17. CONCLUSIONS

This project has explored the potential of Product-Service Systems (PSS) in advancing the transition toward a circular economy in the Nordic region. Three years of devoted efforts with literature studies, interviews, workshops, and 16 pilot projects have created a significant pool of knowledge on barriers and enablers of successful PSS models. The project has analysed PSS models’ environmental potential and identifies the conditions under which these service-based solutions can contribute positively to environmental sustainability.

The findings draw attention to the important roles of policymakers, financial actors, public institutions, and businesses in creating more favourable conditions for the broader adoption and scaling of PSS solutions. Conclusions and recommendations for pursuing PSS in the Nordics have been prepared and discussed with numerous actors.

State of PSS adoption in the Nordics

The project has identified more than 300 PSS business cases in the Nordics. The most financially sustainable solutions are found in the B2B segment, where economic viability appears more easily established than in the B2G and B2C markets. Total Cost of Ownership calculations are more common in B2B settings, allowing businesses to understand better the long-term economic benefits of renting or leasing products. Contract durations in the B2B segment also tend to be longer, offering PSS providers greater financial stability and planning security. However, PSS providers in the B2B market must be aware that their solutions often require extra work from end-users and must adjust their business models accordingly

PSS adoption in the B2C market has been less disruptive, with providers facing challenges translating the apparent consumer interest into long-term service subscriptions. Consumers in B2C markets tend to value personalised services and flexibility, which require significant internal resources from PSS providers and complicate scaling efforts.

The B2G market is enormous and characterised by the procurement of large volumes, often guided by national and local government sustainability visions. However, these positive factors have not led to a significant uptake of PSS solutions in the public sector due to organisational and bureaucratic constraints.

Environmental Potential of PSS

The project’s life cycle assessments (LCAs) show that many PSS models hold significant environmental potential compared to traditional ownership models. In theory, PSS enables a decoupling from the linear economy by offering services rather than products, thus creating incentives to increase product lifetime expectancy and reducing resource consumption while maintaining economic growth. However, this potential is contingent on mitigating unintended negative consequences such as rebound effects and induced impacts related to system operation. LCAs should be applied to assess potential environmental risks and ensure that PSS solutions achieve their sustainability goals. PSS providers can reduce induced impacts and maximise environmental benefits by identifying hotspots and unintended risks before implementation.

17.1 Recommendations

The recommendations below are tailored to enable four main stakeholder groups to contribute to strengthening the implementation of PSS models in the Nordics.

17.1.1 Recommendations for businesses

Nordic businesses looking to adopt or scale PSS models encounter challenges created or influenced by industry dynamics, market maturity, market segment (B2B, B2G, B2C), financial backup, and their specific business model. Several common obstacles emerge across sectors, product groups and market segments. The following recommendations offer general strategies for overcoming these challenges, applicable to a wide range of PSS providers, regardless of company size or industry:

Clearly define and communicate the added value of PSS offerings

One of the key challenges for PSS providers is demonstrating the unique value of their offerings compared to traditional product sales. Businesses should emphasise the long-term economic advantages of PSS through tools like Total Cost of Ownership (TCO) calculations and environmental/climate advantages documented through LCA. Also, other benefits, such as convenience, better product performance, enhanced maintenance services or social benefits should be more clearly communicated to the potential market. For both B2B and B2C segments, addressing perceived inconveniences and illustrating how PSS models improve the customer experience is essential. Real-life case studies and customer testimonials can build trust and drive interest.

Maintain personalisation while scaling

Many PSS customers highly value personalised customer service and strong support. Providers in the B2B sector need to consider not only their business clients but also the end users when designing and communicating their services. As SMEs scale their PSS offerings, maintaining the personalised approach that contributed to their initial success can become challenging. To address this, companies must balance implementing more standardised and efficient processes while preserving the personal relationships that keep customers engaged and satisfied. Digital tools can help achieve this by automating routine tasks while enabling tailored interactions where needed. Mapping customer journeys can also assist in identifying key touchpoints where personalised service adds the greatest value, allowing providers to tailor their offerings to enhance customer satisfaction and loyalty effectively.

Minimise unintended consequences and maximise environmental potential

PSS providers should proactively conduct risk and hotspot assessments before and during implementation to enhance environmental outcomes. Tools like Life Cycle Assessment (LCA) can help companies identify key environmental hotspots and improvement areas to optimise overall system efficiency. To maximise environmental benefits, providers should prioritise designing products for durability, ensuring high usage rates, substituting resource-intensive systems, and reducing emissions throughout operations. Additionally, consider how customer behaviour may impact environmental performance, as rebound effects or other unintended consequences can undermine the positive impact of the PSS model.

Foster strong relationships with suppliers

In circular value chains, building and maintaining strong, long-term relationships with suppliers is critical, as it ensures a reliable supply of spare parts and service-related components—key to maintaining product functionality and lifecycle performance. PSS companies that develop their products have greater potential to design for PSS, enabling better durability and repairability. Power dynamics within the value chain can pose challenges for companies relying on external suppliers. For instance, suppliers of products developed by large, powerful companies may struggle to provide essential guarantees, such as extended product lifespan warranties. This can create barriers for smaller PSS providers, limiting their ability to offer comprehensive service guarantees or circular solutions. Diversifying supplier relationships can increase resilience and flexibility.

Align financial metrics with long-term goals

To thrive in today’s evolving business landscape, PSS providers must rethink traditional financial metrics and embrace those that better align with service-based models. Prioritising metrics focusing on sustainability, recurring revenue, and long-term financial resilience is key to demonstrating value to investors and supporting steady growth. By moving away from conventional sales-driven metrics, companies can showcase the stability of their business models over time. When traditional financing options fall short, PSS providers should consider alternative asset management strategies, such as lease-and-lease-on or sale-and-leaseback models. These strategies can provide much-needed liquidity, relieve the financial burden of asset ownership, and offer flexibility in navigating market uncertainties. By integrating these approaches, PSS companies can optimise cash flow, lower risk, and create a more sustainable growth path, ultimately making their business more attractive to investors and better equipped to weather financial challenges.

Utilise existing tools and foster collaboration

PSS providers should leverage existing tools and templates to enhance and streamline their business models. These ready-made resources can support businesses in efficiently implementing best practices, optimising operational processes, and reducing development costs. The most relevant tools, guides, and templates for Nordic PSS companies are outlined in the comprehensive guide developed as part of this project. By utilising these tools, companies can focus on refining their unique offerings and delivering greater value to customers while accelerating the integration of PSS into their existing frameworks. Additionally, fostering collaboration between PSS providers – within the same product category or across sectors facing similar challenges – can unlock valuable synergies. Sharing knowledge, exchanging best practices, and working together can help businesses overcome common barriers, such as scaling operations and improving customer engagement strategies.

17.1.2 Recommendations for (Nordic) Policymakers

Nordic policymakers must focus on creating a level playing field to support the development of PSS models and help them compete with traditional linear models. This involves internalising linear business models’ environmental and social costs to ensure that companies presenting circular approaches, like PSS, are not disadvantaged by higher operational costs.

Implement Extended Producer Responsibility (EPR) schemes

EPR schemes can be an effective tool in driving circular practices by making producers financially responsible for the end-of-life management of products. This encourages innovation in circular design, product reuse, and waste prevention. Integrating these schemes with other policy instruments across the Nordic region can promote a more comprehensive shift to circular practices. Eco-modulated fees within EPR schemes are important to promote sustainable product design. However, they must still provide sufficient incentives to reduce the number of new products introduced to the market, ensuring that models like PSS, which are not based on continuous product sales, remain competitive.

Introduce a tax shift from labour to natural resources

A tax shift from labour to natural resources would strongly support PSS development, especially in Nordic countries where high labour costs make repair and maintenance services expensive. Reducing taxes on labour and increasing taxes on virgin resources would lower the cost of labour-intensive services essential to PSS models. Additionally, tax incentives, such as VAT reductions on repair and rental services, could make circular services more appealing and affordable for consumers.

Provide targeted public funding

Public funding targeting circular companies is essential to help PSS providers – particularly start-ups and SMEs – overcome challenges in securing traditional financing. Their innovative business models are often perceived as high-risk or incompatible with conventional financial evaluation methods. Offering targeted funding through grants, subsidies, and low-interest loans can enable these companies to invest in research and development, scale their operations, and deliver more sustainable solutions to the market. Many consulted PSS companies have successfully expanded and scaled their business models thanks to such green financing schemes, demonstrating the critical role that public funding plays in accelerating the growth of circular business models.

Offer guidance on environmental reporting standards

Policymakers should provide clear guidance to help PSS providers comply with environmental reporting standards, such as EU Directives and national anti-greenwashing legislation. Expanding initiatives like Denmark’s Business Service Hubs (“Erhvervshuse”) and Innovation Norway would further assist PSS providers in navigating complex regulatory frameworks and building capacity and consumer trust. Additionally, guiding policy frameworks specific to their business models is crucial, as many companies are hesitant to explore the regulatory landscape for fear of inadvertently violating the rules. Clear, accessible information will empower PSS companies to operate confidently within compliance guidelines while driving sustainable innovation.

Develop sector-specific strategies and action plans

To successfully bridge the gap between broad circular economy ambitions and on-the-ground implementation, sector-specific strategies are crucial. While overarching frameworks are valuable, they often fail to address different industries’ unique challenges and opportunities. By working closely with industry stakeholders, policymakers can identify each sector's barriers – related to regulation, market dynamics, or technological readiness – and craft strategies that effectively address these issues. Targeted action plans should include incentives for circular practices, clear guidelines for compliance, and sector-specific resources to aid businesses in transitioning to circular models. By establishing this supportive ecosystem, Nordic governments can drive the shift from linear to circular economies, positioning PSS as a key driver of sustainable production and consumption across the region.

17.1.3 Recommendations for public institutions

Public institutions play a pivotal role in driving the adoption of PSS by integrating circular economy principles into procurement processes. However, it is important to recognise that not all products are best suited for PSS, and ownership models can also effectively support sustainability when based on circular design principles and sustainability criteria. Current procurement frameworks often favour traditional linear models, which can limit innovation and hinder the uptake of PSS. Public institutions have the power to lead by example, creating demand for circular products and solutions while fostering sustainable business models, including PSS.

Revise public procurement policies

To enable broader adoption of PSS, public procurement policies must move away from rigid, predefined specifications favouring traditional product ownership. Instead, procurement strategies should focus on functional requirements – what a product or service needs to achieve – and Total Cost of Ownership (TCO), allowing suppliers to propose innovative, service-based solutions. For example, by shifting from buying products to procuring services (such as renting or leasing), public institutions can reduce their environmental impact and encourage the market to develop more sustainable offerings. Initiatives such as Norway’s National Programme for Supplier Development (LUP) are effective models for this shift, encouraging market innovation by focusing on the institution’s needs rather than predefined solutions.

Prioritise total cost of ownership (TCO) and sustainability

Public institutions should incorporate Total Cost of Ownership (TCO) calculations and sustainability criteria in their procurement decisions rather than focusing solely on upfront costs. PSS models may appear more expensive initially but often result in long-term savings through reduced maintenance and repair costs. Providing clear tools and guidelines for TCO calculations, similar to those developed by Denmark’s SKI (Statens og Kommunernes Indkøbsservice), will help public entities better assess PSS’s financial and environmental benefits throughout the product or service lifecycle. This approach aligns financial decisions with circular economy principles, encouraging long-term sustainable practices.

Enhance capacity-building initiatives

Public institutions should invest in training and capacity-building for procurement professionals to ensure they understand how to incorporate PSS and circular economy principles into procurement strategies. Knowledge-sharing platforms and practical tools should be provided to guide procurement professionals in making climate- and resource-conscious decisions. By fostering a deeper understanding of circular procurement, public institutions can reduce knowledge gaps and drive the successful integration of PSS in their operations.

Engage suppliers early in the procurement process

Public institutions should adopt a proactive approach by engaging suppliers early in the procurement cycle. Pre-commercial dialogues between public buyers and potential suppliers can raise awareness of PSS models, align offerings with the circular economy, and prepare suppliers to meet the requirements of these service-based models. This early engagement can reduce procurement delays and create a more responsive market, increasing the likelihood of receiving innovative PSS bids.

Encourage smaller contracts and pilot projects

Public institutions should leverage direct awards and smaller contracts to foster experimentation with PSS models, particularly through pilot projects. Direct awards for smaller-scale contracts can reduce barriers to entry for SMEs, enabling them to showcase innovative solutions without the heavy administrative burdens of large-scale procurements. By testing PSS models on a smaller scale, public bodies can tailor services to their specific needs while encouraging innovation within the market.

Think outside the box – facilitate the adoption of PSS models directly

Public institutions can achieve significant cost savings and environmental and social benefits by adopting PSS models themselves or applying these principles in innovative ways. For instance, the pilot case of Oslo municipality shows that by establishing a system, a digital platform and a centralised warehouse for redistributing unwanted furniture to other public services, the municipality has the potential to save CO₂e and public spending on new furniture while creating inclusive jobs. This way, the municipality uses the same mechanisms as a PSS provider for its public service entities, providing access over ownership and obtaining similar benefits as a private PSS provider. Municipalities can also address specific challenges by adopting PSS models in unexpected settings. Aarhus’ Rotake reuse system, which was implemented in coffee shops to tackle waste and littering, is a prime example of how PSS can be applied creatively to solve environmental issues. By incentivising the return of reusable takeaway cups, Aarhus is reducing waste while promoting sustainable consumer behaviour. These examples show how municipalities can lead by thinking beyond traditional frameworks and leveraging PSS to deliver more efficient, cost-effective, and sustainable services.

17.1.4 Recommendations for financial actors

While all businesses need a strong case to attract investments, non-linear business models like PSS face additional hurdles. Traditional financial evaluation methods, such as key economic indicators and asset structure, are often misaligned with the long-term value creation that PSS offers. To better support PSS and other circular business models, financial actors and investors must adapt their evaluation criteria to reflect the unique financial dynamics of these models. The following recommendations outline key measures to achieve this shift:

Develop expertise in PSS financial structures

Banks, investors, and financial institutions should ensure they possess the internal expertise to manage the complexities of PSS models. PSS relies on recurring revenue streams rather than traditional upfront sales, necessitating tailored financial solutions that align with the cash flow dynamics of these models. By offering products that reflect the unique needs of PSS – such as longer repayment periods or flexible terms – financial institutions can help PSS providers scale without the limitations of conventional loan structures.

Implement risk-sharing mechanisms

Financial institutions should explore risk-sharing mechanisms, such as government-backed loan guarantees, to lower the risk of investing in PSS solutions. Co-payment structures, where governments guarantee a portion of the loan, can encourage banks to finance circular businesses and alleviate the capital constraints that often hinder PSS providers. These mechanisms will enable greater investment in sustainable models and reduce perceived financial risks.

Expand green financing to include PSS

Institutions like the Nordic Green Bank (Nefco) should broaden their investment criteria to include circular business models like PSS, often overlooked in favour of linear models. By offering dedicated support to national and cross-Nordic PSS businesses, green financing institutions can help overcome significant financial barriers, fostering a robust circular economy in the region.

Collaborate on knowledge-sharing and upskilling initiatives

Financial actors should work closely with public institutions to promote knowledge-sharing platforms and upskilling initiatives. These efforts should equip PSS providers – particularly startups and SMEs – with the financial management skills they need to access formal and informal capital. Upskilling PSS companies in understanding investor expectations and managing their finances will help them scale successfully within the circular economy.

17.1.5 Final thoughts and path forward

In conclusion, this project underscores the potential of PSS in the Nordic region’s transition to a circular economy. By implementing the key recommendations outlined in this report, stakeholders can collectively create the conditions for PSS to thrive. As the shift from a linear to a circular economy accelerates, PSS can play a pivotal role in reducing resource consumption, fostering sustainability, and driving economic innovation. Continued collaboration between businesses, policymakers, financial actors, and public institutions is essential to realise this potential fully. Only by working together can we harness the full potential of PSS and unlock a more sustainable, resilient future for the Nordic Region.