Apocalypse Files - #9 - Shared ownership

It’s been a while!

In each issue (usually bi-monthly), we'll explore the threats to the current business model of a company or of an entire industry, the forces that could take them down or drive systemic changes, and most importantly we'll imagine possible solutions, looking at new and evolving trends, untapped niches, new business models or venture opportunities...

In this issue, we will be taking a look at new sustainable consumption models around shared ownership and reuse. Welcome to the Apocalypse Files.

Just Look Up

We now need 1.7 Earth to support our way of life. We are living far beyond sustainable levels, especially in high-income countries such as France. It’s time to radically rethink our consumption patterns and economic systems! How can we, consumers & companies, be powerful drivers of change?

One solution towards more responsible consumption patterns, is to rethink our relationship to possession & property and envision how new models of ownership could help reduce our footprint: sharing (and reusing) means optimizing the use of objects throughout their lifetime, leading to a lower impact. What are the barriers to keep in mind? Let’s tackle them one by one!

Bad Habits

First barrier: When testing more sustainable solutions, consumers have to consider several factors: how convenient is the more sustainable solution compared to what I already use? How much will it really cost me, financially but also in terms of convenience?

In France, fast-food restaurants have distributed 1 million meals and generated 183 thousand tons of single-use but very convenient packaging waste, according to government officials - not (definitely not) the most sustainable experience but clearly the most convenient. When it comes to adopting more sustainable behaviors, consumers will not compromise on comfort. Sadly, most circular alternatives like reusable packaging for Food&Beverage products are still either more expensive or less convenient than existing solutions. As a result, most single-use objects are still very difficult to replace with reusable ones for a huge part of the population.

Next in line, business models! Our experience at Possible Future is that companies are often run by people who want to change for the better, but they face the immense challenge of preserving their existing business and the jobs it creates. This challenge is even bigger for volume-driven industries such as FMCG. Two certainties remain: one, anything single-use is most likely good for business. Two, circular models directly thwart established revenue sources. For instance if single-use bottles were to be reused 10 times, pack manufacturers would lose about 90% of revenue potential, which would kill them or force them to very quickly adapt.

Third is the impact of reusability on brand image & perception! Ownership is sexy. Society demands that we own the newest stuff. The fashion industry for instance replenishes POS with brand new merchandise multiple times a year and gets rid of leftovers as soon as the new collection comes in: the goods are either burned, shredded or landfilled in developing countries. This waste is hardly anecdotal: In 2017, Burberry destroyed $37m worth of goods (about 1% of their revenues), in order to “preserve its reputation of exclusivity”. The list goes on and is not limited to luxury or apparel: mattresses, dishwashers, phones are also concerned. Brands destroy leftover products to maintain rarity. Public outrage and consumer boycotts have started to make players question their model, but transforming such a huge industry will take time!

And finally, the backbone of circularity models: operations! Consumer goods are designed for a linear life (production, transport, single-use, waste), which means that introducing circularity & reusability requires to rethink entire value chains. Circularity & reusability models require complex logistics, which generate a financial & environmental cost. When we look at packaging for example: metal & glass provide a cleanable alternative to plastic, but those packs show higher unit costs compared to single-use, and they involve adjustments in the filling factories. They also have a higher environmental production cost vs existing single-use plastic solutions: In 2019, Virginie Helias, vice president and chief sustainability officer at Procter & Gamble, highlighted that "it takes five Loop cycles of fill and reuse to be better from an environmental standpoint”. Further down the value chain in distribution, collection costs can limit economic viability.

Ultimately, to “better” solutions is not enough: if not implemented correctly, they can have a worse environmental impact than single-use solutions!

Circularity opportunities rarely allow for business-as-usual models, but new solutions are emerging with a genuinely positive & scalable impact, showing that there are ways to overcome these barriers in search of a more sustainable world.

Easy on me

At Possible Future, we work with many FMCG brands and groups, who increasingly engage into making their business more sustainable, even if that means exploring new activities. While this remains a challenging quest for everybody, we see new solutions and business models arising, with companies turning these challenges into strategic differentiation levers through shared ownership and reuse models. Let’s have a look at inspirations from some of the most challenged industries: hardware, real estate and fashion.

What if we reused & repaired hardware more?

Smartphones: we own them for some time, and when something (usually the battery) fails us, we leave them sitting on a shelf and eventually dispose of them even if they are still almost-functional! According to WeForum, they represent 10% of global e-waste and 85-95% of their emission occurs in the production phase far from consumer eyes.

Recycling is a good option, but repairing & reusing smartphones is an even better one! Extending the object’s lifespan will help contain, and maybe even reduce the number of manufactured & recycled smartphones in the future. According to Kearney, “by extending phone lifespan from three to four years, an average adult could reduce the number of phones they send to waste by 25%”. Among first movers, Back Market has overlayed the existing hardware value chain by offering a brand-agnostic refurbishment service & marketplace: they act as a connector between old & new owners.

Of course, giving smartphones a life extension also means selling fewer ... but could bring different and recurring added value through repair & reuse services around smartphones. For hardware manufacturers and telecom operators to take ownership of the challenge, circularity entails several paradigm shifts: 1/ abandoning the idea of planned obsolescence, 2/ considering repair when designing the phones (most phones can’t even be opened without risk) and 3/ allowing software upgrades over longer time periods (loosing a functional phone to a software upgrade sucks). Would you be interested in a “circularity service offering”, such as D2C maintenance checks, upgrade & enhancement deals, beyond just bring-back-your-device deals? Would you participate in a nation-wide “return your underused hardware devices into the economy” led by hardware manufacturers & government?

What if real estate, a sector built upon individual ownership, became collaborative for a positive social & environmental impact?

Real estate is a polluting industry, especially if you consider that many surfaces are not efficiently used. In addition, it can seem exclusive, especially for people with little or no capital contribution: Owning or even renting out a decent property can be out of reach for most young workers, especially in dense & expensive cities such as Paris. New models are emerging to optimise our use of real estate surface:

• Co-living: the phenomenon is well-spread among students or young workers, giving them access to large flats while limiting individual rent. Following a trend spreading from the US, companies such as La Casa, Nestor and Colonies are growing in France, upgrading the co-living experience with shared living spaces and services, designed especially for co-living.

• Day / night surface sharing: many flats are empty during the day while offices are empty during the night, which presents an opportunity new entrants are banking on. In the San Francisco Bay Area, Codi offers consumers a service to rent out a part of their living room during the day to local freelancers who have no proper office space, proving a new source of revenue for limited effort.

• Co-use can be extended to the co-purchase of properties on share-use systems (see startups like Prello or Altacasa for holiday properties). Holiday properties are often unoccupied throughout the year, except for the holiday season, explaining low occupancy rates in some regions throughout the year. And given how polluting the construction sector is, a better use of these goods could have quite the impact. So why not share the cost of an inaccessible or under-optimized property with friends or even complete strangers, if a system helps define and ensure some ground roules to use the property and avoid disputes?

These models offer exciting ways to create more affordable and inclusive real estate. Why not for example allow more people to benefit from shared holiday properties, while diminishing the need for new housing thus the construction related pollution?

What if fashion & luxury were everywhere instead of waiting in shop windows or in our closets?

Textile is another major polluting industry where startups are experimenting new property & business models. Beyond second-hand, new models such as rental or co-buying systems are emerging. Le Closet is a French company offering subscriptions rental package to receive new clothes on a regular basis in exchange for the previous batch, leading to (hopefully!) a a volume reduction in textile production, without preventing consumers from renewing their wardrobe. The community was created in 2014 and 25 000 members have joined in France so far.

Beyond clothing, the sharing models also applies to luxury items such as watches and handbags, making them accessible to consumers who don’t have the money to purchase them outright through rental. First signs show consumers don’t always attach value to owning stuff permanently, sometimes a short-lived ownership is enough (in addition to having a positive impact). It also makes economic sense for the brands : “The market for co-ownership of luxury goods is potentially enormous and, to date, is largely untapped… Precious collectibles have historically been unaffordable to all except the very wealthy,” Marco Abele, founder and CEO of Swiss luxury co-ownership start-up TEND, told European CEO. This is definitely a paradigm shift to watch in the coming years!

Levitating

Each new solution is an alternative to a certain baseline scenario and deserves to come with a solid assessment to make sure they actually bring positive change that outweighs negative externalities, no matter the underlying industry. But the growing awareness is definitely driving all players across the value chain to reflect on how we can change for the better. What would you be willing to do to make sharing and/or reuse a reality? Which brands would you like to see push for new models of ownership?

That's all folks!

PS: If you haven't guessed, all paragraph titles are from singles in the 2021 Billboard Hot 100, the year the Netflix movie Don’t Look Up came out.