The Biosphere’s Guide to Foolproofing Sustainability, Part 6: Function Over Form – Sustainable Brands

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 theBiosphere Rules. Readpartsone,two,three,fourandfive.

Biosphere Rule #5, Function Over Form, is focused on fulfilling customersfunctional needs in ways that sustain the value cycle. As we will see, this ruleis an inevitable consequence of building out a Sustainable Product Platform,as discussed in the previousinstallment.

As always, the biosphere serves as our guide. Nature has been experimenting witha variety of species playing different ecosystem roles for billions of years.The diversity of the biospheres innovation is impressive. For example, thereover 200,000 species doing some form of pollination including moths,butterflies and bees; as well as bats, birds and bears. Nature is not fixated onthe specific organism doing the work, but more on the function pollination being fulfilled. It's the functions that provide the ecosystem services neededto sustain the biosphere.

Sustainability experts for decades have been exhorting managers to focus more onthe function their products deliver and less on the product itself. They call oncompanies to servicize their business and one of the first executives toheed this siren song was Ray Anderson, the legendary founder ofInterface carpet. In the1990s, Anderson read Paul Hawkens classic, The Ecology of Commerce whichcalled, among other things, for companies to stop selling products and startdelivering the functional service provided by the product. Pioneering theapproach, Interface launched the EvergreenLease in 1995 under theslogan, Selling carpet without selling carpet.

There were a lot of good arguments for leasing instead of selling carpet. Forexample, carpet wear follows the 80/20 rule, where 80 percent of the wear occurson the 20 percent high-traffic surface area. The carpet underneath desks andfiling cabinets gets almost no wear at all. In providing carpeting service,Interface could inspect the carpet on a monthly basis, and just replace thehandful of worn-out carpet tiles. Because less product is being replaced, itresults in an environmental and business win-win.

While the arguments were compelling, the Evergreen Lease ran into problems thebiggest of which was the tax rules around leasing. Leasing is tax advantagedbecause you are allowed to deduct lease payments as a business expense. Butthere is a legal expectation that the leased product will have economic value atthe end of the lease. If you are leasing a BMW, for example, the car isstill valuable when the lease expires. The problem with the carpet tiles is theydidn't really have any economic value at the end of their lease; there wasnothing that Interface could really do with them in fact, they imposed adisposal cost on the company. If at the end of the lease the product was usedup, from a tax perspective you weren't leasing anything; you were merelyfinancing the sale. For this and other reasons, the Evergreen Lease foundered.

Interface, however, was not staking its whole sustainability strategy onEvergreen and was, at the same time, actively pursuing a value-cyclingstrategyfor its carpet tiles developing series of technologies that would became oneof the first fully operational product value cycles. The Reentry2.0 technology allowedthe company to separate the soft-face fiber you walk on, from the heavy backingmaterial. The face fiber was then deep-loop value-cycled back into new fiber.For the backing material, Interface created CoolBlue,a system that would grind up old backing material and cycle it into fresh tilebacking. These technologies comprised a sustainable product platform and changedthe situation for Interface. Leasing became a possibility because the platformgave the tiles value at the end of the lease they were valuable, andnecessary, inputs for Interfaces production process.

But it was more than that: If your value cycle depends on a constant flow ofinput materials, and those input materials are old carpet that is installed atyour customers 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 thatcarpet?

This question is an inevitable outcome for any company building a value cycle.The materials in your product, like the carpet tiles installed in yourcustomer's office, are actually part of your production system. A clientsoffice is serving as your warehouse, storing your input materials until they areneeded for a new production run. Your customer is fully integrated into yourproduction system. They are a customer, in that they are purchasing yourproduct, but they also then become a supplier of production materials. You entera new world where your suppliers and customers merge into custopliers andsurplustomers.

This is an inevitable outcome of pursuing a sustainable product platform. Youmove away from the sell it and forget it model into an entirely new businesssystem. Your company naturally moves to a servicized model, where the deliveryof functional service, not the transfer of ownership, becomes primary: productfunction over product form.

Dr. Gregory C. Unruh is the Sustainability Editor for the MIT Sloan ManagementReview and author of the new book, The Biosphere Rules: Natures FiveCircularity Secrets for Sustainable Profits*. For a limited time, SustainableBrands subscribers can download a complimentary digital copy of the book*here.

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.

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The Biosphere's Guide to Foolproofing Sustainability, Part 6: Function Over Form - Sustainable Brands