6 New Sustainable Business Practices
Lecturer, Sustainability & Corporate Responsibility
The Ohio State University – Fisher College of Business
The importance of sustainability and its impact on business practices has become undeniable. Recently there has been a global shift away from consumer-based economies and cultures to ones that are conserver-based. This shift, it is argued, will create more jobs, wealth and a higher quality of life for ensuing generations than current practices of consuming and degrading resources that are in finite supply. Below are six of the emerging paradigms and associated business models that business executives in my network mention frequently.
1. Sharing Economy
The sharing economy, also called collaborative consumption, epitomized by public libraries, has been with us for centuries and is an example of the conserver economy. Driven in the case of libraries by scarcity and affordability of books, present day interest in sharing assets is driven by conservation interests. For example, equipment and tools for home maintenance, which can be expensive and/or inconvenient to store and maintain, are desired not for ownership per se, but for the service they provide. Many people view automobiles and bicycles in the same manner. Accordingly, rental and leasing options for various assets have become very popular in many communities, particularly among millennials.
2. Product as a Service
Product as a service also builds on the realization that we acquire many of the products we buy, not because we want to own the product, but because we want access to the service the product provides.
Consider the case of light bulbs. We buy light bulbs because want lighted surfaces and spaces. Purchasing light bulbs and changing them when they burn out is an inconvenience most of us would gladly avoid. Phillips realized this and offers the opportunity for customers to purchase lighted surfaces and spaces according to contractually specified details, and Phillips takes the responsibility to provide the lights bulbs and change them as necessary. This turns the business model around for Phillips. Under this model, the company is incentivized to manufacture lights bulbs that will last as long as possible, versus as short as possible when they made money selling light bulbs. Amsterdam’s international airport was an early adopter of this approach.
A similar opportunity is taken by Michelin who offers to provide tires with a miles of service guarantee versus just selling tires. In both the Phillips and Michelin cases the manufacturer earns money by making products that last as long as possible instead of as short as possible, thereby conserving resources in the long run.
3. Circular Economy
The linear take-make-waste economy is giving way to the circular economy in which products are designed to be disassembled, remanufactured, and recycled or upcycled back into economic use. The key here is design,which sets the template for the end-of-life options of a product. Architect William McDonough has eloquently stated, “design is the first statement of human intention.”
An example of the circular economy is By-Product Synergy (BPS). This is the simple concept that one company’s waste may be the input, or raw material, for another company’s production. The Ohio By-Product Synergy network has been operating successfully for eight years working with manufacturers in Ohio that meet periodically to discuss what they buy and what they discard as waste. During its eight years of operation, dozens of such synergies have been identified which save Ohio companies money and conserve resources, many of which are non-renewable. BPS was conceived by the U.S. Business Council for Sustainable Development in Austin, Texas and it has spawned BPS networks in several cities, though Ohio is the only state-wide network. This idea was first put into practice in Denmark in the late 1960’s where today at one location nine companies exchange 28 waste streams.
4. Handprints vs. Footprints
We are all familiar with footprints a metaphor for the damage we do to the environment as we go about our business. But what about handprints? Handprints are a new metaphor for the good we can do. There is a significant difference. The best we can do is to reduce our footprints to zero, which none of us will probably ever achieve. But there is no limit to our handprints, the good we can do.
To imbed this into corporate goals many corporations are now talking about being net positive, the net impact of footprints and handprints, a laudable aspirational goal. One company that has done so is Toledo, Ohio-based Owens Corning Fiberglass, which is ranked #1 in their category in the coveted Dow Jones Sustainability Index.
5. Quadruple vs. Triple Bottom Line
A core sustainability concept is the triple bottom line which is the notion that enterprises are accountable for performance in three accounts – people, planet, profit. In addition to the traditional economic measures, the triple bottom line includes environmental performance and social responsibility.
Researchers in Australia and New Zealand have suggested a fourth “P” – Purpose, suggesting that a sustainable organization should have an aspirational purpose (beyond its mission) that speaks to why the organization exists and why anyone would want to work there. This line of thinking is reflected in a Harvard Business Review (July-August 2018) article, which argues, with numerous examples, that when a sense of purpose is embedded in an organization, employees perform at higher levels and are motivated to embrace aspirational goals.
6. Voluntary Transparency
The quickening pace at which companies of all sizes are finding ways to be transparent and report their sustainability agenda is another indicator of commitment to the consumer-to-conserver transformation I mentioned earlier. Public companies are motivated by investor pressure. Most investors believe that the balance of risks and opportunities is more favorably balanced in companies with a strong sustainability agenda as reflected by formal sustainability reporting or by alignment with the UN Sustainable Development Goals released in 2015. Likewise, private companies that sell goods and services to public companies find that transparency strengthens their supplier relationships.
Consumer-facing companies seek certifications of various types to communicate sustainability commitments and performance. One certification that speaks to how a company is operated, pursued mostly by smaller companies, is the B-Corporation, where B stands for “benefit”. Such companies agree to follow certain practices not only including commitments to shareholders to make a profit but also to benefit their communities environmentally and socially. There are more than 2000 B-Corporations globally. A Columbus, Ohio based B-Corporation that has sought out my classes for sustainability project work is Jeni’s Splendid Ice Cream for whom students developed a sustainability scorecard.
Businesses around the world are shifting to conserver-based cultures, and a focus on sustainability appears to be a necessity for successful business models moving forward. Perhaps Dow Chemical put it best:
“Sustainability requires making every decision with the future in mind. It is about our relationship with the world around us — creating economic prosperity and social value while contributing to the preservation of the planet.”
Drobny is a lecturer on sustainability and corporate responsibility at Ohio State University’s Fisher College of Business. He routinely works with companies of all sizes around the topic of sustainable business practices and each year he takes students to study abroad in Scandinavia to meet with sustainability leaders from companies such as Unilver, Siemens, Akzo Nobel and Ikea.