As consumers and companies become aware of wasteful, unsustainable consumption, a gradual move towards more sustainable and greener practices has been observed. An increasing number of businesses are now adopting greener approaches by creating a sustainable business model, addressing pertinent issues like climate change, pollution, and depletion of natural resources. In their paper titled, ‘Normative Innovation for Sustainable Business Models in Value Networks,’ Henning Breuer and Florian Lüdeke-Freund describe a sustainable business model as “a business model that creates, delivers, and captures value for all its stakeholders without depleting the natural, economic, and social capital it relies on.”
Why should businesses adopt a sustainable business model?
Adopting a sustainable business model is not beneficial for the planet but also for the companies. The growing expectations of fulfilling their corporate social responsibility and reducing harmful corporate practices has compelled businesses to adopt transparent and sustainable approaches.
- Consumer perception
A study by NielsenIQ titled, ‘A ‘natural’ rise in sustainability around the world,’ suggests that 73% of global consumers are willing to alter their consumption habits to reduce the negative impact on the environment. Another report by Aflac has highlighted that 77% of the consumers are more willing to purchase from companies with a Corporate Social Responsibility (CSR) pledge. As a result, many renowned brands have taken several steps to create a positive reputation promoting sustainable practices.
- Impact of business
According to the report, ‘Unlocking the Inclusive Growth Story of the 21st Century: Accelerating Climate Action in Urgent Times’ by The New Climate Economy, 95% of plastic packaging, which is equivalent to US$80 to 120 billion annually, is wasted after the first use. The report also highlights that it is essential for industries to reduce their carbon emissions by 40% by 2060 to prevent the plant from warming over two degrees celsius. Bold actions from various stakeholders to tackle this issue could yield a direct economic gain of US$26 trillion through 2030 compared to the usual business practices. For instance, Apple recently announced that it is committed to being 100% carbon neutral for its supply chain and products by 2030. Amazon recently announced a $2 billion climate pledge fund to invest in companies building products, services and technologies to decarbonize the economy and protect the planet.
- Differentiated Identity
Brands that value sustainability often make it an integral part of their brand identity. This differentiates the brand from competitors as businesses are able to create a notable identity for themselves. Moreover, it also enables companies to create a positive reputation in the market. Unilever, for example, has made sustainability a part of its corporate identity. With its Sustainable Living Plans, the company set targets for their supply chain, sourcing and production on everything. When these plans were adopted in 2010, the then CEO of Unilever, Paul Polman had the vision to double the company’s business while reducing its environmental impact by half in 10 years. The results of this vision were observed in 2018, when Unilever’s purpose-led Sustainable Living Brands grew 69% faster than the rest of the business, delivering 75% of the company’s growth. Carrying forward Polman’s vision, Alan Jope, the present CEO of Unilever said, “In the future, every Unilever brand will be a brand with purpose,”
- Brand Reputation
No brand wants to be recognized and remembered for the ill effects it caused on the environment and its employees. Creating and successfully implementing a sustainable business model will help companies to create a positive brand image and reputation. Lush Cosmetics is a renowned brand when it comes to sustainability. The company has ensured that all its products are 100% vegetarian and environmentally friendly. This has helped the brand gain a positive reputation as Lush and its customers often engage in various activities and programs like recycling programs, ethics and social campaigns.
While most businesses are aware of the importance of adopting a sustainable and efficient business model, the real challenge is to find a way to create and implement one.
How to effectively create a sustainable business model
- Establishing a vision
While creating a sustainable business model, it is important to establish a vision and mission for your business and engage your employees so everyone is on the same page. This will ensure that every person within the organization is committed to a shared goal. Ultimately, this will also prove to be a driving factor to keep employees motivated and interested.
- Engaging customers
Creating a sustainable business model may result in increased prices for the customers. So, companies must ensure that they keep their customers engaged and informed through various channels – social media, websites, offline campaigns etc. Enabling customers to know what a brand stands for and what values it upholds, will help them build a relationship based on trust and commitment with the company.
- Focusing on the value proposition
For a brand to create a mark, it is essential that it identifies its unique value proposition and provides solutions to the customers’ problems using a green approach. Once this is established, a brand may be able to distinguish itself from competitors.
In today’s world, where customers are more aware and conscious than ever before, businesses must either adapt and become more sensitive to the needs and demands of their customers and the environment or face the risk of becoming obsolete. For a business to succeed in the competitive marketplace, service or product is not all; businesses must go the extra mile and ensure that they not only keep their customers happy but also do their bit for the environment.