New business models: the key to integrated sustainability?
Ironically, the first time this concept grasped me was during a discussion about the role of ministries for the environment in public governance. A first-year Bachelor student at the time, I remember being enthused by the idea that rather than building strong ministries for environmental protection, we should be advocating for environment or sustainability advisors across government. Basically, that if a minister of finance, foreign affairs, education, or health had a sustainability advisor, the impact would be far deeper than a dedicated ministry chasing behind the others.
This translates quite well to what has since started to emerge in business — the slow but notable transition of sustainability from CSR to business strategy and operations. This is the integration of sustainability.
Now, this integration of sustainability into business is neither complete nor overly effective. Yes, some products are now packed in recyclable materials and yes, we signed the Paris Agreement — but, no, we’re not fundamentally changing and no, we haven’t broken our path dependency on oil. We are so because the fundamental business model has not changed. We measure progress as economic output and thus are still cemented in a linear economy. A decoupling of growth and progress is needed.
Progress is when we’re all better off at the individual level — people have more choices, more freedoms, more knowledge, more equality, and society is generally better off. Growth is when we’re producing more on aggregate — there are more possessions, more production, but inevitably more inequality and extraction. Fault of a global change in financial systems, we need to redesign our business models.
New business models will require two key aspects: to overcome linearity, and to provide a comprehensive metric for progress. Overcoming linearity means understanding the responsibility of a business for how materials get to them and what will happen after — it means considering the life of a good and conceptualizing it as a cycle, eliminating leakages (such as pollution) and tying up loose ends. It also means taking a systems approach to problems: multiple stakeholders must engage to ensure circularity of any given resource. Circular business models provide not only a sustainable framework on which to build strong businesses, but also empower networks where new revenue streams and job opportunities flow across sectors. It’s a way of generating value where previously it was not seen, and ensuring the benefits are shared. Key tenets are innovation, collaboration, and distributed value creation. In essence, new business models should allow for progress without traditional growth.
A new metric is needed because new business models must consider more than economic output — they need to reflect value created even when it cannot be quantified economically. In essence, this means recognizing (and scrutinizing) externalities. The argument for new metrics also stems from a debate on incentives — companies (and indeed nations) measuring their evolution with growth models (turnover or GDP) are just measuring one aspect of their activities. As such, they only reward progress in one direction. Until a dashboard of new metrics is adopted, there are little chances environmental and social factors will be incentivized, or indeed integrated into short-term objectives.
“Implementing new business models is all too rare”
In business as in governance, our measurement tools and business models are hindering large-scale transitions to sustainability. There is undeniable public discourse about changing models, yet the implementation of new metrics is still far off. Circular economy thinking and Doughnut economics, for example, offer methods for this. Natural capital valuation and carbon accounting offer more inclusive ways of measuring a business’ impact. On the whole, the body of research on the subject is growing in both quality and size, with the world’s brightest minds weighing in. Yet, despite this, implementing new business models is all too rare. Some have been, mostly championed by service-providers and powered by tech and the sharing-economy. The challenge lies with goods-producers, who will have to consult at large and study these models closely. They must search for ways to integrate circular principles throughout their operations, for example through products as a service schemes. Governments too need to reflect on their role in supporting this shift to circularity and the enforcement of new metrics.
“Go beyond commercial viability and measure progress, not growth”
Our belief in this is such that we saw no other way of building Qincho. Knowing that overcoming linearity and new metrics are key to sustainable business inspired our methodology. For our consulting jobs we start by mapping the stakeholders of any project. This system view allows us to identify pressure and leverage points, but also helps us identify leakages and opportunities for upcycling waste to resource or colocating businesses. We then line our projects up to the UN Sustainable Development Goals and fit each objective with a quantitative target — a target that allows the project to go beyond commercial viability and measure its progress, not its growth. This is how we provide our clients a grounded (and marketable) claim to genuinely sustainable business.
