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Sustainable Business Model: How to Create One the Right Way

Developing a sustainable business model stands at the forefront of many companies’ agendas. A sustainable business benefits the environment and tends to thrive in the long haul. Customers prefer collaborating with firms that show a commitment to positively impacting the world.

It’s crucial to note that sustainability isn’t reserved for big corporations alone. Companies, regardless of their size, can steer towards a sustainable business model by implementing particular methods and embracing a sustainable approach.

What is sustainability?

“Sustainable” implies the capacity to keep going at a steady pace, and sustainable development addresses present requirements without jeopardizing the ability of future generations to meet their needs. Yet, we need to explore further to grasp how the notion of sustainability relates to the growth of businesses.

What is a sustainable business model?

For Rex Freiberger, who holds the position of President at Superlativ Media, a sustainable business model is all about creating value for everyone involved while not depleting the resources that make it possible.

Freiberger stressed, “A business model that merely seizes upon a trend isn’t sustainable because the societal resources that fuel it won’t endure for years, or even months.”

Lia Colabello, the Managing Principal at Plastic Pollution Solutions, highlighted a crucial distinction between a sustainable business model – one that’s likely to achieve lasting profitability, and a business model that places sustainability as a top priority.

Colabello clarified, “A sustainable business model is the goal every business leader aspires to achieve – a business that can turn a profit quickly and remain viable for the long run. On the other hand, a business model that emphasizes sustainability, at a minimum, takes into account all stakeholders, evaluates and mitigates environmental impacts, and is transparent and comprehensive in its reporting.”

Eco-friendly packaging practices represent a commitment to sustainability alongside other methods like prudent resource utilization and contributions to deserving organizations.

What makes products sustainable?

Sustainable products represent a harmonious trifecta, benefiting society, the environment, and the economy throughout their life journey. From the moment raw materials are sourced to their ultimate disposal, these products prioritize the well-being of both human health and our planet.

Here are the defining attributes of a sustainable product:

  1. Embrace Renewability: These products are crafted from resources that nature readily replenishes, ensuring that we don’t exhaust our finite natural reserves.
  2. Efficient Production and Minimal Impact: Their creation and distribution demand conservative energy use, leaving behind a minimal environmental footprint by curbing waste generation.
  3. Recycling and Reuse Opportunities: They offer accessible pathways for recycling and reusing, extending their usefulness and reducing resource strain.
  4. Social Responsibility: Ethical labor practices and responsible production methods are integral to their manufacturing, creating safe working conditions and upholding social responsibilities.
what are sustainable products
What makes a product sustainable. Image Credit: CityRyde.com©

What makes a sustainable business model work?

A sustainable business model revolves around four fundamental elements:

  1. Profitable and Socially Responsible: It’s all about making a profit while being socially responsible. Attracting customers is vital for any business to succeed and grow. What sets your business apart? Who are your target customers? What value does your business bring, and which niche does it serve?
  2. Long-Term Viability: Building a business that can thrive well into the future is essential. Some businesses may be profitable for a short while, but what about a year or two down the road? Resources are not always guaranteed or stable, and it’s unwise to base your enterprise on shifting sands.
  3. Sustainable Resources: A sustainable business model depends on resources that can be used over the long haul. Many business activities are constrained by finite or environmentally harmful resources. Take, for instance, the case of palm oil, a cheap but ecologically damaging resource. The allure of inexpensive resources can be tempting, but it’s crucial to consider the broader impact.
  4. Give Back: A truly sustainable business model is one that gives back as much as it takes. This concept is often referred to as the “cyclical borrow-use-return model.” Bob Willard, an authority on measurable sustainability strategies, contrasts it with the prevailing “linear take-make-waste model” that underpins many modern businesses, a model he believes contributes to our world’s unsustainability. Instead of depleting resources, a sustainable business borrows with the intent to replenish. This notion of responsible consumption is something both businesses and consumers can embrace. Reducing resource waste, whether it’s time, money, or other assets, is another way for a business to put sustainability at the forefront.

What is a sustainable strategy?

A sustainable strategy looks at the bigger picture. Rex Freiberger elaborated, saying, “It’s a strategy that comprehends the flow of ‘in’ and ‘out’ – not only money but also the tangible and intangible resources required to create the product or service.”

Colabello emphasized that the most effective sustainability strategies should be rooted in an organization’s purpose. She encouraged businesses to ponder questions similar to those used in crafting a vision or mission statement:

  • Why does the organization exist?
  • What problem does it solve?
  • How will it contribute to a better world, environment, and society?

“Starting from there,” Colabello added, “a strategy can take shape, involving the entire brand ecosystem, including internal operations, the supply chain, the communities it serves, and its industry. The approach is carefully laid out, complete with goals, key performance indicators (KPIs), and a timeline. These plans are communicated both internally and externally, in line with a commitment to transparency.”

Why do we need sustainable business models?

Approaching sustainability offers many avenues, yet the simplest one, capable of uniting all stakeholders, is clear: Kind-hearted businesses draw more customers. According to the 2022 Global Buying Green report, a whopping 86 percent of consumers under 45 were ready to pay extra for sustainable packaging, and 68 percent made purchases in the past six months based on a company’s sustainability efforts.

It’s perfectly fine to openly share your sustainability goals and use them as a selling point. When customers inquire, the more approachable you are about it, the more likely they are to spread the word to their friends.

But let’s not forget that sometimes, it’s not all about money. Perhaps your drive is to become the change you wish to see in the world. After all, as a business grows larger, its impact on the world and its inhabitants magnifies. It’s wiser to embark on a sustainable journey from the start than to switch gears a decade later or when stakeholders start pushing back against unsustainable practices.

In essence, going green isn’t just about being environmentally responsible; it can also boost your business and profits. Businesses are promoting green innovations to demonstrate their commitment to environmental concerns, giving you an edge in the market.

How can you start and maintain a sustainable business model?

Embarking on a sustainable business model is within your reach, and here are some practical steps to consider:

Resource Planning

Start by assessing your resource needs. Take these steps:

  1. Create a list of the raw materials essential for your business, recognizing that requirements vary across different industries.
  2. Delve into the sources of your materials. Who produces or harvests them, and what is their distribution process?
  3. Evaluate the origin and transportation of resources. Can you reduce the distance they travel and minimize fuel consumption? Identify the most critical resources and find ways to enhance their efficiency while reducing dependency.

Once you’ve addressed your resource usage, examine your manufacturing and business processes:

  • Identify processes with high wastage and find ways to reduce their negative impact.
  • Explore local sourcing options for physical materials.
  • Review your product packaging, opting for sustainable and biodegradable alternatives to lessen landfill waste.
  • Pinpoint the least sustainable materials and consider replacing them.
  • Examine end products for waste reduction and possible reuse.
  • Investigate whether waste can be repurposed or integrated into other processes.
  • Seek opportunities to reduce waste, optimize raw material use, and maintain product quality.
  • Ensure fair labor conditions and respect for employees’ time and well-being.

To make your business eco-friendlier, embrace practices like cloud computing, remote work options, and paperless workflows.

Alternate Ownership Models

Consider alternative company ownership structures. Traditional top-down models can lead to significant wage disparities. Engaging everyone in your sustainability objectives can ensure alignment and provide a voice to typically marginalized employees.

Engage Your Customers

Foster a connection with your customers by emphasizing your sustainability efforts. Communicate why your products may come at a higher cost through blog posts or brand stories. You can involve your customers by:

  1. Allocating a portion of your revenue to support charitable causes.
  2. Offering flexible shipping and packaging choices.
  3. Crafting messages that resonate with your customers, converting them into brand advocates.
  4. Encouraging customer involvement in sustainability discussions through forums or online groups.

Remember that transparency is key when dealing with customers and shareholders, sharing both successes and challenges in your sustainability journey. Engaging your customers and weaving sustainability into your business can pave the way for a more environmentally responsible and profitable future.

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