23 Jun Innovation trends in sustainable business models
Written by: Alberto Cremonesi, member of the Board of Directors of Impact Hub Global Network
Can sustainability be leveraged as a competitive advantage? More and more often this question is being raised and discussed in C-suits around the globe as an ever-increasing number of pioneering companies demonstrate that this might as well be the case.
As this awareness gains momentum, some clear trends can already be identified. Generally speaking, we refer to sustainable business models as models that create, deliver, and capture value for all their stakeholders without depleting the natural, economic, and social capital at disposal. It means that both society and environment are taken into account as active parts of the triple bottom line and that every decision has to satisfy at least equally all parts.
The first trend is one that we can call green and technological. This is perhaps the most common type of sustainable innovation in business models we see today. It involves the optimization of the value chain as companies strive to minimize waste, reduce cost and resulting in an improved environmental footprint. Under this category we may list:
- Lean. Rendered popular by the car industry and now adopted mainstream across different industries and sectors. Efficiency and waste reductions are the main drivers;
- Closed loop. The attempt to reutilize the waste at the end of the value chain as an input in the production process. An example is the recycling of aluminium cans to be collected and turned into raw material for new cans;
- Renewable revolution, which includes the growing number of technologies to harvest energy from renewable sources – like solar – with the intention to minimize dependency on traditional sources and abate costs.
The second category of sustainable business models is one that looks at behaviours and systems within society in the attempt to improve the current delivery of value, and that we call social and system innovations. Few examples:
- Functionality versus ownership. The end user makes use of the product or service only as long as needed, without ever owning it. This is the case of car sharing and other forms of what is now popularly known as sharing economy;
- Stewardships. Organizations take on themselves the responsibility to protect a certain resource or to achieve a certain or socail goal. Examples are the ambition of going carbon neutral in certain sectors;
- Sufficiency. This is the most ambitious model, the attempt to reduce consumption at the consumer level, through creating awareness but also revisiting products/services for longer life-cycles.
The third and last trend is perhaps the most radical one as it puts into question the entire concept of value and asks to repurpose the whole idea of business. This trend, that we can call structural, embeds environment and especially societal value within the model, re-architecting the very own vision of the company to serve a social and environmental purpose – like in the case of benefit corporations.
While there is still space for improvement and more experimentation, all these more sustainable models are already proving to be of great commercial value. Efficiency, improved control over input prices and the resulting cost savings are only the lowest hanging fruits. These companies are also better equipped to navigate restricting regulatory
environments – exercising a competitive advantage over less sustainable companies; are able to attract new, customer segments; are generally more innovative as working with less requires rethinking most of pre-set mindsets. And – last but definitely not least – they demonstrate an improved employee engagement and performance, as well as an improved capacity to attract new talent.
About the author:
Alberto is a member of the Board of Directors of Impact Hub Global Network and the founder of Impact Hub Phnom Penh. His focus is on the field of social entrepreneurship and social innovation, non-for-profit management and corporate non-market strategies. He is particularly interested in understanding the processes through which entrepreneurs construct new models and markets, and the growth and scaling up processes of new ventures in order to maximize economic and social impact. Alberto has been living and working in Asia for over 15 years.
Alberto holds an executive MBA from IE Business School. In life, he continues his quest to find the perfect espresso coffee outside of Italy.