Business model innovation for sustainability: a new framework

Innovation & Management Review

ISSN : 2515-8961

Article publication date: 25 March 2022

Issue publication date: 14 June 2022

Sustainable business model innovation (SBMI) is a change in the way a firm operates in order to create positive impacts or to reduce negative consequences for the environment and the society. The aim of this paper is to explain what pathways a firm can take when it implements a sustainable business innovation process in line with Sustainable Development Goals (SDGs).

Design/methodology/approach

The article starts with the analysis of the existing literature about BMI and SBMI in order to extrapolate the main elements of these topics.

Thanks to the combined information from academic and nonacademic sources, the study proposes a new framework. It is divided into three sectors: value proposition, value capture delivery and value capture according to the main studies about the business model.

Research limitations/implications

Regarding theoretical implications, this study contributes to developing a theory of both BMI and sustainable innovation. Indeed it helps in the understanding of the dynamic vision about how the business model changes in order to incorporate triple sustainability.

Practical implications

From a practical view, the paper can serve as a guideline for corporate reorganization.

Originality/value

The new framework differs from some recent academic efforts first of all for its theoretical characteristics: BMI construct and not business model concept is the core of the framework. The business model represents the subject of innovation, not its vehicle. Another unique aspect that can be derived from the approach adopted is that it links theoretical with practical sources.

Sustainable business model innovation

  • Sustainability
  • Business modeling

Ferlito, R. and Faraci, R. (2022), "Business model innovation for sustainability: a new framework", Innovation & Management Review , Vol. 19 No. 3, pp. 222-236. https://doi.org/10.1108/INMR-07-2021-0125

Emerald Publishing Limited

Copyright © 2022, Rosaria Ferlito and Rosario Faraci

Published in Innovation & Management Review . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence maybe seen at http://creativecommons.org/licences/by/4.0/legalcode .

Introduction

Business model innovation is a widely known topic and one of the most recurring keywords in managerial studies. It deals with a new way to do business aiming at prosperity in a dynamic environment through the reconceptualization of the underlying logic behind the value creation, capture and delivery ( Richardson, 2008 ; Teece, 2010 ).

Firms increasingly need to innovate by modifying their business model by initiating changes, improvements and replacements in various organizational elements ( Mitchell & Coles, 2003 ). It is relevant to understand these elements to facilitate the analysis of organizational processes and planning of transformation from one business model to another and to increase the firm’s resilience and the probability of success ( Geissdoerfer, Vladimirova, & Evans, 2018 ).

In recent years, a new form of business model innovation (BMI) has occurred by incorporating the sustainability concept into the firm’s goals and processes. We define sustainable business model innovation (SBMI) as a change in how a firm operates to create positive impacts or reduce negative consequences for the environment and society.

Although there is a broad consensus about the importance of sustainability for firms, the academic studies on how to transform the firm into a sustainable organization remain blurred (i.e. Lemus-Aguilar, Morales-Alonso, Ramirez-Portilla, & Hidalgo, 2019 ; Presenza, Messeni Petruzzelli, & Natalicchio, 2019 ). Moreover, the process of implementing a sustainable business model remains unclear. Indeed, the prior scientific research about this topic offers various reviews (i.e. Boons and Lüdeke-Freund, 2013 ; Bocken, Short, Rana, & Evans, 2014 ; Geissdoerfer, Bocken, & Hultink, 2016 , 2018 ) or analysis of a specific type of SBM (i.e. circular economy, collaborative consumption, inclusive growth and targeting low-income consumers). Nevertheless, the dynamic vision on how the business model changes to incorporate triple sustainability has received insufficient attention.

how to understand the way value proposition, value creation, and value capture within a business model change to include economic, environmental, and social issues. What pathways can an organization take?

To achieve our goal, we propose a new multidimensional framework that allows researchers to study the changes that occur when a business model moves toward sustainability and to study firms that design and manage this transformation process.

To structure the new framework, we must combine elements and characteristics of various tools of both academic and practical matrices. Regarding academic studies, we must consider the three concepts of value proposed by Richardson (2008) , the ten types of stakeholders identified by Bocken, Short, Rana and Evans (2013) in the value mapping tool and the nine building blocks of business model canvas (BMC) proposed by Osterwalder and Pigneur (2010) . Then, we must analyze nonacademic sources. We must consider the four areas of BIA (B Impact Assessment) methods promoted by Blab and the elements of the SDG i mplementation framework created by the United Nations.

At the end of the design process, we identified three macro-areas, namely value proposition, value creation and delivery and value capture, and several elements to describe each of them.

Our paper contributes to enriching the literature about BMI and sustainable innovation by adopting the business model dynamic perspective and presenting a new tool helpful in understanding how the business model changes to incorporate triple sustainability. A holistic framework for developing sustainable BMI could represent a learning framework for researchers to help identify the current assumptions about the phenomenon and improve them. Moreover, this study assumes a theoretical relevance because it uses the BMI construct as a lens to design a new framework. In contrast, the business model represents only the subject of innovation, and previous studies have instead identified it as the vehicle of innovation or a mediating device that can help achieve sustainable innovation. From a managerial perspective, the paper offers new tools that can serve as a guideline for a reorganization that aspires to increase sustainability within firms and reduce resistance to modifying existing business models.

The present article is structured as follows: first, we show the existing literature on BMI and SBMI to capture the current data. In the second section, we describe the research setting and the methodology. Then we propose a new conceptual and integrative framework as a guideline in the business model transformation toward sustainability. Finally, the discussion and the conclusion summarize the results and show the study implications and its limitations and directions for future research.

Theoretical background

Business model innovation.

In the last ten years, the literature on the business model has shifted from the defining aspects to the topic of BMI. It moves away from the idea that innovation is possible only if it is technological, applied to a product or process. Therefore, it resides in the transformation of the business model and expresses how to do business in a new way ( Amit & Zott, 2020 ).

There are several definitionsfor BMI ( Table 1 ). According to Osterwalder et al. (2005) , Labbè and Mazet (2005) , Santos, Spector and Van der Heyden (2009) , Amit and Zott (2020) and Yunus, Moingeon and Lehmann-Ortega (2010) , BMI is a reconfiguration of the business model’s elements, of the firm’s activities or of the value proposition.

Furthermore, scholars have used BMI as a strategic tool or unit of analysis to study how firms can overcome the competitive threat of a specific industry, such as the creative and cultural industry (i.e. Lantano, Petruzzelli, & Panniello, 2022 ) or the tourism and hospitality industry ( Presenza et al. , 2019 ).

Other authors, instead, introduce taxonomies. The most famous is the classification provided by Geissdoerfer et al. (2018) , which identifies four types of BMI – startup, transformation, diversification and acquisition – and by Cavalcante, Kesting and Ulhøi (2011) which talks about creation, extension, revision and termination.

Most studies on BMI frame it as a process based on these taxonomies. Andreini et al . (2021) identified five typologies of processes: cognition processes, knowledge-shaping processes, strategizing processes, value creation processes and evolutionary processes.

This vision implies the existence of various phases which can lead firms to achieve a competitive advantage. So, managers must connect people and processes to anticipate market trends and integrate strategic assets creatively. In this regard, a framework can help and support the change process.

“SBMI” is a scientific topic that has received significant attention both in the literature of sustainability innovation and business models of the last ten years ( Cillo, Messeni Petruzzelli, Ardito, & Del Giudice, 2019 ). This research field aims to strengthen the firm's ability to integrate sustainability into the business model to achieve the goal of sustainable development. In particular, SBMI is a change in how a firm operates to reduce adverse external effects and create new positive external effects for the environment and society ( Presenza et al. , 2019 ).

For explanatory purposes, currently, a growing number of firms integrate green innovation into their business model to attain the opportunities offered by the market and build a competitive advantage ( Presenza et al. , 2019 ).

A SBMI is characterized by (1) the incorporation into the existing value proposition of sustainable principles or goals, (2) the extension of value creation concept from economic value to shared value ( Porter & Kramer, 2011 ), (3) the consideration of nonfinancial interests in the decision-making process and (4) managers who act as sustainability leaders to promote a new mindset within the whole organization ( Stubbs & Cocklin, 2008 ).

The core activity is transforming the value proposition toward a sustainable value proposition that allows value creation by considering the needs of customers, shareholders, suppliers, partners, community, society and environment ( Baldassarre, Calabretta, Bocken, & Jaskiewicz, 2017 ).

It must express economic, environmental and social outcomes. Managers who intend to avoid value destruction through BMI should assume the sustainable value proposition ( Roome & Louche, 2016 ). The sustainable business model must mitigate the value destruction for society and the environment. To do so, managers must clearly understand what value is currently on the verge of being destroyed and consequently act on the business model.

The SBMI also considers the value creation in the carried-out activities and its delivery as eco-social benefits balanced among all the players. In other words, it may include changing energy inputs in the industry using renewable energies, such as the sun and the wind, or modifying the way products reach the market regarding transportation.

The last dimension of a sustainable business model that innovation must consider is the value capture mechanism, the amount of value that individual stakeholders appropriate for themselves ( Amit & Zott, 2020 ). It requires firms to capture economic value for shareholders and investors and environmental and social value for stakeholders. We can affirm that in the SBMI, the subject-matter experts link the value concept to impact and sometimes replace it.

So, this activity is complex because the transformation process often involves incorporating heterogeneous metrics besides including various stakeholders’ needs ( Snihur & Wiklund, 2019 ).

Despite this complexity, the literature on the sustainable business model (i.e. Lozano, 2018 ) and BMI for sustainability (i.e. Geissdoerfer et al. , 2018 ) has highlighted a gap in the SBMI design and implementation. Considering this scenario, we introduce, in the next section, a new helpful framework as a guideline for scholars and academics to theorize the correct business innovation process toward sustainability. Such a framework is also helpful for practitioners to plan actions at different firms' departments and implement business model transformation.

Methodology

This study presents a conceptual framework summarizing the several SBM critical dimensions to support the complex process under the SBMI. We have detailed the research process of these phases: (1) the selection of scientific papers, (2) the establishment of the framework's design and (3) the analysis of papers.

The selection of scientific papers

We have adopted the SCOPUS academic database to retrieve helpful literature for creating a new theoretical framework. To find the papers, we used the following keywords: [sustainable business model], [“business model innovation” and “sustainability”], [“business model” and “sustainability”] and [sustainable business model innovation]. These keywords must be present in the abstract, the title and the paper’s keywords.

We have included only papers written in English and published between 2010 and 2021. Moreover, we included only papers belonging to the subject area “Business, Management and Accounting.” The database returned 520 results. After excluding conference papers and duplicities, we selected only papers that we considered relevant based on two criteria: the journal which has published them and the number of citations (>50 citations). For obvious reasons, we have not considered this last criterion for the most recently published papers (papers published from 2018 to 2021). The final search on SCOPUS returned 68 results.

Then, we read the abstract and the title to understand the papers’ consistency with the research aim. In the end, we have selected 51 papers after reading them in full.

Establish of framework's design

To focus on value to integrate it into the triple bottom line dimensions (i.e. Evans et al. , 2017 ),

To have a multi-stakeholder approach that requires systems thinking ( Seiffert & Loch, 2005 ) and

To analyze every aspect of the business model according to a comprehensive approach.

Disregarding some of the principles mentioned earlier can cause them to lose consistency, and it will therefore fail if implemented ( Osterwalder, Pigneur, & Tucci, 2005 ).

Following these principles, we have intersected the theoretical concepts (academic sources) with practical tools to identify the framework's critical elements.

Academic sources

The three value concepts proposed by Richardson (2008) : (1) the value proposition concerning offers, target customers, differentiation, vision and mission; (2) the value creation and delivery system regarding resources, assets, processes, position in the value network relative to customers, competitors, collaborators and all stakeholders and (3) the value capture system linked to the way to make money.

The nine building blocks of a BMC proposed by Osterwalder and Pigneur (2010) : value proposition, customers, relationship, channels, key resources, key activities, key partners, cost and revenues.

The ten types of stakeholders identified by Bocken et al. (2013) into the “value mapping tool”: customers, investors and shareholders, employees, suppliers and partners, environment, community, government, external agencies, media and academia.

Richardson's classification does not list the business model’s possible elements, and he only focuses on the value concept and considers the latter only in economic terms. So let us add the BMC of Alexander Osterwalder that clearly shows all the components and their interrelationships. However, while being well-conceived and academically grounded, it has a narrow view of the value proposition, focusing only on the customer and not the stakeholder network. Therefore, we have needed a greater focus on the stakeholders. We considered the value mapping tool Bocken et al . (2014) proposed that aims to understand the positive and negative aspects of the value proposition of the network of stakeholders ( Bocken et al. , 2014 ).

Nonacademic sources

The four areas of the B Impact Assessment (BIA) method promoted by Blab, a nonprofit organization: governance, community, environment and workers.

The elements of Sustainable Development Goal ( SDG ) i mplementation framework, created by the United Nations to guide companies to deepen integration of SDGs into business operations and stakeholder engagement: strategy and governance, operations and stakeholder engagement ( United Nations Global Compact, 2020 ).

BLab promotes socially aware business practices by allowing firms to adopt responsible standards voluntarily. By voluntarily joining and meeting a certain level in socially responsible standards, a firm becomes a BCorp. The process of certification generates a B Report that includes several broad categories: governance, workers, community and environment. These categories include further subcategories: the governance category includes “transparency” and “accountability”; the workers category includes “compensation benefits and training”, “ownership” and “work environment”; the community category includes “community products and services” and further enumerated “community practices”; and the environment category includes “environmental products and services”, and further enumerated “environmental practices”.

We have also considered the SDG implementation framework linked to 17 Sustainable Development Goals to deepen the single elements. The 17 SDGs are a worldwide initiative introduced by United Nations in 2004 to encourage firms to adopt social and environmental behaviors.

The analysis of papers

We have analyzed the theoretical papers to describe the framework's single elements identified in the previous phase. With this objective in mind, we have first organized the information into three macro-areas: value proposition, value creation and delivery and value capture.

Then we have identified the specific knowledge about (1) a firm’s purpose and governance, (2) stakeholder engagement, (3) customers impact, (4) environmental practices, (5) environmental resources, (6) workers, (7) stakeholders, (8) cost structure, (9) revenue stream and (10) corporate finance.

The third step regards the search for examples within papers for each framework dimension. We carefully read papers with case studies. Finally, the authors have discussed the results among them.

New framework to sustainable business model innovation

Based on the process discussed above, we proposed a multidimensional vision of sustainable BMI, which a specific framework, i.e Figure 1 has illustrated. We discuss below the three macro-areas identified.

Value proposition section

The framework suggests starting the analysis from the value proposition section made up not only by describing new sustainable value, like existing tools, but also by explaining the governance.

The first step is aligning the firms’ aims with sustainable principles. The main action refers to renewing their mission, statements and core values. Organizations can focus on their strengths to achieve this triple positive impact through missions that support core business strategies and unlock the motivation of all employees and collaborators ( Geissdoerfer et al. , 2018 ). As an example, we quote Danone, a leading firm operating in the nutrition industry explicitly states that it studies and applies solutions that regenerate the environment by promoting the use of resources responsibly ( Jones, Hillier, & Comfort, 2015 ).

The second step concerns transparency, which is often associated with the amount of information an organization is willing to disclose. Transparency cannot exist without ethical action as the presence of an ethical code and an ethical audit ( Depken & Zeman, 2018 ). According to the example given by Enel, since 2002, it has adopted the Code of Ethics, which expresses the commitments and responsibilities in conducting business ( Mazza & Furlotti, 2019 ).

The last element necessary to consider is governance since leading the transformation to a more sustainable business model must be a constant topic on the Board of Directors' agenda. The FCA (Fiat Chrysler Automobiles) board has adopted a “diversity policy” as they understand that diversity in the firm’s composition, in terms of age, gender, experience, work background and nationality, is essential for promoting debate and making balanced decisions.

Value creation and delivery section

Following the framework’s logic, we must consider how the value is created and distributed.

First, one must consider the customer area, carefully observing the impact of products or services on health and wellness, support and satisfied needs ( Schaltegger, Hansen, & Lüdeke-Freund, 2016 ). Customers are interested in corporate sustainability. Consequently, the firm examines all marketing activities aimed at sustainability to satisfy the customers’ needs. The sales team also plays a vital role in promoting the firm's values.

For example, we can mention Illycaffè, an Italian company operating in the coffee industry, which bases its customer relationship on maximizing the sustainable value created by reducing the environmental impact of products and packaging. The salesforce guarantees constant contact with B2B customers and updates on all the leading news regarding products, services, promotions and events. Instead of B2C customers, the firm offers shops based on beauty, socialization, creativity and food culture.

Then the framework requires an in-depth study of the leading resources, the key activities and the partnerships. Inserting sustainable ambition into periodical investor relations is relevant to ensure accountability, and the information enables the communication of long-term value generation. Reporting of sustainable progress requires defining specific metrics ( Depken & Zeman, 2018 ). Some environmental dimensions of sustainability activities refer to reducing greenhouse gas emissions and waste management.

Another element refers to resources considered essential, such as personnel and the environmental.

Human resources play an essential role in achieving sustainable ambitions. Therefore, it is relevant to analyze some elements concerning workers, such as their benefits or wages, training, work environment, job flexibility and others. To illustrate, the Salvatore Ferragamo’s Group considers the well-being of its workers and the internal environment as fundamental elements for its success. It implements many corporate welfare initiatives to favor balancing each employee's professional and private life ( https://sustainability.ferragamo.com/it ).

The use of environmental resources, such as renewable energy, is a significant talking point for some firms. There are several ways to purchase renewable energy: buying specific technologies, like solar panels, wind turbines or vegetable oil filters.

For example, AUDI aims to make all the activities “carbon neutral” by 2050, from the supply chain until production. The firm implements the circular economy model through the implementation of “ remanufacturing ,” the industrial regeneration of used parts or through the introduction of the “Aluminium Closed Loop project”: the scraps of the aluminum sheet are isolated from other waste and sent back to suppliers for new processing ( Wellbrock, Ludin, Röhrle, & Gerstlberger, 2020 ).

Another element of the framework regards the partnership with all stakeholders. Collaboration with government, suppliers, academia, media, external agencies and the community can accelerate innovation to advance sustainable goals.

These external relationships help grow the core business and extend companies’ social licenses to operate ( Bruneel, Moray, Stevens, & Fassin, 2016 ). When companies come together with industry partners, they further raise the playing field for all and pave the way to engage with governments and policymakers to drive action. For example, we can cite the community representing Esselunga, a stakeholder group that influences sustainable practices. Esselunga is an Italian food and mass retail channel company that contributes to the community's economic, social, cultural and well-being development where it operates. The main initiatives implemented last year have focused on three macro-objectives: redistribution of food surpluses, promotion of culture and education, and support for scientific research.

Value capture section

The last area of our framework focuses mainly on the firm’s results and their measurement.

The main question concerns how the firm assesses the impact. There are several metrics that firms can use to assess the triple bottom line integration in the new business model. Such metrics can assess the last year’s turnover and net income, the number of new offices, the hiring of new workers, the new investments attracted, the environmental indices and the customer feedback ( Breuer, Fichter, Lüdeke-Freund, & Tiemann, 2018 ). Tod's group, FCA or ENEL, like most listed companies, use the “Global Reporting Initiative for Sustainability Reporting Standards” indicators defined by the Global Reporting Initiative (GRI) to measure the results of its activities.

Integrating sustainable practices into the capital flow from an economic perspective is essential, and it is from sustainable initiatives that the economic costs derive and consequently the financial investment. These decisions are critical for progress on any sustainable process from investments toward research and development to capital allocations for new facilities.

Further activities concern the updating of risk expectations connected with revenue flows.

Indeed, in the value capture process, firms aim at monetizing the outputs of their activities. Due to products' social and environmental characteristics, managers can increase customer loyalty and willingness to pay, allowing firms to capture higher product prices.

This last section includes the qualitative measurement of the impact concerning mitigation of the destroyed value and the value not captured. To exemplify this qualitative measurement, we mention the permanence of waste from production flows, the nonexploited co-production and the sub-utilized resources about overworking capacity or insufficient use of skills and knowledge.

For each of the three dimensions, we have provided some questions the managers should answer at the end of the sustainable business innovation process and which scholars should study in-depth to provide further theoretical insights. In Table 2 , we have summarized the questions we would include in a possible checklist.

Discussion and conclusion

Subject-matter experts consider the SBMI a complex process that changes the core elements of the firm’s logic to create new value for all their stakeholders.

The radicality of organizational change makes the adoption of a sustainable orientation easier for new entrants (start-up) and riskier for incumbents – the existing companies that have been operating their business for a long time. Indeed, the start-up does not transform an existing business model but creates new ones without a history to respect or a tradition to maintain. At the same time, incumbents’ firms must start revising their current business model. The ambiguity of the situation also can bring uncertainty.

Consequently, the research questions based on this study are “ how to understand how the value proposition, value creation, and value capture within business model are changed to include economic, environmental, and social issues? What pathways can an organization take?”

In order to fill this gap, we have proposed a novel framework that provides a multidimensional view concern to the SBMI process.

We have divided the new framework into three sections: value proposition, value creation delivery and value capture. We have made up each dimension by different elements deriving from the literature. Then we provided a helpful checklist to interpret the framework.

The section related to value proposition includes the description of new sustainable value. The renewed purpose should stem from an authentic motivation and passion within the firm’s organizational culture. It is relevant notice that the governance became a central element to consider within this dimension despite studies on the business model often do not consider it. The second section of the new framework considers the customer’s sphere to create value and the essential resources, activities and partnerships to delivery it. The literature reveals the importance of the sales team that plays a role in promoting the firm's values. Moreover, all the activities of this section must guarantee transparency and ethics. The last area of the framework focuses on the impact and its measurement.

Theoretical implications

The present study provides a new knowledge on the SBMI process design by introducing a new framework.

From the theoretical point of view, a comprehensive framework for developing SBMI could represent a learning framework for researchers. Indeed, the framework proposed should seek to identify the current assumptions about the phenomenon and improve them.

Adopting a dynamic perspective for the business model and introducing a valuable tool to understand how the business model changes to incorporate triple sustainability are contributing factors in the theory development of the BMI and sustainable innovation.

Another theoretical contribution lies in the approach adopted to find the critical areas of the new framework: we have linked theoretical and practical sources. We have sought to develop an integrative framework of elements that are easy to investigate to facilitate the BMI process. This approach is still rare in the published scientific articles and other theoretical frameworks dealing with BMI.

Moreover, the new framework differs from recent academic efforts ( Breuer et al. , 2018 ), above all, by the theoretical approach at its foundation. For example, to build his framework, Ludeke-Freud considers the business model a mediating device that can help him achieve sustainable innovation ( Lüdeke-Freund, 2020 ). So, the business model is the vehicle of innovation. In this case, the BMI construct is the core of the new framework, not the business model. The business model represents the theme of innovation.

Managerial implications

About practical implications, the proposed framework can serve as a guideline for a reorganization that aspires to increase the level of sustainability within an organization. It can help managers and consultants: (1) to experiment, orient, test and implement the business model transformation and the consequent organizational change and (2) to analyze and correct transformation processes that have already started.

Moreover, the study provides an essential feature of the sustainable innovation process, which is helpful for practitioners: they can initially analyze the identified elements in a sequence and then follow an iterative process that assumes continuous questioning of the business model until it achieves complete coherence between all parties.

Therefore, such a framework reduces resistance to modification of the business model within firms and promotes the commitment of individuals to the BMI implementation.

Even if the framework applies to all firms that want to change their business model toward sustainability, since the governmental organizations until the private businesses, experts have designed this framework for small and medium-sized enterprises (SMEs) that are less used to dealing with sustainable indicators and metrics. The scenario forces large corporations to follow the strict business model transformation processes and monitor them with indicators for implementing sustainability. For example, we can mention the listed companies that use the GRI Indicators to disclose their sustainable results in most cases. SMEs faced with these complex processes may become discouraged and implement the organizational change process incorrectly or not implement it at all.

Limitations and future research

This research is subject to certain limitations: we have used a theoretical approach in SBMI, and we have proposed a framework that may be interpreted differently by various researchers.

Consequently, the validation of the results, which one could do through the qualitative methodology of the case studies, is not present in this study due to space constraints in the article and the risk of sidetracking the reader. Therefore, future studies can use this methodology to understand our framework's applicability and suitability in different contexts and smaller and larger firms alike.

Moreover, future research might develop a system of metrics for each element of the framework to measure value delivery and value captured by the firm. Consequently, this could create the basis for future quantitative studies of SBMI, a segment of business model studies that is less important than qualitative empirical studies.

sustainable business model des

Definition of business model innovation

The check list for sustainable business model innovation implementation

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5 Principles of a Sustainable Business Model

  • | December 5, 2011

Systems theory identifies 5 elements for a sustainable business model: Diversity, modularity, openness, slack resources and matching cycles.

Tima Bansal is the Founder of the Network for Business Sustainability and Professor at Ivey Business School. She wrote this article in 2011; see her 2020 article on sustainable business models for more recent perspectives.

Do most shareholders believe they make enough money? Probably not. No matter the profit numbers, shareholders are still clamoring for more. And, the easiest way to grow profits is to grow the business.

Yet, the natural environment cannot accommodate more industrial growth. Our natural resources are being extracted and disposed of faster than they can be renewed. Nowhere is this more evident than with fossil fuels. The more fossil fuels we extract, the more that ends up in our air, water and landfills as either carbon emissions or as byproducts and waste.

The fact that the natural environment is not on the minds of most managers is not entirely surprising. Many business professors still teach the 1970’s doctrine of Milton Friedman: “The social responsibility of business is to increase its profits. ” Growth, therefore, is at the heart of the business model. But the foundation of this model was developed at a time when we didn’t comprehend the natural limits to growth .

Business sustainability tackles these issues head on. Many business advocates translate business sustainability into the triple bottom line: firms are expected to manage the social, environmental and financial implications of their actions. The triple bottom line encourages firms to seek win-wins, where they search for profitable activities that benefit society and the environment.

But, most managers recognize that such win-wins are elusive, especially in the short-term. And as shareholder scrutiny intensifies, managers are under even greater pressure to show consistently high and growing profits each quarter. What’s more, the triple bottom line advises firms what to measure, but not how to manage. It does not tell managers how to organize their business and how to make important tradeoffs. The triple bottom line is still grounded in the short term and in the existing business model.

What is a sustainable business model?

For business models to be sustainable, they need to emphasize resilience. Resilience not only recognizes the importance of profits, but also values longevity and bouncing back from shocks. It shifts the paradigm from business-centric to recognizing that businesses are part of a wider system – a resilient business requires resilient relationships.

Five elements for a sustainable business model

Based in systems theory , approaching sustainability as resilience reveals some important insights into organizational forms, some of which I describe below.

Diversity: The firm needs a diverse set of resources, people and investments to be resilient. While diverse investments are seen to draw on resources and absorb managerial attention, a single line of business, single sources of revenues, or people with similar mindsets can expose the firm to greater risks. Firms can no longer simply ‘stick to the knitting.’

Modularity : Matrixed organizations are often seen as facilitating knowledge flows. However, such organizations are not only resource intensive, they expose the whole organization to shocks as they reverberate through the organization. Organizations need to be less interdependent, and focus on modularity (keeping functions separate), so they can be insulated from shocks.

Openness: Resilient firms must know what’s going on outside their boundaries. These firms can sense issues on the horizon. They are constantly monitoring the external environment, and drawing scenarios of possible futures. They expect not only to react to those potential futures, but also help to shape them. The link between the organization and the external business and natural environment is vital, permeable, and malleable.

Slack resources : In an era of just-in-time production, slack or spare resources are often seen as costly and wasteful. However, innovation and adaptation requires both financial and creative investments, and the space to change direction. Firms that can ride storms must allow for a little more time to accommodate new ideas, scenarios, and shifts in thinking. Slack resources, both assets and capabilities, are always considered as very important to shape a sustainable business model.

Matching cycles : Firms often think about optimizing performance and getting more from less. But, this thinking puts firms on a treadmill, doing the same thing faster every day—and, it has them bumping up against resource constraints. Resilient businesses think, not about constant growth, but rather about cyclical processes: cycles of growth and contraction, cycles of production, and cycles of consumer purchase patterns. Understanding the rhythms of business and the environment will allow the firm to synchronize with them meaningfully, and not overreact to what is likely just a cycle.

5 elements for a sustainable business model

These ideas need to be developed and tested. But, they offer a starting place for dialogue for a 21st century business model based on sustainability.

More from Tima Bansal

From Tima’s Desk features ideas about sustainable business. Tima highlights published and in-process articles, observations, and conversations that have piqued her interest and provoked her thinking. Read the column .

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  • Categories: Articles , Sustainable Finance

Tima Bansal

Tima Bansal is the Founder of the Network for Business Sustainability and Professor of Strategy and Sustainability at the Ivey Business School (Canada). She also heads Innovation North, which helps businesses create value for themselves and society simultaneously over the long term.

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Sustainable business model design

In this post you will learn how to use a tool called the business model canvas to develop effective and impactful solutions for environmental and social impact.

The post also includes real word case studies to demonstrate how you can use this tool to describe the infrastructure, offering, customers, and finances of your sustainable business model and you can now design, discuss, and communicate your sustainability programs in a language people will understand.

One of the many challenges faced by Sustainability professionals is how to communicate the business case for our sustainability programs. We often hear that “management just don’t get it” and this leads to frustration and ultimately, we hit the sustainability trough of sorrow.

One of the biggest problems when we try to present our sustainability plans is that sustainability professionals speak a foreign language – seriously we do. We speak about the bigger sustainability context like climate change and loss of biodiversity, we try to convince people that reducing carbon emissions is important, or we espouse the virtues of achieving the United Nations Sustainable Development Goals. Trying to convince the CFO to invest in your sustainability program using this language is like trying to chase a parked car – the harder you run the more it is going to hurt because they have no idea what you are talking about.

Fortunately for us there is a concept that is used by millions of business professionals around the world that basically acts as a translator to convert your sustainability-idish language into something anyone within the business world can understand.

One of the best ways to describe how a business (including components of a business like a sustainability strategy) is organized and delivers values to its customers is using a business model. A business model is how a company creates value for itself while delivering products and services for its customers.

Sustainable business models also capture economic, social, and environmental value for a wide range of stakeholders.

THE SUSTAINABLE BUSINESS MODEL CANVAS

The sustainable business model canvas.

The following section provides an overview of each of the eleven segments of the sustainable business model canvas that you can use design, develop and describe the infrastructure, offering, customers, and finances of your sustainable business model.

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Case Studies

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Case Study - Project Turns Ghost Fishing Nets into Carpet

In this case study we will look at how a carpet manufacturer improved their business model to create multiple value streams for the business whilst helping clean the oceans.

Interface Business Model Canvas

Interface make carpet for commercial buildings. But they also established their Mission Zero® promise to eliminate any negative impact the company has on the environment by 2020.

Using the business model canvas we can describe the key elements of Interface’s business.

Interface’s core business is manufacturing and selling carpet therefore the primary value proposition offered by Interface is fashionable carpet tiles in a range of designs.

Their customers are typically owners of commercial buildings like high rise office buildings. An interesting thing about these customers is that they have shareholders who expect some sustainability performance requirements of the buildings – but we’ll come back to these shareholders later.

Interface deliver their value proposition (channels) through skilled trades who install the carpet tiles in the buildings.

For customer relationships – this is how we find, keep and grow our customers, Interface use a conventional sales force but they also have a network of architects and designers who recommend their products to the building owners.

Next, we have revenue streams. Interface captures value from carpet sales.

We then need to consider what resources Interface need to deliver quality carpet products. Interface need manufacturing facilities, they need human resources like their sales force, and they also need materials like nylon yarn to manufacture the carpets.

Key activities include manufacturing of the carpet and the establishment of a supply chain for key components that go into making carpet. This includes their re-entry program that recovers and recycles used carpet.

Key partners include their supplier of nylon yarn.

Costs include the costs to operate the business, investment in key resources, costs of key activities and payment to key partners.

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Interface's Net-Works Program Business Model

Net-Works® is an innovative, cross-sector initiative designed to tackle the growing environmental problem of discarded fishing nets in some of the world’s poorest coastal communities.

Interface partnered with the Zoological Society of London to buy discarded fishing nets from some of the poorest communities in the world.

The fisherman from these communities recover the ghost nets that are polluting to oceans and indiscriminately killing sea life therefore helping conserve and sustainably use the ocean.

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Interface purchase these nets providing income to the community and the Zoological Society of London help the community establish banking services, provide education on sustainable fishery management and alternative income sources like seaweed farming.

The nets are recycled into new yarn for Interface’s carpet tiles by their yarn manufacturer.

This directly supports Interface’s Mission Zero goal to source 100% recycled material for its carpet tiles.

It reduces its supply chain risks for raw material as they now need less virgin nylon which is a product of crude oil.

It also allows Interface to deliver additional value to its customers through environmental product disclosures detailing the recycled content in the carpets.

Remember the shareholders we mentioned earlier – now Interface’s customers can report to their shareholders that they are sourcing sustainable products for their buildings.

Interface benefits from an enhanced brand reputation as a leader in sustainability which reinforces the customer relationships.

Which in turn leads to more sales and improved value capture for Interface.

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The Net-Works programme has resulted in a reduction in the number of ghost nets in the ocean, less virgin materials and a new source of income for the communities.

The partnership has created an inclusive business model with positive outcomes for everyone involved.

Using these eleven building blocks you can see how we have been able to describe how Interface’s Net-Works programme complements and directly supports Interfaces’ core business as a supplier of carpet tiles by delivering additional value to its customers, strengthening customer relationships, reducing supply chain risks and enhancing value capture whilst delivering a suite of positive economic, social, and environmental benefits.

We use the above technique with our clients to uncover and unlock new value from their sustainability strategy or sustainability projects. We also use this technique to design, discuss and communicate new sustainability initiatives for our clients.

If you think that business model innovation could help you deliver positive environmental or social impacts for your sustainability strategy then you may want to check out our Impact Business Builder Online Course which teaches you how to design, test, and launch sustainability solutions.

Attributions for Images

Turtle caught in ghost net – U.S. National Oceanic and Atmospheric Administration, public domain

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How Michelin used Business Model Innovation to Create Profitable Sustainability Outcomes

Michelin business model canvas.

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Michelin New Sustainable Business Model

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They bundled this service with a range of professional services to help their customers reduce fuel consumption and optimise vehicle performance. This allowed Michelin and its customers to extract the maximum value from their products.

Their superior technology meant they could get more kilometres per tyre compared with low cost competitors and therefore because they were charging per kilometre they could also maximise revenue per tyre.

Michelin was incentivised to produce less tyres because the more kilometres they got out of a tyre the more revenue they could generate per tyre which meant less material usage, lower supply chain risks, and reduced carbon emissions (not to mention the reduced carbon emission for their customers due to fuel efficiency improvements). They were also now able to take a product stewardship role and recover the used tyres for recycling and re-entry into their manufacturing process.

Michelin were also able to create new customer relationship pathways by creating a direct relationship, stronger intimacy and deeper roots within their customer’s business.

The community were beneficiaries of this business model through less waste to landfill and reduced air pollution. Michelin were also able to support the outcomes of a range of the UN Sustainable Development Goals.

Using the above eleven segments you can describe the infrastructure, offering, customers, and finances of any sustainable business model and you can now design, discuss, and communicate your sustainability programs in a language people will understand.

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Six Steps to a Sustainability Transformation

August 31, 2021  By  Rich Hutchinson ,  Vinay Shandal ,  Judith Wallenstein ,  Mark Wiseman ,  David Young , and  Kilian Berz

If you think the disruption caused by digital has been far-reaching, just wait. That impact will pale in comparison to the changes coming as companies wrestle with how to transform their businesses to become truly sustainable.

Sustainability, a company’s ability to create positive environmental and societal impact, is rapidly reshaping competitive advantage. It is remaking whole industries, blurring and in some cases obliterating boundaries between industries, and generating new waves of growth. The scale of the disruption that will play out over the next few decades, along with the opportunity it creates, will be staggering. Just the push to limit global temperature increases to 1.5°C—the central sustainability challenge of our time—will drive a massive transformation of the global economy and require investments totaling an estimated $100 trillion to $150 trillion by 2050 .

But while the opportunity is clear, the way to drive a successful sustainability transformation is less obvious. To succeed and create a competitive advantage, companies must simultaneously integrate an environmental, social, and governance (ESG) lens into every element of the business and capture the value that this transformation creates.

On the basis of our extensive experience working with companies and investors to drive sustainability transformations, we have identified six actions that distinguish leaders from the rest of the pack:

  • Develop a sustainability strategy anchored in purpose.
  • Capture business value.
  • Build new sustainable businesses.
  • Make the core sustainable.
  • Build capabilities.
  • Own the narrative, and engage investors and stakeholders.

Companies that fail to take up the challenge, and instead continue to view sustainability through a compliance or ESG reporting lens, will miss the opportunity to tap into lucrative new markets and create new, winning business models. They will also see their space for creating shareholder value narrow dramatically. On the other hand, companies that execute effectively in all six areas will truly transform their business and turn sustainability into a competitive advantage.

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Featured Insights and Perspectives from BCG

Develop a Sustainability Strategy Anchored in Purpose

Companies must devise a strategy that takes as its starting point the principle that sustainability is a source of durable competitive advantage. The strategy must clearly connect to the company’s purpose , focus on long-term value creation, and be driven from the top, including the CEO and board.

To outline a clear strategy, companies should step back and look at their performance in all material environmental, social, and governance (ESG) areas. Then they should focus on the areas that matter the most to all stakeholders—not just to investors—today and in the future, and where outperformance can contribute most significantly to long-term business success. That prioritization is critical to helping companies avoid the all-too-common pitfall of creating a profusion of siloed initiatives that ultimately have little impact.

At the same time, companies can reassess their existing business model with the objective of understanding its degree of sustainability. This assessment will likely reveal opportunities to enhance the environmental and societal benefits that the company generates, but it will also strengthen the company’s competitiveness by improving the resilience of its business model.

Capture Business Value

Companies that lead in sustainability, as reflected in ESG performance, can also outperform their rivals financially. But capturing the value that sustainability efforts create can be challenging.

That’s why companies must be intentional and systematic about capturing this value. To start, they must develop a robust business case that accesses all sources of value that their sustainability efforts create. These sources are numerous and varied:

  • Enhanced brand equity and loyalty
  • Price premiums
  • Fresh growth in the form of share expansion, penetration of new markets, or new businesses
  • Operational cost savings
  • Advantages in sourcing, including reliable supplies of scarce inputs
  • Improved access to or reduced cost of capital
  • Reduced risk
  • Valuation premiums

Once they have clearly articulated those business cases, companies should ensure that key areas of the business—including marketing, sales, product development, and finance—have the capabilities not only to capture the value created, but also to track and measure it accurately.

Companies can move quickly to test and scale changes and initiatives in areas where value capture is straightforward and likely to yield immediate financial results. Such efforts will validate the power of the overall sustainability transformation and can be the source of revenues or cost savings to fund other aspects of the journey.

Take, for example, decarbonization for auto OEMs. According to BCG analysis, eliminating 60% of scope 1 and 2 carbon emissions during an initial phase of decarbonization will generate significant annual savings, and those cost reductions can help fund the costs of eliminating the remaining 40%. Even in cases where manufacturing a sustainable product leads to higher costs, the increase often proves to be marginal and more than offset by the enhanced value perceived by customers. For instance, the increased cost associated with creating a smartphone with a net zero supply chain is less than 1% for a $400 smartphone, according to BCG analysis.

Build New Sustainable Businesses

Companies have a major opportunity to unlock new sources of growth, particularly in relation to the trillions of dollars that the public and private sectors will be investing every year to drive the global economy to net zero carbon emissions. They should look for places in those new markets where they have unique advantages, and create new offerings and business models to leverage those advantages.

Digital tools and technology will be critical in building new businesses and helping companies create solutions that fulfill customer needs in new ways. For example, Norwegian mobile operator Telenor partnered with microfinance bank Tameer (with additional support from the Bill and Melinda Gates Foundation, the International Finance Corporation, and the Consultative Group to Assist the Poor) to launch a mobile-based financial services platform for unbanked and underbanked consumers in Pakistan. By the end of 2019, the operation had become the largest branchless banking service in Pakistan, with 6.4 million users. Companies also have an opportunity to invest in deep-tech innovation , including in artificial intelligence (AI), synthetic biology, nanotechnologies, and quantum computing—to generate and commercialize breakthroughs in areas such as decarbonization .

In addition, companies that embrace sustainable business model innovation can help transform entire value chains and ecosystems. They can, for example, introduce new circular business models to reshape the whole product usage cycle. And they can create new business models or make investments in ventures that address the looming scarcity of critical sustainability inputs . Consider recycled plastic. Some 45% of demand for recycled polyethylene terephthalate will be unmet by 2025, according to BCG analysis. Already, a number of companies are investing in innovation to address the gap, including through investments in R&D and recycling infrastructure.

Make the Core Sustainable

Companies that aim to become sustainability leaders must assess and enhance the sustainability of their existing portfolio and operations.

In supply chains , for example, they have an opportunity to create end-to-end transparency, from sourcing through distribution. New tools and technologies are critical in this area. AI can help companies monitor, predict, and reduce their carbon emissions . At the same time, companies can engage suppliers to impose standards, track and improve their performance, and push the ecosystem in which they operate toward greater sustainability. Companies should also re-engineer product designs to make existing products sustainable. This may involve reformulating products with more sustainable ingredients, reducing packaging, and developing refillable products or concentrated versions that reduce weight (and therefore carbon emissions tied to transportation), water consumption, and packaging. Beyond Meat, for example, leveraged plant-based proteins to re-engineer one of the world’s most famous dishes—the burger. That innovation not only launched a popular new alternative to meat, but also helped fuel one of the most successful IPOs of 2019.

Build Capabilities

Companies that want to drive a sustainability transformation must ensure they have the right capabilities and foundation in place to succeed.

First, they must design robust governance of sustainability efforts, both at the board level and within the company itself, including accountability and incentives linked to ESG targets. Second, they need to develop strong, granular data capabilities and robust ESG reporting processes to enable the business to direct and adjust efforts on the basis of real-time performance data and to meet increasingly stringent regulatory reporting standards. Third, they should build new partnerships that allow them to pool resources, combine expertise, co-invest in ways that minimize risks associated with high-fixed-cost investments, and deliver sustainable outcomes at scale more quickly. Fourth, they must embed sustainable business model innovation in the organization.

This last element is particularly critical. Companies will need to continue to adapt their operations, product portfolio, and business models as the bar for sustainability inevitably rises over time. What qualifies as leading performance in carbon footprint or equitable business practices today, for example, will likely be table stakes in the future. As a result, companies must embrace an “always-on” mentality toward innovating in sustainability. The process of driving sustainable business model innovation will be central to that mentality, allowing companies to assess the degree to which their current business models create positive environmental and societal impacts and to improve that performance over time.

Own the Narrative, and Engage Investors and Stakeholders

Leading companies must create a compelling and distinctive narrative around their sustainability strategy —one that connects and amplifies their purpose. At the same time, they can own their sustainability story in the public markets and share that story in a way that resonates with investors, rather than letting ratings agencies and investors tell their story for them. This means going beyond sharing the relevant information with rating agencies, and instead going directly to investors with an effective narrative that includes four key elements:

  • A well-defined point of view about what is most material to the business
  • A clear connection to purpose and an overall sustainability strategy
  • Targets, milestones, and initiatives to get there
  • Robust measurement and disclosure of ESG performance

The measurement and disclosure component is particularly critical, as it will provide evidence to investors that the business is hardwiring the narrative into the organization. Companies should go beyond the annual or biannual reporting cycle and instead provide real-time ESG measurement and reporting mechanisms that increase investors’ confidence in the company’s ability to monitor progress and correct course. Companies can also use ESG measurement to establish clear incentives and accountability mechanisms for employees and leaders.

As companies share their narrative with investors, they should proactively engage with shareholders, and they should do so not just during the release of quarterly earnings. In particular, they should maintain a strong dialogue with active investors who, unlike ETF or index investors, may move in and out of the stock over time. They should also share the narrative with other critical stakeholders, including customers, employees, and members of communities in which they operate. The buy-in of these stakeholders is ultimately what drives value creation.

Driving a successful sustainability transformation requires a fundamental shift in mindset. Company leaders should view the push toward sustainability not as a compliance exercise or a cost of doing business, but rather as an opportunity to create new value. Companies that do so will expand their competitive advantage and develop the muscle to continue to rethink and remake their business as expectations about sustainability inexorably rise in the years ahead.

The authors would like to thank Fanny Berthaud for her assistance in the development of this article.

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Perspectives on Strategy and Value: Insights on creating sustainable value in an uncertain world.

How to Create a Sustainable Business Model

Table of contents.

Creating a sustainable business model is a top priority for many companies. A sustainable business helps the planet and may prove more successful in the long run; customers want to work with companies that care about making a positive contribution to the world. 

Sustainability isn’t just for large corporations. Businesses of any size can work toward a sustainable business model by following specific practices and adopting a sustainable strategy.  

What is sustainability?

Sustainable means the ability to be maintained at a certain rate or level, and sustainable development meets current needs without compromising future generations’ ability to meet their own needs.

However, we must dig a little deeper to understand how the concept of sustainability is relevant to business development.

What is a sustainable business model?

To Rex Freiberger, president of Superlativ Media, a sustainable business model helps generate value for everyone involved, without draining the resources that help to create it.

“A business model meant to capitalize on a trend isn’t sustainable, for example, because the social resources that get it started won’t exist in years or even months,” Freiberger said.

Lia Colabello, managing principal of Plastic Pollution Solutions, noted that there’s a difference between a sustainable business model — a business that will likely achieve profitable growth —  and a business model that prioritizes sustainability.

“A sustainable business model is what every business leader hopes to achieve — a business that will turn a profit quickly and stay afloat for the long term,” Colabello explained. “A business model that prioritizes sustainability is one that, at a minimum, considers all stakeholders, assesses and addresses environmental impacts, and is transparent and thorough in its reporting.”

Eco-friendly packaging practices are a way to commit to sustainability. Other methods include careful resource usage and donations to worthy organizations.

What makes a sustainable business model work?

There are four key elements of a sustainable business model.

1. A sustainable business model is commercially profitable.

You can make a profit and be socially responsible . No business can succeed or scale unless it attracts customers. What is your value proposition? Who are your target customers ? Why is your business valuable, and what niche do you fill?

2. A sustainable business model can succeed far into the future.

A trendy business or one that relies on limited resources may be profitable for a few months, but how will it fare in a year or two? Resource availability and pricing are never guaranteed or fixed; you don’t want to build your castle on a sinking rock. 

3. A sustainable business model uses resources it can utilize for the long term.

You can’t have a sustainable business model without sustainable resources. Many business activities are limited by finite resources or exceptionally high prices. On the other hand, some resources may be readily available yet environmentally harmful. 

Palm oil is a famous example of a cheap and plentiful resource. However, farmers are razing acres of land and causing severe environmental destruction by cultivating the crop. Cheap resources may be tantalizing for business, but consider the big picture instead of taking a shortcut now.

4. A sustainable business model gives back.

One theory is that a truly sustainable business model is one that gives as much as it takes. This concept is called the cyclical borrow-use-return model. 

Bob Willard, expert and author on quantifiable sustainability strategies, contrasts this model with the current “linear take-make-waste model” that so many modern businesses are built upon, which he said is “culpable for contributing to [this world’s] unsustainability.”

Instead of taking from the Earth, a sustainable business “borrows” resources with the intent to replenish them. This concept of responsible consumption is one that both businesses and consumers can promote and practice.

Reducing resource burn — wasted time, money and other resources — is another way a business can prioritize sustainability.

What is a sustainable strategy?

A sustainable strategy takes the big picture into account. “A sustainable strategy is one that understands the flow of ‘in’ and ‘out’ — not just cash flow, but again, the resources, both tangible and intangible, that are required to create the product or service,” Freiberger explained.

Colabello noted that the most effective sustainability strategies start with an organization’s purpose. She encouraged businesses to ask these questions, similar to what you’d ask when crafting a vision or mission statement :

  • Why does the organization exist?
  • What problem is it solving?
  • How is it going to improve the world, environment and society?

“From there, a strategy can emerge that engages the entire brand ecosystem — internally, the supply chain, its communities and its industry,” Colabello said. “The approach is prioritized and diagrammed out, complete with goals, KPIs [key performance indicators] and a timeline. These are communicated both internally and externally, in keeping with transparency.”

Why do we need sustainable business models?

There are many ways to approach the issue of sustainability, but the simplest one, which can unite all stakeholders, is this: Kind businesses attract more customers. According to the 2022 Global Buying Green report , 86 percent of consumers under 45 were willing to pay more for sustainable packaging, and 68 percent purchased items in the past six months based on companies’ sustainability credentials.

It’s OK to be open about your sustainability goals and use your sustainability as a selling point. Customers will ask, and the friendlier you are about it, the more likely they will be to share that news with their friends.

But maybe you’re not motivated entirely by money. Perhaps you’re driven by the desire to be the change you’d like to see in the world. 

After all, the larger a business grows, the greater its impact is on the world and the people around it. And it’s better to start sustainably than to make the switch 10 years down the line — or when stakeholders begin pushing back on unreasonable business practices.

Going green can boost business and profits. Businesses are marketing green innovation to show consumers they prioritize environmental concerns.

How can you start and maintain a sustainable business model?

Getting started with a sustainable business model can be straightforward. Consider the following guidelines. 

1. Plan your resource usage. 

Consider the resources your business requires to operate, and then do the following:

  • Make a list of the raw materials you’ll need. This list will vary dramatically by business type. Software-as-a-service companies, for example, don’t require the raw resources that clothing brands do.
  • Consider where your materials might be sourced. Who is making or harvesting your product materials? How are they being sold?
  • Consider where the resources are coming from and how they are being transported. How far do they have to travel to arrive at your home or warehouse? How can you cut down on fuel miles? What are the riskiest resources on your list, and how can you increase their productivity while lessening your dependence on them?

After you address your resource usage, outline your manufacturing and business processes. Ask yourself these questions:

  • Which manufacturing processes are the most wasteful? How can you mitigate the adverse effects of these processes?
  • For physical materials, is it possible to source locally?
  • How are you packaging your products? (Sustainable, biodegradable packaging can reduce the amount of trash stuck in landfills.)
  • Which materials on your list are the riskiest or least sustainable? How might you replace them? Could you replace them now?
  • What are the end products of these processes? How can you reuse waste material? Does it have to be thrown away?
  • Can the produced waste be used as a resource or be fed into a different process to be used again? How can you reduce unusable waste?
  • Where can you reduce waste? How can you stretch your raw materials? Can you lower the number of resources used to create a specific product while maintaining its quality?
  • What are the labor conditions like? Are your laborers being paid fairly? Is their quality of life improving or worsening because of your business processes? Is their time being respected?

To make your business’s computing eco-friendly , implement cloud computing, allow your employees to work remotely, and eliminate paper from your workflow.

2. Consider alternative forms of company ownership.

The traditional top-down business model can create unreasonable wage gaps between those at the highest rungs of the ladder (CEO, other C-level executives, founders, managers) and those at the lowest (laborers tasked with creating raw materials or carrying out the manufacturing processes). Including everyone in your sustainability goals can help you keep your business on track and give those who are typically disadvantaged a larger say.

3. Engage your customers.

Going green can improve your brand reputation among consumers, but your dedication to sustainability may result in higher prices. But that’s OK; in a compelling blog post, series of posts or dedicated brand story page , tell your customers why they’re paying more for your products.

You might choose to engage customers by pledging a percentage of revenue to support a charity or by offering different shipping or packaging options. Customers who love your product can be converted into brand ambassadors when you create messaging that resonates with them. 

If you involve your customers in your discussions about sustainability, they will become more invested in your company’s success and your products. You could also consider crowdsourcing sustainability ideas from consumers through a forum or online group.

Sustainable businesses must lead with transparency when dealing with customers and shareholders. This means sharing wins and being honest when things don’t work out as planned.

What roadblocks are there to a sustainable business model?

Building a sustainable business can be daunting. If your business is stuck, you may struggle with one or more of these issues:

1. You hold innovation meetings, but ideas don’t go anywhere.

Many good ideas arise when founders or leaders get together at a workshop or meeting. However, you must nurture these ideas and draft a plan of action.  

2. Ideas are not implemented.

Another issue founders face is that the plans for change are never implemented. This could be because it seems too challenging to change the status quo or because the members of the company aren’t yet convinced of the need for a greener, kinder business model.

3. The implemented business models fail in the market.

Two of the most common reasons businesses fail to move toward sustainability include the wrong mindset and a reluctance to dedicate resources to change.

To address these issues, find your allies — those who believe sustainability is essential for the company’s bottom line and the larger world — and connect with them. Together, you can remove or alter harmful, outdated systems and encourage innovation.

Practicing and following through with your sustainability goals helps consumers feel closer to you and instills more trust in your brand. This is crucial at a time when customers expect more warmth and honesty from companies.

Why is sustainability important in business?

Shel Horowitz, an expert on green and transformative business profitability, raised three points about why sustainability is crucial in business:

  • Sustainability allows you to be here decades from now because you’ve created something of lasting value.
  • Sustainability makes you much more attractive in the eyes of customers, employees and other stakeholders who actively want to do business with companies that think beyond the single bottom line.
  • Sustainability helps the planet and its creatures heal from the abuse humans have piled on it, especially in the past 250 years or so.

Aside from businesses’ immense environmental impact, Colabello noted these forces putting pressure on companies to build robust sustainability strategies:

How is a business sustainable?

Freiberger believes a business can make itself sustainable by focusing on the bare essentials it needs to survive and then growing from there. Make long-term projections, and keep an eye on the distant future instead of focusing on more immediate profits, he advised.

As part of making your business sustainable, consider these statistics from the SUMAS Sustainability Management School , and determine where you can cut back to reduce your business’s carbon footprint :

  • An estimated 5 trillion plastic bags are used worldwide each year.
  • 400 million tons of plastics are produced globally every year.
  • Globally, only 9 percent of plastic ever produced has been recycled; 79 percent can now be found in landfills, dumps or the environment; and 12 percent has been incinerated.
  • With rapid population growth and urbanization, annual waste generation is expected to increase by 70 percent from 2016 levels to 3.4 billion tons in 2050.
  • If it continues at the same rate, the plastic industry will account for 20 percent of the world’s total oil consumption by 2050.
  • The construction and later demolition of buildings produce 40 percent of all waste.

If you are thinking about implementing a sustainable business model, consider the short-term expenses you will incur. However, these costs are a small price to pay for a better future and a compelling brand value for increasingly eco-conscious consumers. In other words, sustainability sells.

Jamie Johnson contributed to this article. 

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  • © 2018

Sustainable Business Models

Principles, Promise, and Practice

  • Lars Moratis 0 ,
  • Frans Melissen 1 ,
  • Samuel O. Idowu 2

Antwerp Management School, Antwerp, Belgium

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NHTV Breda University of Applied Science, Breda, The Netherlands

Guildhall faculty of business and law, london metropolitan university, london, united kingdom.

Provides state-of-the-art insights on sustainable value creation

Includes the design of sustainable business processes and architectures

Explores the development of sustainable business models from the standpoint of diverse business disciplines

Includes a wide selection of case studies and examples of sustainable business models' deployment around the globe

Part of the book series: CSR, Sustainability, Ethics & Governance (CSEG)

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Table of contents (18 chapters)

Front matter, introduction: from corporate social responsibility to sustainable business models.

  • Lars Moratis, Frans Melissen, Samuel O. Idowu

Sustainable Business Model Forms and Types

Transformative business models for sustainability transitions.

  • Antonia Proka, P. J. Beers, Derk Loorbach

Sustainable Business Models: The Case of the Collaborative Economy

  • Maria Aluchna, Boleslaw Rok

Examining the Interplay of Social and Market Logics in Hybrid Business Models: A Case Study of Australian B Corps

  • Wendy Stubbs

Public Sector and Circular Business Models: From Public Support Towards Implementation Through Design

  • Mateusz Lewandowski

Theoretical and Conceptual Approaches Towards Sustainable Business Models

Sustainable system value creation: development of preliminary frameworks for a business model change within a systemic transition process.

  • Katariina Koistinen, Minttu Laukkanen, Mirja Mikkilä, Janne Huiskonen, Lassi Linnanen

Creating Integrated Value Through Sustainable Innovation: A Conceptual Framework

  • Wayne Visser

Creating Value Via Sustainable Business Models and Reverse Innovation

  • Marek Ćwiklicki, Linda O’Riordan

Towards Understanding Collaboration Within Circular Business Models

  • Phil Brown, Nancy Bocken, Ruud Balkenende

Information Asymmetries and the Paradox of Sustainable Business Models: Towards an Integrated Theory of Sustainable Entrepreneurship

  • Vincent Blok

Sustainable Business Models Through Servant Leadership: Theory and Praxis

  • Mara Del Baldo

Applications of Sustainable Business Models: Sectoral and Country Examples

Are sharing platforms sustainable (business models) a consumer survey on the drivers of using sharing platforms in the travel industry.

  • Jorna Leenheer, Marco Kuijten

A Southern-Based Code of Conduct in the Global Tea Supply Chain: Implications for Sustainable Business Models

  • Andrew Mzembe

Social Capital as Value Creation and Delivery of a Sustainable Business Model: A Case Study from Indonesia

  • Risa Bhinekawati, Banguning Asgha

Sustainable Business Practices of Turkish Companies Listed on the Borsa Istanbul Sustainability Index

  • Ayca Kubra Hizarci-Payne, Berna Kirkulak-Uludag

Case Studies of Pioneer Sustainable Business Models in Poland

  • Justyna Szumniak-Samolej
  • value creation
  • sustainable value creation
  • CSR and financial performance
  • firms' social responsibilities
  • corporate social responsibility
  • business model deployment
  • case studies
  • pioneering sustainable business models
  • emerging business models
  • sustainability

Lars Moratis

Frans Melissen

Samuel O. Idowu

Lars Moratis is Professor of Corporate Social Responsibility at Antwerp Management School and Professor of Sustainable Business at NHTV Breda University of Applied Sciences. He has published several books and various articles in both academic and practitioner-oriented journals on topics such as CSR strategy development and implementation, CSR standards and standardization processes (including ISO 26000), the credibility of corporate CSR claims. sustainable business models, and responsible management education. He is a member of the editorial board of the International Journal of Corporate Social Responsibility.

Frans Melissen is Professor of Sustainable Business Models at NHTV Breda University of Applied Sciences, the Netherlands. In his research he focuses on the link between sustainability and human behavior, with special emphasis on mitigating the social dilemma by means of sustainable business models. Frans has authored and co-authored a number of papers in refereed journals, presented at various conferences, contributed chapters to several (text)books, co-authored the management book "Workin' Wonderland and co-edited and co-authored the textbook Hospitality Experience: an introduction to hospitality management. He is the Scientific Director of the JPI Urban Europe project Smart City Hospitality.

Samuel O Idowu is a Senior Lecturer in Accounting and Corporate Social Responsibility at London Guildhall School of Business & Law, London Metropolitan University, UK. He researches in the fields of Corporate Social Responsibility (CSR), Corporate Governance, Business Ethics and Accounting and has published in both professional and academic journals since 1989. He is a freeman of the City of London and a Liveryman of the Worshipful Company of Chartered Secretaries and Administrators. Samuel is the Deputy CEO and First Vice President of the Global Corporate Governance Institute. He has led several edited books in CSR, is the Editor-in-Chief of two Springer’s reference books – the Encyclopedia of Corporate Social Responsibility and the Dictionary of Corporate Social Responsibility and an Editor-in-Chief of the International Journal of Corporate Social Responsibility. He is also a Series Editor for Springer’s books on CSR, Sustainability, Ethics and Governance. One of his edited books won the most Outstanding Business Reference book Award of the American Library Association (ALA) in 2016 and another was ranked 18th in the 2010 Top 40 Sustainability Books by,  Cambridge University, Sustainability Leadership Programme.  Samuel is a member of the Committee of the Corporate Governance Special Interest Group of the British Academy of Management (BAM). He is on the Editorial Boards of the International Journal of Business Administration, Canada and Amfiteatru Economic Journal, Romania. Samuel has delivered a number of Keynote Speeches at national and international conferences and workshops on CSR and has on two occasions 2008 and 2014 won Emerald’s Highly Commended Literati Network Awards for Excellence. To date, Samuel has edited several books in the field of CSR, Sustainability and Governance and has written four forewords to books. Samuel has served as an external examiner to the following UK Universities – Sunderland, Ulster, Anglia Ruskin and Plymouth. He is currently an external examiner at Robert Gordon University, Aberdeen, Teesside University, Middlesbrough and Sheffield Hallam University, UK. 

Book Title : Sustainable Business Models

Book Subtitle : Principles, Promise, and Practice

Editors : Lars Moratis, Frans Melissen, Samuel O. Idowu

Series Title : CSR, Sustainability, Ethics & Governance

DOI : https://doi.org/10.1007/978-3-319-73503-0

Publisher : Springer Cham

eBook Packages : Business and Management , Business and Management (R0)

Copyright Information : Springer International Publishing AG, part of Springer Nature 2018

Hardcover ISBN : 978-3-319-73502-3 Published: 10 July 2018

Softcover ISBN : 978-3-030-08801-9 Published: 19 December 2018

eBook ISBN : 978-3-319-73503-0 Published: 28 June 2018

Series ISSN : 2196-7075

Series E-ISSN : 2196-7083

Edition Number : 1

Number of Pages : XXII, 422

Number of Illustrations : 16 b/w illustrations, 16 illustrations in colour

Topics : Sustainability Management , Business Strategy/Leadership , Corporate Social Responsibility , Sustainable Development , Organizational Studies, Economic Sociology

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Sustainable Business Went Mainstream in 2021

  • Andrew Winston

sustainable business model des

This year, ESG moved from a “nice to have” to an essential part of corporate strategy — and there’s no going back.

In 2021, many climate trends that were gaining steam in years past became the norm. In this article, which describes the five biggest climate and sustainable business stories from the past year, the author points to ESG standards and electric vehicles as two of these “there’s no going back” items. The other three stories — business defending democracy, the COP26 climate meeting, and tech’s role in sustainability, were decidedly more mixed. As for 2022, look out for the growing youth voice, ESG tug-of-wars and new standards, and more partnerships to solve big problems, among other coming trends.

How do you know when something becomes the norm? Trends in corporate sustainability have been mostly consistent — an expanding climate crisis, lightning-speed growth in clean tech, rising pressure from many stakeholders, and more. But I generally felt a sense of, “these trends are growing and will be dominant…someday.” In the past year, however, “someday” seems to have finally become “today” — and there is no going back.

  • Andrew Winston is one of the world’s leading thinkers on sustainable business strategy. His books include Green to Gold , The Big Pivot , and Net Positive . AndrewWinston

Partner Center

In 2024, sustainability is taking center stage.

Efforts to track and reduce emissions, environmental impact and contributions to climate change are no longer rare or optional; instead, they’ve become the norm. Businesses, governments and individuals now see sustainability as a global imperative. Advanced technologies, more stringent reporting standards and stronger support from stakeholders are building momentum for eco-friendly initiatives and the incentives that encourage them. Here’s what to watch:

Net zero: The race moves forward

The global focus on achieving net-zero emissions —the point which human-caused greenhouse gas emissions are balanced by an equivalent amount removed from the atmosphere—has intensified in recent years. Many countries have committed to reaching net zero by 2050, aligning with the Paris Agreement’s goal to limit global warming to well below 2 degrees Celsius. And businesses across various sectors are setting rigorous sustainability goals, investing in renewable energy sources and developing innovative solutions to reduce their carbon footprint. These efforts are often driven by stakeholder expectations, regulatory requirements and the recognition that sustainable business practices can improve the bottom line. And they could drive economic gains: Research shows markets for carbon-neutral goods and services may be worth $10.3 trillion to the global economy by 2050. 1

In pursuit of net zero, organizations will focus their sustainability efforts on two paths in 2024:

  • Clean energy : The transition from fossil fuels to renewable energy sources is central to sustainability strategies and net zero initiatives, and was a central issue last year at the United Nations’ COP28 climate summit. As part of their energy transition plans, many countries are increasing their use of clean energy—that is, power generated from recyclable and regenerating sources, such as solar, wind, geothermal and more—to reduce their carbon footprint. Companies are investing in renewable energy projects and implementing energy-efficient technologies and practices. These efforts often go hand in hand with broader corporate sustainability initiatives and can lead to significant cost savings and improved environmental performance.
  • Sustainable supply chains : Driven by increasing consumer demand for sustainable products and heightened awareness of the environmental impact of producing and shipping goods, more businesses are looking to make their supply chain operations more sustainable. This may include using more eco-friendly packaging or production materials and reducing waste, as well as human-centered efforts such as ensuring fair labor practices and safe work environments. These changes often require rethinking organizational practices and developing new partnerships. Businesses are increasingly aware that their impact goes beyond their own operations; as a result, they’re taking steps to address Scope 3 carbon emissions , or those emitted by other operators in their value chain.

Sustainability reporting: Accountability on the record

This may be the biggest year yet in sustainability reporting . The European Union’s Corporate Sustainability Reporting Directive (CSRD), which requires companies in Europe and beyond to make annual reports on the environmental and social impact of their business activities, came into effect in January. In addition to CSRD, California has new mandatory reporting rules coming into play in 2024, while countries around the world are on the verge of implementing their own non-financial disclosure and documentation requirements.

Investors, regulators and stakeholders are increasingly demanding that companies disclose their exposure to climate-related risks , such as dependence on fossil fuels or vulnerability to weather events. Through both mandatory reporting and voluntary disclosures, companies can identify and manage climate-related risks, and provide valuable information to investors and other stakeholders for greater transparency.

Reporting is also becoming critical to corporate social responsibility initiatives. As more companies set broad environmental, social and governance (ESG) goals, finding a way to track and accurately document progress is increasingly important. The transparency provided by regular and thorough reporting is one way to help avoid greenwashing, or misleading claims about sustainability and environmental impact. With regulated documentation, consumers, governments and other stakeholders can make better decisions based on trustworthy information.

But compliance with the broad array of mandatory reporting rules around the globe can be confusing and complicated. One survey found that 81% of companies were creating new roles and responsibilities to accommodate the growing number of disclosure requirements, while 99% of companies said they were somewhat or very likely to invest in more technologies and tools related to ESG reporting. 2 For example, some are turning to software solutions that can more easily capture, manage and report ESG data.

Circular economy: When waste is a resource

Waste not, want not: the circular economy model, which aims to minimize unnecessary waste and make the most of resources, is booming. Instead of seeing things as disposable, it encourages the reuse and recycling of products. Research expects that transitioning to a circular economy could generate USD 4.5 trillion in economic benefits by 2030. 3

Businesses play a crucial role in promoting the circular economy by redesigning products to be more durable, reusable or recyclable, cutting down resource consumption and reducing waste throughout the product life cycle. Retailers, particularly in the fashion industry, are increasingly embracing circular business models: rental and resale programs offer opportunities for growth, while repair services offer an alternative to landfill disposal. Other businesses are getting involved by providing avenues for extending product life or plans for recycling or refurbishment.

Biodiversity: Embracing nature-positive

Biodiversity loss, one of the impacts of climate change and ecosystem disruption, poses a significant threat to Earth’s future. The World Economic Forum’s Global Risks Report ranks biodiversity loss among the top five threats to humanity in the next decade, with over half of the world’s GDP being moderately or highly dependent on nature. 4

Efforts to preserve biodiversity and natural resources gained momentum in December 2022, when countries signed a global biodiversity framework at the United Nations’ COP15 summit. Governments, businesses, and non-profit organizations globally are implementing initiatives such as establishing protected areas, restoring degraded ecosystems and promoting sustainable agriculture and forestry practices.

They’re also turning to a new perspective: “nature positive.” Similar to “carbon neutral” in the context of emissions, nature positive refers to stopping, avoiding and reversing environmental destruction. This can be quantified by measuring metrics like tree cover, habitat integrity and number of species, and is guided by sustainable development principles. The goal is for there to be more nature by 2030 than there is today—which means taking actionable steps in 2024.

 Sustainable technology: New ways to do more

With a boom in artificial intelligence (AI) , machine learning (ML) and a host of other advanced technologies, 2024 is poised to the be the year for tech-driven sustainability. As companies consider their climate impact in the coming year, several tools and capabilities can help guide key sustainability goals:

  • Artificial intelligence : AI can help optimize energy consumption, reduce emissions and support decision-making processes in sustainability strategy development. Some organizations are leveraging AI’s capabilities to pursue their own sustainability—for example, to provide more accurate climate predictions , optimize energy use in buildings or identify areas of waste or inefficiency in the supply chain.
  • Industry 4.0 : Manufacturers are integrating new technologies, including Internet of Things (IoT) , cloud computing and AI and machine learning, into their production facilities and throughout their operations. The smart factories that make up Industry 4.0 have capabilities that lead to increased automation, predictive maintenance, self-optimization of process improvements and efficiencies that reduce both emissions and overall costs.
  • Software solutions : As mentioned, software solutions can help companies navigate the increasingly complex web of mandatory ESG reporting requirements. The IBM Envizi ESG Suite , for example, can collect hundreds of data types efficiently, analyze data across silos and deliver audit-ready reports easily—a process that would otherwise be labor and cost intensive.   Environment, health and safety (EHS) software can streamline data collection and incident reporting, track safety inspections and certifications, and guide risk assessment and mitigation, while environmental intelligence software can monitor weather for potential disruptions and inform decision-making.

Sustainability trends for 2024: The year ahead

As we move through 2024, these sustainability trends will shape global responses to the pressing challenges of climate action and environmental impact. By understanding these key sustainability trends, your organization can better navigate the path to a more sustainable future.

1 Green transition creates $10.3T opportunity for the global economy by 2050, a new report finds (Link resides outside ibm.com ), January 2023

2 Sustainability Action Report (link resides outside ibm.com), Deloitte, December 2022

3 The Circular Economy Could Unlock $4.5 trillion of Economic Growth (Link resides outside ibm.com ), Accenture, September 2015

4 The Global Risks Report 2020 (Link resides outside ibm.com ), World Economic Forum, January 2020

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New York City’s Gradual Transition to a Sustainable City

Steve Cohen

Cities evolve, and great cities are constantly changing. Change comes because of new technologies that bring about economic, cultural, and social change. New York City began as a trading outpost—sending furs, food, and other natural resources to Europe. The port of New York was ideal for the ships of its time, and once we built the Erie Canal, we became the center for shipping goods and resources from all over the American Northeast and Midwest. The city built the facilities required for shipping and recovered fees from shippers. New York became the commercial capital of America. Eventually, New York became a manufacturing center, making clothing, bikes, appliances, and even automobiles. By 1950, most of the clothing worn in America was made in New York City. But then manufacturing changed, and our small vertical factories were unable to compete with larger, horizontal factories, foreign labor was cheaper, and our docks were too small to accommodate containerized shipping. We lost a million residents, many, many jobs, and people thought the city was in a death spiral.

It didn’t work out that way. The factories became artist studios, loft homes, and galleries, and the economy shifted from manufacturing to services. SoHo attracted high-end retail, and the Village became a magnet for tourists. The High Line, the old train track that carried raw materials and finished goods to and from factories to the ships, became a park that raised the value of the land around it. Finance, media, fashion, education, wellness, health care, tourism, e-commerce, and countless new industries replaced the old.

Today, we are in the midst of another transition—to a city that is environmentally sustainable. Our mass transit system already ensures that we can move millions of people a day without gridlock and without the internal combustion engine. Our water system brings fresh, clean water from upstate to the five boroughs. Businesses are being developed to share and charge electric vehicles. Parks are being built for recreation, contemplation, and to absorb rain from extreme weather events. Parks like the High Line and Central Park are public-private partnerships, the old Freshkills Landfill on Staten Island is now a park, and we even have a sandy beach on the west side of Manhattan.

Our local regulatory structure is pushing large building owners to decarbonize their energy use and make it more efficient. Our electric utilities are struggling but slowly replacing fossil fuels with renewable energy. Some of our early attempts at siting wind power in the ocean are proving less cost-effective than we hoped, but new technologies are being developed every day, and I have a great deal of confidence that just like computers and smartphones got better and cheaper, the same cost curves are being seen with renewable energy and battery technology. Whenever I hear that the grid can’t handle the power needs and some of the early technologies are not living up to their promise, I keep thinking of all the young people who have never owned a landline, are not connected to cable TV, and are largely using wireless internet to communicate and connect. I remember VCRs and cassette tapes: those technologies are long gone. Predicting the energy future is impossible due to the development of new technology.

In addition to the source of energy, the real low-hanging fruit of urban sustainability is energy efficiency. Unlike other parts of America, New York City’s transportation system produces fewer greenhouse gasses than our buildings. Most of our transportation is via mass transit or by foot. Unless political hacks like the Governor of New Jersey manage to upend it, New York City will soon benefit from the impact of congestion pricing—both reducing traffic in our central business district and providing a new revenue stream to help modernize our mass transit system and make it more attractive to riders.

While most of the land in the five boroughs sits beneath single-family homes, most of the people in New York live in multi-family dwellings. Apartments tend to be more energy efficient than single-family homes because they share walls, ceilings, and floors. But many of New York City’s buildings are old and incredibly energy inefficient. Those of us living on the upper floors of century-old apartments heated by steam radiators turn off many of them and still need to open the windows to reduce the heat. The many regulations in place to make our buildings more energy efficient and to transition from fossil fuels will take a generation to be implemented. But progress is slowly being made. Technologies like heat pumps are being encouraged by the government, and private manufacturers are improving them—making them less expensive, smaller, and easier to install. According to the New York State Energy Research and Development Authority (NYSERDA) :

“For the first time, heat pumps – electrically powered and highly efficient devices that deliver heating and cooling – topped gas-powered furnaces in total units sold in the U.S. Americans bought more than 4.3 million heat pump units in 2022, compared to roughly 3.9 million natural gas furnaces [1] . Modern cold-climate heat pumps are a smarter, more efficient, and environmentally friendly option to keep homes comfortable without using fossil fuels. Heat pumps work by extracting heat from the air, ground, or water and transferring it inside a building for heating and outside for cooling.”

Moreover, last week, nine states, including New York, signed an agreement to encourage the use of heat pumps. According to Justine Calma , reporting in The Verge :

“ The memorandum of understanding (MOU) sets a 2030 target for heat pumps to make up 65 of residential heating, cooling, and water heating equipment sales. By 2040, the goal is for heat pumps to account for 90 percent of the HVAC and water heating market. Heat pumps are more energy efficient alternatives to traditional heating and cooling systems. And because they’re electric, they can feasibly run on renewables like wind and solar once there’s more clean energy coursing through power grids. The states on board with the agreement include: California, Colorado, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, and Rhode Island.”

Progress will not be instantaneous, but like New York City’s other transitions, the new gradually replaces the old. Creative adaptations and constant movement eventually result in changes you can see.

Of course, we can’t really become a sustainable city unless we do something constructive and creative with our garbage. Small steps are underway, and I believe larger steps will follow. In the next year, New York City’s Sanitation Department will be collecting food waste to be recycled as fertilizer and gas energy. Commercial food waste has been recycled for a decade, and now, household food waste will also be collected and put to work. My own view is that recycling is an intermediate step on the path to a circular economy—where everything we consume is repurposed for reuse. Household waste sorting has never worked too well, and I think we will eventually build waste-factories that use robots and artificial intelligence to sort and mine waste. Currently, New York spends over a billion dollars a year to ship and either dump or burn garbage. What if this cost became a revenue stream due to our ability to take natural resources from our waste stream and sell them? Today, we mine the earth for resources. In the future, we will be able to obtain the same resources from our waste stream. A city like New York has the volume of waste and the capital budget needed to build these waste mining facilities at scale. Hopefully, this will be done in partnership with private firms that will make money from New York’s garbage.

When New York City nearly went bankrupt in the 1970s, our business establishment, unions, and elected leaders joined together and built the city that came back strong over the past half-century. New York’s energy, creativity, and sheer brainpower are unparalleled. New Yorkers are pragmatic and, by necessity, aware of their surroundings. They don’t need to be told twice that five inches of rain in an hour is an impact of climate change. Everyone who looks at the future knows that we need to bring environmental considerations into routine organizational management. New York’s business leadership, unions, institutions, and people understand climate change and the need to simultaneously pursue economic growth and environmental protection. They know that a sustainable city is attractive, exciting, and capable of winning the global competition for talent and business. We can build that city while creating new businesses, making money, and being a model for cities all over the world.

Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of the Columbia Climate School, Earth Institute or Columbia University.

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Meet ‘Smaug-72B’: The new king of open-source AI

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A new open-source language model has claimed the throne of the best in the world, according to the latest rankings from Hugging Face , one of the leading platforms for natural language processing (NLP) research and applications.

The model, called “ Smaug-72B ,” was released publicly today by the startup Abacus AI , which helps enterprises solve difficult problems in the artificial intelligence and machine learning space. Smaug-72B is technically a fine-tuned version of “ Qwen-72B ,” another powerful language model that was released just a few months ago by Qwen, a team of researchers at Alibaba Group. 

What’s most noteworthy about today’s release is that Smaug-72B outperforms GPT-3.5 and Mistral Medium, two of the most advanced proprietary large language models developed by OpenAI and Mistral, respectively, in several of the most popular benchmarks. Smaug-72B also surpasses Qwen-72B, the model from which it was derived, by a significant margin in many of these evaluations.

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According to the Hugging Face Open LLM leaderboard , which measures the performance of open-source language models on a variety of natural language understanding and generation tasks, Smaug-72B is now the first and only open-source model to have an average score more than 80 across all major LLM evaluations.

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While the model still falls short of the 90-100 point average indicative of human-level performance, its birth signals that open-source AI may soon rival Big Tech’s capabilities, which have long been shrouded in secrecy. In short, the release of Smaug-72B could fundamentally reshape how AI progress unfolds, tapping the ingenuity of those beyond just a handful of wealthy companies.

The open-source advantage

“Smaug-72B from Abacus AI is available now on Hugging Face, is on top of the LLM leaderboard, and is the first model with an average score of 80!! In other words, it is the world’s best open-source foundation model,” said Abacus AI CEO Bindu Reddy in a post on X.com.

“Our next goal will be to publish these techniques as a research paper and apply them to some of the best Mistral Models, including miqu (a 70B fine-tine of LLama-2),” she added. “The techniques we used specifically target reasoning and math skills, which explains the high GSM8K scores! Our upcoming paper will explain more.”

Smaug-72B – The Best Open Source Model In The World – Top of Hugging LLM LeaderBoard!! Smaug72B from Abacus AI is available now on Hugging Face, is on top of the LLM leaderboard, and is the first model with an average score of 80!! In other words, it is the world's best… pic.twitter.com/CGHawmLhqI — Bindu Reddy (@bindureddy) February 6, 2024

With today’s release, Smaug-72B becomes the first open-source model to achieve an average score of 80 on the Hugging Face Open LLM leaderboard, which is considered a remarkable feat in the field of natural language processing and open-source AI.

Smaug-72B excels especially in reasoning and math tasks, thanks to the techniques that Abacus AI applied to the fine-tuning process. These techniques, which will be detailed in an upcoming research paper , target the weaknesses of large language models and enhance their capabilities.

Smaug-72B is not the only open-source language model that has made headlines recently. Qwen, the group behind Qwen-72B, also released Qwen 1.5 , a suite of small powerful language models ranging from 0.5B to 72B parameters.

Qwen 1.5 outperforms popular proprietary models like Mistral-Medium and GPT-3.5, has a 32k context length, and works with various tools and platforms for fast and local inference. Qwen also open-sourced Qwen-VL-Max , a new large vision language model that rivals Gemini Ultra and GPT-4V, two of the most advanced proprietary vision language models developed by Google and OpenAI, respectively.

Implications for the future of AI

The emergence of Smaug-72B and Qwen 1.5 has sparked a lot of excitement and debate in the AI community and beyond. Many experts and influencers have praised the achievements of Abacus AI and Qwen and expressed their admiration for their contribution to open-source AI.

Amazing! New Qwen 1.5 72B model rivals GPT-4 even on the Length Adjusted Alpaca v2 Leaderboard. (original alpaca has heavy length bias, this gives a clearer picture) Thank you @jeremyphoward for pointing me to the lengths. Also idea for length adjustment from @teortaxesTex https://t.co/gyoyVDI0hJ pic.twitter.com/KJx3AZCM8y — Blaze (Balázs Galambosi) (@gblazex) February 5, 2024

“It’s hard to believe that less than a year ago, we all got excited about models like Dolly,” said Sahar Mor, an AI influencer and analyst, in a LinkedIn post , reveling at the progress of open source models in the past year.

Smaug-72B and Qwen 1.5 are currently available on Hugging Face, where anyone can download, use, and modify them. Abacus AI and Qwen have also announced their plans to submit their models to the llmsys human evaluation leaderboard , which is a new benchmark that evaluates the performance of language models on human-like tasks and scenarios. Abacus AI and Qwen have also hinted at their future projects and goals, which include creating more open-source models and applying them to various domains and applications.

Smaug-72B and Qwen 1.5 are just the latest examples of the rapid and remarkable evolution of open-source AI this year . They represent a new wave of AI innovation and democratization that is challenging the dominance and monopoly of the big tech companies and opening new possibilities and opportunities for everyone. Only time will tell how long Smaug-72B will remain at the top of the Hugging Face leaderboard, but for now, it is safe to say that open-source AI is having a big moment to start the year.

Correction: February 7, 2024 – An earlier version of this story incorrectly described the nature of the GPT-3.5 model. It is a proprietary technology, not open source. We regret the error.

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IMAGES

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  2. The Triple Layered Business Model Canvas

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  3. Sustainable Business Model PowerPoint Template

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  4. 20 Sustainable Business Models

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  5. Taking the "Five Steps to a Sustainable Business Model"

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COMMENTS

  1. Sustainable Business Model Design: A Review of Tools for ...

    When considering sustainable business model design, the SVAT tool recognises the fact that 'value' is commonly understood predominantly as monetary value and that sustainability requires a more comprehensive view of value that incorporates social and environmental benefits (Evans et al. 2014). The premise of the tool is that in order to ...

  2. Sustainable Business Model Design

    Henning Breuer is Professor for Business Psychology at HMKW Berlin, and runs a small innovation consultancy named UXBerlin. Since 2001 he works with large companies, public organisations, and start-ups, providing consulting on innovation management and culture, sustainable business models, future scenarios, and ethnography.

  3. Four Steps to Sustainable Business Model Innovation

    Four Steps to Sustainable Business Model Innovation April 29, 2021 By David Young and Marine Gerard Reading time: 15 min This article is part of an ongoing series that describes the concept of "Sustainable Business Model Innovation" (SBM-I) and how companies are putting it to use.

  4. Business model innovation for sustainability: a new framework

    Sustainable business model innovation (SBMI) is a change in the way a firm operates in order to create positive impacts or to reduce negative consequences for the environment and the society. The aim of this paper is to explain what pathways a firm can take when it implements a sustainable business innovation process in line with Sustainable ...

  5. How to Tell If Your Business Model Is Truly Sustainable

    1. Scales effectively without increasing risks or diminishing returns. The business model allows the company to grow without reducing its capacity for value creation and profitability. In the case of SBM-I initiatives, as the business scales, so do the environmental and societal benefits it creates, without diminishing the economic returns.

  6. Sustainable business model: A review and framework development

    Sustainable business model: A review and framework development Original Paper Published: 11 July 2020 Volume 23 , pages 889-897, ( 2021 ) Cite this article Download PDF Clean Technologies and Environmental Policy Aims and scope Submit manuscript Feybi Ariani Goni, Abdoulmohammad Gholamzadeh Chofreh, Zohreh Estaki Orakani, Jiří Jaromír Klemeš,

  7. The Quest for Sustainable Business Model Innovation

    March 10, 2020 By David Young and Martin Reeves This article is part of an ongoing series that describes the concept of "Sustainable Business Model Innovation" (SBM-I) and how companies are putting it to use. Corporations are making significant progress in addressing sustainability.

  8. Business Models for Sustainability: Origins, Present Research, and

    A business is carried by a stakeholder network and—in spite of the fact that a business model is a market-oriented approach—particularly a business that contributes to sustainable development needs to create value to the whole range of stakeholders and the natural environment, beyond customers and shareholders.

  9. Sustainable business model innovation: A review

    A sustainable business model is "a model where sustainability concepts shape the driving force of the firm and its decision making [so that] the dominant neoclassical model of the firm is transformed, rather than supplemented, by social and environmental priorities." (p. 103) Birkin et al., 2009a.

  10. 5 Principles of a Sustainable Business Model

    Systems theory identifies 5 elements for a sustainable business model: Diversity, modularity, openness, slack resources and matching cycles. Tima Bansal is the Founder of the Network for Business Sustainability and Professor at Ivey Business School.

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    As it turns out, a really smart guy called Alexander Osterwalder found that there are nine key building blocks that can describe any business model from a multi-national corporation through to a small two-person professional practice. The Sustainable Business Model Canvas, 11 Steps to designing a successful sustainability strategy. Watch on.

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    Sustainable business model innovation (SBMI), then, can be understood as business model innovation which aims to "create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organization and its value-network create, deliver value and capture value (i.e. create ...

  13. Sustainability

    Business model design needs to encounter increasing and highly dynamic challenges due to counter-caesural environmental changes. Empirical research on strategic sustainability is expected to provide guidance for needed dynamic transformation and sustainability. The reported research builds on a multi-case research of four German wine estates. The cases each represent a specific generic ...

  14. Business Models for Sustainability

    Research in sustainability management has a similar interdisciplinary character (Schaltegger, Beckmann, & Hansen, 2013). In this sense, the business model is an excellent unit of analysis for studying and advancing common managerial and entrepreneurial approaches as well as stimulating and revi-talizing old and new business philosophies.

  15. Six Steps to a Sustainability Transformation

    On the basis of our extensive experience working with companies and investors to drive sustainability transformations, we have identified six actions that distinguish leaders from the rest of the pack: Develop a sustainability strategy anchored in purpose. Capture business value. Build new sustainable businesses. Make the core sustainable.

  16. What Is a Sustainable Business Model?

    1. A sustainable business model is commercially profitable. You can make a profit and be socially responsible. No business can succeed or scale unless it attracts customers. What is your value proposition? Who are your target customers? Why is your business valuable, and what niche do you fill? 2.

  17. Sustainable Business Models: Principles, Promise, and Practice

    The chapters in this book examine and analyze existing and new approaches towards sustainable business models and showcase the implementation of sustainable business through both quantitative and qualitative studies, including several case studies and many practical examples. It approaches these issues from the standpoints of diverse business ...

  18. Business Models For Sustainability

    Sustainable business model theory Sustainable business model innovation Tools and strategies for sustainable business model innovation Details to know Shareable certificate Add to your LinkedIn profile Assessments 7 quizzes See how employees at top companies are mastering in-demand skills Learn more about Coursera for Business

  19. Sustainable Business Went Mainstream in 2021

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    The process of integrating sustainability into businesses and processes is still recent, both in startups, small and medium-sized companies and even multinationals. Sustainable business models became a phenomenon of global interest and Design Thinking has been increasingly used as a strategy to support this process. In this context, the aim of this article is to improve the understanding of ...

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  22. New York City's Gradual Transition to a Sustainable City

    New Yorkers know that a sustainable city is attractive, exciting, and capable of winning the global competition for talent and business. New York City can become that sustainable city while creating new businesses, flourishing economically, and being a model for the transition to cities all over the world.

  23. Sustainable and circular textiles

    Building Sustainability and Circularity in the Textile Value Chain The textile industry is one of global importance, providing high levels of employment, foreign exchange revenue and products essential to human welfare. 300 million people are employed in the textile industry and, many of them are women. The United Nations Environment Programme (UNEP) works on providing strategic leadership and ...

  24. Meet 'Smaug-72B': The new king of open-source AI

    While the model still falls short of the 90-100 point average indicative of human-level performance, its birth signals that open-source AI may soon rival Big Tech's capabilities, which have long ...

  25. Tesla temporarily slashes prices for some Model Y cars in the US

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