SDG 12.2: A business case about responsible production

Rotterdam School of Management, Erasmus University

17 Sept 201907:32

Summary

TLDRPhilips envisions a healthier, sustainable world through innovation and circular economy. They aim to decouple economic growth from natural resource use, supported by digital technology and consumer preference for experiences over ownership. Philips commits to UN's sustainable development goals, setting targets for circular products, waste recycling, and medical equipment sustainability. They offer circular models like pay-for-access, refurbished systems, and products with recycled materials, fostering customer loyalty and investor appeal.

Takeaways

🌟 Philips envisions a healthier and more sustainable world through innovation and the circular economy.
🌱 The circular economy is about decoupling economic growth from the use of natural resources, keeping products and materials valuable for as long as possible.
📈 Global trends like digital technology and consumer focus on experiences over ownership support the shift to a circular economy.
🎯 Philips has set ambitious targets for 2020, including 15% of sales from circular products and services, 90% operational waste recycling, and zero landfill waste.
🔄 Philips aims to close the loop on all large medical systems by 2020 and extend this to all medical equipment by 2025.
💼 Philips is driving the transition with innovative business models that maximize the lifetime value of their products and solutions.
🏥 Philips offers a subscription service for ultrasound equipment, providing access over ownership and reducing upfront costs.
🛠️ The company provides refurbished systems that are thoroughly tested, offering customers high-quality pre-owned options at a lower price.
♻️ Philips incorporates recycled materials into product design, with some products featuring a significant proportion of recycled plastics.
🤝 Circular propositions help build customer loyalty, brand reputation, and appeal to investors and purpose-driven talent.
🛑 Philips emphasizes the importance of scaling up circular initiatives by integrating learnings into innovation and strategy, and embedding circular thinking into company culture.
📚 The company focuses on educating employees, developing training, applying reinforcing mechanisms, and promoting role modeling to foster a circular economy mindset.

Q & A

What is Philips' vision regarding the world's health and sustainability?
-Philips' vision is to make the world healthier and more sustainable through innovation and by transitioning to a circular economy.
Why is the transition to a circular economy important according to the script?
-The transition to a circular economy is important because the current global increase in human economic development while expanding our ecological footprint is not sustainable. A circular economy decouples economic growth from the use of natural resources.
What role do digital technology and network connectivity play in the shift to a circular economy?
-Digital technology and network connectivity enable more efficient collaboration across the value chain, making it easier to track and recover end-of-life products and materials.
How do younger consumers' preferences align with the circular economy?
-Younger consumers tend to focus more on the experiences products and services offer rather than ownership, which supports the shift to a circular economy.
What commitments does Philips have to the UN's sustainable development goals?
-Philips is committed to UN's sustainable development goal number 12, which is to ensure sustainable consumption and production patterns.
What targets has Philips set for itself by 2020 in terms of circular economy?
-By 2020, Philips aimed for circular products and services to account for 15% of their total sales, 90% of their operational waste to be recycled, and zero waste to be sent to landfill.
How does Philips plan to close the loop on medical systems by 2025?
-Philips plans to fully close the loop on all large medical systems that become available to them and extend such practices to all medical equipment by 2025.
What is an example of a circular model Philips offers in terms of patient care?
-Philips offers a flexible subscription service called Luma Fire, which provides users with access to portable ultrasound equipment, an app, and an online ecosystem, reducing upfront costs and improving access to innovative care.
How does Philips' refurbished systems business unit contribute to the circular economy?
-The refurbished systems business unit offers pre-owned systems that have been thoroughly refurbished, upgraded, and quality tested, providing customers with products as new but at a more affordable price with a full Philips warranty.
What role does recycled material play in Philips' product design?
-Recycled materials have become an integral part of product design at Philips, with many consumer products featuring an increasing proportion of recycled plastics, such as the Performer Ultimate vacuum cleaner which contains 36% recycled plastics.
How does Philips ensure that circular thinking is embedded in its company culture?
-Philips works on four critical elements: telling a clear story about circular economy to employees, developing dedicated training formats, applying reinforcing mechanisms for corporate targets, and promoting role modeling through dialogue with leaders and encouraging ambassadors.
What advice does the CEO give for businesses considering a circular economy journey?
-The CEO advises businesses to assemble a team from marketing, R&D, manufacturing, and sales for a workshop with an open mind to understand what they really offer to customers and to involve customers to understand what they value.

Outlines

00:00

🌿 Philips' Vision for a Circular Economy

Philips aims to contribute to a healthier and more sustainable world through innovation and the adoption of a circular economy. The company recognizes the unsustainability of increasing ecological footprints alongside human economic development and sees the circular economy as a solution that decouples growth from the consumption of natural resources. Philips is leveraging digital technology and consumer trends towards experience over ownership to facilitate this shift. The company has committed to the UN's sustainable development goals, particularly focusing on sustainable consumption and production patterns. By 2020, Philips set ambitious targets: 15% of sales from circular products and services, 90% recycling of operational waste, and zero waste to landfill. They also plan to close the loop on medical systems by 2025. Philips exemplifies circular economy models through services like their Summers ultrasound, refurbished systems, and产品设计 that incorporates recycled materials, demonstrating a commitment to building customer loyalty and brand reputation.

05:01

🚀 Embracing the Circular Economy for Business Growth

The script discusses the importance of the circular economy not only from an ecological perspective but also as a strategy for predictable business growth and investor appeal. Shareholders appreciate the recurring revenue streams that come from a customer base engaged in product-as-a-service models rather than single transactions. The CEO's interview from 2002 emphasizes the value of circular economy thinking for long-term investors. For businesses considering this journey, the advice is to involve a cross-functional team in a workshop to brainstorm and understand what customers truly value. This approach can unlock energy and inspire innovation. The process is not instantaneous and requires gradual development, as illustrated by Philips' 15-year journey to their current position.

Mindmap

Keywords

💡Circular Economy

A circular economy is an economic system aimed at eliminating waste and the continual use of resources. It focuses on reusing, sharing, repairing, and recycling in order to create a closed-loop system where materials remain in use for as long as possible. In the video, Philips is transitioning to a circular economy to decouple economic growth from the use of natural resources, which is central to their vision of making the world healthier and more sustainable.

💡Sustainable Development Goals (SDGs)

Sustainable Development Goals are a collection of 17 global goals set by the United Nations to address various aspects of sustainable development, including poverty, inequality, climate change, and more. Philips commits to the UN's SDGs, specifically Goal 12, which is about ensuring sustainable consumption and production patterns. This is reflected in their circular economy initiatives and targets.

💡Innovation

Innovation in the context of the video refers to the development of new ideas, products, or processes to drive the transition to a circular economy. Philips is using innovation to adopt business models that maximize the lifetime value of their products and solutions, which is key to achieving their sustainability vision.

💡Digital Technology

Digital technology is leveraged in the video to support the circular economy by enabling more efficient collaboration and tracking of products and materials. It facilitates the recovery of end-of-life products, which is essential for a circular model where materials are kept at their maximum value for as long as possible.

💡Network Connectivity

Network connectivity is the ability to connect and communicate within a network, which in the context of the video, aids in the tracking and recovery of end-of-life products. It is a key enabler for the circular economy, allowing for better coordination across the value chain.

💡Consumer Behavior

Consumer behavior in the video is highlighted as a trend that supports the circular economy, with younger consumers focusing more on the experiences that products and services offer rather than ownership. This shift in behavior is important for Philips as they adopt new business models that cater to access over ownership.

💡Business Models

Business models in the video refer to the innovative approaches Philips is adopting to engage with consumers in a circular economy. These models include pay-for-access rather than ownership, such as the Luma Fire portable ultrasound service, which provides users with access to equipment, an app, and an online ecosystem.

💡Refurbished Systems

Refurbished systems are products that have been thoroughly inspected, repaired, and upgraded to be as good as new. Philips offers pre-owned systems that have been refurbished, providing customers with a more affordable option backed by a full warranty, which aligns with the circular economy principle of extending product life.

💡Recycled Materials

Recycled materials are materials that have been reprocessed after consumer use, reducing waste and the need for new raw materials. Philips incorporates recycled plastics into their consumer products, such as the Performer Ultimate vacuum cleaner, which contains 36% recycled plastics, demonstrating their commitment to circular economy practices.

💡Corporate Targets

Corporate targets in the video are the specific goals Philips has set for itself to achieve its circular economy vision. These targets include having circular products and services account for 15% of total sales, recycling 90% of operational waste, and sending zero waste to landfill by 2020. These targets are part of their commitment to transparency and progress.

💡Role Modeling

Role modeling in the video refers to the practice of leaders and ambassadors within Philips embodying and promoting the circular economy principles. It involves dialogue with formal leaders and encouraging a network of ambassadors to drive cultural change within the company, making circular thinking an integral part of their corporate culture.

Highlights

Philips' vision is to make the world healthier and more sustainable through innovation and a circular economy.

A circular economy decouples economic growth from the use of natural resources, keeping products and materials at maximum value.

Global trends like digital technology and consumer focus on experiences are supporting the shift to a circular economy.

Philips is adopting innovative business models and maximizing product lifetime value to reflect commitments to the UN's sustainable development goals.

By 2020, Philips aimed for 15% of total sales to come from circular products and services.

Philips set a target for 90% of operational waste to be recycled and zero waste to be sent to landfill.

Philips plans to close the loop on all large medical systems and extend such practices to all medical equipment by 2025.

Progress towards circular economy targets is externally audited for transparency.

Philips offers a subscription service for ultrasound equipment, reducing upfront costs and improving access to care.

Refurbished systems from Philips provide customers with high-quality, affordable options with full warranty.

Recycled materials are integral to Philips' product design, with some products featuring a significant proportion of recycled plastics.

Circular propositions help build customer loyalty, brand reputation, and appeal to investors and purpose-driven talent.

Scaling up circular economy practices requires embedding them in company culture and strategy.

Philips focuses on telling a clear story about circular economy, developing training, applying reinforcing mechanisms, and promoting role modeling.

Shareholders appreciate predictable results from circular economy models, such as recurring revenues from product-as-a-service.

Assembling a multidisciplinary team for a workshop can unlock energy and inspire circular economy strategies.

Involving customers in understanding their true value from products is crucial for circular economy success.

Philips' journey to circular economy took 15 years, emphasizing the importance of gradual growth and learning.