Published 4 years ago.
About a 5 minute read.
Sustainability experts for decades have been exhorting managers to focus more on the function their products deliver and less on the product itself. Biosphere Rule #5, Function Over Form, is focused on fulfilling customers’ functional needs in ways that sustain the value cycle.
This is the sixth in a seven-part series on what author Gregory Unruh calls the
‘Biosphere Rules.’ Read
parts one, two, three,
Biosphere Rule #5, Function Over Form, is focused on fulfilling customers’
functional needs in ways that sustain the value cycle. As we will see, this rule
is an inevitable consequence of building out a Sustainable Product Platform,
as discussed in the previous
As always, the biosphere serves as our guide. Nature has been experimenting with
a variety of species playing different ecosystem roles for billions of years.
The diversity of the biosphere’s innovation is impressive. For example, there
over 200,000 species doing some form of pollination — including moths,
butterflies and bees; as well as bats, birds and bears. Nature is not fixated on
the specific organism doing the work, but more on the function — pollination —
being fulfilled. It's the functions that provide the ecosystem services needed
to sustain the biosphere.
Sustainability experts for decades have been exhorting managers to focus more on
the function their products deliver and less on the product itself. They call on
companies to “servicize” their business — and one of the first executives to
heed this siren song was Ray Anderson, the legendary founder of
Interface carpet. In the
1990s, Anderson read Paul Hawken’s classic, The Ecology of Commerce — which
called, among other things, for companies to stop selling products and start
delivering the functional service provided by the product. Pioneering the
approach, Interface launched the Evergreen
Lease in 1995 under the
slogan, “Selling carpet without selling carpet.”
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There were a lot of good arguments for leasing instead of selling carpet. For
example, carpet wear follows the 80/20 rule, where 80 percent of the wear occurs
on the 20 percent high-traffic surface area. The carpet underneath desks and
filing cabinets gets almost no wear at all. In providing carpeting service,
Interface could inspect the carpet on a monthly basis, and just replace the
handful of worn-out carpet tiles. Because less product is being replaced, it
results in an environmental and business win-win.
While the arguments were compelling, the Evergreen Lease ran into problems — the
biggest of which was the tax rules around leasing. Leasing is tax advantaged
because you are allowed to deduct lease payments as a business expense. But
there is a legal expectation that the leased product will have economic value at
the end of the lease. If you are leasing a BMW, for example, the car is
still valuable when the lease expires. The problem with the carpet tiles is they
didn't really have any economic value at the end of their lease; there was
nothing that Interface could really do with them — in fact, they imposed a
disposal cost on the company. If at the end of the lease the product was used
up, from a tax perspective you weren't leasing anything; you were merely
financing the sale. For this and other reasons, the Evergreen Lease foundered.
Interface, however, was not staking its whole sustainability strategy on
Evergreen and was, at the same time, actively pursuing a value-cycling
for its carpet tiles — developing series of technologies that would became one
of the first fully operational product value cycles. The Reentry
2.0 technology allowed
the company to separate the soft-face fiber you walk on, from the heavy backing
material. The face fiber was then deep-loop value-cycled back into new fiber.
For the backing material, Interface created Cool
a system that would grind up old backing material and cycle it into fresh tile
backing. These technologies comprised a sustainable product platform and changed
the situation for Interface. Leasing became a possibility because the platform
gave the tiles value at the end of the lease — they were valuable, and
necessary, inputs for Interface’s production process.
But it was more than that: If your value cycle depends on a constant flow of
input materials, and those input materials are old carpet that is installed at
your customer’s office building, do you really want to sell that carpet at all?
The tiles are an integral part of your value cycle, so who really owns that
This question is an inevitable outcome for any company building a value cycle.
The materials in your product, like the carpet tiles installed in your
customer's office, are actually part of your production system. A client’s
office is serving as your warehouse, storing your input materials until they are
needed for a new production run. Your customer is fully integrated into your
production system. They are a customer, in that they are purchasing your
product, but they also then become a supplier of production materials. You enter
a new world where your suppliers and customers merge into custopliers and
This is an inevitable outcome of pursuing a sustainable product platform. You
move away from the “sell it and forget it” model into an entirely new business
system. Your company naturally moves to a servicized model, where the delivery
of functional service, not the transfer of ownership, becomes primary: product
function over product form.
Dr. Gregory C. Unruh is the Sustainability Editor for the MIT Sloan Management
Review and author of the new book, The Biosphere Rules: Nature’s Five
Circularity Secrets for Sustainable Profits*. For a limited time, Sustainable
Brands subscribers can download a complimentary digital copy of the book*
Published Nov 25, 2019 7am EST / 4am PST / 12pm GMT / 1pm CET
Dr. Gregory C. Unruh is the Arison Professor of Values Leadership at George Mason University in the Washington DC Metro area, and the Sustainability Editor for the MIT Sloan Management Review.