New, sustainable business models and their impacts
Sustainability is not just important on the product level but needs to be supported by a sustainable business model. Eric Mieras, Managing Director at PRé, dives into what that means.
Sustainable business models are becoming the standard
Over the last few years, sustainable business models – whether green, shared, circular or collaborative – have gained ground in companies. Multinationals like life sciences and materials sciences company DSM are putting a lot of effort into developing sustainable products and business models, like this Clean Cow example shows. What differentiates sustainable business models is that they not only generate economic value but also environmental and/or social value. They also often take into account value generated for other stakeholders than just the shareholders. In other words, sustainable business models value economic, social and environmental impact, not only for the company itself but for its entire business ecosystem.
Make sustainable impacts tangible
These new business models provide us with a challenge, as we’re used to only measuring and reporting economic value benefiting our companies. In many sustainable business models, for now, the bottom line is still driven by financial costs and benefits, as the Business Model Canvas for the Clean Cow example shows. If we really want sustainable models to break through and become the new standard, it’s necessary to make implicit and intangible values, like social well-being or biodiversity, visible and measurable. Life-cycle thinking has the power to do so, and life cycle assessment can provide the methodology to make intangible impacts explicit. Initiatives like the Round table for Social Metrics are important to establish a way of measuring social impacts, a necessary development complementing the well-established and frequently used methodologies for environmental impact, e.g. ReCiPe.
Putting social and environmental value into the equation
Making impacts tangible is only the first step. The next step is to valuate these impacts. Initiatives like natural capital valuation , Trucost and TruePrice are trying to monetize the values, translating impact into monetary value. Clothing brand Puma was the first to publish an Environmental Profit & Loss statement and is working on a social P&L. But there are other methods at hand, like the Human Development Index or Earthshift’s 3 Pillars. They all take social and environmental value into the equation and provide ways of measuring the triple bottom line.
Extended, multifaceted P&Ls as starting point
So, what should a sustainability expert looking into new, sustainable business models do? Regardless of the methodology you prefer or the approach that suits your situation, the new P&L is characterized by two things:
- It’s extended – it not only takes economic costs and benefits into account but also makes social and environmental value visible.
- It’s multifaceted – it looks at value from the point of view of many stakeholders in your ecosystem rather than only your company.
If you want to make your business model truly sustainable, a good starting point is defining what triple value you want to create and with whom you want to share it. Only then can you decide what methodologies to use to analyze your current and future impacts. We will discuss some of these methods in more detail in a series of articles on monetization & natural capital valuation.
Sustainability is all about impact. Positive impact makes you meaningful. But first you have to know where you are making an impact and where you can create shared value. That’s where PRé comes in. Pinpointing your impact is an essential starting point for taking joint action with people and organisations in your ecosystem. The combination of sustainability and social business can make a real change in the way we do business.