Why you should focus on sustainable business models
Jonas Reuter
Today more than ever, a sustainable business model is a key to success and responsible corporate governance. Such a business model takes into account not only the economic aspect, but also the social and environmental impact of a company. By implementing a sustainable business model, a company can minimize its environmental footprint while effectively fulfilling its social and economic responsibilities. This article is dedicated to the concept of a sustainable business model and shows why it can be crucial for the long-term success of your company.
What makes a business model sustainable
A business model can be described as sustainable if it takes into account and balances the three pillars of sustainability - economy, ecology and social responsibility. The point is that companies are not only economically successful, but also have an eye on the impact of their activities on the environment and society and act accordingly. A definition of sustainability in the context of business models can be found in the study "Business Models for Sustainable Innovation" by Chesbrough and Rosenbloom (2002), in which the authors describe that "a sustainable business model meets the needs of today's society without compromising the opportunities of future generations".
One example of a sustainable business model is the use of renewable energy. Companies can rely on the use of solar energy or wind power to cover their energy needs. The introduction of circular economy concepts, in which waste and resources are recycled as fully as possible, can also be an important part of a sustainable business model. Another option is to promote social and ethical responsibility in the supply chain. This can be achieved, for example, by introducing labor standards for suppliers.
Our definition of a sustainable business model
A sustainable business model is a business model that aims to have a positive impact on all its stakeholders: the environment, people and the company itself. It is a long-term approach that balances the well-being of the planet and people with the economic success of the company.
Advantages of sustainable business models
Sustainable business models help with the shortage of skilled workers
Sustainable business models can help companies to attract and retain employees, particularly from the younger generations. This is because more and more young people are attaching importance to contributing their talents and skills to a company that is committed to social and environmental responsibility. A 2018 Deloitte Millennial Survey found that more than two thirds of millennials surveyed believe it is important for companies to make a positive contribution to society and the environment. By implementing sustainable business models, companies can therefore specifically increase their attractiveness for this target group and thus strengthen employee loyalty and motivation.
Sustainable business models are more successful in the long term
The thesis that sustainable business models will be more successful in the future is supported by several studies. A 2020 study by the Global Sustainable Investment Alliance found that USD 35.3 trillion will be invested in sustainable investments worldwide. Another study by McKinsey in 2018 predicts that sustainability factors will play a significant role in corporate decisions by 2030 and that sustainable companies will have a higher market capitalization by then. These studies indicate that more and more investors and companies are recognizing that sustainable business models are not only ethically but also economically advantageous and will be more successful in the future.
Sustainability: the key to corporate success, confirmed by experts
Successful companies and renowned thinkers worldwide agree: sustainability is not a buzzword, but a key factor for long-term corporate success. Jacqueline Novogratz, a successful entrepreneur, puts it in a nutshell: "Many business leaders see the relationship between long-term success and sustainability, and that is very encouraging".
Michael Porter, a recognized academic and thinker, illustrates this by pointing out that sustainable thinking should be at the heart of business management: "Companies need to link business success with social progress. Shared value is not social responsibility, philanthropy or even sustainability, but a new way of achieving economic success. It is not at the edge of what companies do, but at the center. We believe it can usher in the next big shift in corporate thinking."
Cameron Sinclair, architect and CEO of the Worldchanging Institute, emphasizes that sustainability is a matter of survival for companies: "If sustainability is seen as a matter of survival for your company, I believe you can bring about massive change".
These expert voices emphasize that sustainability is not only an ethical obligation, but also a decisive factor for the success of a company. It is time for companies to integrate this insight into their business models and make sustainability a central part of their strategy.
Sustainable business models are more resilient and have less risk
Sustainable business models can also make companies less risky. By taking environmental and social aspects into account in the corporate strategy, the risk of government regulations and fines can be reduced. Dependence on scarce raw materials and resources is also minimized through the use of renewable energies and the introduction of circular economy concepts.
There are numerous examples of companies that have switched to sustainable business models and have not only reduced their environmental footprint, but have also strengthened their competitive position and thus achieved greater security and resilience in the face of uncertainties and crisis-like situations. Examples include companies such as Patagonia, known for its sustainable clothing and supply chains, and Novartis, which is focusing on improving the health of rural communities in India with its "Arogya Parivar Initiative" and creating new markets there.
Sustainable business model - these are the advantages at a glance
Implementing a sustainable business model has a number of advantages. Not only is it a way to contribute to environmental protection and social responsibility, but it can also promote business growth and economic success. Below we have listed some of the key benefits that a sustainable business model offers:
- Risk mitigation: by complying with environmental and social standards, companies can reduce risk and protect themselves from potential legal or regulatory sanctions.
- Cost savings: Sustainable business models can lead to long-term cost savings, for example through more efficient use of resources or the use of renewable energies.
- Improved brand image: Companies that are committed to sustainability improve their brand image and attract customers who value environmentally conscious and socially responsible action.
- Employee retention and satisfaction: Sustainable practices can create a positive work environment and contribute to employee satisfaction, which in turn increases employee retention.
- Competitive advantage: In an increasingly environmentally conscious world, companies that are committed to sustainability can gain a competitive advantage over their rivals.
Sustainability - many companies already have it firmly in their sights
The survey conducted by Telekom Deutschland GmbH's Digitalization Index for SMEs 2021 identified a trend towards sustainability. The survey showed that sustainability is not just a side issue for a growing number of companies, but a central component of their business strategy. This underlines the importance that sustainability has gained in the business world and suggests that companies that are proactive in this regard can gain a competitive advantage over their less sustainability-oriented competitors. Sustainability in business models is a clear signal for the future of entrepreneurship and shows that sustainable practices are not only crucial for the environment, but also for business success.
An dieser Stelle wird ein Chart dargestellt, welches auf sehr kleinen Geräten ggf. nicht richtig dargestellt wird. Nutzen Sie ggf. ein größeres Gerät oder verwenden Sie Ihr Smartphone im Landscape-Modus (drehen).
[Source] Telekom Deutschland GmbH. (2021). Digitalization index for SMEs 2021. Retrieved from https://www.digital-x.eu/de/magazin/digitalisierungsindex/archiv on 22.02.2022
Ten impulses to help you develop your sustainable business model
We know that thinking about the complexity of sustainable business models and planning the next steps can be challenging. Therefore, we invite you to take your time and go through these questions. They are carefully formulated to help you dive deeper into the topic, organize your thoughts and explore new ways of thinking. If you find that you need support or a fresh outside perspective on your thoughts, we have a special offer for you. We offer a free 30-minute sparring call where our experts will help you clarify and expand your ideas. This is a great opportunity to share your thoughts and ideas with professionals who specialize in helping companies like yours achieve their sustainability goals. Take advantage of this opportunity and let's take a step into the future of your company together.
10 examples of sustainable business models - Sustainable business models and their implementation in practice
Sustainable business models are more important today than ever before. They help to combat climate change, conserve resources and ensure a future worth living for generations to come. Companies that rely on sustainable business models can not only help to achieve these goals, but also benefit from long-term economic advantages. This is because sustainable business models are often innovative and future-oriented, they open up new market opportunities and can improve the company's image. In this article, we present 10 examples of sustainable business models.
- Cradle-to-cradle design: Companies such as Nike or Steelcase rely on cradle-to-cradle design, in which products are designed from the outset in such a way that they can be fully returned to the biological or technical cycle at the end of their service life.
- Sharing economy: The sharing economy is booming. Companies such as Airbnb or car sharing platforms such as car2go enable people to share resources and thus protect the environment.
- Upcycling: In contrast to recycling, where waste products are processed into new materials, upcycling involves reprocessing old materials so that they shine in new splendor. One example of this is the company Freitag, which produces bags and accessories from old truck tarpaulins.
- Organic farming: Companies such as Demeter or Bioland rely on organic farming, which does not require the use of pesticides and chemical fertilizers and therefore protects the environment.
- Circular economy: The circular economy strives for an economy in which resources are used efficiently and sustainably. Companies such as H&M rely on this model and recycle old clothes to make new ones.
- Green energy: Companies such as EnBW or EON rely on green energy from renewable sources such as wind or solar power in order to protect the environment and drive forward the energy transition.
- Sustainable packaging: Companies such as Alnatura rely on sustainable packaging that is made from recycled materials or is biodegradable.
- Fair trade: Companies such as GEPA or El Puente are committed to fair trade and offer products that have been produced under fair conditions and therefore also benefit the producers.
- Climate-neutral company: Companies such as myclimate focus on climate neutrality and offset their CO2 emissions by investing in carbon offset projects.
- Sustainable mobility: Companies such as Tesla rely on electromobility to protect the environment and reduce traffic on our roads.
The path to a sustainable business model
Sustainable business models not only offer environmental and social benefits, but can also provide financial advantages. In order to develop a sustainable business model, it is important to follow a systematic and structured approach. In the following, we present some starting points and methods that can help you develop sustainable business models
In order to successfully implement a sustainable business model, it is necessary for sustainability to be firmly integrated into the corporate strategy. This means that sustainability is not just seen as an individual project or initiative, but is anchored as a long-term and integral part of the corporate strategy. Companies can achieve this by defining clear goals and milestones, carrying out regular reports and measurements and actively involving their employees. It also often makes sense to anchor the idea of values in the corporate strategy at the same time.
Another important component in the development of a sustainable business model is the analysis of the value chain. This involves looking at the individual steps from raw material extraction to production and disposal. The aim is to minimize environmental impact and take social aspects into account along the entire value chain. By identifying bottlenecks and potential for improvement, companies can increase their efficiency and reduce their environmental and social impact.
In order to build a long-term sustainable business, it is crucial to integrate social and environmental factors into the business model. Companies should be aware that they not only have an economic responsibility, but also a social and environmental responsibility. By taking social and environmental factors into account, companies can strengthen their reputation in the long term and gain the trust of their customers and partners. They can also prepare themselves for future challenges by minimizing any risks and identifying opportunities that arise from a sustainable approach. A sustainable business model that takes social and environmental factors into account is therefore an important step towards a more sustainable future.
Another important component in the development of a sustainable business model is the identification of key resources and activities. Companies should be aware that a sustainable focus usually requires additional resources, whether in the form of investment in renewable energy or employee training. By identifying key resources and activities, companies can ensure that they have the necessary resources and capabilities to achieve their sustainability goals. This can include, for example, developing partnerships with sustainable suppliers or training employees in sustainable practices. Identifying and optimizing key resources and activities is therefore an important step in developing a sustainable business model and can help ensure that companies are successful in the long term.
The exchange with other entrepreneurs and managing directors can be a valuable resource when it comes to developing a sustainable business model. Through conversations and discussions, synergies can be found that allow companies to utilize their resources more effectively and work together on sustainability solutions. By building a network, companies can also benefit from the experiences and best practices of other companies to optimize their own sustainability efforts. In many cases, collaborating with other companies can also help to develop new products or services that support a more sustainable future.
In addition, the collective efforts of companies committed to sustainability can carry more weight than individual efforts. Together, companies can demonstrate to policy makers and other key stakeholders that sustainability is an important issue and that it is possible to develop and implement sustainable business models.
Finally, the exchange with other companies can help to legitimize a company's sustainability efforts. By joining a network of like-minded people, a company shows that it is a serious and committed voice in the sustainability debate. This can strengthen the trust of customers, investors and other partners, who are increasingly paying attention to sustainability and rewarding companies' efforts in this area.
With the MORGEN Academy we offer this exchange as well as a guided development of new business models in 6 intensive sessions
Use the Sustainable Business Model Canvas to develop a comprehensive understanding of your company. The Sustainable Business Model Canvas is a tool that supports companies in evaluating and optimizing their business models with regard to sustainability. It is based on the classic Business Model Canvas, but contains additional aspects that are important for sustainable corporate management.
The canvas consists of nine building blocks, including customers, value proposition, key resources and activities, partnerships and cost structure. Each building block is explained through a series of questions that help companies to look at their business models from a sustainable perspective.
Using the Sustainable Business Model Canvas offers companies numerous benefits. It helps them to develop a comprehensive understanding of their business model and identify where they can make improvements to become more sustainable. It also enables better communication and collaboration within the company by creating a common understanding of business practices.
In addition, companies can use the Sustainable Business Model Canvas to benchmark their business models against other companies in their industry and adopt best practices. They can also work with stakeholders to shape their business models to meet the needs of the community and the environment.
Overall, using the Sustainable Business Model Canvas can help companies optimize their business models and make them more sustainable, which can lead to a positive long-term impact on the environment, society and the company itself.
The Value Proposition Canvas is a tool that helps companies define their value proposition to customers and ensure that it is aligned with their needs. It consists of two main parts: the customer profile and the value proposition.
The customer profile identifies the customer's needs, wants and challenges, while the value proposition describes what products or services the company offers and how it fulfills these needs. By using the Value Proposition Canvas, companies can ensure that their business model is aligned with the needs of their customers and offers a value proposition that is unique and compelling.
Using the Value Proposition Canvas offers companies numerous benefits. It allows them to better understand their customers' needs and respond to their expectations, which can lead to higher customer satisfaction and loyalty. Companies can also identify and close the gap between what customers want and what the company offers in order to improve their competitiveness.
In addition, companies can use the Value Proposition Canvas to improve their products or services and optimize their business models. By tailoring the value proposition to the customers' needs, they can differentiate themselves from other companies in the industry and offer unique benefits.
Overall, using the value proposition canvas can help companies define their value proposition and ensure that it is aligned with the needs of their customers. This can lead to higher customer satisfaction and loyalty as well as improve the company's competitiveness.
Sustainable business models are part of a long-term transformation
There are many ways to implement sustainable business models and every company has the opportunity to make its contribution. By implementing sustainable business models, a company can not only reduce its ecological footprint and contribute to shaping a sustainable society, but such a sustainable business model can also be economically successful. It is important to note that the requirements for sustainability are constantly changing. In order to be successful as a company in the long term, it is therefore necessary to continuously develop itself and its business model. Change is therefore a permanent action that companies should embed in all their processes.
Frequently asked questions about sustainable business models and their definition
Sustainable business models can bring numerous benefits to your company. Firstly, you can reduce the risks associated with environmental and social standards. For example, if you focus on renewable energies, you can reduce your dependence on fossil fuels and thus lower your energy costs. Secondly, sustainable business models can help to position your company for the long term and increase competitiveness. This is because more and more customers prefer products and services from companies that are committed to environmental protection and social responsibility.
Sustainable business models can also have a positive impact on employees. This is because you can create a positive working environment and motivate employees through your company's commitment to sustainability. For example, if you focus on environmentally friendly work processes, you can increase your employees' environmental awareness and improve the working atmosphere. You can also use social commitment to bind your employees to the company and strengthen their identification with your company.
In order to implement sustainable business models, companies must fulfill various requirements. First of all, you should be clear about what goals you want to pursue with a sustainable commitment. Then you can plan and implement the necessary measures. These can include investments in renewable energies, environmentally friendly work processes or social projects, for example. You should also observe the legal requirements and provide your employees with targeted training in order to establish a sustainable commitment within the company.
In order to measure and evaluate the success of your sustainable business models, you should define suitable key figures. These can include, for example, energy consumption, CO2 emissions, resource utilization or employee satisfaction. Regular measurements allow you to monitor the progress of your sustainability strategy and make adjustments if necessary. You can also gain the trust of your customers and other stakeholders by communicating your sustainability performance transparently. Here are some examples:
- Energy consumption: Measure how much energy your company consumes and how much of it comes from renewable sources.
- CO2 emissions: Monitor your company's CO2 emissions and set reduction targets.
- Resource utilization: Evaluate how efficiently your company uses resources and whether there are opportunities for improvement.
- Waste management: Measure how much waste your company produces and how much of it is recycled or reused.
- Employee satisfaction: Conduct regular employee surveys to determine how satisfied your employees are with the company's sustainability efforts.
- Supply chain: Evaluate the sustainability of your supply chain and set targets for improvement.
- Social engagement: Measure the extent of your social engagement, e.g. through volunteering or donations.
- Water footprint: Evaluate your water footprint and look for ways to reduce and improve it.
- Sustainability reporting: Create regular sustainability reports to document progress and communicate transparently.
- Compliance with legal requirements: Ensure that your company complies with all relevant environmental and social legislation and monitor this continuously.
In order to implement sustainability throughout the entire value chain, you should involve your suppliers and partners. Together, you can develop solutions to reduce environmental impact, optimize the use of resources and improve social standards. For example, you can include sustainability criteria in the selection of suppliers, initiate joint projects or offer training courses and workshops. You can also promote cooperation with your partners through transparent reporting of your sustainability performance and raise awareness of sustainability throughout the entire value chain.
The transition to sustainable business models often requires investments in new technologies, processes and infrastructures. There are various options for financing these investments, such as public funding programs, loans from banks or investments from investors. Savings through greater energy efficiency or better use of resources can also help to reduce the costs of the transition.
The sustainability of products and services depends on various factors, such as the use of resources, energy efficiency, packaging and disposal. To improve the sustainability of your products and services, you can, for example, rely on renewable energy, use recycled materials or reduce the use of packaging materials. You can also gain the trust of your customers by communicating your sustainability performance transparently.
Employees can play an important role in the implementation of sustainable business models. To get them involved, you should offer targeted training and workshops to raise awareness of sustainability within the company. You can also create incentives, such as bonus payments or employee events, to encourage your employees to get involved. By communicating your sustainability performance transparently, you can also raise your employees' awareness of the issue of sustainability.
Sustainability in the supply chain can help to reduce the risk of supply chain problems. By incorporating sustainability criteria when selecting suppliers, you can ensure that they are reliable partners in the long term. You can also work with suppliers and partners to develop solutions to reduce environmental impacts and improve social standards. By regularly monitoring and evaluating your supply chains, you can react to potential problems at an early stage and reduce the risk of supply chain problems.
In order to anchor sustainability in the company in the long term, it is important to create a sustainable corporate culture. For example, you can integrate sustainability goals into the corporate strategy and communicate them regularly. You should also involve your employees in the development and implementation of sustainability goals and offer targeted training and workshops to raise awareness of sustainability within the company.
You can also create incentives to encourage your employees' commitment to sustainability. For example, you can offer bonus payments or employee events that are linked to the achievement of sustainability goals. You can also include sustainability aspects in employee evaluations.
Transparent communication of your sustainability performance can also help to anchor sustainability in the corporate culture. For example, you can report regularly on your progress in terms of sustainability or inform your customers and business partners about your sustainability activities. By communicating clearly and comprehensibly, you can raise awareness of sustainability within the company and in society as a whole.
The path to a successful and sustainable business model: conclusions and outlook
Overall, it is clear that implementing sustainable business models is a smart decision for any company, regardless of its size or industry. These models are not only good for the environment and society, but also offer numerous benefits for the company itself. They can minimize risks, save costs, improve brand image, increase employee retention and create a competitive advantage.
However, to realize the full potential of a sustainable business model, it is important to continuously measure and evaluate its progress. This can be achieved by monitoring various metrics such as energy consumption, CO2 emissions, resource utilization and employee satisfaction.
Ultimately, sustainability is not a one-off project, but a continuous process. It requires commitment, adaptability and the will to constantly learn and improve. With the right approach, a sustainable business model can be a powerful tool not only to protect our planet, but also to lead your company into a successful future.
What place does your company have in the world of TOMORROW?
Together we transform current challenges into your business success of tomorrow. Book an appointment today and start the transformation your company needs for the future.
Start
TOMORROW
with MORGENM
Jonas Reuter
About us:
MORGEN is a specialized management consultancy that focuses on the development of new business models for medium-sized companies. In particular, it supports owner-managed companies in their future-proof transformation. Knowledge transfer is at the heart of its consulting activities, which is why the MORGEN Blog regularly publishes articles on key topics such as digitalization, transformation, customer centricity and sustainability.