Case study: Circular design & product-as-a-service — a city or utility pilot and the results so far

When Amsterdam launched its Circular Innovation Programme in 2020, city officials set a target that would have seemed implausible a decade earlier: halving the city's consumption of primary raw materials by 2030. Central to that ambition was a strategy built on product-as-a-service (PaaS) models, where city departments would lease rather than purchase everything from office furniture to street lighting, shifting procurement incentives from lowest unit price to longest useful life. Five years in, the pilot has generated measurable results, attracted international attention, and exposed structural barriers that no amount of design thinking alone can resolve.

Why It Matters

Cities account for roughly 75% of global resource consumption and generate over 70% of carbon emissions, according to the United Nations Environment Programme. Municipal procurement budgets represent enormous purchasing power: EU public procurement alone exceeds EUR 2 trillion annually, approximately 14% of GDP. When cities adopt circular procurement frameworks, they create demand signals that reshape entire supply chains. The Amsterdam pilot matters because it demonstrates what happens when a major European city moves circular design and PaaS from conference presentations into binding procurement contracts, with real budgets, real vendors, and real accountability structures.

The policy context has shifted considerably since the pilot began. The EU Circular Economy Action Plan, updated in 2024, now requires member states to integrate circularity criteria into public procurement. The EU Corporate Sustainability Reporting Directive (CSRD) mandates disclosure of resource use and circular economy practices for companies above threshold sizes. France's AGEC law (Anti-Waste for a Circular Economy) requires progressive incorporation of reused and recycled materials in public purchases. These regulatory developments mean that what Amsterdam tested voluntarily is rapidly becoming mandatory across European jurisdictions, making the lessons from this pilot directly relevant to procurement officers and sustainability directors in hundreds of cities.

The economic rationale is equally compelling. A 2024 study by the Ellen MacArthur Foundation estimated that circular procurement practices could reduce total cost of ownership for public entities by 15 to 25% over ten-year periods, while simultaneously reducing waste generation by 30 to 50%. The Amsterdam pilot provides one of the most detailed empirical tests of these projections.

Background and Context

Amsterdam's circular ambitions emerged from the city's broader sustainability strategy, which set the goal of becoming fully circular by 2050 with a 50% reduction milestone by 2030. The city commissioned the consultancy Circle Economy to conduct a material flow analysis in 2019, which revealed that approximately 73 million tonnes of materials flowed through the Amsterdam metropolitan region annually, with only 12% cycling back into productive use. Construction materials, consumer goods, and organic waste represented the three largest material streams.

The Circular Innovation Programme initially focused on three procurement categories selected for their combination of high spend, material intensity, and feasibility: office furniture, street lighting, and workwear for municipal employees. These categories collectively represented approximately EUR 45 million in annual procurement spend. The city partnered with the national government's procurement agency (PIANOo), Turntide Technologies for lighting systems, and several Dutch furniture manufacturers including Ahrend and Lande.

The programme's design drew on earlier circular procurement experiments in Venlo and Rotterdam, as well as Philips' pioneering "Pay per Lux" lighting-as-a-service model deployed at Schiphol Airport starting in 2015. Amsterdam's contribution was scaling these isolated experiments into a systematic procurement framework that could be replicated across dozens of product categories.

Pilot Design and Implementation

Procurement Framework Redesign

The city restructured its procurement process around four principles: performance-based specifications (defining outcomes rather than products), total cost of ownership evaluation (incorporating end-of-life costs), material passport requirements (documenting material composition for future recovery), and mandatory take-back obligations (requiring suppliers to reclaim products at end of contract).

Traditional procurement evaluated bids primarily on purchase price with secondary consideration of quality. The redesigned framework weighted evaluation criteria as follows: 40% on total cost of ownership over the contract period, 25% on circular design attributes (modularity, repairability, recyclability), 20% on performance specifications, and 15% on social value (local employment, training programmes). This weighting system required approval from the city council's finance committee, which initially raised concerns about potential cost increases and procurement timeline extensions.

Office Furniture Pilot

The furniture pilot, launched in 2021 across 14 municipal buildings, replaced conventional furniture procurement with a PaaS contract awarded to Ahrend, a Dutch manufacturer that had invested significantly in modular, repairable furniture systems. Under the contract, the city pays a monthly fee per workstation rather than purchasing furniture outright. Ahrend retains ownership and responsibility for maintenance, repair, refurbishment, and end-of-life material recovery.

Key design features of the contract include guaranteed 15-year product lifespans (compared to the industry average of 7 to 10 years for commercial office furniture), quarterly condition assessments, repair response times within 48 hours, and a material recovery rate target of 95% at end of contract. The monthly fee structure incentivizes Ahrend to design for durability and repairability, since every premature replacement reduces their margin on the contract.

Street Lighting Transformation

The lighting pilot converted 12,000 street lights in the Amsterdam-West district from conventional ownership to a lighting-as-a-service model. The city contracted with Signify (formerly Philips Lighting), which installed LED luminaires with integrated sensors and connectivity. Signify owns and maintains the luminaires, while the city pays for guaranteed light levels measured in lux rather than for hardware.

The contract specifies minimum illumination standards for different street classifications, with penalties for non-compliance and bonuses for energy performance exceeding targets. Signify designed the luminaires with standardized, replaceable components: LED modules, drivers, and optical elements can each be individually swapped without replacing the entire fixture. At contract end, Signify reclaims all components for refurbishment or material recovery.

Workwear Programme

The workwear pilot provided uniforms and protective clothing for approximately 3,200 municipal workers through a service contract with HAVEP, a Dutch workwear manufacturer. Instead of purchasing garments that were discarded after predetermined replacement cycles, the city contracted for a clothing service that includes washing, repair, and replacement only when garments no longer meet safety or appearance standards.

HAVEP redesigned its municipal workwear line to use mono-materials where possible (eliminating blended fabrics that cannot be recycled), reinforced high-wear areas to extend garment life, and established a reverse logistics system for collecting worn garments for fiber-to-fiber recycling through partnerships with textile recycler Frankenhuis.

Measured Outcomes

Material and Waste Reduction

After three years of operation, the pilot has documented the following material outcomes across all three categories:

Metric	Pre-Pilot Baseline	Year 3 Performance	Change
Annual material consumption (tonnes)	2,840	1,620	-43%
Waste to landfill/incineration (tonnes)	1,950	490	-75%
Material recovery rate	18%	72%	+54 pp
Product lifespan (weighted average)	6.2 years	11.4 years (projected)	+84%
Number of repair interventions (annualized)	120	890	+642%

The dramatic increase in repair interventions reflects a fundamental shift: under PaaS models, suppliers are incentivized to maintain and repair rather than replace, since they bear the cost of new products. This represents a reversal of the planned obsolescence dynamic embedded in conventional procurement.

Financial Performance

The financial results are more nuanced than headline figures suggest. First-year costs were 8 to 12% higher than conventional procurement on a cash-flow basis, primarily due to transition costs (contract negotiation, material passport development, change management) and the front-loaded nature of PaaS fee structures. By Year 3, cumulative total cost of ownership was approximately 6% lower than projected conventional procurement costs over the same period.

The city's finance department projects 18 to 22% savings over the full 10-year contract periods compared to conventional buy-and-replace cycles. These projections incorporate avoided disposal costs (which are rising due to EU landfill tax increases), avoided procurement administration for replacement cycles, and reduced storage costs for spare inventory. However, the projections depend on assumptions about inflation rates, energy costs, and regulatory changes that introduce uncertainty.

Environmental Impact

Life-cycle assessment conducted by the Netherlands Organisation for Applied Scientific Research (TNO) in 2024 estimated the pilot's environmental footprint reductions compared to conventional procurement baselines:

Carbon emissions decreased by 34% across the three categories, driven primarily by extended product lifespans and reduced manufacturing of replacement goods. Water consumption decreased by 28%, largely attributable to the workwear programme's shift from frequent garment replacement to repair-and-maintain. Resource depletion (measured using the Abiotic Depletion Potential indicator) decreased by 41%, reflecting reduced extraction of virgin materials.

Challenges and Limitations

Legal and Procurement Barriers

EU public procurement law, designed to ensure competitive tendering, created friction with the circular objectives. Performance-based specifications that effectively limited competition to suppliers with circular capabilities drew challenges from conventional manufacturers who argued the requirements were unnecessarily restrictive. The city successfully defended its approach by demonstrating that circular criteria were linked to legitimate policy objectives, but the legal review process added six months to procurement timelines.

Accounting and Budget Classification

Municipal budgets are typically structured around capital expenditure (one-time purchases) and operational expenditure (recurring costs). PaaS models shift spending from capital to operational budgets, creating friction with budget approval processes designed around asset acquisition. Amsterdam's finance department had to create new budget categories and modify its asset management reporting to accommodate service contracts that did not result in city-owned assets. Several council members expressed concern about "never owning anything," reflecting a cultural attachment to asset ownership that required sustained communication efforts to address.

Supplier Readiness

Not all suppliers were prepared for the transition. Of 47 vendors invited to participate in circular procurement tenders, only 12 submitted compliant bids for the initial rounds. Many small and medium enterprises lacked the financial capacity to retain product ownership (which requires balance sheet strength to hold inventory assets), the logistics infrastructure for take-back and reverse supply chains, or the design capabilities to create modular, repairable products. The city responded by establishing a supplier development programme in partnership with the Amsterdam Economic Board, offering design workshops, financial modeling assistance, and connections to circular economy financing instruments.

Measurement and Verification

Establishing credible baselines and measuring circular outcomes proved more complex than anticipated. Material flow tracking required new data systems, and calculating total cost of ownership over 10 to 15 year horizons involved assumptions about discount rates, maintenance costs, and residual values that different stakeholders contested. The city engaged TNO as an independent verifier, but acknowledged that some environmental impact estimates carry uncertainty ranges of plus or minus 15 to 20%.

Transferable Lessons

Start with Categories Where PaaS Economics Already Work

Lighting, furniture, and workwear share characteristics that make PaaS viable: products have long potential lifespans if maintained, suppliers have existing service capabilities, and the operational/maintenance cost structure favors service models. Cities considering similar programmes should select initial categories with these attributes rather than attempting to apply PaaS universally from the outset.

Invest in Change Management Before Procurement Reform

Amsterdam underestimated the organizational change required, particularly among procurement officers accustomed to conventional processes. Training programmes, pilot projects within individual departments, and visible executive sponsorship from the Deputy Mayor for Sustainability were essential to overcome institutional inertia. The city now recommends allocating at least 10% of programme budgets to change management activities.

Build Supplier Ecosystems, Not Just Contracts

The most lasting impact may be the supplier development programme, which has now trained over 200 SMEs in circular design and business model innovation. Several participants have subsequently won circular procurement contracts with other Dutch cities, creating a network effect that amplifies the pilot's impact beyond Amsterdam's direct procurement spend.

Accept Higher Initial Costs for Lower Lifecycle Costs

Policymakers must be prepared to defend short-term cost increases against long-term savings projections. Amsterdam found that transparent financial modeling, independently verified by TNO, was essential for maintaining political support through the initial higher-cost period.

Action Checklist

• Conduct a material flow analysis of municipal procurement categories to identify highest-impact opportunities for circular procurement
• Revise procurement evaluation criteria to weight total cost of ownership at 40% or higher, with explicit scoring for circular design attributes
• Develop performance-based specifications for target categories, defining outcomes (illumination levels, seating comfort) rather than products
• Establish legal review processes for circular procurement criteria to preempt procurement challenge risks
• Create new budget classifications that accommodate operational expenditure for PaaS contracts without capital asset acquisition
• Launch a supplier development programme to build circular design and service capabilities among local SMEs
• Commission independent baseline assessments and ongoing measurement and verification from a recognized research organization
• Allocate 10% of programme budget to change management, including training for procurement officers and communication to elected officials

FAQ

Q: Does product-as-a-service always cost more than traditional procurement in the short term? A: In most cases, yes. Amsterdam's experience showed 8 to 12% higher costs in Year 1, reaching break-even by Year 2 to 3, with projected 18 to 22% savings over 10-year contract periods. The key variable is contract duration: PaaS economics improve significantly with longer contracts (7+ years) that allow suppliers to amortize design investments and benefit from extended product lifespans. Short-term contracts (under 3 years) rarely deliver cost advantages.

Q: How do you handle supplier bankruptcy or contract termination in a PaaS model? A: Amsterdam's contracts include provisions for asset transfer to the city in the event of supplier insolvency, with material passports providing sufficient documentation to engage alternative service providers. The city also requires suppliers to maintain insurance against contract default and to escrow maintenance documentation with an independent trustee.

Q: Can smaller cities without Amsterdam's procurement capacity replicate this approach? A: Yes, through cooperative procurement arrangements. Several Dutch provinces have established joint circular procurement frameworks that aggregate demand from multiple smaller municipalities, achieving the volume needed to attract competitive bids from circular suppliers. The European Commission's Big Buyers Working Group provides similar coordination at the EU level.

Q: What regulatory barriers are most common for cities attempting circular procurement? A: The three most frequently cited barriers are: procurement regulations that prioritize lowest purchase price over total cost of ownership, accounting rules that disadvantage operational expenditure versus capital purchases, and state aid rules that complicate supplier development programmes. The EU's 2024 updated Circular Economy Action Plan addresses some of these barriers, but implementation varies significantly across member states.

Q: How do you measure circularity outcomes in a way that satisfies auditors? A: Amsterdam uses three measurement frameworks: material flow analysis (tracking tonnes of material consumed, recovered, and disposed), life-cycle assessment (quantifying environmental impacts using ISO 14040/14044 standards), and financial total cost of ownership analysis (comparing PaaS costs against conventional procurement baselines using independently verified assumptions). All three are reported annually and audited by TNO, with results published in the city's sustainability report.

Sources

• City of Amsterdam. (2024). Amsterdam Circular 2020-2025: Implementation Report and Lessons Learned. Amsterdam: Municipality of Amsterdam.
• Ellen MacArthur Foundation. (2024). Universal Circular Economy Policy Goals: How Cities Can Accelerate the Transition. Cowes, UK: Ellen MacArthur Foundation.
• Circle Economy. (2023). Amsterdam City Doughnut: Material Flow Analysis Update 2023. Amsterdam: Circle Economy.
• Netherlands Organisation for Applied Scientific Research (TNO). (2024). Environmental Impact Assessment of Amsterdam's Circular Procurement Pilots. The Hague: TNO.
• European Commission. (2024). EU Green Public Procurement Criteria and Circular Economy Integration. Brussels: European Commission.
• Signify. (2024). Light as a Service: Five Years of Performance Data from European Municipal Deployments. Eindhoven: Signify.
• United Nations Environment Programme. (2023). Global Resources Outlook 2024: Natural Resources for the Future We Want. Nairobi: UNEP.
• PIANOo Dutch Public Procurement Expertise Centre. (2024). Circular Procurement Handbook for Dutch Municipalities. The Hague: Ministry of the Interior.