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Good morning and welcome to the 28th meeting this year of the Rural Affairs, Climate Change and Environment Committee. Members and the public should turn off their mobile phones and BlackBerrys, as leaving them in flight mode or on silent will affect the broadcasting system.
Agenda item 1 is on resource use in the circular economy, and we will take evidence from Professor Walter Stahel of the Product Life Institute. I welcome Walter to the meeting and invite him to make an opening statement about the principles involved.
Good morning. Thank you for inviting me. Agriculture or farming is an interesting case, because we basically have two economic models in competition. One is the industrial production model, the objective of which is to create value added by managing a flow. The other is the circular economy, the objective of which is to preserve value by managing a stock. In the first case, aggressive marketing is needed as a tool. In the second case, a caring attitude will give the best results.
A farmer has to work on both levels—on one side, preserving the natural capital, stock, biodiversity, clean water and all those things, as well as the skills and the acquired capital, in how they do the farming. On the other hand, farmers are forced to produce value, to sell value added, and to sell products that the market wants, so it is the only sector that has to optimise the two economic systems in parallel.
So that is where you want to kick off, and I am sure that we can apply those models to industry. Can you give us a short discussion about the principles behind a circular economy and how such an economy would work in the wider sense? We have to think about industry, the public sector and all sorts of services if we are going to apply those principles in Scotland today.
The circular economy is about managing stocks. There is the natural stock or capital, the human stock or capital, the manufactured stock or capital, and the financial capital, so there are different levels that you must try to optimise. If you are talking about manufactured goods such as buildings, infrastructure or durable goods, reusing and extending the service life of goods is the main strategy of the circular economy.
There is a problem with the word “economy”, so the economics of the circular economy are very important, and the economics tell you that the smaller the loop the more profitable it is. If you can reuse a product locally, you will make a better price than if you have to remanufacture it or recycle it. If you look at the economics, recycling is the least interesting option. It may be necessary to prevent waste or to reduce waste volumes, but from a profit point of view recycling is normally not an interesting option.
For example, providing mineral water in bottles is by far the most interesting option environmentally speaking, but the problem is that global companies such as Nestlé want to sell their Perrier or San Pellegrino water in glass bottles worldwide, which is a complete nonsense. A big change for Nestlé might be to sell Nestlé-branded local water from the highland springs in every region in Europe that provide good mineral water. Big companies—I am using Nestlé just as an example—would need to adapt their marketing by no longer using their water brand but using their overall brand to say, “We are capable of finding the best sources everywhere.” Therefore, Nestlé might sell Nestlé mineral water instead of San Pellegrino water. We could then have reusable drink containers in a regional context, whereas in a global context one needs to use cans or plastic bottles. A lot of adaptations would be needed to work profitably in a circular economy.
I am sure that members will have lots of questions for you as we consider the detail of the issue. Are the cradle-to-cradle approach and the circular economy approach the same thing?
Personally, I do not like the term “cradle to cradle” because that implies some kind of mechanism or automatism. I defined the circular economy in a report to the European Commission in 1976 called “The Potential for Substituting Manpower for Energy.” My conclusion was that the circular economy, compared to the manufacturing economy, was exactly that—it was about substituting manpower for energy. For me, a big advantage of the circular economy is that it creates jobs and saves huge amounts of resource consumption and greenhouse gas emissions in a local or regional economy. However, the term “cradle to cradle” suggests a mechanistic approach and the jobs element is completely missing in the discussion.
The second element in the circular economy is that you should give preference to resources that you can upgrade. One such resource is the human resource because, through education and training, you can make labour more productive and more creative. That also means that you need to use labour, because unemployment is not only a waste of resource but a loss of skills—labour is the only resource that degrades when it is not used. Natural resources such as farmland may have a similar effect depending on the different options used, such as planting trees for reafforestation, keeping sheep or cultivating arable land. Each of those different options has downstream activity. For example, the advantage provided by reafforestation would be highest where that is coupled with building up industries that use wood in construction and in the high-value end of the industrial economy. The important thing is to consider the circular economy in the wider economic or societal context of a region.
09:45
The question of the availability of labour occurs to me. Birth rates are falling in the industrialised world, and some of that has to be taken up with people migrating into the economies that we have. That is an important component in the future—and it raises tensions of another sort.
You talk about maintaining the human element. I presume that we must be thinking about economies where we try to substitute people for energy. Therefore, we have to find ways of paying those people at a reasonable rate so that they can live properly. As far as farming is concerned, it is obvious that there is very cheap labour for the harvesting of vegetables. For family farms, there is a very different approach.
How can we optimise the ways in which people can get a fair return for their labour and their efforts? Machines have taken over so much of what labour used to do. We are not talking about going back to an utterly labour-intensive era but, in relation to what you have been speaking about, we are talking about having a new emphasis on substituting labour for energy use.
One of my battle horses over the past few years has been the need to introduce sustainable taxation, or sustainable framework conditions, although taxation is part of those framework conditions. To me, sustainable taxation means to tax only unwanted things. That means taxing emissions, waste and the consumption of non-renewable resources—all the things that you wish to reduce; you should not tax the things that you wish to promote, such as human labour. That is the main battlefield. The other one is value-added tax, which should be levied only on activities where there is value added. The circular economy—farming in this sense—preserves values, and any activity that preserves values should not have to pay VAT.
Funnily enough, I had a discussion with people from the United Kingdom Treasury, and they had no problems with the VAT idea but, like economists, they had a lot of problems with the labour tax. Taxing labour was introduced in the UK to finance the French-British war. In France, it was introduced in 1914. It is normally introduced to fight a war but, when the war is over, the reason is forgotten.
If labour is not taxed, the main impact will be on any activity involving caring—education, health, farming, and especially organic or biological farming. Any caring activity is labour intensive and local, and economies of scale are not possible. Not taxing labour would not only promote farming—organic farming, in particular—and the circular economy of reusing, repairing and remanufacturing products, infrastructure and buildings; it would promote all the other caring activities, too.
Could you highlight for us why those approaches have not been fully adopted to date?
Sorry—which approach?
The circular economy approach. What would be the barriers to adopting that approach, in which the committee is very interested? At what levels might the barriers be?
Actually, the approach has been increasingly adopted, especially over the past 10 years in investment goods. Most of the approaches have been widely adopted where tools are involved and people need goods to produce income.
Toys are the opposite of tools. The consumer market is ruled by fashion, which means bigger, better, faster and safer products. You will hardly ever find publicity for car sharing or for rental agreements in marketing or newspapers; rather, everything is about new cars, which now have 55 airbags instead of 24, and that is obvious progress. Marketing is geared to pushing the industrial economy, selling and shortening life cycles—of smartphones, for example. However, that has started to change. The young generation is fully hooked on smartphones, but many young people, at least on the continent, do not have a driving licence because they do not think that they need a car. Therefore, they do not buy cars. If they have a driving licence, they will rent a car or be in a car-sharing or lease scheme. The consumer side is therefore changing to some extent.
The manufacturing side is changing, too. The most important change that happened—this is starting to dawn on industry—was that the prices of resources came down throughout the 20th century. From 2000 to 2010, there was a huge jump, and resource prices are now higher than they were in 1900. It has been forecast that that trend will continue. Resources got cheaper in the 20th century, and it made sense to buy them, produce products, sell them and forget about it. In the new paradigm of increasing resource prices, it starts to make sense for many companies to retain the ownership of resources, and the only way to do that is by renting goods, or operational leasing or whatever else you want to call it. The goods in the market are then the resources of tomorrow at yesterday’s resource prices. That is completely changing resource securities and how the industrial economy looks at matters.
The role of the state is a bit difficult. Its role is very much to do with resource exploitation, which implies child labour and environmental issues in South Africa and other regions, and to do with waste. The 2008 European Union waste framework directive should now be implemented. As I said, the state could have a big influence on the circular economy through taxation by not taxing labour or not applying VAT. The European Commission is trying to promote resource security and efficiency, but that is much more difficult than dealing with the two ends of resource extraction and waste production.
You have emphasised the issue of aggressive marketing in the economy within the current model, but you have also highlighted changes. I can understand the model of car clubs, which is a clear example. Where would marketing fit in? In the shift that you describe, it seems that it would still need to have a role. How would that alter? You talked about a caring attitude, but I am not sure how that would fit with marketing models.
Let us take global companies, which are being squeezed. The circular economy is basically an economic model for markets that are near the point of saturation. Those are the industrialised countries. The huge markets in China and India are far away from saturation, and the traditional model of creating waste through more products, better products, more infrastructure and more schools is still the right way to increase the quality of life. Global companies such as Nestlé or Mercedes-Benz would have to develop a split personality to push sales in emerging markets while taking a conserving or preserving attitude in the developed markets. For any company, it is difficult to have two models competing with each other.
On the caring attitude, for a long time the publicity for Audemars Piguet, which makes expensive watches, has been that you never buy an Audemars Piguet for yourself—or you do not own it; you safeguard it or look after it for your children. Caring basically excludes fashion—it means having quality that one then keeps. I call that the teddy bear effect. I have a lot of teddy bears. My watch is more than 50 years old and I have had the pens that I use and other things for 40 or 50 years. Usually, they were given as presents, so I have a link to the people who gave them to me. I have two cars that were produced in 1969. If people develop a relationship with goods, the value of those goods is more than only the function.
The traditional manufacturing industry has successfully destroyed that relationship. People should not have any kind of personal relationship with a house, furniture or the goods around them—they are simply a toy for people to enjoy until they get a better one. Basically, a caring attitude means that we recreate or revalue the personal links to goods, because then we do not throw them away. Of course, we then buy quality, because it does not make sense to buy a cheap disposable thing and keep it for life.
Will you outline the major challenges for Government in trying to take forward a circular economy approach? Are they to do with the general mindset and consumer habit or the unwillingness of industry and manufacturing to change practices?
10:00
The major challenge is to shift the minds of people from thinking that waste is a problem that is inherent to the product to thinking that waste is a problem only in the minds of people and that if they no longer want something, that does not mean that the product has become waste.
Therefore, it is important to educate people to know that if they are fed up with something or no longer want it, they have a moral or ethical obligation to find another user for it—another buyer. The success of eBay is based on the fact that there is a huge global market for trading used goods.
There are several other challenges. One is that, in people’s minds, new products are of superior quality to used or remanufactured goods. However, an Organisation for Economic Co-operation and Development report stipulates that people who have young children should prefer to buy used clothes, which produce fewer allergies than new clothes, because they have been washed a couple of times. However, people who promote such ideas are immediately hit by the industry that manufactures new clothes.
The same thing could be said about some technical goods—remanufactured car and truck engines are of a higher quality and normally last longer. Caterpillar has good statistics among manufacturers that also remanufacture. However, such things are taboo, because they attack the main idea of the industrial economy that new goods are better than used ones.
Another issue is selling the idea that using regional resources—including the manufactured stock—and regional skilled labour creates a valuable regional economy, which is only part of the total economy. We will always have new products—such as those in life sciences and nanotechnology—that are innovative and creative, use fewer resources and normally produce higher value added. The Government must push for better management of existing stocks, although that is difficult to export, and for new products that use revolutionary technology, which can be exported and which reach out. In a way, that is a split personality—we do one thing but also push the other.
We are in difficult economic circumstances, so people tend to buy the cheapest goods rather than the best quality, even though that is a false economy. Whether we believe that we are in the middle of or just coming out of a recession, is timing a problem?
The problem is more sociological. Ten years ago, the book “The Multi-option Society” showed that people today always want to keep all their options open; they do not want to take decisions. In his famous song, Freddie Mercury sang:
“I want it all, and I want it now.”
If we combine that with the multi-option society, we have a complete mess, because people—especially young people—take loans to buy things that they do not really need but which they think that they might need or which they want. They do not want to buy high-quality goods, because they then lose the multi-option.
The problem is partly one of education and values. We come to the philosophy of how we should educate young people to define their basic needs and to focus on quality. The same thing applies in human relationships. People should think twice before buying something and should buy something that might be durable. The context is wider, but the consumer society is very much within young people in particular.
Good morning, professor. If a company decided that it wanted to adopt the circular economy approach, what are the main challenges that it would face? Are they similar to the challenges of mindset change and behavioural change that you have described as facing Governments and states, or would a company face different challenges? If so, how would it go about overcoming those?
The main problem is that, normally, you cannot profitably work in two worlds. If you want to change to the circular economy, you have to give up the throughput model.
A nice example of the problems faced in doing that is provided by Rolls-Royce, which changed from a model of selling jet engines and spare parts to selling power by the hour. In other words, Rolls-Royce decided that it would put at the disposal of airlines the service of its jet engines and get paid a fixed fee per hour for them. In the beginning, Rolls-Royce had to buy back all the engines and spare parts in the market, so it had a huge capital outlay in becoming the owner of the fleet and of the goods. However, its annual income from renting the engines was initially smaller than what it got from selling engines, for which it got a huge sum.
Rolls-Royce quickly realised that it had to change its business model completely. If you sell power by the hour, basically you no longer want spare parts, which are a huge waste of money and are inefficient. Instead, you want spareless repair technologies and in-flight monitoring of engines to avoid breakdowns. Under the new model, you make more profits by prevention. Basically, you want to keep the engines running, so you need to ensure that you have the lowest possible repair and maintenance costs. That requires a complete change in mindset, and it takes time. Once you have done it, you are much better off, but the changeover is difficult.
Is Government stimulus required to introduce that change of mindset, or can that come from the bottom up?
I think that both are required. Big international companies probably do not need Government stimulus, but small and medium-sized enterprises normally lack the knowledge and the overall view. For SMEs, it would be useful if the Government, possibly together with the universities, could provide some kind of data bank that would allow them to see what other companies have done, what the successful models are, what new capabilities and skills they might need and where they can get those. If you can produce clusters of universities and companies that actively use this approach, that will both provide young people with an incentive to study it, because they will be able to see where the jobs are, and allow the companies to see where they will get the people that they need.
One trick to attract companies such as Caterpillar, which are already active in this field, might be for the Government to announce that it wants to promote the circular economy. By producing clusters involving academia and industry, that might attract companies that are willing to make the step to come to Scotland for that reason.
I also want to ask about a slightly different topic, but I think that other members may have questions.
Yes, we will take supplementaries and then come to your second topic.
Professor, can I ask about the place of the eco-industrial park in the discussion about businesses? Would Government need to kick-start something like that, or could it happen in a different way?
From a risk management point of view, I am a bit sceptical about eco-industrial parks, which involve one company using the waste of another as a resource. The German Democratic Republic was the biggest eco-industrial park that ever existed, because it had to make do with what it had. Everything was based on coal, on pork and on other centralised agriculture. When the German Democratic Republic changed to a market economy in 1989, it was efficient for western industrialists to buy certain parts of that chain of production and with that they destroyed the chain and the whole economy collapsed.
In an eco-industrial park, if one of the major companies decides to change the model or production process—whatever the product—or goes bankrupt, other companies might have the problem of trying to source new resources, having lost access to their previous supply. I am all for looking at the total, but from a risk management point of view you should never depend fully on one supplier of any resource, product or part.
Going back more than 20 years, I used to work for a little business called Unilever. I know nothing of what it is doing now, but I would like to draw on my experience of working there to ask you how businesses might work both nationally and internationally. Back in the days when I made detergents—though it hardly matters that it was detergents—there was a business that was based in the United Kingdom and there were many other businesses that were based around the world.
You indicated earlier that it would be difficult for a business to have two different mindsets, but it seems perfectly possible for one business that is based in the United Kingdom to have one mindset, particularly if it felt that it had the resources there, and for other businesses in other markets or places to have a different mindset. The only difficulty that I think the company overall would have had would have been profitability: if the UK business had been able to generate its 8 per cent—or whatever—frankly, the board at head office would not have worried about how it had achieved that, as long as it was done ethically. Is it that difficult for international businesses to have different models in different places?
I do not think that it is difficult. The problem is that, in the mindset of economists, economy of scale means that if you produce something for the global market in one factory the costs will be lower, as the cost of transport is more or less zero—a 20-foot ISO container shipping from China to Europe costs something like $6. However, what all those economy-of-scale calculations never take into account is catastrophic risk.
I discovered during a discussion about solar storms that if a solar storm were to hit the northern hemisphere it could knock out several transformers for high-tension electricity transfer lines. You simply need new transformers, but delivery time for those transformers is about one year, and there is only one company left that produces them, which is a very efficient company in South Korea. When you think about it, that is absolutely crazy. Europe and the United States no longer produce transformers because the South Koreans are more efficient, but we have completely lost out, not only on a national and policy level but on a corporate level, given the strategic importance of having regional and national manufacturers.
10:15Let us think about the famous volcano, Eyjafjallajökull, the tsunami in Japan on 11 March 2011 and, six months later, the floods in Bangkok. In relation to the volcano’s effect on companies, it was transport that came to a standstill. The tsunami on 11 March and the Bangkok flood destroyed unique companies that produced a single component for the car industry, with the result that certain Volkswagen models, for example, were not on sale for six or eight months. Industry is learning that it may not be such a good idea to have a global supply chain that becomes vulnerable.
You mentioned Unilever. The food situation is normally better than the car situation partly because people want local food. You eat porridge in Scotland but in Asia people do not eat porridge. The food market is much more local and regional than companies would like it to be. There is also organic farming, and the trend on the continent—I do not know about the UK—is for people to go to farms to buy food or to have contracts with farmers to supply them with seasonal food. That change in the food chain is slowly happening—regional and seasonal food is seen as more fun and exciting—but mainly among people who do not have to buy the cheapest food.
Can I go back to the basic point? Unilever had very local manufacturing for most things. The issue is the ability to make a profit—probably over the reasonably short term—so that the business can be persuaded to have a different model. Is there any evidence that that cannot happen?
The global players are always in competition with the regional or national players. They normally have similar competitiveness or profitability, but corporate strategy people believe that global branding, global production and global products are, in the long term, the winning proposal. If we cannot convince them that we can have a series of regional and national companies that are as profitable and competitive, they will always go for the global branding.
You mentioned the concept of car leasing, and the fact that companies such as eBay, Rolls-Royce and Caterpillar have, to an extent, started working with a circular economy. Are there any businesses that have fully embraced the circular economy approach? From a Scottish perspective, it would be interesting to know whether other countries have started to embrace or have embraced the concept of a circular economy.
The term “circular economy” can be interpreted differently. We can see from the internet that the leading country as far as the circular economy is concerned is China—although we do not really consider China to be a circular economy. The reason why the circular economy is different in different countries is essentially that the approach is based on using existing capital and stock—mostly human capital and manufactured goods.
One of the big problems in almost all industrialised countries, including the US, is the neglect of operation and maintenance. Our roads, water systems and sewerage systems are all 50 to 100 years old, and they are falling apart. The big challenge is to bring about the proper operation and maintenance of infrastructure—for example, adapting existing Government building stock to satisfy energy saving requirements. There is a huge market there, because we have neglected that stock for a long time.
A lot of local, regional and national companies thrive on the rental of goods. Children’s furniture is one such area. In Germany, high-quality wooden furniture for babies has become fashionable. People might use baby cots and other such things for one or two years. What do they do with them after that? People will want to buy a nice one but, instead of buying a nice one, they can rent one and then give it back and rent another one.
Ladies’ handbags are a big fashionable thing at the moment. A young lady might like to have the latest Gucci handbag or whatever every weekend, but she cannot afford to buy such things, as they can cost upwards of £3,000. However, she can rent one for, say, £50, so she can get a different very expensive handbag every weekend and be the king of fashion. It has started to dawn on people that, if they want something new to impress their friends—a Ferrari or another expensive car, for example—and the last thing they can afford to do is to buy it, they can rent it instead. Nobody will know whether it is rented or bought. That is one of the drivers of the new economy. People who are very fashion conscious but who do not have much money realise that they can buy the illusion for their peers by renting goods.
That is fascinating.
I am sure that our colleagues Claudia Beamish and Jayne Baxter have taken note of the Gucci handbag proposal. There might well be a social enterprise coming up soon.
Aye, that’ll be right.
Professor Stahel, your comments on the need to improve infrastructure are certainly noted. You have mentioned proposals such as not taxing labour and taxing only unwanted things, although you will be aware that, in Scotland, we do not have complete powers over tax. The Scottish Government, Zero Waste Scotland and Scottish Enterprise are actively engaged in exploring and implementing activities that could help to build a more circular economy although, currently, there is no single circular economy plan or strategy for Scotland. You have touched on some of this, but I am interested in your views on the priorities that Scotland should pursue over the short, medium and long term to progress a more circular economy.
On a general level, a circular economy basically allows you to build a more resilient economy and more resilient communities. That applies in any area. For example, in energy, the trend is to have a national grid or even a European grid— as with Unilever, the trend is to always have a bigger system to manage centrally. From a risk management or sustainability perspective, however, you would be much better off with diversified energy production. In other words, depending on the energies that are available regionally, you could combine geothermal energy with wind, tidal and photovoltaic to a degree.
If you use photovoltaic, do not do it the German way, which is to feed everything into the national grid. Photovoltaic is 12V direct current, and if you feed it into the national grid, you will have a lot of transformation losses. People can easily convert their home to 12V DC—all the technology is available from the car and camper van market, which is all 12V DC, and energy saving lightbulbs and so on are available for 12V DC at cheap prices. If people convert their home to photovoltaic using truck batteries, the utility companies lose them as customers and suddenly do not profit from photovoltaic. It is the same problem: the big players want everything to feed into the big system, whereas, from a decentralised perspective and if you want to build resilient communities, you are much better off having local independent units that work up to the grid. The grid should not dictate the way in which the local units function.
Basically, it is bottom up versus top down and, at the moment, in most cases, the top-down approach wins. Obviously, there are governance issues. Being Swiss and a fan of direct democracy, I have to tell you that bottom-up solutions are normally much more long lasting, sustainable and resilient.
Did I lose your question or did I answer it?
You partly covered it. You have covered the energy sector, but are there any other examples of how we could progress to a more circular economy?
There is a huge volume of manufactured goods. Another top-down approach that has been popular in the past few years has been cash for clunkers schemes, under which any car that is older than eight years is scrapped and people are given a bonus of €5,000 or whatever to buy a new car.
In a circular economy, a much more intelligent policy would have been to give people €5,000 to replace their car’s polluting engine. In other words, the engine would be remanufactured or a diesel engine would be replaced by a compressed natural gas engine, which is basically the same technology. That would have had a much higher impact on local employment, because all the conversions would have been done locally, and on pollution, because new cars would not have had to be produced. There would also have been a better impact on the utilisation of the cars than there was through replacing eight-year-old cars with new cars that had the same technology.
We did a calculation on the resources that go into scrapping cars and producing new ones. Applying the circular economy approach instead of a cash for clunkers scheme would have had a huge impact on local economies and the environment. However, that approach probably could not have been pushed politically, because the car industry would have come on to the barricades. The industrial economy wants people to throw away functioning products and buy new ones, of course, as that fuels it, but that is not the best approach.
10:30
I have listened intently to what has been said about your concept, professor. We have had the industrial revolution and the consumer society. Basically, we live on a factor of need, as you say, and sometimes greed. People say, “I want this handbag,” “I want that jacket,” “I want that car,” or whatever. From 200 years ago, people have come off the land, manufactured goods, earned a wage and then bought other goods, and that has created other jobs. Does your concept basically mean that everything would be circularised within a region, and the region would manufacture and use all the products? Many companies have centralised into one big factory for the whole country, but you are suggesting that they could devolve operations down into a region. I can see the concept. At the end of the day, that will reduce pollution and movement and ensure that people use products in a regional society. Have I basically got a handle on what you mean?
No. We cannot produce everything locally or regionally. Europe no longer produces mobile phones, because Nokia has been sold to Microsoft, so mobile phones are now produced only in North America, China and South Korea. There are many other products in the same situation. We should take advantage of large-scale manufacturing and low costs to import products, but we should have better quality control of what we want. Basically, we want repairable goods. If we import repairable goods, we can do the maintenance and repairs operations locally. As a policy, we should try to get the best products, but we should develop an economy that reuses, remarkets, repairs and remanufactures properly, making the stock that we have last as long as possible and then recycling the materials, which are a strategic stock.
If I have correctly understood what is basically happening in Scotland, you import a lot of goods and export a lot of waste. With the circular economy, you would look at the region as an enterprise and close the loops by looking at the waste material that is exported as a resource and finding ways of making new products and getting new value out of it.
Your point about renting is interesting. After all, back in the 1960s and 1970s, people rented a television, a hi-fi or whatever.
I also agree with your comment about reusing things. When my wife throws stuff out, I mostly take it to charity shops so that people can use it again. I abhor things being thrown into skips or dumps when someone else can get some use out of them. I certainly find your concept quite interesting and thank you for answering my question.
Let me give you a couple more examples of consumers buying use or utilisation very often without realising it. They rent cars, apartments, taxis, public spaces such as roads, hotel rooms, libraries, concert halls, cinemas, the internet and public transport; in all those cases, you do not buy the thing itself but buy the use of it. It is therefore more important that we make people and, indeed, SMEs aware that the concept of renting is not some revolutionary new thing that will endanger everything that they have done in the past.
On the issue of quality, when people check in at a hotel, they never ask, “Who slept in the bed last night? Was it Idi Amin Dada? Some other dictator?” You trust the hotel to maintain the quality of its service. In most cases, however, the hotel’s bedlinen and towels are owned not by the hotel itself but by a textile-leasing company; after all, that is the core business of such companies, not hotels. The process that textile-leasing companies go through almost every day in delivering and taking back goods is very intensive, with a radius of efficiency of 60 miles, or 90km. Because transport limits efficiency, there are many regional or even local textile-leasing companies; you will never have a global textile-leasing company. Inherent in the concept of selling services is the need to be close to the client whereas, with industrial production, you can be on the other side of the globe.
Similarly, people who take aeroplanes do not realise that, although they might get a ticket and reservation from the airline, the airline itself does not own the aircraft; that the stewardesses’ uniforms are owned not by the airline but by a textile-leasing company; and that the food is provided by a catering company. All these businesses are selling and buying services. The fact is that public procurement could have a very big influence in the buying of services. For example, if you look at the websites of the Pentagon and NASA, you will find that the procurement preference of those United States administrations is to buy services. The space shuttle will be the last piece of hardware that NASA will own and operate; in future, all those services will be bought.
Public procurement can have a very strong influence on industry and creativity. If it means that services will be bought, there will immediately be huge competition among start-up companies for providing those services.
I will allow two short supplementaries to round things off. We have had a good overview of how renting rather than buying could be an issue that Governments, particularly the Scottish Government, could consider seriously. Claudia Beamish, do you have a very short point to make?
I assure you that this will be a very short point. Given the forthcoming public procurement bill, today’s conversation has been very helpful, so I first want to thank Professor Stahel for that.
On the issue of renting, which I fully adhere to as a concept for moving us forward, I want to respond to Angus MacDonald’s point about Gucci handbags by putting into the dialogue that such a proposal would still encourage the consumer society and all that side of things. Therefore, further to Professor Stahel’s earlier reference to people caring for special things, I want to point out that my handbag was given to me by my school when I left after 10 years to become an MSP. When the handles of the handbag broke, I got my partner to replace them with plumber’s tubes. I leave you with that thought.
Thank you for that.
Follow that.
I want to go back to Professor Stahel’s point about the national grid. In Scotland, 24/7 and 365 days a year, we export electricity through the national grid to England and Northern Ireland. That allows the lights to stay on and industry to continue in those places. We use a range of energy sources for that, but we are increasingly moving towards using greener contributions in the energy mix. The plan is for that to continue if Scotland votes for independence. Therefore, although I understand the point about the need for a local focus, is a national grid not essential and in fact a good thing?
The national grid—or, on the continent, the European grid—makes absolute sense for transferring surpluses to balance demand and supply, but it would still perform that function if the regional grids were more independent or stronger. The national grid is paid by volume, so the more electricity it shifts around, the more money it makes and the more power it has. If you increase regional production and the price for using the national grid goes up, there will be more incentive to make regional grids or networks. Basically, big systems always employ arguments about economy of scale by claiming that, if you want the price to be cheap, the system needs to be big.
Another argument is that, if the national or centralised solutions are expensive, that will provide incentives for using regional systems as part of the circular economy. We should take into account the need for risk management, such as for a catastrophic failure of the national grid, and move to regional systems. For example, if that solar storm was to happen, there could be a prolonged blackout of several months, for which the national grid would provide no remedy. I hope that that will never happen, but the chances of its happening are increasing through probability. That provides a lesson about the need for local sources of energy.
Actually, the biggest promoter of plus-energy buildings, which is a really decentralised model, is the mayor of New York, Michael Bloomberg, who is certainly not a green. His argument is that, if we have more and more buildings that are energy autonomous from the grid, whenever there is a blackout there will be less pressure on the emergency services—the police and fire brigade—to get people out of elevators and there will be higher security because buildings will remain lit. The big push is that he wants all new buildings in Manhattan to be plus-energy buildings because that takes the pressure off the state and the emergency services.
Thank you. We have heard a wide range of things to get us thinking, and I believe that our colleagues on every other committee in the Parliament should be thinking about these things as well, because they are all interrelated, joined up and even circular, I guess.
Thank you for your stimulating evidence. I suspend the meeting briefly to enable us to change over witnesses.
10:45 Meeting suspended.Previous
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