What is a sustainable business model?

Mar 3, 2022 | Sustainability

A few things before we start. I’m not a sustainability expert – although I’m working on it. I’m not an economist or business model expert. But I am a business owner trying to do the right thing. I’ve been researching sustainable business models and I wanted to share some of what I’ve found out in the hope it helps others beginning to navigate this, as it turns out, quite complicated topic!

What is a business model?

Right, back to basics. A business model is essentially a map showing how an organisation uses its resources to offer value to its customers. It will also include how it makes profit from these activities for organisations where making profit is a goal.

How is a sustainable business model different?

 A business model for sustainability prioritises more than just profit as a goal. It looks at how the organisation can generate environmental and societal benefits too, creating shared value. It is a business model that takes into account the effect the business has on the world, as well as the impact of those effects on the business.

Shifting towards a sustainable business model can require a significant change in how the business operates. It can also require a big shift in mindset from seeking constant business growth to measuring value in other ways. Outdoor clothing brand Patagonia is a brilliant example of this; their mission is not to grow but to stay stable so that people and the planet can be prioritised.

Why is it so important to move towards a sustainable business model?

No business operates in isolation. Global environmental and social trends such as climate change and resource scarcity are disrupting traditional business models. In many cases, the shift towards a more sustainable business model is not only desirable, but essential to the long-term survival and continued profitability of the business, and the health of our planet.

Not only that, consumers, investors and partners are increasingly making decisions about your business based on sustainability credentials…whilst still also demanding a great price, speed or quality. It makes good business sense to listen to them!

A sustainable business model satisfies all of these demands. In short, it’s better for the future, and it’s a compelling brand value.

Where do you start with creating a sustainable business model for your organisation?

To work, a sustainable business model must have:

  • A plan for staying relevant, future-proofing for people and the planet – for example, avoid basing your business on a current trend that could pass, or creating something that relies on limited resources
  • A plan to engage in a society, giving at least as much as it takes
  • And finally, once the first two have been satisfied, a plan on how to stay commercially profitable.

It’s all about big picture thinking rather than cutting corners now and then trying to deal with the consequences in the future.

Asking yourself these questions can help get you started with rethinking your business:

  • Why do we exist? What problems can we solve? Can we rethink the value we deliver?
  • Can we change how it’s delivered? For example, can we reduce our waste?
  • Can we change who’s receiving the value? How can we improve society through our actions?

Looking at the United Nations’ Sustainable Development Goals can be a helpful place to start. How about picking a handful that you think you can contribute towards in your own way and using those as the framework for some of your thinking?

Some example business model innovations to get you thinking:

  • Circular, or closed loop – regenerative by design, this model involves sharing, leasing, reusing, refurbishing and recycling existing materials for as long as possible. For some examples, visit the Ellen Macarthur Foundation website
  • Regenerative – companies find value through innovations that restore, protect or enhance ecosystems. For an example, see some of the great work Patagonia have been doing
  • Decarbonised – producing vastly less climate pollution. For some handy information on this, visit Plan A Academy
  • Just – increase access to goods and services to lower-income individuals or communities or that expand job and career opportunities. Read about Apple’s Racial Equity and Justice Initiative for one good example
  • Local – where goods are produced close to where they are needed. Take a look at the new Food Enterprise Park in Norwich, a work in progress where co-located businesses could work together to reduce waste and for symbiotic relationships.

This list is not exclusive or exhaustive. One of the great things about going through this process is that there is plenty of scope for innovation. Consider partnerships too as a way to help you do great things.

Creating your new sustainable business model

Capturing all your ideas and creating a plan is key part of the process. These pointers might help you break it down into bite sized chunks:

  • The vision – what are your long-range goals and aspirations? Once you’ve created your vision, create your values, weaving sustainability in as one of your core beliefs
  • Review your resource usage – what do you use? Where are they coming from? What are the riskiest resources on the list and how can you increase their productivity while lessening your dependence on them? Can you find a more sustainable alternative?
  • Outline your manufacturing/business process – Can you reduce, reuse or recycle waste? Can you source locally? What are labour conditions like? Follow this thought process back down your supply chain.
  • Be future focussed – Assume your business will grow then consider how increased workforce, larger premises, higher energy consumption may influence your sustainability
  • Be generous – Can you find ways to give back to the community? Could you consider alternative forms of company ownership to reduce the wage gap between the highest and lowest paid?
  • Create an action plan – this itemised roadmap should contain all the steps you need to take to achieve your vision, along with timescales and a plan for how you will report on progress to keep focused and accountable
  • Engage your customers, stakeholders and colleagues – if your changes result in higher prices for your consumers or less profit for shareholders in the short term, let them know why. Tell your brand story through your website, social media etc. and use your sustainability as a selling point.

How you present this is up to you. It will depend on the size and scope of your business and who your stakeholders are. We have gone for a simple action plan in our evironmental policy.

You can also read our company values on this page.

Issues to overcome

Reviewing your business model and creating a plan is a start. You then need to live up to these plans to achieve your vision. Getting it all right first time is unlikely. There are bound to be constraints that get in the way. You may find ideas are not developed as you’d hoped, or your new model may even fail in the market. The key here is to keep going! Review, rewrite, try something new, but don’t give up!

The larger your business grows, the greater its impact on the world and people around it – start sustainably now. It’ll be easier in the long run.

We would not have made the progress we have on our sustainability journey without the help and support of the sustainability team at West Suffolk College. If you are a local business we highly recommend you visit West Suffolk College Sustainability Centre to find out how they could help you too.

Sign up to our newsletter

We send out just one email a month stuffed full of fairly interesting marketing and sustainability content. Why not give it a go?