1. Executive Summary and key findings

Nordic businesses are increasingly exploring circular business models, while policymakers and public institutions in the region are prioritising the transition to a circular economy. This shift aligns with the Nordic vision to become the most sustainable and integrated region by 2030, delivering environmental, social, and economic benefits. Transitioning to a circular economy requires a fundamental departure from the traditional linear “take-make-waste” model, moving instead towards models where products and materials are used longer, creating value in innovative ways.

One promising approach for advancing circularity is the adoption of Product-Service-System (PSS) models. In these models, businesses retain ownership or control of products throughout their lifecycle, creating incentives for durability, quality, and extended use. This shift allows products to serve multiple users over a longer period, maximising their utility and reducing the need to produce new goods. By implementing PSS models, businesses can create new revenue streams through services such as rentals, repairs, and maintenance. Consumers, in turn, benefit from greater flexibility, improved access to high-quality products, and lower total ownership costs while contributing to a more sustainable system where fewer resources are wasted.

Despite the potential of PSS, broader implementation in the Nordics remains limited. While examples like car-sharing, facility management, and workwear rental services have gained traction, small and medium-sized enterprises (SMEs) and startups face significant challenges in scaling these solutions to achieve economic viability. Barriers include the deeply rooted culture of ownership, gradual adoption of sustainable consumption patterns, and market conditions that still favour traditional ownership models. Additionally, limited cross-border knowledge sharing and inconsistent industry collaboration slow the widespread adoption of PSS models and circular practices in the Nordics.

From 2021 to 2024, the project “Product-Service Systems in the Nordics – Paving the Way for Circular Business and Sustainable Consumption” has explored whether, when, and how PSS models can succeed in a Nordic context, delivering both resource efficiency and economic benefits. Through active stakeholder engagement – including 16 pilot projects across the Nordics – and comprehensive literature reviews, the project assessed key barriers to adoption, assessed the sustainability potential of PSS models, and provided actionable recommendations for their practical implementation. Moreover, the project aims to enhance regional cooperation by facilitating the exchange of insights and best practices, accelerating the adoption of PSS models and building synergies to overcome market and cultural barriers.

This report examines the conditions necessary for PSS success in the Nordics, highlighting key opportunities, challenges, and relevant policy frameworks. It provides specific recommendations for key stakeholders – businesses, policymakers, public institutions, and financial actors – who play a vital role in advancing the adoption of sustainable PSS models. Based on the project’s findings, 13 key insights have been identified, offering a deeper understanding of how PSS models can enhance resource efficiency, promote circularity, and drive sustainable economic growth while addressing the barriers that need to be overcome for their widespread adoption.

Effective policy interventions are essential for creating a competitive landscape that supports circular business models, including PSS. Although PSS is recognised in EU and Nordic circularity strategies as key to advancing the circular economy, many policies fall short of translating this recognition into concrete, actionable measures. A more strategic and coordinated policy framework is needed – one that not only acknowledges PSS but also implements targeted actions to drive adoption. Current Nordic policies often lack the specificity and coordination needed to drive widespread change. For instance, Sweden’s regulation on alternatives to single-use takeaway packaging has spurred investment in PSS and attracted B2B customers for reusable packaging. However, these efforts have not yet led to significant shifts in consumer behaviour or substantial environmental outcomes. This underscores the need for a strategic approach, combining targeted incentives for PSS with broader policies that promote resource efficiency and sustainable consumption.

Shifting the tax burden from labour to natural resources would further support PSS development, especially in the Nordic countries where high labour costs make services such as repair and maintenance expensive. By reducing labour taxes and increasing taxes on virgin resources, the cost of labour-intensive services – integral to PSS models – would decrease. Additionally, offering tax incentives, such as VAT reductions for repair, rental, and leasing services, would make circular service-based models more affordable and attractive to consumers, driving their broader adoption.

Implementing Extended Producer Responsibility (EPR) schemes can be a powerful tool for promoting circularity. By placing financial responsibility for end-of-life product management onto producers, EPR promotes the development of products designed for longevity, reuse, and recycling. However, for EPR to be fully effective, it needs to be complemented by other policy measures, such as policies targeting consumer behaviour or other stricter regulation on waste management. A coordinated approach across the Nordic region, integrating EPR with incentives for circular design, resource efficiency, and waste reduction, will create a more comprehensive shift towards sustainable business models like PSS.

PSS models have shown some success in the B2B sector across the Nordic countries, although scaling remains a challenge due to various barriers. While economic viability is more easily achieved in B2B settings – thanks to economies of scale, long-term contracts, and TCO considerations – PSS adoption is still limited by factors such as market readiness, resistance to change, and the complexity of implementing new business models. The upcoming mandatory sustainability reporting requirements do, however, increase the appeal of PSS solutions, especially those that can demonstrate clear environmental impact reductions, giving businesses an additional incentive to adopt these models. B2B also allows for more efficient customer acquisition, as one contract can serve multiple end users within a company, unlike B2C models, which typically engage customers individually. However, despite these advantages, scaling PSS even within B2B remains difficult. To fully unlock the potential of PSS, significant efforts are needed to overcome these barriers and expand its reach into B2C and B2G markets, where changing consumer habits and rigid public procurement processes pose additional challenges.

Many PSS services attract customers through a 'personal touch’ - characterised by trust, personalised service, and flexibility – an aspect that is especially important for SMEs. Many Nordic PSS providers seek to expand their operations. However, scaling up while maintaining this connection can be challenging, as it requires significant resources and risks losing close customer relationships. As this personal connection is often a key reason customers choose PSS solutions, providers, particularly SMEs, need strategies to preserve it as they grow. An alternative solution is to expand PSS services by replicating successful models in other locations or market segments.

Enhanced collaboration between PSS providers – whether within the same product category or across different sectors facing similar challenges – can unlock significant synergies. Knowledge-sharing and best practice exchanges are essential for overcoming common barriers, such as scaling operations and developing effective customer engagement strategies. Greater collaboration can also lead to standardisation within sectors, making it easier for businesses to integrate PSS models into their existing frameworks. This collective effort will help PSS providers expand their market presence and innovate more rapidly, driving the broader adoption of circular business models.

PSS holds the potential of minimising environmental impact by decoupling resource use from economic growth. PSS aims to fulfil consumer needs using fewer products, thereby reducing resource consumption and waste generation. By adopting circular economy strategies, PSS providers can lower the use of virgin materials, decrease energy consumption, and minimise pollution and greenhouse gas emissions, contributing to improved resource efficiency and sustainability. This shift towards a service-based economy can promote the dematerialisation of society, where services, rather than physical goods, are central to economic growth. The three main types of PSS models – product-oriented, use-oriented, and result-oriented – offer varying levels of sustainability benefits, all with the potential to contribute significantly to environmental goals. However, unintended consequences must be considered.

To fully realise the environmental potential, it is crucial to critically assess positive impacts and possible unintended consequences of the PSS, such as induced impacts and rebound effects. Induced impacts might occur through additional processes within the system, such as increased transportation, product maintenance, or the production of capital goods. Rebound effects – both direct and indirect – can also arise when the efficiency of a system leads to increased consumption, either within the PSS or in other areas. For example, services can increase the affordability of certain products, inducing increased consumption. PSS models rely heavily on user engagement, and their environmental performance is influenced by how users interact with the system, e.g. whether consumers return products as intended, or increase overall consumption of services. As a result, unintended or undesirable consumer behaviour can reduce or offset the potential environmental gains.

Induced impacts and rebound effects are often difficult to predict, especially during the use phase, but they can be estimated through the use of tools such as Life Cycle Assessments (LCA). LCAs help PSS providers evaluate potential negative consequences and identify strategies to address them. Key aspects to consider in an LCA assessment include the functional unit and scale of the system, realistic assumptions on consumer behaviour, the number of products required, the rate of product loss, what the system replaces, and whether additional processes may lead to negative impacts. Conducting customer surveys and gathering user feedback are critical in assessing actual environmental impacts and potential unintended effects during the use phase. These findings can then be accounted for in the PSS design and implementation.

Beyond their environmental advantages, PSS models can provide substantial social value for both consumers and local communities. Many PSS offerings, particularly membership-based rental models, foster a sense of community, while others offer personalised customer service experiences. The shared and more intensive use of products allows PSS providers to offer services at lower costs compared to traditional product sales, making certain products more affordable and accessible to consumers who might not otherwise have access. Additionally, because PSS models often rely on labour-intensive services such as repair and maintenance, they create valuable local employment opportunities. Highlighting these social benefits can help PSS providers attract customers who prioritise both social and environmental impact, reinforcing the market appeal of these models.

One of the primary challenges facing the widespread adoption of PSS models is the ingrained cultural preference for ownership, which affects individual consumers, businesses, and public actors alike. Although certain PSS models, such as car leasing, have become widely accepted in the Nordics, many product categories face resistance due to emotional attachment, perceived convenience, potentially higher long term costs or concerns over control or safety. The success of PSS models hinges on shifting consumer behaviour and attitudes towards the concept of access over ownership. This can be achieved through clear communication of the benefits – such as cost savings, flexibility, and reduced environmental impact – along with addressing any potential drawbacks. Changing these deeply held preferences is key to unlocking the full potential of PSS in both consumer and institutional markets.  

Overcoming financial barriers is critical to scaling PSS models, particularly for SMEs. Many PSS businesses face challenges in securing stable cash flows and aligning high upfront investments with long-term revenue generation, which can be at odds with traditional financial metrics. Financial institutions must innovate in how they assess the value and risk associated with circular business models, adopting approaches that account for the long-term value of PSS. Governments can play a key role by offering financial instruments that share investment risks, such as loan guarantees or co-investment schemes. Such support will provide the necessary financial backing to scale PSS models and embed them more deeply in the market.

Public procurement holds immense potential for stimulating the growth of PSS models. While there are no significant legal barriers to adopting PSS in Nordic countries, many public institutions have yet to integrate PSS into their procurement strategies outside of sectors such as ICT and mobility. Complex procurement rules, lack of knowledge, and rigid framework agreements often hinder the adoption of innovative PSS models in public institutions. Addressing these challenges will require better training for procurement officers, increased market engagement, and the development of more flexible procurement processes that encourage the adoption of circular business models. Public institutions, by leveraging their purchasing power, can lead the way in promoting sustainable consumption and production patterns.