Is it possible for a traditional product company to find profitability in circular business models? If you ask Hako, after having participated in Cirkulära Halland (Region Halland’s project on circular business models), the answer would be yes!
– “Both political decisions and customer demand are pointing in this direction, so we wanted to be the first in our industry to hop on board,” says Jonas Tapper, Business Area Manager for After Sales at Hako Ground & Garden AB.
It all started with a discussion back in February, 2019. Hako’s Jonas Tapper was discussing the Cirkulära Halland project with Josefina Sallén at RISE and based on that, he concluded that it would be interesting to make an attempt at adapting the company’s business model in this way.
– “We sell and maintain machinery for gardening & landscaping, sweepers, vacuums and other types multifunctional outdoor cleaning machines,” says Jonas Tapper. “Our business also includes buying back used machines, renovating them and then reselling them. For our ground maintenance activities, we’re now looking into whether we might be able to transition from selling products, to selling functions,” he says.
Interesting both environmentally and financially
Reasons for the interest in this were many. First and foremost was concern for the environment. Manufacturing new products consumes a large portion of the world’s resources and Hako wanted to make a difference by lowering its own environmental impact. But there were financial considerations as well.
– “Society is moving more in the direction of reuse and circularity. We see this in public tendering in particular and government contracts are a big part of our business,” says Jonas Tapper. “When we started looking at this more closely, we realized how large the demand for reuse really was. And, because we know that this form of sales has progressed quite far in other sectors, we also wanted to see if it could provide us with a competitive advantage,” he says.
Sound financial calculation important
A decision was thus made to proceed during spring 2019 and that same summer, a working group was set up consisting of Jonas Tapper, Kenneth Rolling (Head of Logistics) and Mats Palm (CFO). Together with RISE, they studied the demand for reuse and performed calculations on the profitability of it.
– “Yes, the environmental aspects are important. But, you still need to do the math and ensure that there is a sound financial case for going forward,” says Jonas Tapper.
They also had some practical dilemmas that we were able to solve by applying a circular approach
In order to calculate profitability, they contacted one of their customers, Halmstad Municipality, to ask if they might consider being a pilot customer.
– “They immediately became interested and we’ve been working closely with them ever since,” says Kenneth Rolling. “We came up with some proposals and suggestions that they gave us feedback on. In that way, we helped each other find the way forward. Working closely in this way, with RISE and our customer, has been tremendously advantageous to us in making this transition,” he says.
Perfect match for a municipality
It turned out that Hako’s thoughts of transitioning from selling products to various types of services and functions instead was perfectly aligned with Halmstad Municipality in many ways.
– “Like many other municipalities, they had already established strategic goals for becoming more sustainable, but needed to find more solutions for achieving those goals,” says Jonas Tapper. “They also had some practical dilemmas that we were able to solve by applying a circular approach,” he says.
Good deal for both parties
One example was machinery that Halland Municipality had purchased for both summer and winter maintenance tasks. But, the machinery wasn’t optimal for either task and that had a negative impact on the work environment.
– “When you encounter a situation like that, it can help to switch your focus from product to function,” says Jonas Tapper. “With a focus on selling products, it becomes too expensive for the customer to purchase two pieces of machinery. But, if we instead lease machinery for the summer tasks and other machinery designed specifically for the winter tasks, we can arrive at the same cost, but with much better performance,” he says. “It makes things easier for the customer, gives them better cost control, a more even cash flow and better control on the products. A win-win for both sides, in other words,” he says.
Looking forward to testing and disseminating
So far, everyone involved is very satisfied.
– “It gives us a competitive advantage, which, environmentally, also takes us in the right direction,” says Jonas Tapper. “Through our discussions, we’ve been able to identify the customer need and how we can help them with that. In turn, it enables us develop the business. We’re now very excited about testing and spreading this concept further within our organization, to our partners and to our customers,” he says.
Cirkulära Halland
We’re all familiar with the concept of a “wear-and-tear” or “throw away” society. Where we use a product until it breaks or it is time to replace it with a newer model. And then, you just throw the old one in the dumpster. Today, we think differently. We know that our world’s resources are finite and that we must take better care of our planet. With that in mind, the Paris Agreement on Climate Action and Goals of the 2030 Agenda for Sustainable Development have set high demands on countries, regions, municipalities, companies and consumers alike. But, where do we start? How do we actually create a sustainable, circular economy? How do companies broaden and adapt their businesses to become both profitable and circular? And, how can the public sector (municipalities and regions) adapt their tendering processes to impact the market?
In Cirkulära Halland (Region Halland’s project on circular business models), RISE has worked in close collaboration with industry and municipalities to create the prerequisites for a circular economy. This is our story.
