Description
Do PaaS models reduce overall resource consumption? Enhancing circularity is one motivation for starting PaaS. But PaaS does not necessarily deliver on that promise. It requires monitoring consequences and benchmarking them with other behaviours.
In this episode, Ankita Das, PhD Researcher on Circular Business Models at Circular X at Maastricht University, explains the origin and character of rebound effects. She does not stop there but shares common mitigation strategies and ways to implement rebound thinking in the early design process of a business model.
This episode is the seventh in the series PaaS Decoded, 16 conversations about the fine details of product-as-a-service.
Video Impressions
People
Ankita Das, PhD Researcher on Circular Business Models, Circular X at Maastricht Universty
Patrick Hypscher, Co-Founder of Green PO, Expert in Sustainable Business Models
Chapters
00:00 Intro
02:14 Definition of Rebound Effects & Backfiring
04:33 Extra or careless consumption
06:33 The difference between rebound effect and unintended consequences
09:44 PaaS-specific rebound effects
14:16 Measuring rebound effects
17:23 Making rebound effect scanning part of pilots
19:45 Common mitigation strategies
21:41 On rebounds caused by sufficiency & refuse strategies
23:26 Be aware the bad impacts before you start
About Circular X (from website):
Circular X is a European Research Council (ERC) funded research project focused on experimentation with circular service business models. It will run from 2020-2025 and aims to support the acceleration of the business transition towards a Circular Economy through tools, methods and cases in collaboration with businesses, large and small.
Further Links:
Jevons Paradox: https://en.wikipedia.org/wiki/Jevons_paradox
How do companies measure and forecast environmental impacts when experimenting with circular business models? https://www.sciencedirect.com/science/article/pii/S235255092100292X
The Circular Rebound Tool: A tool to move companies towards more sustainable circular business models https://cris.maastrichtuniversity.nl/en/publications/the-circular-rebound-tool-a-tool-to-move-companies-towards-more-s
Miro Template The Circular Rebound Tool https://miro.com/miroverse/the-circular-rebound-tool/
Homie pay per use https://www.homiepayperuse.com/
Circular X https://www.circularx.eu/
Transcript
[00:00:00] Intro
Ankita Das: We do see specifically careless consumption is linked to product as a service and the sort of increased consumption of other goods and services or increased demand of the same service. That is also a rebound we see.
Patrick Hypscher: Welcome to the seventh episode of PaaS Decoded. 16 conversations about the fine details of product as a service. In the last episode, Andrew Shannon elaborated on the role of the assets for funding a circular business. In today’s episode, we look at rebound effects caused by product as a service businesses and how to mitigate them.
Patrick Hypscher: She has degrees in zoology and biochemistry and environmental sciences, policy, and management. She worked at the United Nations Industrial Development Organization. As a startup co founder, she developed and implemented the business model design for a circular water reuse solution. At Maastricht University’s CircularX project, she focuses on experimentation with circular business models.
She is the lead author of the research paper with the title, How do companies measure and forecast environmental impacts when experimenting with circular business models? Welcome Ankita.
Ankita Das: Patrick, for the nice introduction. The
Patrick Hypscher: Ankita, what’s, what’s the last thing you personally regretted?
Ankita Das: last thing yeah, probably probably flying too much. I don’t buy a lot of new clothes and I don’t yeah, I’m very conscious with my consumption in that way, but then I, I do fly more often than I should or travel more often than I should.
Patrick Hypscher: Would that qualify as a rebound effect?
In the,
Ankita Das: I think it would actually, yeah.
[00:02:14] Definition of Rebound Effects & Backfiring
Patrick Hypscher: Okay. How would you explain a rebound effect?
Ankita Das: Well, Rebound effects, they’re not anything new, actually. They, we’ve known about them since the 1860s and first time they were documented was in energy efficiency literature. So they observed that when you make steam engines more efficient uh, you build more steam engines and so it’s the Jevans paradox.
But now we also see them in circular business models and in sustainable business models where they offset the intended environmental gains. So, to define it, it’s the difference between the actual and intended savings of yeah, environmental impact gains. So yeah, sometimes they can unfortunately be quite high, they can be about 50%, can be offset or even more, sometimes a hundred percent, causing a backfire effect, as we call it in academia. So yeah, that’s, that’s what they are.
Patrick Hypscher: Okay. And when you say backfire effect, in what way is a backfire effect different from a rebound effect? Is
Ankita Das: A backfire effect is, is a rebound effect. It’s just when the rebound is more than a hundred percent. So if the initial business model the, if you have an initial business model and then you transition to a more circular strategy, if the rebound of the circular strategy is more than 100%, so actually your environmental impact is higher than the first business model you started off with, then that’s a backfire effect.
And rebound on its own is when it’s less, you know, if you wanted to have a 30% impact reduction, but you only get 20% because there’s a 10% rebound.
Patrick Hypscher: And when you say 20%, 30%, 100%, you refer to a baseline metric you defined before, like material consumption or carbon emissions, or what’s
Ankita Das: It
Patrick Hypscher: this 100 percent about?
Ankita Das: Yeah, it can, it can vary. So there’s different ways of me measuring rebounds. So you can measure it in terms of CO2 equivalent or in terms of GHG emissions or water usage. So there’s many different ways of measuring it and, and yeah, so it depends.
[00:04:33] Extra or careless consumption
Patrick Hypscher: And, a rebound would then be if let’s say my service reduces the absolute greenhouse gas emissions of a, of a single utility or a single contract by let’s say 30%, but this overall leads to a higher demand so that in absolute terms the total greenhouse gas emissions increase.
Ankita Das: That is an example.
Patrick Hypscher: What are popular examples from let’s say nowadays when it comes to rebounds?
Ankita Das: Well, the one you mentioned is I think one that’s talked about a lot where yeah, savings or efficiency strategies cause um, Yeah, whether it’s time or monetary savings for the consumers, and then that is sort of offset with increasing demand for the same product or for other goods and services.
Another example with products as a service business models is that of careless consumption. So when, when the users do not feel like they have as much an ownership with the product they can treat it a bit more carelessly. And then that can cause the service provider to have to replace the products more often, and then that increases the environmental impact of the business in the long term.
Patrick Hypscher: Two more questions about the conceptual idea of rebounds. Does it require a certain threshold, absolute or relative when we talk about rebounds?
Ankita Das: Wouldn’t say there’s any specific threshold. I mean, you can have a 1 percent rebound, and then that is something you should just factor in into the cost of doing business and into the eventual environmental impact that you report.
But it can also be a lot higher than that. So it really depends.
Patrick Hypscher: And can any business activity cause rebound effects?
[00:06:33] The difference between rebound effect and unintended consequences
Ankita Das: no. So, we try to make a distinction between what is a rebound effect and what is an unintended consequence.
Patrick Hypscher: Yeah. I’m curious. Huh.
Ankita Das: Yeah, these get confused a little bit sometimes. I used to get confused with them as well. But not everything is a rebound effect. So some things are just unintended consequences.
So for example, if I have a rental business model and I rent out clothes um, and, and that is something I’m trying to do moving away from a linear business model of just selling the clothes I had, and now I’m trying to rent them out. But now I have to wash them and I have to do the reverse logistics of getting the clothes back to my warehouses, et cetera. And those aspects have an environmental impact as well. And then if you compare the impact of the rental business model with the linear of just selling to consumers, it can be that your rental has a higher impact when you include the washing and the reverse logistics and the energy costs.
But then that is an unintended consequence, not a rebound. Because, it would be an impact of the rental business model anyway, even if the linear business model did not exist. A rebound specifically would be when in this rental business model, consumers used the clothes more because they have access to the service and there’s a higher demand because they might have saved some money.
So it’s important to make this distinction because otherwise everything is considered a rebound, right? If you, if you dilute the definition too much.
Patrick Hypscher: So the, the key differentiator is the customer behavior that drives additional consumption.
Ankita Das: Well, in this example, but the key difference here is what would be fundamental environmental impact of a business model. And what is sort of an induced system wide impact. And that is the difference what is an impact that would exist anyway if you tried to make a rental business model washing and, and reverse logistics as part of that.
But if you, if you have these other aspects of careless consumption and yeah, increased demand, that is sort of outside the direct consequence of having a rental business model, so that is a rebound.
Patrick Hypscher: Wouldn’t it be fair to say that as a provider who’s doing textile subscriptions, you have to expect this kind of customer behavior. You have to factor it in. It’s part of the model, if you don’t design your proposition consciously.
Ankita Das: Well, yes and no, it, it sort of depends on where you draw this boundary . And, and this is where in literature, at least we try to draw this boundary.
Because otherwise yeah, everything becomes a rebound effect generally an envrionmental impact of a business model is also then considered a rebound, which isn’t quite correct.
[00:09:44] PaaS-specific rebound effects
Patrick Hypscher: Yeah. Yeah. Okay. Okay. Got it. Let’s move on to product as a service in particular, you already mentioned it here and there. Do you see some rebounds that most likely always occur in product as a service specifically compared to other businesses?
Ankita Das: Yeah, I think there are some. So the literature on this is really early stage, both in academia, but also we have seen some examples of companies trying to measure. For this, it’s still very limited.
But we do see yeah, specifically careless consumption is linked to product as a service and the sort of increased consumption of other goods and services or increased demand of the same service. That is also a rebound we see. But it’s, it’s not, that one isn’t specific to product as a service.
And then this is another one that’s specific to mobility products and services. So when you have car sharing or yeah, those kinds of business models, we see a modal shift that happens. And what that means is consumer shift usage from certain activities which were positive in the beginning to other activities which might not be. So they have access to a car. Maybe there are some consumers in that consumer base who were going around with a bicycle or with walking or public transport, but now they use the car, which increases the impact.
But that also has to be weighed a little bit with what is a positive rebound and what is actually helping people’s lives and making the quality of life better. Yeah.
Patrick Hypscher: And now I just heard positive rebound. So what’s a positive rebound?
Ankita Das: So positive rebound is considered to be something that. Well, there’s two ways to talk about it.
One is where rebound actually decreases the environmental impact that you intended. So it, it decreases it further than you were anticipating. And then the other side of it is also you can refer to rebound, that there can be rebound effect, and so your environmental impact can increase, but perhaps it gives access to goods and services to communities that didn’t have access to it. In the beginning they were impoverished in some way or didn’t have access to mobility solutions and now they do. And they now use it and that is just fundamentally giving access to a dignified life. So, so then it’s a balance of do you really want to remove that to avoid the rebound?
Patrick Hypscher: And when I started to look into literature about circularity and product as a service, I realized that product as a service is sometimes seen as a key instrument to reduce the overall resource consumption. Product as a service will save us all and decouple, grow from resource consumption.
Is it delivering on that promise?
Ankita Das: Well, the yes and no, I think in some cases it, it is quite successful, but we’re seeing now more and more that there are these negative and unaccounted for rebounds of product and service that really undermine the promise of how much savings it can have for consumers.
Environment or yeah, for society and the planet.
Patrick Hypscher: Yeah. Okay. Can you, can you name one good and one bad example?
Ankita Das: We do see lots of cases of rebounds occurring, right? in mobility, in household appliances to a product as a service, or clothing rental, where, yeah, these aspects sort of undermine, rebounds undermine the impact. But and then there are, there’s some signs of success where , the structuring of the business model is such that it really incentivizes careful consumption and, and reducing consumption.
So there’s the case of the Homie washing machines which is a washing machine service where you, you rent the washing machine and then you pay per use. And then within that they, the company incentivizes you to wash colder washes. And then they did observe that. The customers do change the washing behavior and reduce the number of washes they do and also wash colder. So yeah, that would be a sign of success in that setting.
[00:14:16] Measuring rebound effects
Patrick Hypscher: that brings me to the topic of measurement. Yeah, in that case it was the, the amount of water being used, or energy. Is there any general approach towards measuring rebound effects or what are essential steps there?
Ankita Das: I think it is quite complicated at the moment. There’s a lot of development and research ongoing in this field, so. The studies that I see do attributional or consequential life cycle assessments, they’re called where you incorporate the, the decision for different scenarios and decisions a user might take into your LCA and calculate that.
There’s also use of causal loop diagrams or system dynamics modeling, it’s called, where again, you bring in all the behavioral mechanisms that a consumer might do and then sort of bring it in into your assessment methods. So yeah, there’s, there’s some research happening on this and some, it is quite promising, but we’re not there yet where we have like a gold standard of how to do this.
Patrick Hypscher: Are there any examples from, business practice that has a level of complexity a company can use on a regular basis?
Ankita Das: I have seen some business reports in, in conferences I’ve been to where they do measure. This was a specific case of an outdoor rent goods rental company, and then they forecasted the environmental impact of a potential rental business, and they did an LCA of different scenarios and then sort of developed their business model based on that.
So they got these results that said after a certain number of uses a certain tent or so has a much higher impact for the business than if it would be sold to a customer. So then they incorporated that into their business model.
It’s really promising to see that, but I’ve, I’ve only seen that one example in, within business so far.
Patrick Hypscher: Are there any metrics that stand out when you’re looking at rebound effects?
Ankita Das: I think, uh, usually it’s the carbon dioxide emissions, the CO2 equivalent. And the, the GHG emission reduction. So it’s these are the ones I see. And then sometimes it’s also water.
Patrick Hypscher: Yeah. I just recall when we back in Blue Movement had a conversation about product circularity indicator and we had, I think, 18 different indicators so, I mean, you could also add land use. You can
Ankita Das: of course.
Patrick Hypscher: Overall material consumption. And you can also break that down. And at some point you, you, you reach the aggregation level where it’s, it’s just hard to trade one for the other. You have to make choices, commercial choices, moral choices, what you’re trying to optimize for, you know but that’s probably, I mean, that’s unique to, to a business setting, the business product, uh, also the company strategy what are the key metrics and you probably use them as a key basis for the rebound effect calculation.
[00:17:23] Making rebound effect scanning part of pilots
Patrick Hypscher: When it comes to business models and also with the case you mentioned, It’s in many cases also about future propositions, how to build a new offering, make it more appealing for customers, but also better for the environment.
How can you predict rebound effects if that’s possible at all?
Ankita Das: I think early detection is the, is the best way to do it. So when a business is still in the experimentation phase of trialing a new business model, they’re doing A& B testing or, or different types of yeah, pilots. That’s the time you sort of need to think ahead and think about what can be the potential rebounds and how could we go about mitigating them or just even being aware of them, I think, goes a long way already.
So yeah, there, there are some tools out there. And that can help with this. So using those or just actually doing an actual quantitative measurement that is within your resource set. Capabilities,
Patrick Hypscher: Are there any, are you aware of any, let’s say, Miro boards or rebound effect cards, yeah, that you
Ankita Das: It’s a very, very lovely transition to yeah, this tool that yeah, we, I worked on with my colleagues it’s called the Circular Rebound Tool.
And we tried to develop a qualitative tool for business designers or product designers or, or developers. Because it’s often the case when, in that early experimentation phase, there’s not enough data on the actual Service our product and, and it’s good to have a quick tool that can give you an overview of what the impact of your business model could be. So it does not replace quantities of measurements, but it, it does give an idea of potential rebound effects of different types of business models.
So like recycle and remanufacture or rental, and then you sort of take these business models and you ideate with them on a Miro board and you use it in a, in a life cycle maps to look at the full life cycles of product or service. And then also you, you get the opportunity to look at some potential rebounds and ways to mitigate.
[00:19:45] Common mitigation strategies
Patrick Hypscher: Okay. Once you identified potential rebounds, do you see any common mitigation strategies, or is it always dependent on the specific preposition?
Ankita Das: I think there are some common ones.
So especially in the case of careless consumption it’s been documented that If, as a business, you increase the own feeling of ownership of that your users feel towards the products that they rent out or use through your service. Then there is a, a higher likelihood of products being cared for longer and taken care of longer.
We also do see pricing mechanisms or price control to prevent careless consumption. So if if there’s significant damage to a product or service, a high penalty is often a deterrent to prevent that.
There’s also some solutions with the gamification of the use to incentivize more positive yeah, use cases and, and prevents frivolous.
And we also see some cases of increasing awareness of, um, consumers. So giving more direct information about how certain actions that they might take with their consumption increase environmental impact or what is the direct CO2 footprint of that and, and sort of informing really about that and then that can also deter some of the rebounds of induced demand of other products and services, for example, or of the same service.
Yeah, so that, those are things that we find that business can do. There’s, there’s a whole host of policy interventions, of course that can help and that are really necessary for this to, to sort of solve this, this dilemma of rebounds. But yeah, that, that’s for business.
[00:21:41] On rebounds caused by sufficiency & refuse strategies
Patrick Hypscher: When I hear you talking about these strategies some circular strategies come to my mind and some, let’s say, overall discussions. One is the refuse strategy from the R strategies. Another one is of course also the, let’s say, sufficiency discussion. What’s the relationship between, let’s say, rebound effects and these refuse and sufficiency conversations?
Ankita Das: I would say that these strategies, sufficiency, and then refuse, they can sometimes be a solution for rebound effect. But at the same time, they can also have rebound themselves. So yeah, I didn’t know, I know it’s, it’s all in loops.
Yeah, so in a sufficiency strategy for example, if a business incentivizes the consumer to use less in, in one setting than any time or monetary or energy savings made can again be offset in a different setting. And, and the way around that is to also incentivize consumers to when, when they do spend that saving of time and energy and money to do it in a way that has an overall positive impact.
So, to do, to, to spend the savings into better sustainable innovations or, or into products and services that are regenerative. So we’re not saying that any of the hard earned money that consumers save should not be spent, but it, it’s more about yeah, really incentivizing sustainable investments essentially in, in the grander scheme of thing.
Patrick Hypscher: Okay. Nice. Yeah. That makes sense.
[00:23:26] Be aware the bad impacts before you start
Patrick Hypscher: Ankita, I have three final questions and they’re a bit more general. The first one is what is the main thing you need to ensure as a brand or manufacturer before you want to start a circular product as a service?
Ankita Das: I think that’s a good question.
I think the main thing to keep in mind is to try and forecast in, in bad impacts when you’re still trialing your product as a service, you’re still thinking about it. Because in that way, prevent yourself from being locked in and, and making certain investments that are yeah, lock you in for the medium to long term, that have a higher environmental impact.
So I would say, yeah, think about what are the true actual environmental impact gains or losses of this new type of business model you want to trial and try and map out any potential rebound effects whether you do it quantitatively, if you can, wonderful, great.
If you can’t, I think a qualitative way is already a good start. If you yeah, use for example, the circular rebound tool. Or if you find other tools and services that are similar that yeah, prompt you to think about these things.
Patrick Hypscher: Okay. Second question. What are significant trends you see in circular product as a service for the next five years.
Ankita Das: Yeah, I think more generally I see this struggle to, to well, account for rebound effects and how to mitigate them. And it gets complicated because so much depends on the use space in products as a service. And I also see a significant attention being put on how consumers can be made to feel that they still have ownership of a product that they use as a service.
And I think those are the two nuts to crack.
Patrick Hypscher: And my last question is about sharing knowledge and connecting people since that’s a ambition of Circularity. fm. Maybe you have some research questions, challenges, opportunities these days. And someone is listening right now. What kind of people should reach out to you?
Ankita Das: Yeah, I think I would be really interested to hear from anyone who is in business or was a consultant who is struggling with some of the things we talked about today. It’s fair, your business who is trying to measure your rebounds I would love to hear from you and, and yeah, hear about what are your struggles with this and how we’ll go about it in practice, because we also see this difference of things that us academics think up in research, but it don’t really translate into our real life. So, and
Patrick Hypscher: Yeah. Cool. So if that sounds like you, please reach out to Ankita.
Thanks a lot for your time and sharing your insights about rebound effects. So quite a few surprises for me. And yeah, looking forward to where, where we will be standing in five years from now when it comes to rebounds.
Thanks, Ankita.
Ankita Das: thank you very much for having me Patrick.
Patrick Hypscher: This was another episode of PaaS Decoded. 16 conversations about the fine details of product as a service. If you liked it, share this episode with colleagues or on social media. If you missed a question or topic, please send me an email so I can improve the conversations for you. If you learned something from this episode, please provide a review via Spotify or Apple Podcasts.
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