Sustainable business model adoption among S&P 500 firms

Sustainable business model innovation is a hot topic, which has received increasing interest from businesses, academia, NGOs and policy makers as a promising way to create ‘systems-level change’ for sustainability. This work was intended to do a ‘reality check’ of the adoption of sustainable business models by the largest global corporations — those listed in the S&P 500 index — over the period 2005–2014. We examined press release communications during this period, which represent public data about business-relevant events. We used academic and practitioner expert panels to build a set of keywords across nine sustainable business model archetypes (Figure 1) and utilised automated content analysis to examine companies’ sustainable business activities and practices.

Nine SBM archetypes

Figure 1. Nine sustainable business model archetypes (Ritala et al., 2018 based on Bocken et al., 2014, 2016 and Lüdeke-Freund et al., 2016).

 

One of the findings was that large capitalized firms have mostly adopted the environmentally-oriented archetypes, and to much lesser extent the societal and organizational ones. Difficult topics such as sufficiency and scaling up of sustainable business model innovation initiatives remain challenging in large business. Further detail about the analyses on types of business models pursued and trends can be found in our paper. Good food for thought for future work!

Sources:

Bocken, N., Short, S., Rana, P., Evans, S. 2014. A literature and practice review to develop Sustainable Business Model Archetypes. Journal of Cleaner Production, 65, 42–56

Bocken, N.M.P., Weissbrod, I., Tennant, M., 2016. Business model experimentation for sustainability. Sustainable Design & Manufacturing Conference, Crete, Greece, 4-6 April 2016.

Lüdeke-Freund, F., Massa, L., Bocken, N., Brent, A., & Musango, J. 2016. Business Models for Shared Value: How Sustainability-Oriented Business Models Contribute to Business Success and Societal Progress. Cape Town: Network for Business Sustainability South Africa.

Ritala, P., Huotari, P., Bocken, N., Albareda, L., Puumalainen, K. 2018. Sustainable business model adoption among S&P 500 firms: A longitudinal content analysis study. Journal of Cleaner Production, 170, 216-226. https://doi.org/10.1016/j.jclepro.2017.09.159 

 

 

 

 

Value mapping for sustainable business thinking

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Value mapping for sustainable business thinking

Pressures on business to operate sustainably are increasing. As a result, companies need to adopt a systemic approach to doing business, that integrates consideration of the three dimensions of sustainability – social, environmental, and economic – in a manner that generates shared value creation for all stakeholders including the environment and society.

This is referred to as “sustainable business thinking”.

The business model is a useful framework for system-level innovation. It is about the way business is done. It makes a link between different activities inside a company, such as design and production, to more outward looking activities, such as supply chain management, managing partnerships, and distribution.

A business model framework is included below.

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 Figure. Business model framework. Bocken et al. (2015), adapted from Richardson (2008), Osterwalder and Pigneur (2010) Bocken et al. (2013) and Short et al. (2013).

A value mapping tool has been developed before to assist in ‘sustainable business modelling’ (see below). The tools aims to help create awareness of stakeholder perspectives, contradictions and synergies, and consider the value captured, missed and destroyed for each stakeholder to develop new opportunities that could benefit the whole network of stakeholders, not just the firm and the customer.

Figure. Value mapping (this particular version was used in a joint workshop for AMFI together with Christiaan Kraaijenhagen 20 Jan, 2015)

In this study, the potential use of value mapping as a tool and process was explored, to encourage sustainable business thinking. A range of workshops (over 20) was held with different audiences – industry, academic and student, non-profit – to get a better idea of the usefulness of the tool in different settings.

The potential applications to stimulate sustainable business thinking identified by using the tool include the following:

(1) Ideation for start-ups and established firms, to develop new sustainable business model ideas

(2) Education, to learn about sustainable business model innovation, by using case studies for example

(3) Product and process design and life cycle thinking

(4) Evaluation and screening, of new business model ideas

(5) Systems thinking, to take a more holistic perspective on doing business

(6) Collaboration, to find out about each other’s ‘value maps’ and find common ground

More information on value mapping as an approach is available at:

Bocken, N., Rana, P., Short, S. 2015. Value mapping for sustainable business thinking. Journal of Industrial and Production Engineering, DOI: 10.1080/21681015.2014.1000399 

Bocken, N., Short, S., Rana, P., Evans, S. 2013. A value mapping tool for sustainable business modelling. Corporate Governance, 13 (5), 482 – 497

Business model innovation for sustainability grid

Today, the business model innovation for sustainability grid was launched.

The business model innovation for sustainability grid was developed to inspire businesses to reconceive how they operate and become more future proof when faced by growing sustainability challenges. It was based on based on research by Nancy Bocken, Samuel Short, Padmakshi Rana and Steve Evans (University of Cambridge)A literature and practice review to develop sustainable business model archetypes. It is maintained by Plan C the Flemisch network for sustainable management of materials.

To grab the opportunities of a sustainable future, innovations need to introduce environmental and social considerations at the core of the business model, while retaining a profitable proposition. Classified around 8 archetypes of business model innovations for sustainability, a multitude of approaches and real life business cases is presented.

The business model innovation for sustainability grid is available here.

Sufficiency based sustainable business model innovations – towards a typology

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Business models define the way a firm does business. Sustainable business model innovation may be viewed as an important lever for change to ‘business as usual’ to tackle pressing sustainability issues. To expand the scope of business model innovations in practice and research beyond product service systems (e.g. Tukker, 2004), green (FORA, 2010) and social business models (Yunus et al., 2010), sustainable business model archetypes were developed. These include: Maximise material and energy efficiency; Closing resource loops; Substitute with renewables and natural processes; Deliver functionality rather than ownership; Adopt a stewardship role; Encourage sufficiency; Seek inclusive value creation and Re-purpose the business for society/environment (see figure below).

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 Figure: Sustainable Business Model Archetypes. Adapted from Bocken et al. (2014)

 Sufficiency based sustainable business models seek to reduce consumption and, as a result, production. The focus is on influencing consumption behaviour, which may involve product design for durability, a major shift in promotion and sales (e.g. no overselling) and supplier selection based on durability. Profitability would typically result from premium pricing, customer loyalty, and better (particularly more durable) products, while societal and environmental benefits include reuse of products and resources across generations, reductions in product use (impact) and societal education (Bocken et al., 2014). Perhaps the opposite of premium models are ‘frugal innovations’ (or Jugaad innovations) where business model solutions are developed with minimum resource inputs. This may also be viewed as a form of ‘sufficiency’.

The figure below includes a typology for sufficiency-based business models, which may facilitate the process of building up these business models.

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  Figure: A sufficiency-based business model typology (Bocken, 2014)

 

Explanation of the Sufficiency Typology

The examples are briefly explained below:

Extending product life – Ensuring the product will last as long as possible. Characteristics for design: durability, reparability, modular design. The original customer retains ownership of the product. The business model is often ‘premium’ but includes high levels of service.

Encourage direct product reuse – Reuse of the product across markets and generations. After use by one customer, it will be passed on to another ‘customer’ for free or a price mostly lower (except e.g. antiques, collector items) than the original purchase price. Companies such as Ebay facilitate this. A different example of direct product reuse can be seen at Reduse, home of the Unprinter. This start-up (which I support as an advisor) has developed a technology to remove print from paper and make paper reuse possible.

Sharing resources across more people – Sharing the same product across multiple customers. The customer never ‘owns’ the product. Product sharing platforms are emerging to facilitate this.

Mitigate product use – Mitigating the use of energy / resources by individuals and businesses such as demand management by energy providers stimulated by government incentives.

Mitigate product life cycle resource use – Solutions focused on minimising resources, the most prominent example being ‘frugal innovations’. Unfortunately, most of these solutions have been focused on low income countries and have not yet widely expanded to the ‘west’.

References

  • Bocken, N.M.P., 2014. Sufficiency based sustainable business model innovation. Sustainability Science Congress, 22-23 October 2014. Copenhagen.
  • Bocken, N.M.P., Short, S.W., Rana, P., Evans, S. 2014. A literature and practice review to develop sustainable business model archetypes. Journal of Cleaner Production, 65, 42–56
  • FORA, 2010. Green business models in the Nordic Region: A key to promote sustainable growth, Denmark. Retrieved  http://www.foranet.dk/media/27577/greenpaper_fora_211010.pdf
  • Tukker, A., 2004. Eight types of product–service system: eight ways to sustainability? Experiences from SusProNet. Business Strategy and the Environment, 13(4), 246–260.
  • Yunus, M., Moingeon, B., Lehmann-Ortega, L., 2010, Building Social Business Models: Lessons from the Grameen Experience, Long Range Planning, 43(2-3), 308–325.

 

Sustainable business model archetype: Encourage Sufficiency

Sustainable business model archetypes are groupings of mechanisms and solutions that contribute to building up the business model for sustainability. We developed these as part of collaborative research to develop a common language that can be used to accelerate the development of sustainable business models in research and practice. The sustainable business model archetypes are:

  • Maximise material and energy efficiency;
  • Create value from ‘waste’;
  • Substitute with renewables and natural processes;
  • Deliver functionality rather than ownership;
  • Adopt a stewardship role;
  • Encourage sufficiency;
  • Re-purpose the business for society/environment;
  • Develop scale-up solutions.

 

The “Encourage sufficiency” sustainable business model archetype for example is about solutions that actively seek to reduce consumption and production. The focus is on customer relations and influencing consumption behaviour, product design for durability, a fundamental shift in promotion and sales (e.g. no overselling) and supplier selection based on durability. Profitability would typically result from premium pricing, customer loyalty, and gaining market share from better (e.g. longer lasting) products.  Societal and environmental benefits of sufficiency-based business models include reuse of products and resources across generations, reductions in product use, and societal education (Bocken et al., in press).

Examples

In the clothing industry, the Common Threads Initiative by Patagonia is a good example of ‘sufficiency’. The company pledges to ‘build useful things that last, to repair what breaks and recycle what comes to the end of its useful life’, whereas customers in return are asked to pledge to only but what is needed and will last, make repairs and reuse (share) what is no longer needed and recycle anything else. Patagonia also asks customers to “Not Buy” their jackets, trying to make them aware of the effects of their purchases and encourage them to make things last rather than buying new. However this may have the same effect as asking people not to think of a pink elephant… yes, more purchases!

Clothing swaps, where you come together with friends and swap clothes you no longer wear, are a fun way to freshen up your wardrobe without having to buy something new. It makes use of the ‘resources’ we have in the back of our wardrobes. This also encourages reuse of resources rather than new sales. A specific initiative by M&S encourages its customers to ‘shwop’: to donate clothes to charity through collection bins placed in their stores. In return, customers receive discount vouchers for M&S. Although shwopping encourages customers to have a critical look at their wardrobes and give unwanted items to charity, it does not encourage fewer sales, it may even encourage more by generating traffic to the store.

In the furniture industry, Vitsoe is an interesting example of ‘sufficiency’. Vitsoe has created a video, which shares vision against planned obsolescence – ‘the design and manufacture of products that are deliberately intended to have a limited useful life’ –, which results in an endless cycle of replacement and repurchasing. Vitsoe’s design is aimed to be timeless and durable and its 606 shelving system is still compatible with its first system decades ago. Vitsoe does not give discounts and employees do not receive sales commissions. Vitsoe seeks to provide customers with furniture solutions that  ‘do more with less’.

How can a business still make money if it sells less? Neither Vitsoe nor Patagonia is on the lower end of the price spectrum – on the contrary. Their products are premium-priced but they believe in good customer service. Vitsoe for example helps customers reinstall its shelves when they move home. Patagonia supports repair of its products. The proverb “I am not rich enough to buy cheap things!” applies here.

Although the number of sufficiency-based business models is not yet overwhelming, the concept of making products that last and are repairable is not new and there is an opportunity to make it stylish again to make stuff last. In the fashion industry there are several emerging business models such as Mud Jeans who have combined a sufficiency-based idea with leasing, or the ‘deliver functionality, not ownership’ archetype discussed in the next blog. What interesting sustainable business model innovation-combination will be next?

Source

This blog is based on the following article:

Bocken, N.M.P., Short, S.W., Rana, P., Evans, S. A literature and practice review to develop Sustainable Business Model Archetypes. Journal of Cleaner Production (in press/ Open Access)

Sustainable business model archetypes

Sustainable business models include a triple bottom line approach and consider a wide range of stakeholder interests – including environment and society – into the way business is done. They are important in driving corporate innovation for sustainability, can help embed sustainability into business purpose and processes, and serve as a key driver of competitive advantage.

Many innovative concepts and approaches may contribute to delivering sustainability through business models, such as dematerialisation and choice editing, but these have not been collated under the theme of business model innovation. Through literature and business practice review, a wide range of examples, mechanisms and solutions that contribute to business model innovation for sustainability were identified. These were collated and analysed to develop a categorisation of sustainable business model archetypes.

Sustainable business model archetypes are groupings of mechanisms and solutions that contribute to building up the business model for sustainability. The aim is to develop a common language that can be used to accelerate the development of sustainable business models in research and practice.

The sustainable business model archetypes are:

  • Maximise material and energy efficiency;
  • Create value from ‘waste’;
  • Substitute with renewables and natural processes;
  • Deliver functionality rather than ownership;
  • Adopt a stewardship role;
  • Encourage sufficiency;
  • Re-purpose the business for society/environment;
  • Develop scale-up solutions.

 

Each of these archetypes will be discussed in greater detail in subsequent blog posts.

 

Source

This blog is based on the following article:

 

Bocken, N.M.P., Short, S.W., Rana, P., Evans, S. A literature and practice review to develop Sustainable Business Model Archetypes. Journal of Cleaner Production (in press/ Open Access)