Home Appliance Industry Trends & Opportunities
Sustainability starts at home. It is therefore no surprise that the home appliance industry in Europe has the potential to make a significant impact in the transition towards the EU being a climate-neutral region by 2050. However, the industry is facing a growing set of challenges linked to mounting regulatory pressures, as well as meeting the 55% emission reduction objective by 2030.
Paolo Falcioni
Director General, APPLiA
Federico Magalini
Director Electronics & Tech Industry, dss+
We sat down with Paolo Falcioni, Director General of APPLiA and Federico Magalini, Director Electronics & Tech Industry at dss+ to discuss the challenges and trends of the industry in relation to the wider sustainability agenda.
APPLiA is a Brussels-based trade association with 25 direct members that provides a single, consensual voice for the home appliance industry in Europe, promoting the industry’s mission to advance Europeans’ lifestyles.
The home appliance industry in Europe:
- €79 billion added value to GDP
- 983,000 directly and indirectly employed
- 3,214 enterprises
- APPLiA statistical report 2021-22
APPLiA is enabling and accelerating Europe’s digital and green transition, helping to establish Europe as the no.1 hub for clean technology.
Q.
Home appliances are responsible for improving the daily lifestyles of everyone, ultimately saving time and making homes more efficient. With energy efficiency now more critical than ever, what is the role of the home appliance industry in the journey towards net-zero?
Paolo Falcioni (PF): The home appliance industry has always been driven by innovation and improving lifestyles. Over the last few years, we have also seen how much the industry, through huge technological improvements, is working to reduce energy consumption thereby playing a critical role in the decarbonisation of Europe. Any appliances like fridges and washing machines can contribute substantially towards energy saving. Whilst the role of energy efficiency has been a key selling point in the past 25 years, it is now more important than ever. The industry has always been one step ahead and there’s no doubt it will be a key part of the solution of a more sustainable world than it has ever been before. In terms of the need to double energy efficiency by 2030 and be carbonneutral by 2050, this will not be possible without the contribution of our industry. If we had a magic wand and could replace all appliances with the latest generation, this would immediately meet the target.
Federico Magalini (FM): This is a concentrated industry, with around 20 companies representing 90% of the sales. Historically companies were working to reduce their emissions related to their production because it made business sense, but now it’s also towards reducing their scope 1 and scope 2 emissions, developing new business models, data capture, and minimising exposure to operational risks. As Paolo said, the industry has always been a step ahead and this can be seen over the last decade where we observed, for example, that in Italy between 2010-2022 despite the increase of consumer demand, the average kWh consumption per appliance has been decreasing due to the technological improvements and energy efficiency of newer appliances.
The switch to energy-efficient appliances has already proved successful
Q.
With war in Europe and more recently the Middle East, we have seen energy price hikes and a decrease in consumer confidence to spend. How is the current socio-political climate impacting the industry?
PF: Yes, it's a difficult hurdle to overcome and we are of course in favour of increasing consumer confidence or removing the hurdles undermining their confidence. The housing market is slowing down too and inevitably the domestic appliance market is following. When there is a housing boom, our sector booms too. One of the priorities of the European Commission is the renovation of buildings, which would make them more energy efficient. This, along with the replacement of appliances within them, would bring significant energy efficiency gains.
FM: It's interesting if you think how much people recognise that insulating a building has an impact on how much energy is used to keep the house warm in winter and cool in summer, but it's more difficult to imagine giving that incentive to the replacement of an appliance that's used 24/7. The missing link with policy makers and consumers is that most appliances run 24/7 like fridges and freezers, they run like a boiler, but are not recognised that way. This is where smarter products can play a key role, providing convenient added features such as voice control and mobile-app integration, as well as providing energy efficiency. It's also important to mention that some of the members are going beyond the business model of selling appliances, looking into rental of appliances. Companies are innovating the way they try to offer consumers opportunities to leverage the best available products or services.
"Agile mindset is at the core of any change management. It’s about continuously looking at the KPIs, progress areas, failings, then adapting, and improving."
- Paolo Falcioni, Director General of APPLiA
Q.
There's a lot of new EU legislation and proposals that will affect the industry, for example what do you foresee as the complexities around the right-to-repair proposals?
PF: There's no doubt that right-to-repair is an important consumer right, but it has to be set in the right context. It's good news if the repair is something that a consumer can do with the right tools and spare parts, but there is a line we don't want to cross. That line is safety. For example, if the parts are heavy or connected to the mains, then we cannot put consumers at risk neither during repair, nor when using the machine afterwards. And let's not forget about repair liability. Who is responsible if the self-repair leads to an accident? Safety must come first. Then there's the efficiency of the product. If any repair action has a risk of changing energy efficiency, then why would we want to encourage the potential reduced efficiency of the product? Consumers need to be informed about their options when they buy an appliance. If we set aside the self-repair aspect, then right-to-repair still has a very big role to play.
FM: We have seen from APPLiA members data and our analysis that the total estimated number of products that were requested repairs in 2018 amounts to 10,300,000, out of which 91% were repaired and only 9% led to substitution with 36,750,000 million of spare parts shipped for repair activities. All the APPLiA members reported a non-neglectable role for repair and service in the total turnover of the company: it is on average equal to 4% of the total turnover and in a few cases higher than 8%. It's also important to remember that repair and aftersales services are also creating jobs and opportunities for other companies across the EU, especially considering independent companies which are sometimes contracted or in partnership agreements with producers, in 2019 there was an estimated total of 29,000 partner companies.
"Consumers need to be informed about their options when they buy an appliance. If we set aside the self-repair aspect, then right-to-repair still has a very big role to play."
- Paolo Falcioni, Director General of APPLiA
Q.
What about the challenges in terms of the pledges to use recycled plastics?
PF: The reality is that the demand for quality recycled plastics is currently outweighing the offering, but there’s no doubt that the industry has an important role to play. We have substantially contributed to defining what the bottlenecks are to increase the amount of recycled plastic in products. It's one of those chicken and egg situations - if not enough material is coming out, then it cannot be used in manufacturing.
FM: Recycling technology is essential to improve and meet demand, which is strong and growing. The problem I often see is with the pledges for recycled plastics because they are often made without knowing how to implement these pledges so it's a case of helping companies to transform their supply chain, using recycled material rather than virgin material. We should not forget existing supply chains have been developed and optimised over decades and switching to a new, recycled material is not instant. In some cases, we know product design and materials need to be re-engineered or re-thought.
Q.
The EU is proposing new packaging laws that would require at least 90% of packaging for large appliances to be transported in re-usable packaging by 2030. What are your thoughts on this?
PF: It is a very concerning development for our industry. Our key priority must be the safe transportation of appliances, so that they are not damaged. Transporting a fridge is not like transporting a green salad. Both of them must arrive in the right conditions at the consumer home, but the requirements to get to it are completely different. Packaging is an integral part of the product design, and, as a consequence, each packaging is unique. Imagine the environmental consequences if each packaging would have to travel from the factory to the consumer home and back. I doubt that it would be more sustainable than the current system, where almost 100% of the packaging is recycled.
FM: Sustainability is a driver for change and packaging plays a key role in a company’s scope 3 emissions, so it’s not just a case of looking at the reusability, but also the whole supply chain. We see companies redesigning their packaging system, eliminating plastics, using more recycled material and in some cases limiting the amount of ink used on the exterior. This is pretty much linked to reduction of impacts companies are already pursuing, while in some cases is triggered by upcoming changes in legislative requirements related to EPR.
"Packaging is an integral part of the product design and, as a consequence, each packaging is unique. Imagine the environmental consequences if each packaging would have to travel from the factory to the consumer home and back."
- Paolo Falcioni, Director General of APPLiA