The societal context for business is changing. Planetary boundaries (the borders within which humanity can continue to develop and thrive), societal needs, and changing social licenses to operate are constraining companies; their opportunity space is narrowing, restricting their ability to pursue business value creation as usual. Companies need a new approach to release these constraints and expand the opportunity for new growth and value creation.
What is SBM-I?
Adopting sustainable business model innovation (SBM-I) enables companies to refresh business strategies and create innovative business models to optimise for business, environmental, and societal value. SBM-I helps companies create environmental and societal surpluses (net environmental and societal benefits) and connects them to the drivers of business advantage and value creation. In this way, companies boost and deliver total shareholder return, total societal impact (the total benefit to society from a company’s products, services, operations, core capabilities, and activities), and environmental, social, and governance performance.
To understand just how far along companies are in creating sustainable business models, we examined 300 corporate sustainability initiatives. Of those, 85 were cases of a sustainable business model innovation creating environmental and societal surpluses and business value. While all these companies took significant steps on their quest for SBM-I, few captured the full potential of SBM-I.
Full potential of SBM-I
The front-runners exhibit seven characteristics. They adopt sustainability as advantage, anchored in a clearly defined purpose; optimise the robustness and resilience of the business model; aim and optimise for holistic environmental and societal impact against six dimensions; combine multiple archetypes of SBM-I; use digital and technology to achieve scale impact and competitive economics; build new partnerships for impact and reach; and reinforce and expand advantage by creating value for all stakeholders. These characteristics enabled the front-runners to break economic constraints, access new markets, expand scale with the right economics, and change ecosystem dynamics to enhance competitive advantage.
To help companies achieve sustainability as advantage, we propose adopting a four-step innovation cycle:
- Expand the business canvas by using deep stakeholder discovery and scenario analysis, and identify the vulnerabilities and opportunities that are tied to environmental and societal issues.
- Explore the seven archetypes of innovation and the characteristics of SBM-I leaders to ideate more robust and resilient business models that generate notable environmental and societal surpluses.
- Test and refine these business model innovations to expand environmental and societal surpluses, and connect them to drivers of competitive advantage and business value creation.
- Scale the winners to expand impact and realise advantage by reshaping the stakeholder ecosystem and altering the boundaries of competition.