventual recycling, which would enable them to optimize their use of resources.”

This is eminently sensible. Remember the last time you complained about throw-away products. Unlike our parents’ and grandparents’ generation, we don’t expect anything we buy (refrigerators, cars, televisions, laptops) to last forever.

Mr van Houten is calling time on that, arguing that to sustain the current produce-and-consume model “would require unlimited, easily accessible resources and infinite space for waste”. Our “disposable economy”, he says would have terrible consequences, some of which – skyrocketing CO2 emissions, unmanageable waste streams, the increasing difficulty of extracting resources – we are already starting to see.

Crucially, Mr van Houten appears to be both thinker and do-er, revealing that his company is already starting down this path by “redesigning its products and considering how to capture their residual value… shifting from a transaction- to a relationship-based business model – one that entails closer cooperation with customers and suppliers. And it is changing its corporate culture to emphasize long-term solutions.”

He has seen the future – and it is round.