WRAP Cymru’s sustainable procurement team has worked in collaboration with ClwydAlyn, a North Wales Housing Association and Beko to support the introduction of a new circular leasing purchasing model, to be more sustainable, cost effective and increase social value in social housing accommodation.
Problem
To move away from the linear, short-term and expensive method of owning equipment to one that focuses on providing a service to ClwydAlyn, in a cost efficient, lower maintenance process, and deliver environmental and circular economy benefits.
Solution
Switching from a purchase and ‘transactional’ agreement to a leasing scenario that considers the whole life cost of the asset, and encourages the stakeholders to provide long-term, sustainable, circular and innovative alternatives.
Impact
This provided a cost-effective and low maintenance solution in the provision of critical services to the ClwydAlyn clients and social housing stakeholders.
Problem
In the past, housing associations typically purchased white goods or leased commercial units which were often over-engineered for the domestic tasks required. This case study examines the opportunity for leasing and developing a long-term relationship between the buyer and equipment provider/manufacturer for domestic use.
Solution
Sustainable procurement and the provision of circular, affordable and innovative services are highlighted in the WRAP Cymru sustainable procurement hierarchy guidance which highlights the positive impact of leasing equipment as outlined below:
In leasing equipment, both the user and seller benefit by promoting the long-term utilisation of the asset, due to the following:
- Lower initial costs benefit the cash flow of the buyer and provides a long-term income stream for the seller.
- A leasing option supports the idea of better ‘design’, therefore the manufacturer designs and builds machinery and equipment with maintenance, repair and materials recovery in mind.
- Lower overall whole life costs can be a by-product of this ‘product-as-a-service' concept.
- Easier life management by the buyer, with any product failure being the responsibility of the supplier who would handle repairs and manage ongoing maintenance.
- Transparency of costs is ensured by an agreement that details a fixed amount of funds allocated on a monthly/annual period over the duration of the contract (three years in this case, but longer contracts can be negotiated).
- This more sustainable approach to equipment sourcing benefited ClwydAlyn as it saved money over the period of the contract, used less energy due to product efficiencies (and so less CO2 emissions associated with use), in addition to employing local engineers to service and maintain the equipment (and hence benefiting the local economy).
Beko had long believed that there needed to be an alternative to the linear sales model for appliances but had struggled to find a partner to work with to make that a reality.
In ClwydAlyn we found a partner that shared our passion and our aspiration to move to a circular business model that brings sustainability and social benefits, whilst also being commercially viable for both parties.
Working with Neil Lynch and the whole team at ClwydAlyn was a real pleasure, their drive and determination was critical to the project success, and we look forward to continuing our work with them to build on this pilot. We hope this example of what can be achieved through working in partnership will inspire other housing associations and local authorities to make product leasing for social housing the default way of supplying appliances in the future.Andrew Mullen, Sustainability and Regulatory Affairs Specialist, Beko
Impact
Direct benefits of switching from the previous commercial equipment to smaller, domestic washing machines under the new leasing agreement resulted in:
- A significant reduction in costs with the 4 new machines (tumble dryers and washing machines) being charged at £55.60 per month, approximately 10% of the cost of the previous machines, with no balloon payments. This new leasing model represents a saving of £430 per month.
- Increased efficiency of the new units resulted in less electricity being consumed, with exact figures to be determined with further monitoring.
- Local service operators were also included in the leasing costs to provide servicing and repairs as needed, supporting local employment.
As well as presenting a great opportunity to save money, this project has allowed us to look at sustainability and environmental opportunities.
The service model will bring benefits to ClwydAlyn by leasing high end domestic appliances to ensure that we are getting optimum usage and prevent repetitive purchasing and disposal of multiple items of equipment in the same timeframe. It has also reduced our energy consumption, and feedback from residents and staff is that the new equipment has improved the image and environment of our laundry areas at sites and offered a domestic solution that people will use in the community when moving towards independence.
It has been a real pleasure to work with Andrew Mullen at Beko and I really appreciate his trust and support throughout the concept and design of the service model. I would also like to thank Huw Lloyd from WRAP Cymru’s sustainable procurement team who first suggested the idea and has consistently provided support and advice since day one.Neil Lynch, Head of Procurement, Contracts & Social Value, ClwydAlyn