Over the last decade, enlightened business leaders have instigated the shift to new business models that underpin a new era capitalism. Their focus is much more considerate of the so called ‘externalities’ of their business operations, goes beyond mere compliance with often inadequate regulation, and ensures that an enduring social license to operate is baked into their business model.
It’s not just the focus of business leaders. Asset managers and regulators are now laser focused on the environmental impact, the holistic systems impact, and the governance of the organisations that they invest in or grant permission to operate. In short there’s now an urgency for leaders to focus on ESG alongside assuring competitiveness, profitability and shareholder returns.
For those leaders who see beyond the need for compliance, who pursue innovation in strategy, in business model design and in ecosystem interaction, there are significant opportunities to reposition their businesses for advantage in this new context.
According to the Boston Consulting Group, there are nine attributes that underpin the design of a sustainable business model. They suggest that superior business models:
- Scale effectively without increasing risk or diminishing returns
- Increase differentiation and competitiveness
- Reduce the potential for commoditization
- Harness network effects to drive growth and amplify impact
- Harness business ecosystems for advantage
- Remain durable in the face of shifting environmental and societal trends
- Create environmental and societal benefits material to key stakeholders
- Increase returns to shareholders alongside environmental and societal benefits to stakeholders
- Embody and operationalise the organisational purpose
The majority of these attributes, at face value, could be considered generic prerequisites for the design of any business model to compete successfully in the era of platforms and ecosystems. The seventh and eighth make explicit that businesses need to explore how they can create the holistic sets of environmental and societal benefits that stakeholders demand in this new era.
A framework to guide this exploration considers six dimensions:
- economic vitality – for employees and communities beyond the firm
- environmental sustainability – considering aspects including climate, biodiversity, pollution
- lifetime wellbeing – not just health but self-actualisation
- ethical capacity – not just compliance but positive impact
- societal enablement – how to help society function better
- access and inclusion – no longer for the few but for all
Sustainable business model innovation requires multi-disciplinary teams to explore these dimensions from both internal and external perspectives.
In a previous blog post explored the need to create value through social purpose. In the case of societal enablement, for example, this would entail assuring that governance and management mechanisms are designed to enable responsible leadership, shareholder democracy and equality of workforce participation alongside assuring that products and services are designed to with appropriate stakeholder input, social participation and due diligence.
Whilst there is an imperative to focus on creating environmental and societal surplus for stakeholders, this must be in tandem with creating sustainable business advantage and value for shareholders. Without a thriving, profitable company, you will not have the resources to create the desired societal impact and ESG performance.
Sustainable business model innovation requires exploring this intersection and identifying how meaningful environmental and societal surplus can be created alongside driving future differentiation and competitiveness.
Get in contact if you would like help to explore the design of a sustainable new business model for your organisation.