Innovating sustainable business models: the next wave of corporate sustainability?

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, “That means a new business model”.

Back in 2010, we convened a roundtable with representatives from M&S, Unilever, Bank of America Merrill Lynch, Kingfisher and the Shell Foundation to explore the emerging idea of sustainable business models. We learnt two things.

First, the group had already realised that more product and service innovation was not going to be enough. One participant described their world-leading sustainability change programme 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. Do put your ideas in the comments below or by email to d.bent@forumforthefuture.org.

This post first appeared on GreenBiz on 12 July 2011. It was sharpened up by Madeleine Lewis

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s