The Innovative Business Models Leading the Next Wave of Sustainability
<p>Leading companies are realizing that simply reducing impacts is not enough -- you've got to reimagine your entire business model to shake up the status quo and make real change possible.</p>
When is enough enough? A group of leading companies that we work with at Forum for the Future tell us that even their substantial progress on sustainability is not enough. And we think they're right.
The next wave of corporate sustainability will be about innovating the fundamental logic of how a company creates value, in short creating "sustainable business models." In this emerging field, what examples and best practice can you suggest that help us all understand what to do next?
We think of a sustainable business model as one that achieves commercial success by delivering social value within environmental limits. Unilever's Sustainable Living Plan commits them to double sales over the next decade while halving the environmental footprint of making and using their products. As CEO Paul Polman says [PDF], "That means a new business model".
Back in 2010, we convened a roundtable with representatives from M&S, Unilever [PDF], Bank of America Merrill Lynch, Kingfisher and the Shell Foundation to explore the emerging idea of sustainable business models. We learned two things.
First, the group had already realized that more product and service innovation was not going to be enough. One participant described their world-leading sustainability change program as "only taking the rough edges off." In order to secure the future success of their companies, they needed to go further, faster on sustainability.
Second, they are reaching the limits of what they could do in the status quo. They needed their operating context to shift, so they can take the next leadership steps.
So what to do about it? Again, two things shone out.
First, the company can go beyond improving its current products and services -- it can experiment new sustainable business models. Academics define a business model as the fundamental logic of how a company creates value. As an example, Apple's recent success is down to more than great design. It made downloading music easy, and built a business model around that. While the sustainability benefits are contested, it is clear Apple has successfully changed the status quo in music, media and consumer electronics.
There are already a few examples that stand out. One is Zipcar, the world's largest car sharing and car club service. Customers meet their need for convenient, cheap urban mobility. There are fewer cars on the road doing short journeys as each Zipcar replaces at least 15 cars.
Second, companies will need to collaborate to shift the status quo. There will be experimentation here too, as businesses try out different combinations of collaborators for particular issues. Sometimes it will make sense to gather together competitors, sometimes only supply chain partners, consumers, regulators, NGOs or some combination of these different groups.
The roundtable gave us plenty to think about here at Forum for the Future. So much, in fact, that we developed a new strategic direction. Going forward we will focus on transform the critical systems of food energy and finance, to make them fit for the challenges of the 21st century. Our approach is "system innovation," using collaboration to shift the status quo. It is explained in a handy 2 minute animation here.
Our sustainable business work is all about using this approach to enable leading companies to go further -- to succeed through sustainability. We will focus on helping companies innovate sustainable business models. In fact, one of the targets we have set ourselves is to help three companies decouple their financial success from environmental and social impact in the next five years. A tall order! Which is why we're keen to hear your examples of sustainable business models. Let us know your comments below or by email.
Photo CC-licensed by Shane Watson.