Sustainable Business Models PDF

Sustainable Business Models Triple layered business model canvas The triple layered business model canvas adds to how a business creates value by including a triple bottom line approach to sustainability. This tool can be used in a creative approach to business model innovation. The triple layered...

Sustainable Business Models Triple layered business model canvas The triple layered business model canvas adds to how a business creates value by including a triple bottom line approach to sustainability. This tool can be used in a creative approach to business model innovation. The triple layered business model acknowledges new dynamics between each levels of the canvas. Joyce, A., & Paquin, R. L. (2016). The triple layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production, 135, 1474-1486. The limits of the original BMC Upward (2013) describes the original business model canvas as built on a profit first philosophy. The business model elements can be quantified to make sure that revenues outweigh the costs in strictly financial terms. Although the original definition of a business model is centred around the notion of value, it is implied that financial value is the only dimension of value that will be measured in a business model. The triple bottom line One of the first means to inluence the business decisions has been with Elkington's idea of the triple bottom line (1991). This means adding to financial accounts other performance indicators. By keeping track of social and environmental benefits and impacts organizations can simulate a broader and more sustainable approach to their acivities. The triple bottom line approach has inspired the Global Report Initiative (GRI) where organizations periodically document their pracices according to a standardized list of indicators. Elkington, J. (1998), “Partnerships from cannibals with forks: The triple botom line of 21st-century business”, Environmental Quality Management, Vol. 8 No. 1, pp. 37–51. Business model innovation for sustainability The works of Bocken et al (2014) have defined business model innovation for sustainability as “Innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organization and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions” Bocken, N. M., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of Cleaner Production, 65, 42-56. Economic layer - the original BMC Environmental Life Cycle Layer Core concept: Functional value The functional value describes the focal outputs of a service (or product) by the organization under examination. It emulates the functional unit in a life cycle assessment, which is a quantitative description of either the service performance or the needs fulfilled in the investigated product system (Rebitzer et al., 2004). The difference between a LCA's functional unit and the functional value can be seen as one of usage. The functional unit is per one usage, the functional value is the total amount used in by customers in a given time-frame (such as one year) *LCA: Life cycle assessment Materials The materials component is the environmental extension of the key resources component from the original business model canvas. Materials refer to the bio-physical stocks used to render the functional value. For example manufacturers purchase and transform large amounts of physical materials, whereas service organizations tend to require materials in the form of building infrastructure and information technology. These service organizations also consume significant material resources in the form of assets such as computers, vehicles and office buildings. It is important to note an organization's key materials and their environmental impact. Production The production component extends the key activities component from the original business model canvas to the environmental layer and captures the actions that the organization undertakes to create value. Production for a manufacturer may involve transforming raw or unfinished materials into higher value outputs. Production for a service provider can involve running an IT infrastructure, transporting people or other logistics, using office spaces and hosting service points. As with materials, the focus here is not on all activities but rather those which are core to the organization and which have high environmental impact. Supplies and Supplies and out-sourcing represent all the other various material and production outsourcing activities that are necessary for the functional value but not considered ‘core’ to the organization. Similar to the original business model canvas, the distinction here is between is considered core versus non- core to support the organization’s value creation. Within the environmental layer, examples of may include water or energy which, while they could come from in-house sources (local wells and on-site energy production); they are likely to be supplied by local utility companies. Distribution As with the original business model, distribution involves the transportation of goods. In the case of a service provider or a product manufacturer, the distribution represents the physical means by which the organization ensures access to its functional value. Thus within the environmental layer, it is the combination of the transportation modes, the distances travelled and the weights of what is shipped which is to be considered. As well, issues of packaging and delivery logistics may become important here. Use phase The use phase focuses on the impact of the client's partaking in the organization's functional value, or core service and/or product. This would include maintenance and repair of products when relevant; and should include some consideration of the client’s material resource and energy requirements through use. Many electronic products incur use phase impacts when charging a device and using an infrastructure needed to support the network of users. End-of-life End-of-life is when the client chooses to end the consumption of the functional value and often entails issues of material reuse such as remanufacturing, repurposing, recycling, disassembly, incineration or disposal of a product. From an environmental perspective, this component supports the organization exploring ways to manage its impact through extending its responsibility beyond the initially conceived value of its products. Environmental impacts The environmental impacts component addresses the ecological costs of the organization's actions. While a traditional business model often summarizes organizational impacts primarily as financial costs, the environmental impacts components extends that to include the organization's ecological costs. Based on LCA research, these performance indicators may be related to bio-physical measures such as CO2e emissions, human health, ecosystem impact, natural resource depletion, water consumption. Some environmental indicators can take the form of traditional business metrics still related to LCA such as energy consumption, water use and emissions. Environmental benefits Environmental benefits extends the concept of value creation beyond purely financial value. It encompasses the ecological value the organization creates through environmental impact reductions and even regenerative positive ecological value. Social Stakeholder Layer Core concept: Social value Social value speaks to the aspect of an organization's mission which focuses on creating benefit for its stakeholders and society more broadly. For sustainability-oriented firms, creating social value is likely a clear part of their mission. However, even the most profit-oriented organizations likely consider their value creating potential beyond simply financial gain. Employee The employees' component provides a space to consider the role of employees as a core organizational stakeholder. A number of elements may be included here such as amounts and types of employees, salient demographics such as variations pay, gender, ethnicity, and education (to name a few) within the organization. As well, it provides a space for discussing how an organization’s employee-oriented programs e e.g. training, professional development, additional support programs e contribute to the organization's long term viability and success. Governance The governance component captures the organizational structure and decision-making policies of an organization. In many ways, governance defines which stakeholders an organization is likely to identify and engage with and how the organization is likely to do so. Organizations can vary widely based on several aspects of governance including ownership (e.g., cooperative, not- for profit, privately owned for-profit, publicly traded for- profit), internal organizational structures (e.g., organizational hierarchy, functional v. unit specialization) and decision-making policies (e.g., transparency, consultation, non-financial criteria, profit sharing), and each of these points can influence how an organization may engage stakeholders in creating social value. Communities While economic relationships are built with business partners, there are social relationships built with suppliers and their local communities. When interacting with communities, an organization's success can be greatly influenced through developing and maintaining mutually beneficial relationships. If an organization has only one or multiple facilities located in the same geographical area, then there may be only one local community. However, if an organization has facilities in different countries, it is important to consider each community as a different stakeholder with ifferent cultural needs and realities. While organizations have tended to focus more on the community where they are headquartered, organizations should consider all communities where it has facilities as important. Societal culture The societal culture component recognizes the potential impact of an organization on society as a whole. This component leverages the concept of sustainable value to acknowledge an organization potential impact on society and how, though its actions, it can positively influence society. Non-governmental organizations (NGOs) represent another element that can be included in the societal culture space as they carry social agendas through their influence on businesses. Scale of outreach Scale of the outreach describes the depth and breadth of the relationships an organization builds with its stakeholders through its actions over time. This may include the idea of developing long term, integrative relationships and the outreach of impact geographically e e.g. local, regional, or global focus; as well as an organization's impact in how and whether it addresses societal differences such as locally interpreting ethical and or cultural actions across different cultures and countries. End users The end-user is the person who ‘consumes’ the value proposition. This space is concerned with how the value proposition addresses the needs of the end-user, contributing to his/her quality of life. Users with similar needs have typically been segmented based on relevant demographics e e.g., age, income, ethnicity, education level, etc. Importantly, the end-user is not always the customer as defined in the economic layer of the business model canvas. For instance, textbook publishers historically consider course instructors as customers though students are the end-users. Social impacts The social impacts component addresses the social costs of an organization. It complements and extends the financial costs of the economic layer and the bio-physical impacts of the environmental layer. There is not yet a consensus on what social impacts to consider, nor how to quantify them. Some of the more common indicators include working hours, cultural heritage, health and safety, community engagement, fair competition, respect of intellectual property rights; though which ones to focus on likely depends on the nature of the organization and an organization may find the need to create its own indicators here. Social benefits Social benefits are the positive social value creating aspects of the organization's action. This component is for explicitly considering the social benefits which come from an organization's actions. As with social costs, social benefits can be measured using a broad range of indicators.