What is a 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 five maturity levels.

 

1. Purpose: Create Value for society and the environment, as well as economically across the entire value chain.

2. Leadership: Long-term viability is understood, and sustainability is culturally embedded across the organisation.

3. Efficiency: Sustainability is understood to be the smart thing to do as it leads to operational cost savings.

4. Obligation: Expected to do - Sustainable actions are driven by market and investor pressure.

5. Compliance: The focus is on reducing operational risk.

 

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 and to become Net-Zero by 2030. 

 

Organisations who understand the government's direction and commit to becoming sustainable businesses 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