At Firmhouse, we believe that Product-as-a-Service is one of the most important business models for pushing forward the transition to a circular economy. However, a circular economy depends on several key aspects.
The Ellen MacArthur Foundation defines a circular economy as being "based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems."
This means that material loops are closed, with companies striving to keep products in circulation as long as possible while also regenerating the environment. In this blog, we will explain why design for reassembly (which goes beyond simple disassembly) and modularity are crucial for achieving circularity.
There has been considerable discussion about the need to transition to a circular economy. Both the European Union and countries such as the Netherlands have set ambitious goals. In the Netherlands, the aim is to achieve 50% circularity by 2030 and to be fully circular by 2050. However, as of 2024, only 7.2% of the world’s economy is actually circular. In fact, this percentage dropped from 8.6% in 2021. This indicates that there is still a significant journey ahead.
Several business models have been proposed to facilitate the transition towards a circular economy, ranging from product life extension to recovery and recycling. Among these, one of the most prominent models that adopts a holistic, systems-thinking approach is the Product-as-a-Service (PaaS) model, also known as the Product-Service System (PSS).
The circularity potential of PaaS, especially performance-based PSS models, is among the highest of all circular business models. While it is challenging to quantify precisely, PaaS or PSS has the potential to achieve 100% sustainability and circularity. However, no company or business model has yet achieved complete circularity.
To truly close material loops, a system-thinking approach is essential, often requiring a shift in mentality across the entire supply chain. PaaS or PSS can facilitate this transition, but a key prerequisite is the modularity of the product and its design for reassembly.
There is still a significant gap in achieving our circular ambitions. Even more concerning is that global circularity has decreased by 1.9 percentage points since 2018 when it stood at 9.1%. In the 12 months following the release of the first Circularity Gap Report, the upward trend in resource extraction and greenhouse gas emissions persisted, and key indicators confirm that the issues inherent in a linear economy are deeply entrenched in the global system.
In short, we are moving in the wrong direction. This highlights the magnitude of the challenge ahead. We can only hope that the current global crises will lead to a reassessment of what we value in the economy.
We empower companies to launch their Product-as-a-Service models, helping them accelerate the transition to a circular economy quickly and easily. Together, we can turn our circular ambitions into reality.
Modularity is crucial for retaining the maximum value of a product for as long as possible. A good illustration of this is the Value Hill (Figure 1), developed by Circle Economy. This model effectively visualizes how value is created and typically lost in a linear economy. However, in a circular economy, the goal is to retain value for as long as possible by keeping products within the smallest possible loop. This approach allows companies to extract long-lasting value from their products while gaining insight into which collaborations are necessary to sustain this value.
This brings us to another important circular economy framework known as the 10 R’s hierarchy: Refuse, Rethink, Reduce, Reuse (Resell), Repair, Refurbish, Remanufacture, Repurpose, Recycle, Recover, and Re-mine. This hierarchy, shown in Figure 2, outlines strategies for minimizing waste and maximizing the lifecycle of products within a circular economy.
This framework outlines the hierarchy of steps that should be prioritized to enable a circular economy. It begins with actions like refusing, rethinking, and reducing—focused on not using materials at all or significantly minimizing their use. While these steps influence overall design considerations, they do not directly relate to modularity, which is concerned with the components included in the product. In essence, modularity primarily supports the latter steps of the hierarchy, enabling R3 to R10.
Modularity can only be achieved through design considerations that extend a product’s utilization period or enable reassembly. True modularity requires easy separation of components, avoiding the use of glues or adhesives that permanently bond parts, making disassembly impossible without damaging the product. Modularity enhances durability (longevity), repairability, maintainability, recyclability, sharing, and upgradeability.
Often, modularity demands design changes or, for new products, specific design considerations. These changes must be compensated by reaping the benefits of circular economy principles, such as an increased likelihood of repairing broken devices or extending product lifespans through hardware upgrades and refurbishment, thus keeping products in circulation longer.
Although there are various types of modularity, standardization, and multi-functionality are often key components of effective circular design. While modularity can sometimes require more material input, it pays off in the long term by achieving a longer lifespan, and consumers are increasingly embracing its benefits.
If we consider the previous R10 framework, it's clear that not all of the R's fully enable the circular economy. Focusing on the technical cycle of the Ellen MacArthur Foundation's butterfly diagram (Figure 3), we can see that many of the circularity loops are, once again, enabled by modularity. The key principle is that the shorter the loop, the better it is for the circular economy (figure 4), as shorter loops typically retain more value and require fewer resources.
One of the most prominent examples of modularity in action is Fairphone. Over time, many initiatives have attempted to bring a modular phone to market, but none succeeded—except Fairphone. Taking a more pragmatic and feasible approach, Fairphone managed to create the first truly modular phone. The merchant designed it with longevity in mind, focusing on repairability. Fairphone provides replacement parts and clear instructions for users to fix their devices, aligning with the growing Right-to-Repair movement, which is gaining traction across Europe
In the same spirit, the Framework Laptop is a perfect example of why modularity is critical for circularity. Instead of having to replace an entire laptop when something goes wrong or when you want an upgrade, Framework’s modular design lets you easily swap out individual parts like the battery, memory, or storage. This means you can keep your laptop running smoothly without sending the whole thing to the landfill. By allowing users to replace or upgrade components, Framework not only extends the life of the laptop but also helps cut down on electronic waste. It’s a practical approach that shows how modular design can really make a difference in supporting a more circular and eco-friendly way of using technology.
Last but not least, Bosch HomeConnect exemplifies how modularity can make home appliances more sustainable. With features like customizable shelving in their refrigerators and smart connectivity through an app, these appliances let you adapt and manage your home more efficiently. You can adjust or upgrade parts as needed, rather than replacing the whole appliance. Plus, the app gives you insights into energy use, helping you cut down on waste and save on bills. By making appliances more adaptable and easier to maintain, Bosch is showing how smart design can support a more circular and eco-friendly approach to home living.
This blog outlines why modularity is essential for circularity and how it can accelerate the transition to a circular economy by keeping products at their highest value for as long as possible. Want to learn more about how Product-as-a-Service can give your company a competitive edge? Explore our other blogs or get in touch with us.
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