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Written by Basel Agency for Sustainable Energy (BASE)
Achieving a more circular built environment requires scaling innovative business models that rethink how we design, produce, use and manage products and systems. Product-as-a-Service (PaaS) shifts customer ownership to ‘usership’, and responsibility for products and their performance to service providers equipped to optimise their use. For building services such as cooling, heating and lighting, PaaS is increasingly recognised as a model that can enhance efficiency, longevity and performance, delivering value and better aligning with circular economy principles. Contracts are more than just legal agreements, they are powerful tools that shape how PaaS models function in practice. A well-structured contract can act as a catalyst for circularity by aligning incentives, defining responsibilities, and ensuring long-term value creation for all stakeholders, rather than simply shifting financial and operational responsibilities.
With the support of the Circular Buildings Coalition (CBC), the Servitisation for the Energy Transition (SET) Alliance, an initiative led by the BASE Foundation, has been addressing this challenge. Our work focuses on developing clear, practical guidance on PaaS contracts for building services, supporting stakeholders to embed circular economy principles into contract design and project implementation. In this thought piece, we outline the key findings from our blueprint project; sharing insights from the white paper and upcoming contract guidelines set for release in April 2025.
Through stakeholder discussions with PaaS solution providers, built environment professionals and circular economy experts, as well as a review of standardised contracts, our white paper highlights key contractual considerations that can support circularity. The specific implementation of these principles will vary based on the technology, sector, and operational context, as factors such as equipment type, regulations and industry standards influence contract structures. Tailoring contracts to reflect these nuances is essential for ensuring both economic viability and more circular outcomes.
The guidelines present a unique opportunity for stakeholders to drive meaningful change by aligning economic incentives with sustainability and circular economy goals. While PaaS is typically explained through three primary stakeholder groups: solution providers (OEM and non-OEM), customers (both public and private entities), and financiers, each solution and project operates within a broader ecosystem of collaboration. The successful adoption of PaaS for building services and ensuring circular impact relies upon actors such as:
1. Built Environment Professionals: (e.g., Architects, MEP Engineers): Design and technical professionals who influence key decisions on system and product selection, and integration. Their work ensures that building services align with sustainability and circularity principles, influencing durability and end-of-life considerations.
2. Industry Associations: Groups that promote best practices, standards, and industry-wide adoption of circular economy strategies. Their efforts are instrumental in advocating for policy change, providing education, and building networking opportunities for stakeholders in the circular built environment (e..g, Green Building Councils)
3. Regulatory Bodies: Government entities and policymakers that shape the legal landscape for circular business models. They influence policy development, set standards for waste management and energy efficiency, and incentivise circular solutions through regulations and incentives (e.g., European Commission)
4. Insurers: Companies that provide risk management for service-based business models, helping to overcome perceived financial risks of PaaS contracts by offering tailored insurance products and performance guarantees.
5. Sub-Suppliers (Subcontractors and Component Manufacturers): Companies that provide key parts, materials, or services that contribute to the development, maintenance, and operation of PaaS solutions. These could include maintenance teams, refurbishment specialists, or suppliers of modular or recyclable components. Their role is crucial in ensuring the circularity of the model throughout its lifecycle, from product creation to end-of-life management.
Across all stakeholders, a common thread for success is recognition of the long-term value of circularity over short-term gains, a strong commitment to achieving sustainability and climate-related goals, as well as a willingness to collaborate across value chains and embrace new frameworks.
Addressing key contractual challenges offers greater clarity on PaaS, the challenges and opportunities, to facilitate the development of financially viable, operationally efficient, and solutions better aligned with circular economy principles. Discussions with key stakeholders indicate that whilst momentum for PaaS in the buildings sector is growing, scaling adoption requires leadership from key market players. The guidelines are therefore designed to be of particular value to:
The PaaS movement for building services is gaining traction across sectors. For providers, the model offers a way to build long-term customer relationships, generate recurring revenue, and differentiate through performance-based offerings. For customers, particularly those with ambitious sustainability targets but limited financial or technical resources, PaaS provides access to high-quality, efficient solutions without the upfront investment or operational burden. For PaaS to reach its full potential, more players, solutions, and demonstrations of real-world impact are needed.
Undertaking this project has highlighted the need for clearer pathways to adoption. Practical resources such as pricing tools, standardised contracts, and industry-specific guidance are essential to help organisations navigate the transition. Addressing perceived risks, improving financing mechanisms, and showcasing successful case studies will be key to strengthening the business case for service-based solutions.
Unlocking the full potential of PaaS for building services is a shared opportunity. contracts don’t just document business relationships, they actively shape how PaaS models function and evolve. When designed with circularity in mind, they become a catalyst for sustainable innovation and long-term business success. By working together to integrate circular economy principles into service-based models and contracts, we can demonstrate and measure the benefits, driving greater value, wider adoption, and long-term impact. To accelerate this transition, we need to refine contracts, strengthen value propositions, and develop scalable models that support sustainable, resilient service-based solutions in the built environment.
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