DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • 141
public-private partnerships in the model, healthcare providers are incentivised
to focus on health promotion and in the long-term reduce the patients’ need for
healthcare. 270 It is also highly relevant to address the increasing caloric intake
that has been growing steadily in Europe other developed economics, and could
drive exceedingly high healthcare costs. 271
3.6.1 Performance models in procurement
Opportunity:
2035 economic
potential:
Shift towards performance models in procurement of advanced and
(semi)durable equipment.
EUR 70–90 million p.a.
Key barriers:
Sample policy
options:
Insufficient capabilities and skills due to lack of experience;
imperfect information; custom and habit.
Guidelines and targets; capability building; procurement rules.
The central idea in ‘performance’ 272 models is a contract in which the customer pays for
the use, or the performance, of a product rather than the product itself. The rationale is
that there is no inherent benefit in owning the product. On the contrary, ownership can
entail additional costs (upfront investment), risk (unpredicted repair, maintenance or
obsolescence), and end-of-use treatment costs.
THE OPPORTUNITY FOR DENMARK
Performance models are relevant for many of Danish hospitals’ purchasing categories,
whether it is leasing clothing and bed linens or contracting the full management of
scanning and radiation equipment. At the heart of each such model lies a mutual benefit
for suppliers and customers to reduce the total cost of ownership. While the customer is
able to reduce purchasing and maintenance costs, as well as maximise performance and
uptime, the supplier is able to secure sustainable revenue streams, maximise resource
utilisation, and drive efficiency during the use phase. 273 Importantly, performance models
also incentivise manufacturers to design more durable products that are easier to
maintain, repair and refurbish or remanufacture (see Chapter 3.4).
There are already multiple examples of suppliers providing performance that are relevant
to, or directed exclusively towards, hospitals. In the healthcare sector, suppliers like
Siemens, Philips and GE are already rolling out performance models for their equipment,
in addition to having existing refurbishment operations. 274 Some of the most well-known
examples outside the healthcare sector include Ricoh’s and Xerox’ service contracts for
high-volume printers, Desso’s carpet tile concept, 275 and Philips’ lighting services (selling
‘lux’ instead of lighting fixtures 276 ).
270 NHS European Office, The search for low-cost integrated healthcare. The Alzira model – from the region of
Valencia (2011).
271 Today, the average caloric intake exceeds 3,500 kcal per day, 40% above the recommended daily intake. In
addition, the diet has become more fatty, salty, and sweet over the past 40 years. EEA, 2008; Food Standards
Agency; European Food Safety Authority; J. Schmidhuber, The EU Diet – Evolution, Evaluation and
Impacts of the CAP (FAO, Rome, 2008).
272 Performance models used to collectively denote performance contracts, leasing, asset centralisation contracts
and other models designed for supplier to help customer minimise total cost of ownership.
273 For a more in-depth discussion on performance-based business models, see Stahel, W. R., Palgrave McMillan,
The Performance Economy (2006).
274 www.healthcare.siemens.com/refurbished-systems-medical-imaging-and-therapy; www.healthcare.philips.
com/main/products/refurbished_systems/; www3.gehealthcare.com/en/products/categories/goldseal_-_refurbished_systems/
275 www.desso-businesscarpets.com/corporate-responsibility/cradle-to-cradler/
276 By owning the energy bill, Philips is able to significantly reduce energy consumption and cost. www.ellenmacarthurfoundation.org/case_studies/philips-and-turntoo.