Is leasing the unsung hero of the circular economy?
Leasing has an important role to play in the much-heralded idea of the ‘circular economy’ but it will take effort by equipment manufacturers and leasing companies for this idea to become a reality, writes Gonzalo Fernández Porras, business development manager of Acquis Insurance Management.
While so much of our culture is still engrained in a throw-away mindset which chooses to own, use, and dispose of products in an increasingly shorter cycle, the movement towards re-programming our behaviour and embracing the ‘circular economy’ gains momentum daily.
Improving environmental sustainability is by no means a new concept, but governments, companies or individuals focused on participating in a ‘circular economy’ actively seek to eliminate waste by promoting superior product design, and making upfront consideration for recycling, refurbishing, reusing, maintaining and collecting reusable materials.
The leasing industry is already well-positioned to be a front runner in supporting the growth of the ‘circular economy’, promoting a model which focuses on allowing customers to efficiently access the equipment they need to run their business, rather than owning it outright.
Because lessors retain ownership of an asset throughout its lifecycle, they can take responsibility for extending its useable life, recovering it for reuse and remanufacturing and in doing so maximise its economic utility while minimising its environmental impact.
This is a model already working well within certain areas of the leasing industry: many telecoms companies operate a leasing model which seeks to extend the life of products by working with partners in developing companies to reuse products, and at the end of the product life, taking back and recycling valuable materials; for some time the tyre industry has been using leasing as a way to manage replacement, and control the re-tread and re-use process through to eventual end of life material recovery.
Extending this mindset into other areas of leasing will serve to benefit equipment manufacturers, lessors and end customers alike, and ultimately the environment by reducing dependence on dwindling natural resources. One area which has seen significant growth in recent years is electric car batteries where manufacturers are seeking to employ leasing models which aim to simplify recovery, recycling and quality control, while at the same time potentially helping to maintain the re-sale value of the electric vehicle.
In making consideration for contributing to a ‘circular economy’ there are several areas leasing companies will need to consider:
Design and durability of products
Major players in leasing should seek to work closely with manufacturers to influence the design of products and encourage improved performance. Manufacturers concerned with their corporate social responsibility have an economic and environmental obligation to make their products more durable and resource-efficient, designing and building them from the outset to ensure the product lasts for its entire leasing period and beyond.
Protecting products during use
Leasing programmes should make careful consideration for protecting the leased equipment throughout the life of the agreement.
By employing good quality equipment insurance programmes which seek to repair products in the first instance, and keep items in circulation rather than disposing and replacing with new ones, lessors will ensure they get more out of their equipment portfolios both economically and environmentally.
Considering the end of rental ‘afterlife’
Greater consideration needs to be made for not only what happens the moment a new product is leased, but also what happens when it comes back in. At the end of its lifecycle, lessors must look towards handling equipment in a sustainable manner.
By making professional refurbishment a crucial part of their business model, lessors can help ensure that even the most highly specialist products achieve their maximum useable life. When equipment no longer meets the standards of the leasing market but is still in good working condition, selling it on the second-hand market will help regain residual value and allow a second life for the product.
For equipment beyond good working conditions, ensuring it is dismantled properly and valuable parts are salvaged for reuse or recycling will help close the circle.
Clearly, leasing has a substantial role to play in the ‘circular economy’ but equipment manufacturers and leasing companies need to rapidly adapt thinking beyond the leased life of a product, designing products built to last with an upfront focus on sustainability, adequately protecting equipment throughout its leased life, and seeking to extend its economic life with professional refurbishment and ultimately recycling all reusable constituent parts.