Developing a sustainable business model
With so many experts – or self-proclaimed experts – discussing business models, research in the field is moving at a rapid pace, often in quite controversial directions. However, I recently found a very interesting article on sustainable business models and their archetypes.
A team of researchers from Cambridge and Delft university, funded as part of the innovation scheme found in the previous EU budget model, developed a framework which helps to cluster sustainable business models on two distinct levels. First, business models are clustered into one of three macro areas, including technological, social and organizational concepts. This serves as a continuous reminder that sustainability is not only technology-driven, but can happen and does happen because of social, personal and group dynamics.
The second level defines eight distinct archetypes, which include:
1) Maximizing material and energy efficiency
2) Creating value from waste
3) Substitutions for renewable and natural processes
4) Delivering functionality
5) Adopting a stewardship role
6) Encouraging sufficiency
7) Re-purposing for society and environment
8) Developing scale-up solutions.
On the technological side, there are three defined archetypes which deal with reducing waste, re-using waste, and substituting materials and processes with more natural alternatives when possible. Under this umbrella includes lean manufacturing solutions, as well as pillars of the circular economy, such as the blue economy, cradle-to-cradle design, and biomimicry.
The social cluster deals with business models that influence our current way of consuming products and services. Examples of existing models within this realm include businesses which promote “smart solutions”, such as car sharing, city wide mobility solutions (e.g. bicycles), or solutions based on payment-per-usage rather than payment-per-property. However, this cluster ventures far beyond this realm, incorporating new business models in which consumers receive the education they need to make choices which are healthier for them and – at the same time – better for the environment. These decisions are not necessarily driven solely by price. In a larger sense, this segment includes business models which aim to challenge the pace and the drivers of modern consumption, limiting price sensitivity, consumer choice, and the frequency of purchase by choosing a fairer way of trading.
The last cluster, the organizational one, deals with challenging the status quo of how we work, build and consume. It also defies the concept of scale as we traditionally understand it. Sustainable business models in this segment include hybrid businesses/ social enterprises, crowd-sourcing, crowdfunding, and open innovation.
What is the larger point? Ultimately, having a “green product” or a greener service does not necessarily make your business more sustainable unless you can ensure that the product is used properly, purchased in a sustainable environment, and re-used/re-cycled accordingly. In a nutshell, a “greener” product which is sold in a traditional setting is merely part of a communication campaign with the aim of being perceived as more sustainable. It is not about building a sustainable business model: in other words, maximizing material and energy efficiency is an archetype of sustainability when delivered on a whole portfolio of products, not as a showcase for one or two products.
Moreover the technological aspect is often associated with particular social and organizational aspects. For example, creating value from waste, combined with empathic design and creative thinking, can be a powerful agent of change. This idea was fully explored by MIT spinout Sanergy. They have developed a business plan to provide franchised toilets to Nairobi’s slums, collecting human waste and converting it into bio-fertilizers. With their business model, they help the community stay clean, which will ultimately support the outgrowth of new toilette franchisees and produce fertilizers to support local farmers. As a matter of fact, the social and organizational aspects of business model planning are gaining more and more traction, to the point that Forbes is publishing an annual list of top social entrepreneurs called Impact 30. These are either for profit or not-for-profit entrepreneurs whose businesses aim at delivering change in our society, and whose archetype almost entirely fall in either the social or organizational cluster.
How do we transform your business into a sustainable one? One product at the time, or by re-thinking your firm’s modus operandi?