Selling performance and service rather than just a product – the advantages of the functional economy

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The functional economy and how it works in practice was discussed at a public hearing, organised on the 8th June by the European Economic and Social Committee. The focus is on the function of the product rather than on the product itself - the functional economy considers how the product can be used most efficiently. "The concept of the functional economy has to be well-defined. We also have to explore the effect it will have on the creation of jobs and the advantages of a long lasting product which can be used by more than one consumer", said the EESC Rapporteur Thierry Libaert in his opening speech.

"This type of economy will fight against planned obsolescence and waste because it is based on a different paradigm that goes beyond the classic relationship between producers and consumers", confirmed Alejandro Salcedo, Coordinator of Consumers Department - Junta de Comunidades de Castilla La Mancha.

At the public hearing there were representatives from two companies that already sell solutions to their clients based on the functional economy - Michelin and Xerox. They confirmed that the attractiveness of their offer lies in selling performance rather than  just a single product. Their digital solutions offer increased efficiency and sustainability, provide detailed information,  reduce the number of breakdowns of the products and decrease energy costs for their clients.

During the discussion some of the participants expressed concern that the functional economy might have a negative effect on existing jobs. However, other speakers insisted that the functional economy offers a business model which represents a shift from a resource-heavy model to a model in which human labour and skills are given priority.

"Companies are committed to selling performance rather than just products. The functional economy pays off – it is not only about sustainability", said in his concluding remarks Mr Libaert. "It can create more jobs for qualified people. Europe has no choice – we have to build on the fact that we are extremely rich in human capital and skills. "