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Business Model Innovation and sustainability

For decades, corporate social responsibility has been managed by most CEOs as a Pubic Relations activity, financed through philanthropy and Marketing Department budgets, rather than as a core principle guiding decision-making. What a loss to companies, consumers, the environment and communities. Those few companies who were early adopters of sustainability as a business practice versus messaging opportunity gained attractive financial and market position advantages.

Fortunately, “The times, they are a changing.”

A recent Accenture-UN Global Compact report states that sustainability is moving from the sidelines into senior leadership team meetings where sustainability issues will influence corporate decisions on capabilities, processes, systems, in fact the entire supply chain. “According to the survey, A New Era of Sustainability – UN Global Compact-Accenture CEO Study, 2010, the global economic downturn did little to dampen corporate commitment to sustainability, in fact it seems to have done the opposite: 80% of the CEOs say the downturn has raised the importance of sustainability.” Concern about sustainability is at an all time high, with climate change and education among the top areas of concern.

Small wonder. For companies competing in maturing industries with flat to falling demand, the best new business opportunities are unsolved problems. Environmental health and community well-being are areas ripe with unsolved problems. Other top drivers of company’s commitment to sustainability, according to the study, include brand, trust and reputation (three forces that are highly interdependent). Sadly, consumer demand and employee engagement ranked lower in advancing the sustainability agenda. With a stronger economy, consumers and employees may become more important factors.

So what does this all mean for business model innovation?
With sustainability concerns on the sidelines, environmental footprint considerations and advancing local communities’ well-being didn’t even enter business model considerations, except indirectly as drivers of cost and perhaps workforce availability and quality. Now, decisions about target market, business scope, value promise, advantages and profit drivers (the five strategy decision areas of the business model) will increasingly take sustainability goals into account.

The UN Global Compact is but one of multiple groups in which companies committed to sustainability make commitments to which they are then help accountable. Business for Social Responsibility and CERES are two groups I also admire. I encourage you to look at these organizations’ websites and see example after example of member companies changing their business models to advance sustainability goals.

My sense is that sustainability concerns will follow the pattern of PCs – a lot of hype, slow uptake at first and then zooming demand driven by successive waves of expanded technical capabilities, with adoption rates steadily rising.

Don’t be a laggard in sustainability practices, therefore, if you want to ride a wave to better performance and if your want to seize opportunities to attract and retain today’s young talent.

At a time when economists are exploring broader notions of national well-being than Gross National Product, companies are being compelled by external risks and opportunities to move beyond financial performance to a Triple Bottom Line (profits + people + environment) focus. CEO feedback in the Accenture-UN Global Compact survey reflects CEOs’ deep appreciation that there is no way to hit all three targets until sustainability moves from a lower-level staff responsibility to a leadership imperative, affecting how leaders are judged and company performance is measured. Going forward, commercial decisions will increasingly be shaped by a desire to leave more than just investors and customers better off by the company’s actions.

What are you doing differently to advance your Triple Bottom Line?

More articles by Kay Plantes

Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. She resides in Madison, Wisconsin and Oslo, Norway. For more information visit her website - Business Model Innovation and read her most recent book - Beyond Price.

The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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