Unsustainable business models

In 2014, we published an overview of sustainable business model archetypes based on literature and practice review. At the time, this was a great way to move the business model discussion beyond products-as-a-service (e.g. Tukker, 2004) and also propose some more challenging models such as the ‘sufficiency-driven-business-model’ (Bocken & Short, 2016), focused on business challenging their role in endless consumption. We used cases of companies like Patagonia (‘don’t buy this jacket’) and Vitsœ (living with less, that lasts longer) to demonstrate that other business models are possible.

From the great and constructive feedback we got on the archetypes since, we found out that many people used these archetypes to develop sustainable innovations, whether it is in their own venture or business, a large corporation, NGOs, or in their research.

While it is also clear that a lot of companies started innovating their business models for sustainability and the circular economy since (and we report on emerging business examples in ERC project Circular X) we found that greater awareness of unsustainable business models could help people recognise common flaws and solutions for their sectors. Such flaws are often so ingrained – sometimes even commonly accepted – that more awareness is needed of these flaws to break through them.

We were inspired by the great focus on lineareconomy vs circulareconomy, but considered there were many other institutionalised unsustainable business models and possible sustainable business responses. Awareness of these institutionalised unsustainable business models could create more traction to break them down. See below our list of Unsustainable Business Models (UBMs) developed in this recent article:

  1. Environmental resource exploitation and waste UBM
  2. Human resource exploitation and waste UBM
  3. Economic exploitation UBM
  4. Unhealthy or unsustainable offering UBM
  5. Quantity over quality and value UBM
  6. Addictive consumption pattern UBM
  7. Complex opaque global value chain UBM
  8. Short-term shareholder – not stakeholder value UBM
  9. Financing and supporting unsustainable practices UBM

Please find the full open access study on unsustainable business models as well as possible positive pathways forward for different industries such as energy, transportation, construction, food, clothing, and finance, co-authored with Dr Sam Short here.

Sources:

Bocken, N. M., & Short, S. W. (2016). Towards a sufficiency-driven business model: Experiences and opportunities. Environmental Innovation and Societal Transitions18, 41-61.

Bocken, N. M., & Short, S. W. (2021). Unsustainable business models–Recognising and resolving institutionalised social and environmental harm. Journal of Cleaner Production, 127828.

Bocken, N. M., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production65, 42-56.

Tukker, A. (2004). Eight types of product–service system: eight ways to sustainability? Experiences from SusProNet. Business strategy and the environment13(4), 246-260.

Young, D., & Reeves, M. (2020). The quest for sustainable business model innovation. BCG.

Value creation and appropriation in economic, social, and environmental domains: resolving asymmetries

“Today’s economy is highly destructive of natural and social capital, and is characterized by large and growing gaps between rich and poor” (Elkington, 2013, pp. 10).

Vallue creation and appropriation are much-studied processes in business and management, but research and practice has focused mainly on how economic value is created and appropriated by businesses. This over-emphasis on the economic logic has created institutionalised asymmetries in the relationship between business, society and the natural environment. 

In this paper, co-authored with Prof. Paavo Ritala and Dr Laura Albareda, we ask ourselves the following question: what are the main asymmetries involved in the economic, environmental and social domains for specific types of goods, and what are the most promising solutions to those asymmetries from the viewpoint of business?

We answer this question by addressing: 

(1) the type of economic goods used to create value (private and club goods, public goods and common goods) 

(2) value creation and appropriation domains (economic, social, and environmental)

Based on Samuelson (1954) we define the types of goods as follows: 

Private and club goods such as cars (private) and cinemas (club goods) are those that are excludable from others and are therefore subject to rivalry by private consumption. While private goods are privately owned, club goods include private but shared systems, such as cinemas and sport clubs. 

Public goods such as public defence and education, are those of which the use of them does not exclude others; in other words, they cause no rivalry as their individual use does not typically reduce the availability to others

Common goods like forests and the ocean are those typically available to everyone and are defined as non-excludable because while it is impossible to exclude a person from their consumption, they do involve rivalry as their (mis)use precludes their future use by others.

The main domains are:

Economic domain: market-based activities, such as production, distribution and consumption of goods and services.

Social domain: human activities, including issues around social equity and justice, health, education, culture etc.

Environmental domain: the natural environment and its longterm sustainability.

Building on the framework that brings the types of goods and domains together, we argue that there are several institutionalised asymmetries, between the goods used to create value and the domains in which the value is eventually appropriated. The table below shows an overview of the problems or assymetries and potential solutions. 

Table. Overview of problems or asymmetries across the domains and examples of solutions

 Economic domainSocial domainEnvironmental domain
Private & club goodsProblems: Overproduction, planned obsolescence, overconsumption, bargaining power and information asymmetry
Solutions: Business creating private goods that individuals desire or need and capturing financial value by sales
Example: long-lasting functional products, classic design
Problems: Business fostering the regeneration and maintenance of common goods, improving the environmental outcomes 
Solutions: Business creating private goods that contribute positively to society 
Example:  business providing language services
Problems: Negative environmental externalities promoted by the production of private goods or services 
Solutions: Business creating private goods that do not contribute negatively, or contribute positively, to natural environment 
Example: frugal innovations 
Public goodsProblems: Abuse and overexploitation of a public good for private self-interest; Teamwork and free-riding problem 
Solutions: Business contributing their knowledge and capabilities to the generation of improved
public goods 
Example: companies supporting health, former initiative Google Health 
Problems: Corruption; Privatisation of public goods  
Solutions: Business contributing and partnering and using their knowledge and capabilities to build improved public goods and social welfare 
Example: public-private partnerships; B corporations in education and health systems
Problems: Negative environmental externalities promoted by the production of public goods
Solutions: Business contributing to the positive environmental impacts of public goods  
Example: Net positive initiatives 
Common goodsProblems: Tragedy of the commons 
Solutions: Business participating in the management of common goods, improving collective economic outcomes 
Example: soil remediation services, sustainable forestry initiatives
Problems: Collective action and policy failures  
Solutions: Business adopting collective action to manage common goods, improving social outcomes 
Example: businesses involving underprivileged members ofsociety in value chain
Problems: The (mostly hypothetical) case of overprotection of natural resources 
Solutions: Business fostering the regeneration and maintenance of common goods, improving the environmental outcomes 
Example: Sustainable agriculture; regenerative agriculture

The full paper can be read here.

Sources: 

Elkington, J., (2013). Enter the triple bottom line. In: Henriques, A., Richardson, J. (Eds.), The Triple Bottom Line: Does it All Add up. Routledge.

Ritala, P., Albareda, L., & Bocken, N. (2021). Value creation and appropriation in economic, social, and environmental domains: Recognizing and resolving the institutionalized asymmetries. Journal of Cleaner Production290, 125796.

Samuelson, P. A. (1954). The pure theory of public expenditure. The review of economics and statistics36(4), 387-389.

Integrating Intellectual Property and Sustainable Business Models – The SBM-IP Canvas

Intellectual property (IP) may be seen as a barrier to sustainability transitions, but can it also be used to an advantage to accelerate sustainability transitions in a business context? To date, this idea has received insufficient attention in research. The IPACST project (Intellectual Property Models for Accelerating Sustainability Transitions) investigates the potential positive role of companies and their business models in sustainability transitions. A joint paper with colleagues from University of Cambridge, Lund University and HTW Berlin suggests that IP, when aligned with sustainable business model strategy, can be used to create not only commercial, but also societal and environmental impact. To this end, the study develops a an SBM-IP (sustainable business model-intellectual property) canvas that integrates IP considerations into each of the sustainable business model canvas building blocks. The study uses case examples to illustrate different IP considerations that are relevant for the different types of SBM-IP building blocks. The case examples show that different IP types (e.g., trademarks, patents) and ways to use them (e.g., applying more or less restrictive licensing) are used by companies in relation to the different building blocks. More about this topic can be read in the article.

Source:

Hernández-Chea, R.; Vimalnath, P.; Bocken, N.; Tietze, F.; Eppinger, E. Integrating Intellectual Property and Sustainable Business Models: The SBM-IP Canvas. Sustainability 202012, 8871.

Sustainable business modelling

This is a re-post on tools for sustainable business model innovation and features the value mapping tool and sustainable business model canvas.

What is a business model? A business model describes how a company does business and what its value proposition (benefits or offering to customer), value creation (resources, suppliers and other partners who help create value) and value capture mechanisms (cost structures and revenue streams) are.

What are sustainable business models? Sustainable business models consider a much wider group of stakeholders than just customers, and explicitly consider society and environment as stakeholders. They go beyond creating value for a customer and include concerns about the benefits and harms to society and the environment by the way business is done. This is a much more systemic view on doing business than making money by delivering benefits and value to customers.

I am interested how current business models can become more sustainable and how start-ups can develop sustainable business models from the outset.

Together with my colleagues Sam ShortPadmakshi Rana, and Steve Evans, I developed the Value Mapping Tool, to assist in ‘sustainable business modelling’ – the process of inventing new sustainable business model ideas.

Value mapping tool. Source. Bocken, Short, Rana, Evans (2013)

This tool can help users to:

  • Understand the positive and negative aspects of value in a network of stakeholders
  • Identify conflicting values (i.e. where one stakeholder benefit creates a negative for another stakeholder)
  • Identify opportunities for business model redesign – especially to improve societal and environmental impact

Here is a simplified process of using the value mapping tool to use for your business:

Each ring in the diagram represents a different brainstorm. During each of these brainstorms, all of the following “stakeholders” need to be considered:

  • Customers – perceived and actual benefits and negative impacts. You may want to break this down into different customer segments.
  • Network actors – in short, the firm and its supply chain responsible for creating value. This may be broken down into particular key suppliers or partners as can be seen above.
  • Environment – benefits (afforestation) and negative impacts (e.g. emissions to air).
  • Society – benefits (e.g. health) and negative impacts (e.g. working conditions)

Brainstorm 1: the purpose of the business is discussed. Why is the business here in the first place? What is the product or service offered by the company or business unit? What is the primary reason for the existence of the business (this should not be primarily financial)?

Brainstorm 2: what value is created for the different types of stakeholders? What positive value is created and what negative value do all the stakeholders mitigate?

Brainstorm 3: what is the value destroyed or missed or negative outcomes for any of the stakeholders? Consider for example, waste to landfill or loss of local employment caused by offshoring. Are there contradicting impacts at a global and local level? Is the business missing an opportunity to capture value, or squandering value in its existing operations? For example, are assets, capacity and capabilities under-utilised? Are potentially useful materials going to landfill?

Brainstorm 4: This brainstorm is intentionally put at the end and is about blue-sky thinking. The focus is on turning the negatives into positives. What new positive value might the network create for its stakeholders through introduction of activities and collaborations? What can you learn from competitors, suppliers, customers or even other industries?

To move from ideas to implementation the brainstorm may be followed up by roadmapping the activities and business model elements to be changed. A great way of doing this is using the Business Model Generation work by Osterwalder and Peigneur (see www.businessmodelgeneration.com for more details). We have adapted their “strategy canvas” here:

Overview of business model elements in ‘sustainable business model canvas’. www.businessmodelgeneration.com, adapted by Bocken, Schuit, Kraaijenhagen (2018)

For a more detailed discussion of the value mapping tool and sustainable business model canvas, the full research articles can be found here: 

Bocken, N., Short, S., Rana, S., Evans, S. (2013) A value mapping tool for sustainable business modelling”, Corporate Governance, 13(5) .482 – 497. DOI link: 10.1108/CG-06-2013-0078

Bocken, N. M., Schuit, C. S., & Kraaijenhagen, C. (2018). Experimenting with a circular business model: Lessons from eight cases. Environmental innovation and societal transitions28, 79-95. DOI link: https://doi.org/10.1016/j.eist.2018.02.001

The guide for facilitators and more info can be found here

Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities

Sustainable business model innovation is increasingly seen as a key driver for competitive advantage and corporate sustainability. While it has been recognised that companies require dynamic capabilities to innovate their business model for sustainability, the role of organisation design to nurture such dynamic capabilities remains under-addressed.

To investigate this in more detail, we conducted a study with 7 multinational corporations leading in the field of sustainability. In total, we conducted 53 semi-structured, in-depth interviews with 6 top managers, 24 senior managers, and 25 mid-level managers actively engaged in Sustainable business model innovation inside their organisations.

By taking this qualitative research approach, we address how organisation design affects dynamic capabilities needed for sustainable business model innovation. We identified barriers and drivers on three levels: the institutional, the strategic, and the operational. The overview of institutional, strategic and operational barriers and drivers can be found in the figure below. It should be noted that drivers are not direct antidotes to the barriers identified; they rather co-exist as counter-forces.

 

 

Figure Barriers and DriversThis study has 3 key contributions:

  1. Understanding how organisational design affects dynamic capabilities needed for business model innovation.
  2. Presenting a multi-level framework (institutional, strategic, operational) to show how interconnected barriers and drivers obstruct or enable sustainable business model innovation
  3. Advancing theoretical perspectives on sustainable business model innovation through this comprehensive study

 

Finally, this study on sustainable business model innovation, organisation design and dynamic capabilities can help guide companies in their transitions towards achieving greater levels of sustainability. By creating greater awareness of the barriers and drivers at the institutional, strategic and operational levels, building on knowledge from mid-, senior- and top-managers in 7 multinational companies seen as sustainability leaders, it can serve as a source of inspiration to support business practice towards sustainability.

The fully open access article can be found here.

 

Sources: 

Bocken, N. M.P., & Geradts, T. H.J. (2019). Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities. Long Range Planning, 101950.

Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40-49.

 

Developing Circular Business Model Innovation Tools

The circular economy is now seen as potential driver for sustainable development by business, academia, and policymakers. In such a future circular economy, new business models need to be developed that slow, close and narrow resource loops to address key resource and climate challenges. However, this is not easy and new tools and methods are necessary to support the transition and development of such new business models.

In the new collaborative paper with Lars Strupeit, Katie Whalen, and Julia Nußholz, we map the field of Circular Business Model Innovation (CBMI) tools. We find that there are many generic tools and approaches that might be used, such as the lean startup approach by Eric Ries, or the business model canvas by Osterwalder & Pigneur. Also there are various sustainability focused tools such as the value mapping tool. However, few specifically focus on CBMI, and the generic tools and approaches might ‘dilute’ the circularity or sustainability message. We classify the tools according those that focus more on Ideation and Design, Implementation and Testing, and Evaluating and Improving circular business models, building on the work on business model innovation by Frankenberger and colleagues, amongst others. Finally we develop a checklist that could support future ’tool developers’ (Figure 1, below). This checklist might also be of interest to those developing sustainability tools, by replacing the first line with ‘The tool is purpose-made for sustainable innovation’.

Future work will involve collaborative development of CBMI tools and roll-out to help make circular business models more widespread.

Checklist for tool CBMI development

Figure 1. Checklist for CBMI tool development. Source: Bocken, Strupeit, Whalen, Nußholz (2019). 

 

Source:

Bocken, N., Strupeit, L., Whalen, K., Nußholz, J. 2019. A Review and Evaluation of Circular Business Model Innovation Tools. Sustainability, 11(8), 2210.  https://doi.org/10.3390/su11082210

 

 

 

Value mapping tool for Sustainable Business Modelling – Guides for facilitators

The Value Mapping Tool was developed to assist in ‘sustainable business modelling’ – the process of inventing new sustainable business model ideas.

The process of using the tool, and the terminology of value captured, value missed, value destroyed and new value opportunities were introduced in the first journal paper and earlier conference paper about the value mapping tool. By first considering the value captured, value missed and value destroyed from the perspective of multiple stakeholders, the failed value exchanges in existing business models can be identified. “Environment” and “Society” analogous to the work by Stubbs and Cocklin (2008)  are necessary stakeholders in the value mapping tool, next to the more familiar ones such as customers, the government and suppliers. The business is split up into its key stakeholders: employees and investors/ shareholders. Only after considering the value captured, missed and destroyed from these multiple stakeholder perspectives, new value opportunities should be sought that resolve failed value exchanges and create new forms of value through business model innovation. In this way, more value can be created for the whole value network, not only the firm and its customers.

Since its development the value mapping tool has been used by researchers and people in businesses around the world, which has led to various translations. This post shares some of these.

Because of multiple requests for advice, the brief guide with prompt questions for facilitation of workshops using the value mapping mentioned in the first journal paper can be found here:

 

 

Other languages 

Courtesy of researcher Ignacio Pavez the guide is now also translated into Spanish:

 

Courtesy of Dr Benjamin Tyl, the tool itself is now translated in French and the figure can be found below.

The document guideline-value-mapping-tool-fiche-ti-1446 also developed by Benjamin includes an in-depth guide for practitioners in French with various new ideas. It is structured according to: The workshop process (split into 3 sessions); Advice; FAQ; and Next steps.

 

Value mapping tool - French

Value mapping tool – French

 

Thanks for sharing your translated versions!

 

Happy Value Mapping!

 

Sources:

SUSTAINABLE BUSINESS MODEL AND SUPPLY CHAIN CONCEPTIONS – TOWARDS AN INTEGRATED PERSPECTIVE

The concepts of Sustainable Supply Chains and Sustainable Business Models are closely related and highly complementary. Business model innovation often requires significantly new supply chain lay-outs. For example, when shifting from product sales to product rental or leasing models, new forms of distribution and product take-back are required. The relationship with retailers also changes. Similarly, supply chain opportunities can drive business model innovation, for example, when new distribution channels give access to new customer segments desiring different value propositions.

This blog discusses the similarities and differences between Sustainable Supply Chains and Sustainable Business Models .

It is based on the book chapter on the topic written by Florian Lüdeke-Freund, Stephan Gold and Nancy Bocken in the book “Implementing Triple Bottom Line Sustainability into Global Supply Chains” edited by Lydia Bals and Wendy Tate, published in May 2016 via Greenleaf)

 

Sources: 

Bals, L. & Tate, W. (2016) (Eds.): Implementing Triple Bottom Line Sustainability into Global Supply Chains.Sheffield: Greenleaf.

Lüdeke-Freund, F.; Gold, S. & Bocken, N. (2016): Sustainable Business Model and Supply Chain Conceptions – Towards an Integrated Perspective, in: Bals, L. & Tate, W. (Eds.): Implementing Triple Bottom Line Sustainability into Global Supply Chains. Sheffield: Greenleaf, 337-363.