Sustainable business model design
In this post you will learn how to use a tool called the business model canvas to develop effective and impactful solutions for environmental and social impact.
The post also includes real word case studies to demonstrate how you can use this tool to describe the infrastructure, offering, customers, and finances of your sustainable business model and you can now design, discuss, and communicate your sustainability programs in a language people will understand.
OVERVIEW
One of the many challenges faced by Sustainability professionals is how to communicate the business case for our sustainability programs. We often hear that “management just don’t get it” and this leads to frustration and ultimately, we hit the sustainability trough of sorrow.
One of the biggest problems when we try to present our sustainability plans is that sustainability professionals speak a foreign language – seriously we do. We speak about the bigger sustainability context like climate change and loss of biodiversity, we try to convince people that reducing carbon emissions is important, or we espouse the virtues of achieving the United Nations Sustainable Development Goals. Trying to convince the CFO to invest in your sustainability program using this language is like trying to chase a parked car – the harder you run the more it is going to hurt because they have no idea what you are talking about.
Fortunately for us there is a concept that is used by millions of business professionals around the world that basically acts as a translator to convert your sustainability-idish language into something anyone within the business world can understand.
One of the best ways to describe how a business (including components of a business like a sustainability strategy) is organized and delivers values to its customers is using a business model. A business model is how a company creates value for itself while delivering products and services for its customers.
Sustainable business models also capture economic, social, and environmental value for a wide range of stakeholders.
As it turns out, a really smart guy called Alexander Osterwalder found that there are nine key building blocks that can describe any business model from a multi-national corporation through to a small two-person professional practice.
THE SUSTAINABLE BUSINESS MODEL CANVAS
The Sustainable Business Model Canvas
The following section provides an overview of each of the segments of the sustainable business model canvas that you can use design, develop and describe the infrastructure, offering, customers, and finances of your sustainable business model.
Value Proposition
The first element in describing a business model is the value proposition. The value proposition is the collection of products and services that meets the needs of your customers.
Customer segments
The next element is the customer segments to whom you deliver the value proposition. Various sets of customers are segmented based on their needs and characteristics. These segments could be mass market customers (sports fans) through to niche markets (fans of SlamBall which is a form of basketball played with four trampolines in front of each net and boards around the court edge – seriously this is a thing). For your sustainability strategy, your customer segments might include the engineering department as one segment and finance as another as each department has different needs.
For sustainability, we also include an attached segment here that describes beneficiaries of the sustainability program.
Channels
Channel describe the way you deliver your products and services to your customer segments. Channels might include delivery your services through a store front, a logistics company or in the case of sustainability, an NGO.
Customer Relationships
For any business or sustainability strategy to succeed you need to establish a relationship with your customers. The customer relationship describes how you will engage with your customer and ranges from personal assistance (business coach) through to automated services like Amazon.com.
Revenue streams
To be sustainable a business needs to understand how it makes income (captures value) from its customer segments. In the case of sustainability programs, we also add a connected segment which describes how your sustainability program captures value in the form of the UN Sustainable Development Goals – what are the positive sustainability outcomes.
The above elements describe the right-hand side of the business model canvas and capture of the things that we create and deliver the various customer segments. The left-hand side of the canvas then describes the things we need to be able carry out the right side of the canvas. The left-hand side of the business model canvas includes:
Key Activities
These are the most important activities necessary to execute the value proposition. An example for Tesla might be creating an efficient supply chain to drive down the manufacturing costs of its electric vehicles.
Key Resources
The key resources to create value for the company. These resources/assets could be human, financial, physical and intellectual.
Key Partners
These are relationships with other organisations that support delivering your value proposition. An example for Tesla would be vehicle part manufacturers who deliver key components of the electric vehicles.
Cost Structure
Once we understand the key activities, resources, and partners we need, it is relatively easy now to understand the costs associated with delivering the business model.
For sustainability we add a connected section to capture any potential negative sustainability impacts.
Using the above eleven segments you can describe the infrastructure, offering, customers, and finances of your sustainable business model and you can now design, discuss, and communicate your sustainability programs in a language people will understand.
Case Studies
Case Study - Project Turns Ghost Fishing Nets into Carpet
In this case study we will look at how a carpet manufacturer improved their business model to create multiple value streams for the business whilst helping clean the oceans.
Video
Interface Business Model Canvas
Interface make carpet for commercial buildings. But they also established their Mission Zero® promise to eliminate any negative impact the company has on the environment by 2020.
Using the business model canvas we can describe the key elements of Interface’s business.
Interface’s core business is manufacturing and selling carpet therefore the primary value proposition offered by Interface is fashionable carpet tiles in a range of designs.
Their customers are typically owners of commercial buildings like high rise office buildings. An interesting thing about these customers is that they have shareholders who expect some sustainability performance requirements of the buildings – but we’ll come back to these shareholders later.
Interface deliver their value proposition (channels) through skilled trades who install the carpet tiles in the buildings.
For customer relationships – this is how we find, keep and grow our customers, Interface use a conventional sales force but they also have a network of architects and designers who recommend their products to the building owners.
Next, we have revenue streams. Interface captures value from carpet sales.
We then need to consider what resources Interface need to deliver quality carpet products. Interface need manufacturing facilities, they need human resources like their sales force, and they also need materials like nylon yarn to manufacture the carpets.
Key activities include manufacturing of the carpet and the establishment of a supply chain for key components that go into making carpet. This includes their re-entry program that recovers and recycles used carpet.
Key partners include their supplier of nylon yarn.
Costs include the costs to operate the business, investment in key resources, costs of key activities and payment to key partners.
This is the business model for Interface’s core business. Now let’s look at how their sustainability strategy fits into this business model.
Interface's Net-Works Program Business Model
Net-Works® is an innovative, cross-sector initiative designed to tackle the growing environmental problem of discarded fishing nets in some of the world’s poorest coastal communities.
Interface partnered with the Zoological Society of London to buy discarded fishing nets from some of the poorest communities in the world.
The fisherman from these communities recover the ghost nets that are polluting to oceans and indiscriminately killing sea life therefore helping conserve and sustainably use the ocean.
Interface purchase these nets providing income to the community and the Zoological Society of London help the community establish banking services, provide education on sustainable fishery management and alternative income sources like seaweed farming.
The nets are recycled into new yarn for Interface’s carpet tiles by their yarn manufacturer.
This directly supports Interface’s Mission Zero goal to source 100% recycled material for its carpet tiles.
It reduces its supply chain risks for raw material as they now need less virgin nylon which is a product of crude oil.
It also allows Interface to deliver additional value to its customers through environmental product disclosures detailing the recycled content in the carpets.
Remember the shareholders we mentioned earlier – now Interface’s customers can report to their shareholders that they are sourcing sustainable products for their buildings.
Interface benefits from an enhanced brand reputation as a leader in sustainability which reinforces the customer relationships.
Which in turn leads to more sales and improved value capture for Interface.
The Net-Works programme has resulted in a reduction in the number of ghost nets in the ocean, less virgin materials and a new source of income for the communities.
The partnership has created an inclusive business model with positive outcomes for everyone involved.
The programme started in the Philippines and was expanded to Cameroon in 2015.
Conclusion
Using these eleven building blocks you can see how we have been able to describe how Interface’s Net-Works programme complements and directly supports Interfaces’ core business as a supplier of carpet tiles by delivering additional value to its customers, strengthening customer relationships, reducing supply chain risks and enhancing value capture whilst delivering a suite of positive economic, social, and environmental benefits.
We use the above technique with our clients to uncover and unlock new value from their sustainability strategy or sustainability projects. We also use this technique to design, discuss and communicate new sustainability initiatives for our clients.
If you think that business model innovation could help you deliver positive environmental or social impacts for your sustainability strategy then you may want to check out our Impact Business Builder Online Course which teaches you how to design, test, and launch sustainability solutions.
Attributions for Images
Turtle caught in ghost net – U.S. National Oceanic and Atmospheric Administration, public domain
How Michelin used Business Model Innovation to Create Profitable Sustainability Outcomes
Video
Michelin Business Model Canvas
Michelin New Sustainable Business Model
They bundled this service with a range of professional services to help their customers reduce fuel consumption and optimise vehicle performance. This allowed Michelin and its customers to extract the maximum value from their products.
Their superior technology meant they could get more kilometres per tyre compared with low cost competitors and therefore because they were charging per kilometre they could also maximise revenue per tyre.
Michelin was incentivised to produce less tyres because the more kilometres they got out of a tyre the more revenue they could generate per tyre which meant less material usage, lower supply chain risks, and reduced carbon emissions (not to mention the reduced carbon emission for their customers due to fuel efficiency improvements). They were also now able to take a product stewardship role and recover the used tyres for recycling and re-entry into their manufacturing process.
Michelin were also able to create new customer relationship pathways by creating a direct relationship, stronger intimacy and deeper roots within their customer’s business.
The community were beneficiaries of this business model through less waste to landfill and reduced air pollution. Michelin were also able to support the outcomes of a range of the UN Sustainable Development Goals.
Conclusion
We use the above technique with our clients to uncover and unlock new value from their sustainability strategy or sustainability projects. We also use this technique to design, discuss and communicate new sustainability initiatives for our clients.
Using the above eleven segments you can describe the infrastructure, offering, customers, and finances of any sustainable business model and you can now design, discuss, and communicate your sustainability programs in a language people will understand.
If you think that business model innovation could help you deliver positive environmental or social impacts for your sustainability strategy then you may want to check out our Impact Business Builder Online Course which teaches you how to design, test, and launch sustainability solutions.