Sustainable business models take a triple bottom line approach to define performance and consider a wide range of stakeholder interests – including environment and society. Businesses, which adopt sustainable business models, may be more resilient and competitive in the longer term. A research team at the University of Cambridge developed a list of sustainable business model archetypes – exemplars of solutions that contribute to building up the business model for sustainability. Nancy Bocken of the research team explains.
GUESTBLOG BY NANCY M.P. BOCKEN
Centre for Industrial Sustainability, University of Cambridge
The elements of a sustainable business model
A business model defines how a firm does business. At the hart of the business model is the ‘value proposition’ – the product/ service offering of the company. Value creation and delivery are the ways in which capital, materials and people are employed to create and deliver value: What are the key activities of the firm, what are the logistics and sales channels, who are the key partners and what are the key technologies used? Value capture is about the cost structure and revenue streams: does a company for example charge per piece, or use a subscription or usage fee?
The different elements of the business model are clearly visualised in the business model canvas for example.
Sustainable business models or ‘business models for sustainability’ take a triple bottom line approach to define performance and consider a wide range of stakeholder interests – including environment and society – into the way business is done. Sustainable business models are not only about satisfying customer demand and generating economic value for the company. Businesses with sustainable business models seek to contribute positively to society and the environment rather than exploiting these through the way they do business.
“Businesses, which adopt sustainable business models, may be more resilient and competitive in the longer term.”
Those businesses, which adopt sustainable business models, may be more resilient and competitive in the longer term by recognising the interdependencies between their business, and the society and environment in which they operate. For example, by looking after the natural resources a business relies on (e.g. forests, agricultural land, watersheds), businesses can secure their future supplies. By looking after employees, businesses can create a loyal and steady workforce, who serve as ambassadors and perhaps also customers of the business. The development of sustainable business models can be an important driver for business resilience, innovation for sustainability and serve as a key driver of competitive advantage.
Sustainable business model archetypes
Through collaborative research at the University of Cambridge, a list of sustainable business model archetypes was developed – exemplars of solutions that contribute to building up the business model for sustainability.
The sustainable business model archetypes, explained next, are:
- Maximise material and energy efficiency;
- Closing material loops
- Substitute with renewables and natural processes;
- Deliver functionality rather than ownership;
- Adopt a stewardship role;
- Encourage sufficiency;
- Re-purpose the business for society/environment;
- Seek inclusive value creation.
Definition: Do more with fewer resources, generating less waste, emissions and pollution
Examples:
- Lean manufacturing
- Dematerialization
- Increased functionality
Positive impacts
- Enhance efficiency and improve resource use
- Cost savings
Definition: Reuse materials and products; turn waste into feedstocks for other products and processes, and make best use of under-utilised capacity
Examples:
- Cradle-to-cradle
- Industrial symbiosis
- Extended producer responsibility
Positive impacts
- Reduces waste
- Turns waste into value/ new business lines
- Generate new revenue streams
Definition: Use of non-finite materials and energy sources
Examples:
- Cleantech
- Renewable energy
- Biomimicry
Positive impacts
- Reduces use of finite resources, waste and pollution
- Supports long-term energy supply
- Contributes to ‘green economy’
Definition: Provide services that satisfy users’ needs without having to own physical products
Examples:
- Rental/ lease
- Pay per use
- Product-service systems
Positive impacts
- Encourages right behaviours with manufacturers and users
- Potentially reduces need for physical goods
Definition: Proactively engage with all stakeholders to ensure their long-term health and well-being
Examples:
- Resource stewardship
- Biodiversity protection
- Choice editing
Positive impacts
- Ensuring long-term well-being of planet (e.g. forests) and society (e.g. health)
- Ensuring long-term viability of the value network
Definition: Solutions that actively seek to reduce end-user consumption
Examples:
- Consumer education
- Demand management, slow fashion
- Frugal businesses
Positive impacts
- Actively reduce consumption of resources
- Encouraging community sufficiency and sustainable living
- Long-term customer loyalty, and new repair and service markets
Definition: Seek to create positive value for all stakeholders, in particular society and environment
Examples:
- Social enterprises and b-corporations
- Net positive initiatives
- Bottom-of-the-pyramid solutions
Positive impacts
- Deliver positive societal (e.g. community development) value
- Deliver positive environmental (e.g. afforestation) value
- Prepare for a resource capacity for long-term business sustainability
Definition: Sharing resources, knowledge, ownership and wealth creation
Examples:
- Collaborative consumption
- Peer-to-peer models
- Open innovation
Positive impacts
- Sharing resources, skills and knowledge and distribute wealth
- Leverage resources and talents
- Create new business opportunities
Tackling resource scarcity through the archetypes
 |
With increasing resource scarcity sustainable business models are becoming increasingly important. It is not only essential to be resource efficient and develop products, which combine multiple functions to reduce total product need (archetype 1) – innovations will need to happen at all levels. |
 |
Businesses can seek opportunities to turn “waste” into value (e.g. Kalundborg Symbiosis), and repair, refurbish and remanufacture to encourage product reuse (archetype 2). |
 |
They need to become less reliant on fossil fuels (archetype 3). In developing nations off-grid solutions such as solar lights are gaining ground, but in developed countries a wide scale transformation of energy networks is required – otherwise, for example, an electric car powered with electricity from a fossil fuel-based power plant will have limited environmental gains. |
 |
The total throughput of products needs to be reduced – for example through lease models, which reduce the need for individual ownership (e.g. launderettes, document management systems, car sharing; archetype 4). |
 |
Businesses need to take responsibility for the scarce resources they use. “Net positive” initiatives are a good example of how businesses can ‘do more good than bad’, when paper or palm oil using companies for example start afforestation initiatives rather than contributing to deforestation (archetype 5). |
 |
The responsibility not only lies with producers but also with consumers. They can be more resource-efficient by thinking before consuming: do I need this product or service in the first place? Is the product durable? Is the product repairable? This is about choosing durable products and looking after them (archetype 6). This also requires a specific mindset from manufacturers who will need to develop durable, reparable and upgradable products and offer good service and warrantees accordingly. |
 |
Social enterprises and b-corporations dedicate themselves to a positive environmental and/ or social goal, rather than seeking to merely maximize their profits (archetype 7). A ‘buy one-give one’ model, where sales in the developed world finance a “give-away product” in a developing country (e.g. WonderBag and Toms Shoes) is a common type of social enterprise. |
 |
Finally, solutions will need to be scaled up and made available for a wide audience (archetype 8). Peer-to-peer or consumer-to-consumer models such as car sharing and ‘bed sharing’ (e.g. couchsurfing) can reduce total product throughout, by preventing new cars from being manufactured or new hotels being built. Nor surprisingly, these types of new business models lead to opposition from existing industry (e.g. AirBnB vs. the hotel industry in New York). |
Business model innovation is hard for small players, the new entrepreneurs, coming to the scene who will need to fight against existing industries who outnumber them in financial, human and capital resources. Large corporations on the other hand may lack the agility to change their business models overnight. New ideas and collaboration across key stakeholders will be required to make big changes happen and allow sustainable business models to become widespread.
The business model innovation grid
To inspire businesses to reconceive how they operate and to become more future proof, Plan C created an online tool: the Business Model Innovation Grid. Ordered around the 8 ‘archetypes’ explained above, we present a multitude of exemplary approaches and 100 real life business cases.
Source: A literature and practice review to develop sustainable business model archetypes
