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Clarifying the contribution of Product Service
System to Sustainable Entrepreneurship
Sina Sabet Mobarhantalab*
School of Industrial and Information Engineering Politecnico di Milano, Milan, Italy & School of Design,
Politecnico di Milano, Milan, Italy
*Corresponding authorEmail: sina.sabet@mail.polimi,it
Abstract.
The Product Service System (PSS) concept has been proposed as a methodology to design
innovative business models from economic, environmental, and socio-cultural perspectives.
In recent years, some interesting fields of study have emerged, suggesting feasible ways for
sustainable development, like sharing economy, circular economy, product service system
design, and sustainable entrepreneurship. The purpose of this investigation is to understand
the origin, and current state-of-the-art in Product Service Systems, and Sustainable
Entrepreneurship to provide an overview of the current knowledge. Then the concentration
will be on clarifying the contribution of Product Service Systems to Sustainable
Entrepreneurship. Regarding the contribution of PSS to sustainable entrepreneurship, this
paper suggests counting on drivers necessary for a PSS's sustainability and extending those to
the Entrepreneurial Ideas.
Keywords: product service system, sustainable entrepreneurship, sustainable development
1. Introduction
Multiplying the world’s population by the middle of this century and consequently raising the
level of consumption necessitates a factor 10 increase in resource productivity and
subsequently in sustainable development. (Mont, 2002) In business model literature (e.g.
Battistella et al., 2012), in recent years, some interesting topics have emerged, proposing
feasible ways for sustainable development, like sharing economy, circular economy, and
product service-system design. While research about PSS and servitization has been well
established for more than 20 years, it has been more than a decade that the notion of
sustainable entrepreneurship has been raised to address the contribution of entrepreneurial
activities to sustainable development (Schaltegger& Wagner, 2011).
This work aims to understand the origins and current state-of-the-art of Product Service
System (PSS) and sustainable entrepreneurship to give an overview of the current knowledge.
Our analysis will then be focusing on investigating the contribution of Product Service
Systems to Sustainable Entrepreneurship.
1.1 Sustainable entrepreneurship
1.1.1 Definitions and particularities
Sustainable entrepreneurship had been prominently defined by Shepherd and Patzelt (2011,
p.35) as the pursuit of opportunities to transform them into the existence of future products,
processes, and services for the sake of economic and non-economic gains for all individuals,
the economy, and society while focusing on the preservation of nature, life support, and
community (Farny and Binder, 2021), and aspires to create viable market solutions and to act
as change agents who realize and exploit opportunities for sustainable development.
Subsequently, the main focus of the sustainable entrepreneurship is economic, social, and
ecological value creation through business activity (Schaltegger and Wagner, 2011; Belz &
Binder, 2017; Muñoz & Cohen, 2018) as noted by Farny and Binder, (2021) and for this
purpose different conceptualizations for the integration of these three dimensions had been
proposed which the most prominent perspectives are:
1. Elkington’s Triple Bottom Line model, also known as the concept of intersection
between the economy, environment, and society where the combination of economic, social,
and ecological benefits is a win−win−win situation for business, society, and the environment.
2. Passet’s Bioeconomy model, famous for the concept of embeddedness, and views
sustainability in three concentric circles, in which the economy is embedded in the wider
society, and again embedded and surrounded by its natural environment.
3. The concept of Integration, in which economic-driven, socially-driven and ecologically-
driven entrepreneurship jointly form sustainability entrepreneurship (Schlange, 2009; Muñoz
& Dimov, 2015; Heikkurinen et al., 2019).
1.1.2 The converging point in sustainable entrepreneurship
Despite different criticisms for each albeit, the core idea that brings all perspectives under
the same umbrella is that the financial gains out of entrepreneurial activities must not
unfavorably affect the natural and social environments. That is to say, instead of trying to
minimize social and environmental burdens, ideally, entrepreneurship seeks to regenerate the
environment and instill positive social change, beyond mere economic wealth generation
(Markman et al., 2016; Muñoz & Dimov, 2015; Patzelt & Shepherd, 2011). Therefore,
sustainable entrepreneurship postulates entrepreneurial activity as a potential solution to
environmental degradation and social inequality (Cohen & Winn, 2007; Muñoz & Cohen,
2018; Shepherd & Patzelt, 2011). (Farny and Binder, 2021)
Simultaneously, sustainable entrepreneurship needs a sort of trade-off between multiple
objectives that are likely to create internal conflicts, avoiding structural tensions since
conflicts mainly originate from the level of integration or separation of intertwined objectives
in sustainable dimensions.
There is significant evidence of the positive association between sustainable-based
performance, and the promotion of competitive advantage over the competitors. (Laszlo and
Zhexembayeva, 2011) Accordingly, countries trying to develop sustainable transformation in
their regional areas would promote their competitive edge over peers; as stated by Parkinson
(2016), the economic development of regional cities will lead to decentralization and
deconcentration of investments that enhance the competitiveness in the creation of economic
opportunities, wealth and jobs that would improve the prospects of achieving social cohesion
and environmental sustainability.
1.2 Product Service System
As Anarelli (2016) states, literature on PSSs began to emerge after the publication of the
work by Goedkoop et al. in 1999, with seminal works like those by Mont (2002), Manzini et
al. (2001), and Tukker (2004), and the significant literature review by Baines et al. in 2007.
The number of publications about PSSs, as well as scholarly interest, has continued growing
until the present. In brief, PSS would be a solution that includes services with the products
through alternative scenarios for product/services utilization.
Morelli (2002) approached PSS’s definitions using three main perspectives:
• From a traditional marketing perspective: where the notion of PSS springs from a shift
of paradigm from products to an integrated blend of products and services that support both
production and consumption (Manzini, 1993).
• From a service marketing perspective: in which a PSS presents an evolution of
traditional modular and standardized services toward customized and targeted ones (Albrecht
and Zemke, 1985).
• From a product management perspective: where the notion of PSS refers to the
extension of the service component around the product for economic activities that are
conventionally product-oriented for business activities that are more service-oriented (Mont,
2000).
Aurich et al. (2006) argued that PSSs contains mutual interrelated physical and non-
physical components and its methodology is the integration of product and service design
processes.
This paper takes Komoto and Tomiyama’s view (2009) into consideration since, they have
argued a definition which is far too close to the notion of sustainable development. They have
stated that the PSS is methodology to design innovative business models from economic,
environmental, and socio-cultural perspectives.
2. Background and research gap
Integrating sustainability into a company’s activities is marked by high complexity and
uncertainty due to the different and often competing demands and objectives, which require
organizations to achieve economic, social, and environmental value simultaneously (Farny et
al., 2019; Muñoz & Cohen, 2018). (Farny and Binder, 2021)
Unlike conventional entrepreneurship, which mainly focuses on economic profit
maximization, sustainable entrepreneurship builds on the key premise that entrepreneurs have
the potential to create economic, social, and ecological value through their business activity.
Simultaneously PSS requires the introduction of a new business model, focused on the
provision of a new kind of offering to customers, a Unique Selling Proposition, which can
constitute a strong competitive advantage, and could position the firm on a higher step in the
market, linking this aspect to benefits like “Differentiation” and “Lock-out competitors”. At
the same time, to sustainably address the economic, environmental, and societal aspects of a
business. Therefore, the contribution of PSS to sustainable entrepreneurship appears to be
meaningful.
3. Discussion
PSS is a research topic closely linked to business model innovation and sustainability.
(Annarelli et al. 2016) The ultimate PSS objective is to increase a company’s competitiveness
and profitability. Another of the PSS objectives is to reduce the consumption of products
through alternative scenarios of product use instead of acquiring it. Here it is questionable
why? The response would be: to decrease the environmental impacts of production and
consumption. Plenty of PSSs’ benefits have been identified by scholars in this field. In this
section, the most promising advantages, concerning sustainable development would be
presented that are meaningfully addressing the contribution of PSS to sustainable
entrepreneurship.
3.1 Environmental sustainability profile of PSS
The environmental sustainability goal can be reached through PSS in different ways: reuse
and recycling of products at the end of their life cycle, which is a concept that can be applied
to several business models, like office furniture (Besch, 2005), construction machinery
industry (Dongmin et al., 2012), manufacturing (Igba et al., 2015); maintenance services to
lengthen products’ useful life and reduce change rate, a potential that can be fully exploited in
manufacturing (Meier et al., 2010a; Huang et al., 2011); forms of leasing, sharing and/or
pooling to maximize consumption rate by allowing multiple-use, leaving to the provider the
ownership and maintenance of the product (Mont, 2002; Tukker, 2004).
As mentioned by Anarelli (2016), the most frequently recognized benefit by many
scholars, is the reduction of environmental impact, which is also one of the main reasons
behind the development and implementation of a PSS.
3.2 Economic sustainability profile of PSS
Differentiation is also an important benefit, as stated by Baines et al. (2007): “PSS is
claimed to provide strategic market opportunities and an alternative to standardization and
mass production. The fundamental benefit is an improvement in total value for customers
through increasing service elements.” (Annarelli et al. 2016)
Most times, together with these two benefits, we can also find “Cost reduction” (Goedkoop
et al., 1999; Heiskanen and Jalas, 2003). Together with differentiation, we have the following
benefit of “Revenue increase”, due to the higher value gained by the offering through PSS,
and due to the lower impact of costs throughout the life cycle, also thanks to remanufacturing
and reuse of components.
3.3 Economic-environmental benefits of PSS
Other important benefits of PSS are those regarding “Consumption efficiency” and
“Production efficiency”, which are mostly cited in pair (Cook et al., 2006; Armstrong et al.,
2015): PSS is conceived and designed so as to prolong products’ life cycle and utility, in
order to allow better exploitation of resources and less waste production. The prolonged life
span of products leads to greater efficiency during the consumption phase from the customers’
perspective.
Moreover, adding services to a product may also introduce advantages from the producer’s
perspective, because through the implementation of reuse & recycling policies, many
components and parts could be remanufactured, reutilized, and recycled into new products,
which is clearly more sustainable (economically and environmentally) than producing entirely
new components.
Also, “Cooperating with authorities” and “Reducing environmental costs” are strictly
connected to the social and environmental aspects of sustainability, allowing for the
anticipation of the implications of future take-back legislation (Goedkoop et al., 1999).
3.4 Social sustainability profile of PSS
Another important benefit is that of “Locking-in customers” which is strictly connected with
“Customer engagement, and was recognized first by Vandermerwe and Rada (1988) and Wise
and Baumgartner (1999) the main purpose is not necessarily to gain the largest share of the
market share (customers) but to gain the strongest relationships with the most profitable
customers.” (Annarelli et al. 2016)
3.5 Key drivers for sustainability
Regarding the contribution of PSS to sustainable entrepreneurship, it is suggested to count
on drivers necessary for the sustainability of a PSS and extend those to the entrepreneurial
discovery process. Drivers can be considered as the motivations underlying the decision of
developing/implementing a PSS. (Annarelli et al. 2016)
Major drivers for the environmental sustainability are “Cooperating with authorities” and
“Reducing environmental costs” are strictly connected to the social and environmental aspects
of sustainability, allowing for the anticipation of the implications of future take-back
legislation (Goedkoop et al., 1999). While as drivers for social sustainability, most of them
are relate to marketing, like “Building relationships with customers” or “Extending existing
offer” (Azarenko et al., 2009; Wagner et al., 2013): customer involvement, and engagement
are crucial elements in establishing a successful PSS offer. It would be also the same as
“Extending existing offer”, which is strictly related to the benefits of “Differentiation” and
“New market development”.
Lastly main drivers for economic sustainability is a strong position in customer’s market as
organizations strive to reach it, thanks to new innovative offerings like PSS, which is also
difficult to imitate for competitors; furthermore, an extension in the total offering (intended as
new additional services or entirely new systems) can be a powerful means to restrain even
more loyal customers and acquire new ones. Other drivers are particularly related to the
dimension of strategic analysis, like “Searching for USP” and “Discouraging newcomers”
where businesses could meet their economic sustainability. (Annarelli et al. 2016)
4. Conclusion
PSS allows firms to decouple economic growth from environmental pressure while
satisfying consumers’ needs, constituting an important strategic market opportunity. It
requires the introduction of a new business model, focused on the provision of a new kind of
offering to customers, a Unique Selling Proposition, which can constitute a strong competitive
advantage, and could position the firm on a higher step in the market, linking this aspect to
benefits like “Differentiation” and “Lock-out competitors”. At the same time, to sustainably
address the economic, environmental, and societal aspects of a business.
PSS premise is suggesting business models full of drivers that are well capable of meeting
sustainable entrepreneurship context and guidelines while, traditional business models
focused on product selling, could be easily copied and reproduced by competitors, acting in
the same market or also coming from other markets (newcomers) and sectors attracted by new
possibilities.
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