Leasing

Source: Leasing: A Step Toward Producer Responsibility

By: Bette K. Fishbein; Lorraine S. McGarry; Patricia S. Dillon; INFORM 2000

Synopsis: Leasing, if executed properly, has the potential to close the materials loop of production. Leasing explores how and offers case studies of companies with leasing programs already in place.

Reflection:

I had every intention of treating this resource much like I have previous ones, by applying it to that context with which I have the most experience, bikes. See, bikes are something of a paradox in the consideration of sustainability. On the one hand, they are a solution to so many of the problems with which we’re faced. Riding a bike to work addresses all of the following: physical and emotional health, traffic congestion, fossil fuel use, GHG emissions… I’m sure there are others, but those are the biggies. No question, riding bikes is a good thing.

On the other hand, bikes are a technology-driven industry, and we are as guilty as any of perpetrating planned obsolescence. Many, many years ago, bikes had one speed and you couldn’t coast. Then, you could coast. Then you could select from a few gears, then five, then ten. Now, you can ride a bike that has 30 different gears, or via a different mechanism, one that has a CVT, allowing you to select an INFINITE number of gears! Whoa! Life is good. Well, every time the bike industry added a gear, it made one of the previous generations obsolete, and a product doesn’t have to be obsolete for very long before the manufacturer stops supporting it. There are parts of a bike that wear out. On a timeline long enough, there will come a day when the parts required to keep an old bike working are simply no longer available. It is then a pretty wall-hanging. Or a boat anchor. Or garbage. It is no longer a usable bike. There is a class of cyclists, affectionately referred to as retro-grouches, for whom this seemingly inevitable progression is a continual source of aggravation. Why can’t we just make a bike that’ll last forever?

It was at this point I was going to construct Reality B, in which The Bike Company wasn’t in the business of producing and selling bikes, but in the business of leasing bikes as a service to those desiring to ride. I really struggled with this seemingly simple mental exercise, and a brief explanation will illustrate why and hopefully get me to a deeper understanding of how leasing fits into sustainability. In this reality, the variables that would make The Bike Company competitive would be durability, reliability, choice, and yes, performance, although it’s hard to say in which order those would be valued. It’s probably safe to assume that in Reality B that people will still value the things they valued before. The cyclist with buckets of disposable income is still going to look for the bike that performs best regardless of cost, and the cyclist who looks for the most durable and reliable product will use the service that can provide her with that. So the market doesn’t necessarily change. What changes?

The first thing that pops to mind is the bikes themselves. As a mechanic, I can personally attest that less expensive, lower performing bikes are harder to work on and require more attention. So, it stands to reason that the bikes available for lease will be of higher quality, creating a win-win situation for dealer and cyclist alike. My next question was, would it slow the pace of innovation? With current market incentives, planned obsolescence means bike companies are completely revamping their lines every three or four years (that’s an estimate based on anecdotal, personal evidence). As mentioned above, some of these changes involve adding gears, to which most cyclist reply, “whattya need all them gears for?” Non-bike examples would be things like increased horsepower in autos, steam cycles in washing machines, more memory in computers, etc. What do these have in common? I’d say they’re all examples of technological innovation we didn’t know we wanted until the companies showed it to us and told us we needed it. So is this innovation for the sake of innovation (and sales), or is it really adding to our quality of life? Good question, but I don’t want to wander too far astray.

Where were we? Yes, the effect of leasing on innovation. If I understood the resource correctly, this is where the difference between an operating vs. capital lease becomes important. As Leasing points out, only operating leases create the kind of market pressure/monetary incentives, by ensuring that the manufacturer retains ownership of the item after use, that can potentially close the loop on the production of goods. So going back to the bike example, from The Bike Company’s perspective, they want to be producing a product that retains value (as the proud owner of no less than six bikes, I can attest that they do not retain value; it never pays to sell). This could mean a bike that might be refurbished and re-leased, dismantled so the parts can be reused or recycled, etc. Again, the question of innovation pops up, but I think the point Dr. K made regarding one of my previous points is starting to sink in. Innovation isn’t entirely dependent on raw materials. If we want a high performance bike made out of the parts from older bikes, and people are willing to pay for it, we’ll make it happen.

And that’s kind of where I’ve left it. I still have a lot of questions about the philosophy of leasing. As a renter, one of my biggest worries is that I’m left with nothing tangible when I’ve fulfilled a lease and moved out. I’ve paid for the service of being sheltered, but I want something that’s mine. How does leasing other objects in our lives relate to that? Can leasing offer us the choice we’ve come to expect? If not, does it have a chance at success? I encourage any and all (not just the prof) to weigh in on this if you’d like.