Creating a sustainable business model can be difficult. Let's dive deep into the concept of sustainability in business development.
A growing movement against plastic products and irresponsible consumption is just one of the signs that sustainability is becoming more and more important to buyers. But what does that mean for your business, and how can you create – or shift to – a sustainable business model?
The dictionary definition for "sustainable" is "able to be maintained at a certain rate or level." Wikipedia is a bit more helpful: "Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs." But we need to dig a little deeper to understand how the concept of sustainability is relevant to business development.
What makes a sustainable business model?
1. It's commercially profitable.
No business can succeed or scale unless it attracts customers. What is your value proposition? Why is your business valuable, and what niche are you filling?
2. It 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? Resources' availability and pricing are never guaranteed or fixed – it's best not to build your castle on a sinking rock.
3. It uses resources that it can utilize for the long term.
Obviously, you can't have a sustainable business model without using sustainable resources. Many business activities are limited by finite resources or exceptionally high prices. On the other hand, some resources may be easily available yet environmentally harmful. Palm oil is a famous example of a cheap and plentiful resource, but farmers are razing acres of land and causing severe environmental destruction by continuing to cultivate the crop. Cheap resources may be tantalizing for business, but think about the big picture rather than taking a shortcut now.
4. It 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, a business expert and author on quantifiable sustainability strategies, contrasts this with the current "linear take-make-waste model" that so many modern businesses are built upon, which he states is "culpable for contributing to [this world's] unsustainability."
Rather than taking from the earth, a sustainable business will "borrow" resources with the intent to replenish them. This concept of responsible consumption is one that both businesses and consumers can promote and practice.
Why do we need sustainable business models?
There are plenty of ways to approach the issue of sustainability, but the simplest one, which can unite all stakeholders, is this: Kinder businesses attract more customers. Use your sustainability as a selling point: 90 percent of U.S. shoppers prefer cause-based products and companies.
It's OK to be open about your sustainability goals. Customers will ask, and the friendlier you are about it, the more likely they are to share that news with their friends.
But maybe you're not entirely motivated 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 on the world and 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.
Whatever your motivation, if you don't start with a sustainable business model, there will be consequences down the line. They may not be present during your lifetime, but isn't it only right that the generations that come after us benefit from the same richness, variety and opportunity that we have? Like Willard said, is a system that promotes waste and manipulation really one that should be defended?
How can you start and maintain a sustainable business model?
Plan out your resource usage.
- Make a list of the raw materials you'll need. Depending on the type of business you want to start, this list will vary dramatically. SaaS companies, for example, won't require the raw resources that a clothing brand will.
- Think about where your materials might be sourced. Who is making or harvesting them? How are they being sold?
- Consider where they are coming from and how they are being transported. How far do they have to travel to arrive to 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 also lessening your dependence on them?
Once you've created your materials list, outline your manufacturing and business processes. Ask yourself these questions:
Which manufacturing processes are the most wasteful? How can you mitigate the negative 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 fed into a different process to be used again? How can you reduce the unusable waste?
Where can you reduce? How can you stretch your raw materials? Can you lower the amount of resources needed 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?
Consider alternative forms of company ownership.
The traditional top-down business model can create unreasonable wage gaps between those at the highest rungs at the ladder (the CEO, other C-level executives, founders, managers) and those at the lowest (the laborers tasked with creating raw materials or carrying out the manufacturing processes). Including everyone in your sustainability goals can help keep your business on track and give those who are normally disadvantaged a larger say.
Engage your customers.
Your dedication to sustainability may result in higher prices for your consumers, and that's OK. Let your customers know why they're paying more for your products in a compelling blog post, series of posts or dedicated brand story page. Including your customers in the decisions is one way of serving them and giving them more power over their dollars. Americans are willing to pay 17 percent more to do business with companies known for great customer service, and cause-based spending is also on the rise.
You might choose to engage customers by pledging a percentage of revenue to a certain charity or organization, for example, or offering different shipping or packaging options. Customers who love your product can be converted into evangelists when you create messaging that resonates with them. If you can involve your consumers in the 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.
What blockers are there to a sustainable business model?
Building a sustainable business can be daunting. If you're running a business that's stuck in its status quo, you may be struggling from one of three issues:
1. Innovation meetings are held, but ideas are not developed further.
Many good ideas arise when founders or leaders get together at a workshop or meeting, but to be implemented, they must be further developed and a plan of action drafted.
2. Ideas are not implemented.
The second issue founders face is that the plans for change are simply never implemented. This could be because it seems too difficult 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 are the wrong mindset and a reluctance to dedicate resources to change. To address these, find your allies – those who believe sustainability is important for the bottom line and for the larger world – and connect with them. Together, you can remove or alter harmful, outdated systems and encourage innovation.
In the past 10 years, customers have become more vocal about brands they like and brands they don't. In fact, a third of Americans have used social media to complain about a brand or its customer service. Practicing and following through with your sustainability goals helps consumers feel closer to you, allowing them to place more trust in your brand. This is crucial in a time where customers are expecting more warmth and honesty in the companies they shop from.
If you think about it, the conversation about sustainability is also one about family and relationships, homes and comfort. You don't need to wax poetic about lofty marketing models or craft textbook-like prose to convince customers or stakeholders why sustainability is worth supporting. Just talk to them like the fellow humans they are.