ASU Center for Organization Research and Design

Green Servicizing for a More Sustainable US Economy: Key Concepts, Tools and Analyses to Inform Policy Engagement

Sep 1, 2009

A sustainable economy requires economically successful business activities and models that achieve fundamental reductions in energy, material and water throughput in the delivery of necessary goods and services. The primary environmental policy interest in these sustainable business models is that they provide an environmentally superior alternative to the "business as usual" (BAU) ways that existing economic needs are served and functions delivered. Sustainable service-led business models are particularly required, both to address the challenge of the "services transition" and to exploit the promise of the "functional economy." The focus of inquiry for service-led business models that constitute a more sustainable alternative to BAU are innovative or emergent product service systems (PSSs) or "servicizing" models. The PSS concept describes the economic space in which products and services are combined in value propositions to meet customer needs. While PSS activity is poorly captured by economic statistics, "BAU" PSSs are ubiquitous—e.g., mobile telephony, car rental, pizza delivery, capital equipment leasing—and are an important determinant of the overall performance of the US economy, both in environmental and traditional terms. Innovative and emergent PSSs that intensify the service component can improve eco-efficiency over BAU approaches to delivering key economic functions and services. Examples of such Green Servicizing include: leasing/sharing arrangements (e.g. car-sharing; "lifecycle solutions" for IT equipment); functional procurement and efficiency services (e.g. Chemical Management Services, Resource Management, Energy Services Companies), among others. International experience indicates that "Green Servicizing" approaches can achieve eco-efficiency improvements ranging from marginal to radical, with the latter generally obtained by models focused on the sale of "function" rather than products per se.The US Environmental Protection Agency's Office of Resource Conservation and Recovery, long interested in and supportive of these types of business models, commissioned this work to obtain critical tools, concepts and analysis needed to consider policy engagement to achieve the potential of "green servicizing." Towards this end, the report briefs the Green Servicizing concept; provides a working definition of high-potential Green Servicizing models; identifies 10 such models and briefs their market status and environmental performance; provides analysis and methodologies to assist in weighing policy engagement; and identifies possible next steps to begin more substantive engagement. The report finds that Green Servicizing can make a significant contribution to a more sustainable US economy by providing more eco-efficient alternatives to the BAU delivery of environmentally problematic and economically critical functions and products. However, achieving its full potential will require policy engagement. Towards this end, a possible key initiative for US EPA would be to develop and implement a strategy to achieve the full eco-efficiency potential of functional procurement and efficiency services models. These models, which include the Energy Service Company (ESCO) model, Resource Management, Integrated Pest Management (IPM) Services, Chemical Management Services, etc., can reduce the consumption of environmentally problematic goods and services by transforming their procurement into performance-based service arrangements. Collectively these models address the critical elements of the "environmental footprint" of the economy generally and of many individual enterprises and institutions.