Businesses across Europe are facing mounting pressure to invest in more eco-friendly practices, but high upfront costs and operational challenges stand in the way. Neil Pein of BNP Paribas Leasing Solutions, explains how embracing Product-as-a-Service (PaaS) models can improve accessibility to green technology, support the circular economy and help organisations meet evolving regulatory requirements.
The EU’s renewable energy target of 42.5% by 2030 is forcing organisations across all industries to rethink their business models. New regulations such as low emission zones, energy efficiency mandates and reporting requirements like the EU’s Corporate Sustainability Reporting Directive are turning up the heat for businesses to adopt more sustainable practices. While these policies present challenges, they also offer a huge opportunity for firms to invest in green technology.
Fortunately, the green technology sector is rife with innovative solutions that are ready to support companies on this journey. From EV charging points to solar panels and LED lighting, green technologies are developing rapidly and will be central to helping organisations reduce their carbon emissions.
So, what’s the catch? While the grass may be greener when it comes to leveraging certain technology, the challenge for businesses lies in the hefty gardener’s bill that comes with it. Big upfront costs remain one of the major barriers to investing in green technology. A rooftop solar energy system or an EV charger can cost thousands – if not tens of thousands – of euros upfront, with additional outlays for installation and maintenance. For businesses operating on tight margins and economic uncertainty, these costs can deter much-needed investment.
As a result, businesses find themselves between a rock and a hard place. Regulatory requirements are pushing them to adopt more eco-friendly practices, but the financial burden of doing so is slowing down the pace of progress.
A new route to sustainable profitability
Investing in green technology and managing costs don’t have to be mutually exclusive. Product-as-a-Service (PaaS) business models offer a game-changing way to access green technology by shifting the focus from ownership to usage or business outcomes.
Under a PaaS model, companies pay for the service or outcomes provided by a product, rather than owning the asset itself. This means predictable monthly payments replace large initial capital outlays. Additional services such as maintenance, upgrades, and insurance are often bundled into the contract, reducing operational complexity and ensuring optimal performance throughout the product’s lifecycle.
Take the example of an EV charging station. Businesses pay for the electricity they consume, whilst the Charging Point Operator (CPO) is responsible for installation, maintenance and upgrades.
This service-focused model provides the flexibility businesses need in today’s unpredictable environment. Companies can scale their usage of green technologies in line with business growth and adjust contracts to match evolving needs without the burden of capital-intensive purchases and big upfront investments. CPOs can offer membership plans and charging credits, catering to individual needs through integrated services.
A win-win for all parties involved
PaaS models also make economic sense for manufacturers of green technology products. By retaining responsibility for their products, manufacturers benefit from recurring revenue streams through ongoing service contracts rather than one-time sales, providing them with predictable cash flow. It also incentivises the design of more durable, repairable and recyclable technology, which in turn supports the circular economy.
Manufacturers are ideally positioned to implement PaaS models, as they have deep product knowledge, control over product development, access to detailed operational data, and the ability to scale solutions. Those leading the transition towards service-based business models are offering significant value to customers and differentiating their brand in a competitive marketplace.
A collaborative path to sustainability
Collaboration is key to fulfilling the promise of PaaS across the green technology sector. Markets for products like solar panels and EV chargers are characterised by a complex and fragmented ecosystem with various interdependencies between different stakeholders. For example, most solar panel manufacturers are largely based outside of the EU, while smaller regional players handle installations for residential and small to medium commercial needs.
Fragmentation in the market can make PaaS adoption more challenging as these circular models rely on a whole ecosystem approach. While the industry has seen some consolidation, with major players acquiring smaller companies or forming partnerships, more collaboration is needed to ensure these circular business models are viable and attractive to end-users.
Regulatory pressures and corporate sustainability goals are driving demand for more greener solutions, yet traditional ownership models are no longer fit for this transition. By shifting the focus from ownership to usage or outcome-based services, PaaS opens the door for businesses to embrace green technologies without the burden of upfront costs, helping them stay on the right side of compliance in the process.
