Philips has been a leading innovator in rethinking its business according to the circular economy, from providing lighting as a service rather than a product, to more sophisticated e-waste management, and design for recycling materials and parts harvesting. This vacuum cleaner uses high amounts of recycled plastic in six black parts. The recycled plastic was developed in collaboration with Veolia and uses 95% post-consumer recycled Polypropylene made from old battery casings sourced in Europe
Loop / Optimise
Interview with Philips
Could you tell us about how Philips became interested in ideas around the circular economy?
Philips: At Philips we believe that there are strong global trends that make a circular economy a business necessity for now and the future:
- Resource availability and pricing results in increased resource price volatility which dampens economic growth, discouraging businesses from taking resource-related risks.
- Over the next two decades, it is estimated that the middle class will expand by another three billion people, coming almost exclusively from the emerging world, driving demand and ultimately waste
- More and more companies are responding to sharpened, new legislation and governance models by introducing new innovative designs for their products.
- We have seen the emergence of a different type of consumer, who is interested in different ownership and business models for example Airbnb, Zipcar, Spotify.
- The multi-channel world has also led to new levels of engagement and connectivity with consumers looking for relationships with brands that go beyond the transactional.
A circular economy aims to decouple economic growth from the use of natural resources and ecosystems by using those resources more effectively. By definition it is a driver for innovation in the areas of material-, component- and product reuse, as well as new business models such as solutions and services. In a circular economy, the more effective use of materials enables to create more value, both through cost savings and by developing new markets or growing existing ones
Could you tell us about some of the challenges in shifting such a big company to designing products and services around the circular economy?
Philips: The main challenge comes from the disruptive nature of the innovation. We are not only changing the design of the product or the business model but we are doing both simultaneously. To help us drive the change required in the company we have identified four enablers that help us implement circular economy principles:
- Business models: Attractive value propositions that will enable an optimal capture of the economic opportunities of a circular economy – for example through further emphasis on access over ownership.
- Design: Designs that enable multiple lifecycles with minimal loss of value, quality and energy impacts and that can also be mined for materials and components that can be reused
- Collaboration: Cross value chain and cross sector collaboration is essential. Networks and knowledge sharing schemes that facilitate the large scale establishment of a circular economy as well as policy mechanisms that enable their creation need to be implemented.
- Reverse logistics: this is all operations related to the recovery and reuse of products and materials. Essentially the strategies, processes and infrastructure to enable the cost-effective collection, treatment and redeployment into the market of products, components and materials at high quality and high volume.
How does it work organisationally? Is there a department or group driving it?
Philips: The actual circular economy innovations have to take place in our existing R&D, Design and Business teams. As a sustainability team we aim to help and stimulate those teams working on the circular economy innovations by providing them with expertise and tools and by sharing experience and learnings across the different teams.
How would you describe the different mindsets of circular thinking/design for the circular economy versus traditional linear thinking for the linear economy?
Philips: Circular economy requires Philips to think about the next loop of the products, even before we start to develop the new product. We need to decide if at the end of the first lifecycle the product will be repaired, refurbished, parts harvested or recycled as all of these loops require us to make different design choices.
How has your vacuum cleaner range benefitted from circular economy thinking?
Philips: Circular economy thinking has led to a regular use of recycled materials in product design. Materials quality and performance are continuously improved in close collaboration with suppliers.
Much like other products developed by Philips, this vacuum cleaner uses high amounts of recycled plastics in its characteristic black colour. The recycled plastic was developed in collaboration with Veolia polymers and uses 95% post-consumer recycled Polypropylene made from old battery casings sourced in Europe.
The use of recycled plastics brings challenges and opportunities for a company like Philips, which aims for high sustainability standards.
A major challenge for the development of recycled plastic is to match its properties with the most critical specifications required by its intended use. For example, if most products need to withstand drop tests at ambient temperature, in the case of the the vacuum cleaner, the recycled plastic needs to pass the test at zero degrees Celsius. This is because vacuum cleaners are often stored in garages, where temperatures can be very low.
The advantages of using recycled plastic go beyond the evident environmental benefits – the lower cost compared to virgin plastic makes it a potential business opportunity. However, the price of recycled plastic is not sufficiently stable. This is due to low volumes of demand and supply. Further research investments and long term commitments are two fundamental actions to ensure a more widespread deployment of recycled plastic in the future.
What kind of market research have you done with customers around the circular economy and what kinds of insights have you learned?
Philips: Market research consistently shows that consumers are concerned about the state of the environment and expect companies like Philips to improve their environmental performance. At the same time we also see that consumers struggle to take the environmental performance into consideration when buying new products as they already need to make a complex buying decision where they need to review the specifications, price and design of the different products. As a result the majority of consumers do not specifically buy sustainable or circular products. This means that besides just labelling a product as green or circular we need to make sure that circular propositions are superior over the linear alternative. We need to find additional benefits for instance around performance or convenience that convince consumers that the circular solution is simply better than the linear alternative
Philips: At Philips, the use of recycled plastic is currently focussed on vacuum cleaners, coffee machines and irons and most production locations are based in Europe. At the moment we are expanding recycled plastics into new product categories and we will also increase the amounts of recycled plastics in our production locations in Asia.
The use of recycled plastics in new products is one concrete approach Philips is taking to close material loops and work towards a circular economy. Other approaches focus on expanding the product-as-a-service concept in our healthcare equipment business and translating it also to home appliances like vacuum cleaners.
For more on Philips work on the circular economy click here