Developing sustainable business models

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Developing sustainable business models

A sustainable business model?

With so many experts – or self-proclaimed experts – discussing business models, research in the field is racing, often in quite controversial directions. However, I recently found an 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 that helps to cluster sustainable business models on two distinct levels. First, business models are pressed into three macro areas: 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.

sustainable business models archetypes

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 the environment

8) Developing scale-up solutions.

Circular Economy

On the technical side, three defined archetypes deal with reducing waste, reusing waste, and substituting materials and processes with more natural alternatives when possible. Under this umbrella includes lean manufacturing solutions and 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 consumer products and services. Examples of existing models within this realm include businesses that 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 that 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 current 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. This segment’s sustainable business models include hybrid businesses/ social enterprises, crowd-sourcing, crowdfunding, and open innovation.

What is the more significant 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 appropriately used, purchased in a sustainable environment, and reused/re-cycled accordingly. In a nutshell, a “greener” product sold in a traditional setting is merely part of a communication campaign to be 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 change agent. MIT spinout Sanergy thoroughly explored this idea. They have developed a business plan to provide franchised toilets to Nairobi’s slums, collecting human waste and converting it into bio-fertilizers. Their business model helps the community stay clean, ultimately supporting the outgrowth of new toilette franchisees and producing fertilizers to support local farmers. 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 for-profit or not-for-profit entrepreneurs whose businesses aim to deliver change in our society and whose archetype almost entirely falls 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?

 

 

 

Reference

Bocken, N. M. P., et al. “A literature and practice review to develop sustainable business model archetypes.” Journal of cleaner production 65 (2014): 42-56.

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