The Swiss ski mountain resort of Davos was where chief executive members of the World Economic Forum gathered last week to discuss weighty world events, and this year’s theme of ‘sustainability’ was at the heart of the agenda.
The theme prompted nearly 3000 members to consider how to mobilise business to respond to the risks of climate change.
But, in the search for answers from global finance, could a niche industry like finance leasing offer a way forward: Could leasing be the unsung hero of a circular economy?
In financial hubs far from Davos, incorporating ideas of the circular economy from an IT and insurance perspective are gaining traction.
According to Gonzalo Fernandez Porras, business development manager of Acquis Insurance Management, leasing has an important role to play in the circular economy, but it will take effort by equipment manufacturers and leasing companies for this idea to become a reality.
Fernandez Porras, a provider of insurance services for the asset finance sector, believes: “reprogramming our behaviour and embracing the circular economy gains momentum daily.”
He said the leasing industry is “well-positioned” to be a front runner to support the growth of the circular economy, which is achieved by promoting a business model that focuses on allowing customers to have access to the equipment they need to run their business, rather than owning it outright.
He said: “Because lessors retain ownership of an asset throughout its lifecycle, they can take responsibility for extending its useable life, recovering it for reuse and remanufacturing, and in doing so maximise its economic utility while minimising its environmental impact.”
Such an initiative has grown legs in the IT sector through a collaboration between 3stepIT and BNP Paribas Leasing Solutions.
3stepIT chief executive Carmen Ene said: Our company business model is built around the circular economy. The objective is to extend the lifetime of every device that we manage, through the ‘first life’ and giving it a ‘second life’ by refurbishing and re-using. We resell 97% of the devices that are returned at the end of lease. Every time a device is reused, we displace the manufacture of a new device. As most of the carbon footprint of a device over its lifetime is produced in its manufacture, this makes IT more sustainable. We like to think we are making the planet more sustainable, one device at a time,” she said.
“3stepIT is a signatory of the UN Global Compact that has established 17 Sustainable Development Goals (SDGs). We make decisions internally based on sustainability principles and we involved our employees in a ‘walk the talk’ effort to make their own lives more sustainable,” she added.
Fernandez Porras said extending this mindset into other areas of leasing will benefit equipment manufacturers, lessors and customers.
“One area which has seen significant growth in recent years is electric car batteries where manufacturers are seeking to employ leasing models which aim to simplify recovery, recycling and quality control, while at the same time potentially helping to maintain the re-sale value of the electric vehicle,” Fernandez Porras added.
When asked whether asset finance and leasing was immune from climate change pressure, Ene said the sector is not.
“Climate change is an urgent pressure, but I think it’s broader than that. The success of companies over the long term is inseparable from the societies in which they operate. So carbon footprint is important, so is e-waste, our fastest growing waste stream, so are single-use plastics,” she said.
“You need a broad strategy to address sustainability on all fronts. And this cannot be achieved by one company or one country or one government it needs deep and active participation of every individual on our planet,” she concluded.