What is a sustainable business model?

How do the
SDGs contribute to the sustainable business model?

Globally, businesses are at a defining moment to act on sustainability. Customers, employees, investors and policymakers are demanding proof that the brands they buy from, engage with, work for and invest in are conducting business in a sustainable way and are not just abiding by ethical business practice and minimum standards for environmental accountability.

 

Increasingly stakeholders want to see more than surface-level sustainability and corporate social responsibility efforts. They want to see purpose embedded into organisations authentically and transparently.

 

The traditional business model has transformed into a sustainable one, putting purpose at the heart of an organisation. 

 

Of course, not all businesses have made that leap, instead taking a step by step approach to their sustainability journey. While some small businesses think they can't impact global challenges like climate change at all. As small and medium enterprises account for over 99% of the private sector, together, they can make a considerable contribution to our planet's social and environmental state, so they are critical players in the race to zero and getting behind sustainability transformation.

 

Regardless of size, however, the evidence is mounting up; those that do not transform their business model are missing out on an opportunity to build resilience, capture value and create a sustainable competitive advantage for the long term.

 

The sustainability maturity levels

Through our work with Boards, CEOs and senior leadership teams, we have identified four maturity levels.

 

  1. A focus on traditional CSR (corporate social responsibility) or social value.

  2. A focus on yearly opportunity projects across the sustainable development spectrum.

  3. Sustainability is embraced as a core organisational pillar with identified key projects.

  4. Sustainability is embedded at the core of the organisation and business operations enabling competitive advantage.

 

Reporting versus strategy

With calls to reduce carbon emissions and reach net-zero, reporting metrics have taken centre stage. ESG reporting is well documented in the investor world while measuring greenhouse gas emissions, waste, water pollution, and energy consumption are popular for businesses of all sizes.

 

While there has been notable progress in defining metrics for sustainability and supporting them with increasingly relevant and better-quality data, this has inadvertently created an overemphasis on reporting and compliance per se. So instead of measuring action and progress against a strategic plan, environmental and ESG reporting metrics, for example, have become an end in themselves.

 

To make a substantial difference in this decade of action - we need to transform the way we operate our business models, making them sustainable from the ground up. Essentially we need to refocus on strategy and actions, reengineering the whole process rather than bit parts and adding in metrics, and use the sustainable development goals (SDGs) as the framework.

 

What is a Sustainable Business?

Becoming a sustainable business is about taking responsibility for your impact on the environment and communities you and your supply chain operate in and having the least damaging effect possible.

 

In the UK for example, the government is determined to tackle climate change and has pledged to reduce emissions by 78% by 2035 compared to 1990s levels andto become Net-Zero by 2030. 

 

Organisations who understand the government's direction and commit to becoming a sustainable business now will be well-positioned to meet future legislation in their home and export markets. While implementing a sustainability strategy that focuses on both the short and long term will enable business leaders to withstand global and national economic shocks and meet the needs of today and tomorrow's customers and stakeholders.

 

Most larger corporations have begun their sustainability journey, however many SMEs who understand the value of becoming sustainable are unsure how to get there and where to make the necessary changes in their business. According to the Centre for Economics and Business Research Ltd, 78% of companies don't know where to start to become more sustainable. 

 

How do you transition to a sustainable business model?

Businesses can transition incrementally or disruptively; it depends on the appetite of the business leaders.

 

Whichever route is taken, the end goal is to move from a linear (take-make-waste) economy to a circular one, reducing the impact on resources and amount of waste.

 

When we think about the maturity levels of our clients, we obviously would like them to move into maturity level 4 as quickly as possible.

 

This means that leaders need to reimagine their corporate strategy by creating new modes of differentiation, embedding societal value into products and services, reimagining business models for sustainability, managing new performance measures, and reshaping business ecosystems to support these initiatives. 

 

To begin, leaders need to review the organisation's current model against sustainability to establish a benchmark.

 

Five steps to sustainability transformation

 

  1. Commit - create the business case and get buy-in from the entire business, Board through to new hires.

  2. Act - explore the value and supply chains and stress test them for social and environmental sustainability, risks and profitability. Create "imagine if……………." scenarios - "what happens if - XYZ trend emerged, and regulation came into play". Balance profits with purpose.

  3. Empower - for employees and stakeholders to focus on sustainability and believe in the integrity of the business, align purpose and business strategy. Make a good brand great.

  4. Collaborate - partner with employees, supply chain partners, NGOs and communities to fully understand, embed and be a force for good.

  5. Communicate - communicate your journey authentically, internally and externally, creating one voice for sustainable development.

 

How we can help

The research is clear, enterprises who fail to take up the sustainability challenge, instead viewing sustainability through the ESG or compliance reporting lens will miss the opportunity to create new models for business, to tap into new domestic and international markets and see their space for creating shareholder value narrow dramatically. 

 

On the other hand, companies that effectively create and execute a sustainable business model will transform their business and turn sustainability into a competitive advantage.

To truly understand sustainability and act responsibly, get in touch with Felicity Jones or Claire Benson, or fill in the form below.

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