3.1 eco efficient system innovation vezzoli polimi 07 08 3.11

course System Design for Sustainability . subject 3. System design for eco-efficency . learning resource 3.1 Eco-efficient system innovation . year 2007-2008

carlo vezzoli . politecnico di milano . INDACO dpt. . DIS . faculty of design . italy Learning Network on Sustainability

learning resource 3.1

Eco-efficient system innovation course System Design for Sustainability subject 3. System design for eco-efficency

carlo vezzoli politecnico di milano . INDACO dpt. . DIS . faculty of design . Italy

Learning Network on Sustainability

contents

Phase’s transformation (processes) Phase’s transaction (semi-finished/products)

Cycles’ combinations (products/services)

Adding value to the product life cycle Providing final results to customers Providing enabling platforms for customers



3.1.1 System eco-efficiency

As has been said before, over the last few years some design research centres, starting with a more

stringent interpretation of environmental sustainability (that requires a systemic discontinuity in

production and consumption patterns) have reset part of the debate on design for sustainability

starting from system innovation. In fact, some authors have observed that the criteria for product

Life Cycle Design meets obstacles in traditional supply models of product sale (Stahel, 2001;

Cooper, 2000; Lindhqvist, 2000; Goedkoop, van Halen, Riele, Rommes, 1999; Manzini, Vezzoli,

1998). By most design researchers a more significant ambit in which to act to promote radical

changes for sustainable consumption, seemed to be the widening possibilities for innovation beyond

the product, particularly innovation of the system as an integrated mix of products and services that

together lead to the satisfaction of a given demand for well-being (Goedkoop, van Halen, Riele,

Rommes, 1999; Brezet, 2001; Charter, Tischner, 2001; Manzini, Vezzoli, 2001; Bijma, Stuts,

Silvester, 2001).

Commonly referred to in this context as Product-Service Systems (PSS), system innovations are

shifting the centre of business from the design and sale of (physical) products alone to the offer of

product and service systems that are together able to satisfy a particular demand.

To clarify this concept we can take the example used in a UNEP publication (UNEP, 2002): given

the “satisfaction” in having clean clothes, we do not need only a washing machine, but also

detergent, water and electricity (and the services that supply them), and maintenance, repair and

disposal services. So when we talk about system innovation, it is meant an innovation that involves

all the different socio-economic stakeholders in this satisfaction system: the washing machine and

detergent producers, the water and electricity suppliers, the user and those responsible for

maintenance and disposal.

Furthermore, it is to some extent a shared opinion that these innovations could lead “to a system

minimisation of resources, as a consequence of innovative stakeholder interactions and related

converging economic interests” (UNEP, 2002). Thus eco-efficient system innovation derives from a

new convergence of interest between the different stakeholders: innovation not only at a product (or

semi-finished) level, but above all as new forms of interaction/partnership between different

stakeholders, belonging to a particular value chain, or value constellation (Normann, Ramirez,

1995).

In other terms, the research interest in this innovation model relies on the fact that it can raise

system eco-efficiency through innovative stakeholders’ interactions.

In reality, this interpretation of system innovation forms part of the foundations and criteria already

expressed in Product Life Cycle Design (see learning resource 2.2). However, when this approach

was adopted, it emerged even more clearly (as the basic assumption) that it was the reconfiguration

of the system that constituted the starting point towards achieving certain results. The

environmental value must in any case be assessed on the overall effects of the life cycles of the

products and services that make up the system on offer.

3.1.2 Traditional sales/design model: eco-efficiency constraints

To understand in general terms why system innovation and innovative stakeholder interaction could

be more eco-efficient compared to traditional product sales/design let's use the Life Cycle model,



but substitute the phases with the related stakeholders (fig.??). Here laundry could be a useful

example of satisfaction system again. For this satisfaction I do not need only a washing machine,

but also detergent, water and electricity (and the services that supply it), and maintenance, repair

and divestment services.

In the case of a traditional product sale/design, the producer of the washing machine (but also of the

detergent and the electricity) has an interest in reducing material and energy consumption during the

production phase. On the contrary, he has no direct economic interest either in limiting consumption

during use, or in reducing divestment impact and valorising the resulting waste. Sometimes the

producer is even interested in selling products with a short life span, with the only aim of

accelerating replacement.

Similar arguments could be made about other phases and stakeholders, so in a nutshell the

economic interests behind the traditional product sale or design lead the various stakeholders

towards a discrete resource optimisation, i.e. in phases’ transformation processes (fig. ??)

In other words, the biggest problems in the transformation processes do not appear within one given

phase, when related to a single stakeholder (e.g. manufacturer of a washing machine). In terms of

eco-efficiency, more problems arise in the so called phase’s transaction, during the sale or disposal

of (semi-finished) products. Here can occur indifference towards reducing resources

consumption; or even worse - an interest to increase consumption of resources. For example the

producer of plastic has an interest to increase the sales of its materials (to cause increase of

resources consumption).

Similar problems arise during so called combinations of products and services life cycles, where

stakeholders do not have any direct interest in the resources consumption reduction.



Stakeholders in a product life cycle: discrete vs. system resources optimisation

In summary, the growth of eco-efficiency and applying an LCD approach in a traditional

sale/design model (due to its sole focus on the sale of products), faces several constraints due to:

� a low level interaction of the product system’s stakeholders

� even lower level of interaction of the satisfaction system’s stakeholders.

3.1.3 Toward the system eco-efficiency

We have observed that the fragmentation of stakeholders in the various phases of a product’s life

cycle (in the traditional economic framework of industrialised countries), means that the eco-

efficiency of the life cycle system usually does not coincide with the economic interests of the

individual constituent stakeholders.

From eco-efficient perspective could be interesting to list all those innovative

interactions/relationship between the stakeholders that for economical reasons, could result with

resource optimization based on product function.

Even better would be mapping out those innovative interactions and relationships of the whole

demand satisfaction system, which could effectuate system-satisfaction based resource

optimization. In our example (fig. ??) the washing machine and detergent producers, the water and

electricity suppliers, those responsible for maintenance, the user and the end-of life manager.

In the light of the arguments arisen so far which could be the incentives for companies to enhance

the system eco-efficiency? Which are there economical models, where the economic and

competitive benefits for a company correspond to a reduction in resource consumption or more in

general to a reduction in the environmental impact? One has to look for innovative elements in the

stakeholder interactions and configuration that could be trans-phase innovations or trans-cyclic

innovations.

In both cases a stakeholder integration and extension of their interactions in time could be

helpful for both cases.

A) A stakeholders integration (extension of control), which in turn could be:

• vertical: a single stakeholder responsible for the whole life-cycle phases; e.g. a producer of

washing machines as well as recycler of the washing machines.

• horizontal: one stakeholder is responsible for different products and services within one

satisfactory system; e.g. producer, who sells washing machines as well as washing powder and

later deals with their end-of-life treatments.

Without going too deep into this topic we can just mention that also vertical and horizontal

integration have their own limits due to monopolistic risks and inefficiency enabled by the absence

of concurrency.

But the extension of control is not the only trans-phasal or trans-cyclical way to modify the

interactions.

B) Extending the length of interactions and partnerships, meaning that relations between

stakeholders do not end with the transaction - sale of the (pre)product:



• vertical: more stakeholders, including the final user, extend their interactions within a given

Product life cycle

• horizontal: more stakeholders, including the final user, extend their interactions within Product-

Service System life cycles.

Thus eco-efficient system innovation derives from a new convergence of interest between the

different stakeholders: innovation not only at a product (or semi-finished) level, but above all at

configuration level, i.e. when setting up new forms of partnership/interaction between different

stakeholders in a satisfaction system.

Convergence scheme between the interests of stakeholders in a satisfaction system, working

towards system sustainability

3.1.4 Eco-efficient system innovation typologies

A system approach can “lead to a system minimisation of resources, as a consequence of innovative

stakeholder’s interactions and related converging economic interests”. System innovation can be

seen as a strategic innovation, a possible choice for companies to separate resource consumption

from its traditional connection with profit and standard of living improvements; to find new profit

centres, to compete and generate value and social quality while decreasing (directly or indirectly)

total resource consumption. In other words, system innovation is potentially a win-win solution:

winning for the producers/providers, the users and the environment.

Three major business approaches to system innovation have been studied and listed as favourable

for eco-efficiency:

• Services providing added value to the product life cycle

• Services providing “final results” for customers

• Services providing “enabling platforms for customers”.



3.1.4.1 Adding value to the product life cycle (type I)

Let's start with an example of an eco-efficient system innovation adding value to the product life

cycle.

EXAMPLE

Klüber has moved from selling to commercial customer just lubricants to a service providing added

value to product use. Using a service called S.A.T.E. it analyses the effectiveness of aerosol

treatment plants and sewage treatment. For this purpose, Klüber has designed a movable chemical

laboratory, a van, that is able to monitor a client’s industrial machines directly, to determine the

performance of lubricants used, and their environmental impact. It also controls noise, vibrations,

smoke and many other undesirable industrial impacts. The additional service which Klüber offers

clients, leads to plant improvement in term of efficiency, guarantees functionality and durability,

and enhances environmental protection.

Kluber has broken away from the business-as-usual attitude. Its interests do not rely just on the

amount of lubricant sold only, but also on service, and in fact there has been a reduction in the

overall quantity of lubricant consumed per unit of service, and thus a reduction in polluting

emissions. Other benefits arise from the improved monitoring of performance of various machines,

so that any accidental pollution can be avoided. For example, a leading Italian company of

aluminium pressure castings, has reduced the consumption of chemical reactives in its purging

systems by 20%. In another leading company involved in the mechanical machining of copper

alloys, a lubricant containing chlorine, phosphor, boron, and formaldehyde has been substituted

with another without these toxic compounds. Finally, the Kluber approach means operators are

better safeguarded.

Clients perceive they derive added value from this service because it frees them from the costs and

the problems associated in the monitoring and checking of their equipment. Achieving better

efficiency from lubricants also provides many economic benefits both in production processes and

in improving the life of machines, and plant costs are also reduced.



In summary, a system innovation adding value to the product life cycle is defined as (UNEP, 2002):

a company (alliance of companies) that provides additional services to guarantee life cycle

performance of the product (sold to the client). A typical service contract would include

maintenance, repair, up-grading, substitution and product take back services over a specified

period of time.

3.1.4.2 Offering final results to customers (type II)

Now an example about an eco-efficient system innovation providing final results to the customers.

EXAMPLE

The ‘solar heat service’ is a full-service providing a final result, consisting in ‘selling’ hot water as a

finished product. Hot water is produced by new equipment that combines sun, energy and methane,

with economic and energy savings. Solar plants are designed in order to maximise the contribution

of solar energy. Hot water is measured by means of a specific heat meter and the whole system is

monitored, in order both to control in real time how the system works, and also to apply the

Guarantee of Solar Results, a specific contract through which the installer makes a commitment to

get a pre determined level of efficiency. AMG has already tested this service in a Tennis Club in

Palermo city (Italy), providing hot water for the dressingrooms. The innovative feature of this

Product-Service system is that AMG will not invoice the client for the methane consumed to obtain

hot water, but rather, hot water is sold as an entire service. AMG sells heat, and calculates the

thermal kilowatts consumed by its clients; for instance, in 2001 one litre of hot water costs 0,2 euro

cents. With AMG the consumer pays for receiving a comprehensive service, from the installation,

to the thermal-energy meters, and to the transportation of methane to the boilers. With equipment

maintenance provided as well, the customer is overall buying a ‘final result’.

This new product-service mix is sold as a complete service, which can significantly benefit the

environment. The combination of methane and solar energy used to produce hot water supplies is

70% of what is needed. The company thus becomes motivated to innovate in order to minimise the

energy consumed in use. Billing is by unit of service and not per unit of consumed resources. The

less methane consumed (the higher the use of solar energy and the system efficiency) the higher the

income for AMG. AMG estimates this will lead to a decrease in emissions of 100 tons of carbon

dioxide per year.

AMG derives economic benefits through diversification. It is improving its strategic position by

giving added value to consumers, as well as the use of clean energy. From this perspective, it has

achieved considerable value by tapping into local solar radiation as an economic resource. Within

the European context AMG has achieved considerable results and found real economic

opportunities in terms of market differentiation. The initial investment, used for the panels, is offset

because half of the thermal energy needed is generated by solar energy, thus free.



Thus a system innovation offering final results to customers can be defined as (UNEP, 2002):

a company (alliance of companies) that provides a customised mix of services (as a substitute for

the purchase and use of products), in order to provide a specific final result (in other words, an

integrated solution to meet the customer’s satisfactions). The mix of services do not require the

client to assume (full) responsibility for the acquisition of the product involved. Thus, the producer

maintains the ownership of the products and is paid by the client just for providing the agreed

results. The customer benefits by being freed from the problems and costs involved in the

acquisition, use, and maintenance of equipment and products.

3.1.4.3 Offering enabling platforms for customers (type III)

And finally an example about an eco-efficient system innovation of enabling platforms for

customers.

EXAMPLE

AutoShare, like many other car sharing systems, is a service providing an enabling platform of

product (car) and services. Cars are stationed near member’s homes and accessible 24 hours a day

via a telephone reservation system. Members can use the car for as little as one hour, or as long as

they like. To obtain these benefits, members pay a small subscription fee to AutoShare to contribute

to the fixed costs of the company, and are then charged only for the hours that they use the car.

Essentially a member pays for the mobility they use (rather than needing to outlay a large amount of

money for something that will spend most of its time immobile). All AutoShare cars are stationed at,

or very near, a transit stop of the public transport system of Toronto, which consists of subway

trains, streetcars and buses. This also helps accommodate customers combining public transit and

car trips.

AutoShare currently has a partnership with a local car rental agency where it obtains nearly new

cars from the agency for short-term leases, and in return, sends the agency the longer-term rental

business which Autoshare cannot accommodate. Car sharing is targeted at people who will use it for

major shopping expeditions, weekend trips to second homes or visits to friends / family who live at

a distance.

A car sharing system basically intensifies the use of cars, meaning a lower number of cars are

needed in a given context for a given demand of mobility. AutoShare estimates that every ‘shared’

car on the road replaces 5 to 6 privately owned cars and this helps deter non-car owners from

purchasing. A side effect is the reduction in car use per demand of mobility, in favour of public

transport or other means, such us bicycles and walking. In fact, members belonging to the car

sharing organisation tend to drive much less than car owners, as it is in their interest to drive less in



order to reduce the hourly costs associated with driving behaviour. This, in turn, reduces emissions

which contribute to smog and climate change.

AutoShare has benefited by opening up a new market. Although environmental consciousness is

attractive to members and helps ‘sell’ the service, the economic benefit is, for them, the primary

attraction. For car users, a subscription to AutoShare provides convenient access to car mobility at

lower costs than a traditional car rental agency. For those who travel less than 12,000 km per year

by car, subscribing to, and using the AutoShare service, is cheaper than purchasing a private car,

and the company manages the associated issues of owning (regular maintenance and repairs,

cleaning, insurance, etc.).

In summary a system innovation offering final results to customers is defined as (UNEP, 2002):

a company (alliance of companies) offers access to products, tools, opportunities or capabilities

that enable clients to get the results they want, efficiently satisfying their needs and desires.

The client obtains the desired utility, but does not own the product that provides it, and pays only

for the time the product is actually used. Depending on the contract agreement, the user could have

the right to hold the product/s for a given period of time (several continuous uses) or just for one

use. Commercial structures for providing such services include leasing, pooling or sharing of

certain goods for a specific use.

3.1.4.4 System innovation eco-efficiency potentials

All 3 types of eco-efficient system innovation approaches, distinguished so far (adding value to

product life cycle, offering final results to customers, offering enabling platform to customers),

present environmentally and economically favourable solutions. In fact, these and other examples



show that innovative relations between the client and the providers and other value chain

stakeholders can reach mutually beneficial solutions, where the same economic interest that led

towards innovations, reduces the environmental impact.

In set terms it means that the potential eco-efficiency of the system innovation depends on those

economic interests of the stakeholder, that favour:

� product life cycle optimisation

� materials life extension

� minimisation of utilised resources.

System eco-efficiency is also raised with:

� easily adoptable technologies

� fast substitution of obsolete products with new and more eco-efficient ones.

3.1 eco efficient system innovation vezzoli polimi 07 08 3.11

Technology

satisfaction system

system innovations

system ecoefficiencyas

faculty of design

design researchers

product life cycle design

design research centres

sustainability subject