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Sustainable Business Models for Eco-Design and Innovation - The Case of Riversimple

  • ESCP Europe Berlin

Abstract and Figures

The idea that companies (and other kinds of organisation) should strive for “sustainable business models” in order to contribute to a sustainable development of the natural environment, society, and economy is becoming increasingly popular. But it is misleading. A business model per se cannot be sustainable. It is a model. And as such it integrates a variety of socially constructed, interrelated and context-dependent concepts (e.g. value, target groups, resources). It is a tool, i.e. a means, and not an end. Business models, if developed and managed properly, can support sustainable business processes, products, services, and environmentally and socially beneficial forms of consumption. But in all these cases, the attribute “sustainable” rather refers to the respective processes, products, etc. Therefore, to be precise, we should speak of “business models for sustainable products” and so forth, or, in general, “business models for sustainability” or “BMfS”. Separating the business model (the means) from the sustainability issue to be solved (the end) is an important first step before we can systematically and effectively think about how business models can support sustainable business. Following this line of thought, this contribution to the EcoSD Annual Workshop 2015 distinguishes and then brings together two issues: the eco-design question and the business model question. The first asks: How to create useful artefacts that generate as much utility and joy as possible, using the smallest possible amount of natural resources, including footprints, for the longest possible period of time? The second is about a different but related issue: How to market eco-designs and innovations to unfold their full sustainability potential, in ways that allow users to easily adopt them and that allow eco-entrepreneurs to make a business? Practitioners such as Riversimple founder Hugo Spowers, who is an eco-design and business pioneer in the field of e-cars, increasingly call for a move to the business model level: “Disruptive technology can only work if it comes with a new business model.”
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The challenges of eco-innovation
From eco-ideation
toward sustainable business models
EcoSD Annual Workshop 2015
Coordination :
Sustainable business models
for eco-design and innovation
The case of Riversimple
Faculty of Business, Economics & Social Sciences, University of Hamburg
Hamburg, Germany
Center for Sustainability Management (CSM), Leuphana University
Lüneburg, Germany
The idea that companies and (other kinds of organisation) should strive for
“sustainable business models” in order to contribute to a sustainable development
of the natural environment, society, and economy is becoming increasingly
popular. But it is misleading. A business model per se cannot be sustainable. It is
a model. And as such it integrates a variety of socially constructed, interrelated,
and context-dependent concepts (e.g. value, target groups, resources; cf. (Wirtz
et al., 2016)). It is a tool, i.e. a means, and not an end (Doganova & Eyquem-
Renault, 2009). Business models, if developed and managed properly, can support
sustainable business processes, products, services, and environmentally and
socially benecial forms of consumption. But in all these cases the attribute
“sustainable” rather refers to the respective processes, products, etc. Therefore, to
be precise, we should speak of “business models for sustainable products” and so
forth, or, in general, “business models for sustainability” or “BMfS” (Schaltegger
et al., 2016a; Wells, 2013a). Separating the business model (the means) from the
sustainability issue to be solved (the end) is an important rst step before we
can systematically and effectively think about how business models can support
sustainable business.
Following this line of thought, this contribution to the EcoSD Annual Workshop
2015 distinguishes and then brings together two issues: the eco-design question
and the business model question. The rst asks: How to create useful artefacts that
generate as much utility and joy as possible, using the smallest possible amount of natural
resources, including footprints, for the longest possible period of time (Schmidt-Bleek, 2000)?
The second is about a different but related issue: How to market eco-designs and
innovations to unfold their full sustainability potential, in ways that allow users to easily adopt
them and that allow eco-entrepreneurs to make a business (Boons & Lüdeke-Freund, 2013)?
The challenges of eco-innovation
While eco-design, or more broadly speaking eco and sustainability innovation,
is a dynamic topic in academic research and business practice, we are only
beginning to explore the relationships between eco-design and business models.
There is no doubt that moving to the business model level, as a step beyond
processes, products and services, is a worthwhile endeavour. It holds the promise
of multiplying the positive effects of eco-design through a deliberate focus on
how businesses create value under market conditions. Practitioners such as
Riversimple founder Hugo Spowers, who is an eco-design and business pioneer
in the eld of e-cars, increasingly call for this move to the business model level:
“Disruptive technology can only work if it comes with a new business model.”
(Hugo Spowers, in Wysocky, 2014).
This paper offers some general thoughts about BMfS and their relation to
eco-design, the barriers that inhibit their emergence and how business model
innovation can overcome these barriers. The case of Welsh e-car designer
Riversimple is used as an example of eco-design and business model innovation
in practice.
APProAchIng busIness models For sustAInAbIlIty
Based on Chesbrough and Rosenbloom (2002) and Doganova and Eyquem-Renault
(2009), we have dened business models as “market devices” that can be used to
connect sustainability innovations to markets (Boons & Lüdeke-Freund, 2013). The
major idea behind this denition is that innovations such as eco-products or services
for poor people hold a particular sustainability potential that will only be realised if
the innovation in question is successfully marketed – eco-cars will only help mitigate
environmental degradation if they are used by a large number of people, i.e. when
the mobility market is transformed by truly sustainable alternatives (Schaltegger
et al., 2016b). While eco-designers are concerned about the cars’ performance,
business model developers are concerned about how to market them. Both tasks
are interrelated, but require quite different perspectives and skills.
Business model development and management deal with value propositions for
customers, supply chains, market interfaces, and nancial models (for a recent
overview of traditional business model concepts see Wirtz et al., 2016). Some
authors propose sort of guidelines to support business model developers in their
search for BMfS. We summarised these guidelines as a set of four “normative
requirements”, each addressing one of the major areas of a business model (here,
we refer to the business model concept by (Osterwalder and Pigneur, 2009))
(Boons & Lüdeke-Freund, 2013):
- The value proposition provides measurable ecological and/or social value in
concert with economic value.
Sustainable business models for eco-design and innovation
- The supply chain involves suppliers who take responsibility towards their
own as well as the focal company’s stakeholders.
- The customer interface motivates customers to take responsibility for their
consumption as well as for the focal company’s stakeholders.
- The nancial model allows a just distribution of costs and benets among
business model stakeholders and includes ecological and social effects.
These requirements are purposely formulated in a generic way. The idea is
not to prescribe BMfS, but to improve the likelihood that a business model
can be aligned with different kinds of sustainability innovation (this alignment
function is discussed in Lüdeke-Freund, 2013). Due to their generic quality, these
requirements should be applicable in a wide range of contexts. Major contexts are
the introduction of environmental innovations (often referring to green technologies
such as solar power), social innovations (such as inclusion programmes in supply
chains), and economic innovations (e.g. the introduction of new organisation
paradigms). These categories are of course not mutually exclusive since, for
example, social innovations can also involve technological innovations, which
might change the economics of a business.
Table 1: Major innovation orientations for BMfS (Bocken et al., 2014)
(incl. technological)
Maximise material and energy efciency
Create value from waste
Substitute with renewables and natural processes
Deliver functionality rather than ownership
Adopt a stewardship role
Encourage sufciency
Economic (incl.
Repurpose for society and environment
Develop scale-up solutions
These orientations can be further specified (Table 1). “Develop scale-up
solutions”, for example, refers to business models that deliver ecological or social
solutions at a large scale in order to maximise the benets for the environment
and society. Scaling can be achieved through franchising or licensing, for example
(e.g. Tesla’s technology licensing). “Deliver functionality rather than ownership”
is about services that satisfy customer needs, instead of selling physical products
they have to own (e.g. Hilti’s tool leasing). The assumed effect is a decoupling of
benets for the business and its customers from physical production volumes.
As a last example, “maximise material and energy efciency” is about doing
more with less resources, waste, emissions, and pollution (e.g. Dow’s closed-loop
system “Safechem”).
The challenges of eco-innovation
bArrIers to busIness models For sustAInAbIlIty
3.1. Barriers to BMfS
While the received literature proposes different frameworks and tools to describe
and support BMfS, little attention has been paid to the barriers that inhibit their
realisation in practice. Daily experience tells us that most companies do not employ
business models that (fully) subscribe to the above proposed normative requirements
and innovation orientations. Early on, Wüstenhagen and Boehnke (2008) identied
three major barriers to BMfS which are summarised below (for a more recent and
ne-grained analysis of barriers see e.g. (Laukkanen & Patala, 2014)).
3.2. Internalisation of external effects
The reduction of negative ecological and social effects expected from sustainability
innovations does not necessarily translate into private benets for the rm and
its customers. What is the immediate customer benet of a solar installation?
It reduces CO2 emissions, but what is the private benet for users of green
power? While conventional technologies often cause ecological and social costs,
sustainability innovations are designed to reduce these negative effects. This, in
turn, can lead to relatively higher nancial costs, if narrowly measured, and, at
least in the short term, to competitive disadvantages (think of the early days of
renewable energies, or the current situation of most e-mobile manufacturers).
3.3. Capital intensity and long lead times
Developing new technologies, such as fuel cells, requires large investments – and a
lot of time. Their nancial amortisation usually takes longer than with established
technologies and it can even be unpredictable due to insufcient forecasts of cost
and revenue proles. Early adopters have to bear the costs and inconvenience of
switching to new technologies, e.g. due to a lack of charging infrastructures for
e-mobiles, and its initially higher purchasing and running costs. Both investors
and users are important nanciers of sustainability innovations, but both might
have reasons to wait until others bore the initial costs – a prisoner’s dilemma.
3.4. The power of incumbents
Existing companies invested large amounts of money in developing, marketing,
and improving their offerings, valuable assets, technologies, and infrastructures.
Sustainable business models for eco-design and innovation
They often hold strong positions in the market and they are reluctant to change
their current businesses before these are fully exploited. Hence, incumbents have
a vital interest to inhibit change. While this might call for radical system-level
change, e.g. to completely replace conventional energy supplies, incremental
change can accumulate until a tipping point is reached. The German energy
industry has reached this tipping point after more than thirty years in which
renewable energies, smart technologies, and programmes to change the behaviour
of energy users were under development or kept in niches.
3.5. Overcoming Barriers with Business Model Innovation
Wüstenhagen and Boehnke (2008) also made general suggestions how to
overcome these barriers through value proposition and supply chain design and
new nancial models. Tools to support according business model innovations are
emerging in both academia and business practice (these are not further discussed
here; see e.g.( Foxon et al., 2015; Joyce et al., 2015; Upward & Jones, 2016)).
3.6. Value proposition
The value proposition of a BMfS should translate societal benets at least
partly into private benets for customers, i.e. the societal benet of an offering
must be tangible for the customers who pay for it. Proper value proposition
design can help justify the relatively higher costs of green or social offerings.
Additional private benets can be created for example through distinguishing
product features. Tesla’s e-mobiles are designed to attract high-income customers
whose willingness to pay for a premium vehicle is used to nance Tesla’s dynamic
product and organisation development.
3.7. Supply chain
Wüstenhagen and Boehnke argue that supply chains and networks should
combine carefully selected in-house activities, such as R&D, manufacturing, or
distribution, with outsourcing of non-core activities with high additional costs
and low marginal benets for the rm. Not doing everything in-house reduces
investments and allows focusing on those parts only that must be developed anew.
Combining new processes, products, and services with standard parts of third-
parties not only reduces R&D costs but also makes sure that the innovation in
question is at least in part compatible with existing production and consumption
The challenges of eco-innovation
3.8. Financial model
Purpose-driven patient investors and public funding with a long-term horizon
are crucial to secure the basic funding for sustainability innovation projects. As
argued above, investment needs can be reduced by focusing on particular core
activities. Investments can be divided among several investors, e.g. through co-
operations with incumbents who co-nance the scale-up and roll-out of a new
business model. From a customer perspective, low switching costs and upfront
costs are crucial, e.g. through all-in service fees, leasing or contracting models.
rIversImPle: desIgnIng An ecosystem For e-cArs
4.1. Riversimple’s Eco-Design
Welsh car designer Riversimple (based on information published on http://, as of March 2015) develops a new type of hydrogen-fuelled e-car
that tries to circumvent the limitations of the automobile industry’s traditional
designs and related lock-ins, such as its dependence on the oil industry and large-
volume manufacturing models (see Wells, 2013b, for a reection of sustainability
innovation in the automobile industry). Riversimple aims to combine high
standards in design and engineering. Only the most recent technologies and
materials are used to develop a highly efcient car driven by a hydrogen fuel cell
and super capacitators (fast charging energy storages). Strong and lightweight
materials are used for the body, mainly carbon bres, four in-wheel motors move
the car, and regenerative braking reduces energy losses (Figures 1a and 1b).
The car’s components are aligned with the requirements of low-powered
hydrogen fuel cells since Riversimple’s eco-design builds on two principles that
are inspired, inter alia, by the works of Amory Lovins.
Figures 1a and 1b: Early design studies of Riversimple’s “hyrban” prototype (2010)
Sustainable business models for eco-design and innovation
4.2. Design principle 1: Decoupling energy provision for accelerating
and cruising
This principle allows using a small fuel cell, in terms of capacity, for cruising,
while fast charging super capacitators provide the energy to accelerate the car.
Instead of using a big, heavy, and costly fuel cell for both cruising (low energy
demand) and accelerating (high energy demand), separating the energy provision
for these two processes allows for a more efcient fuel cell design.
4.3. Design principle 2: Mass decompounding
The principle of mass decompounding opens up a virtuous circle based on using
a decreasing amount of components and overall mass, and accordingly decreasing
energy use. Fewer components lead to less weight, which leads to less energy
consumption and a smaller fuel cell and engine, which in turn reduce the car’s
weight and so forth.
4.4. Riversimple’s Business Model (in the Making)
While Riversimple’s design principles address the “eco-design question” the
company is also working on the “business model question”. Riversimple’s
eco-design approach is a means to revise traditional automobile design and
manufacturing, and thus the root cause of many negative effects on the natural
environment and human health. The company’s idea for a new business model –
which is still under development – is equally radical as it seeks new ways to create
multiple forms of value for the company’s various stakeholders in an integrated
manner. Some business model properties are evocative of Better Place and Tesla
Motors (e.g. fee-based revenue model, open source philosophy) while some are
unique (e.g. distributed local manufacturing based on replicating small-scale
4.5. Value proposition
The value proposition describes the benets a company promises its customers
and further stakeholders based on the products and services it offers. Riversimple’s
value proposition can be sketched as follows:
- Affordable and aesthetic eco-mobility for everyone;
- Car for urban trafc and daily commuting;
The challenges of eco-innovation
- No ownership due to an all-in leasing fee;
- Individual mobility as hassle-free service.
4.6. Supply chain
The supply chain, the backbone of any business infrastructure, shall build on
a network of local small-scale manufacturers offering locally produced cars for
local use. Another characteristic is the public availability of design details:
- Manufacturing network based on local, small facilities (5,000 cars/year);
- Open source philosophy, design details openly available as CAD les;
- Sale-of-service model along the supply chain;
- Team of engineers, designers, and business developers with professional
backgrounds (e.g. Formula 1, Fiat, Porsche Holding).
Riversimple plans to offer its e-cars, for which the company will retain ownership,
and related services mainly through local distribution networks:
- Local provision of locally manufactured cars;
- Local refuelling network;
- Riversimple retains car ownership.
4.7. Financial model
The economics of this model still have to be tested, but some general features are
already described on Riversimple’s website. The model builds on dedicated and
specialised nanciers and an attractive monthly fee for future customers:
- Investments from patient seed and venture capital providers (Bscope,
investment arm of Piech-Nordhoff family, former shareholders in Porsche)
- Monthly all-in leasing fees as major revenue source
- Fees cover the car, fuel, maintenance, and insurance
Figure 2 summarises the most important business model features according to
current publications by Riversimple. It must be considered that their model is
currently under development and still needs renement and validation.
Sustainable business models for eco-design and innovation
Figure 2: Overview of Riversimple’s planned e-car business model
4.8. Conclusion
Riversimple’s approach to designing a new kind of hydrogen-fuelled e-car is based
on the co-development and co-evolution of a whole ecosystem: the company
develops a new technological artefact, the e-car, and anticipates the networks that
are necessary to produce and use it, although developing these networks goes far
beyond car design in a narrow sense. While other car developers mainly focus on
their cars, Riversimple works on the parallel establishment of different networks: a
local manufacturing system, a refuelling infrastructure, and a stakeholder network
as part of the company’s governance system. On top of that, a new business model
carrying these technological and organisational innovations is under development.
Its central theme is to offer an aesthetic form of individual eco-mobility to everyone.
This business model for eco-mobility faces several barriers. How can Hugo
Spowers and his team motivate customers to contribute to the reduction of negative
environmental and social externalities, i.e. how to offer eco-mobility and private benets?
The central idea is to offer eco-mobility as a hassle-free, all-in, fee-based service
that might appeal to a broad range of customer segments. How does the company
try to overcome the problem of capital intensity and long lead times, i.e. how to
nance R&D over a long period of time? Riversimple found patient and purpose-driven
investors to nance the development of its e-car and its market introduction. The
most challenging barrier, however, is the power of incumbents, i.e. how to overcome the
lock-in effects and path dependencies of one century? One way of dealing with this barrier
is to create a network of allies who can contribute or even replicate Riversimple’s
model in the future without belonging to the original company. Riversimple’s
transparency, non-exclusivity, open source philosophy, and its dedicated network
The challenges of eco-innovation
approach might become the nexus of a future movement of which climax might
be a global e-car revolution.
Finally, which innovation orientations are contained in Riversimple’s business
model draft? Obviously, maximise material and energy efciency, as can be found in
the car’s light-weight construction, high-efciency fuel cells and engines. The
model is also about delivering functionality rather than ownership since Riversimple
plans to own the cars while users pay all-in fees. The company’s open access and
network approach as well as the plan to design locally replicable manufacturing
units suggest that the company is aiming to develop scale-up solutions. Whether this
combination of innovation orientations in Riversimple’s business model for eco-
mobility will allow for a sustainable business is a question for future research.
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About the Author
Florian Lüdeke-Freund
Florian Lüdeke-Freund is a Senior Research Associate at the
University of Hamburg, Faculty of Business, Economics and
Social Sciences, and a Research Fellow at Leuphana University’s
Centre for Sustainability Management (CSM). He obtained a
PhD in Economics and Social Sciences for his cumulative thesis
on “Business Models for Sustainability Innovation: Conceptual
Foundations and the Case of Solar Energy”. His main research interests are
sustainable entrepreneurship, corporate sustainability, and innovation management
with a particular focus on business models. Florian publishes regularly journal
articles, book chapters, conference papers, and research reports on these and further
issues. His article “Business Models for Sustainable Innovation” (2013), together
with Frank Boons, is one of the top ten most read articles of the Journal of Cleaner
Production. Together with Stefan Schaltegger and Erik Hansen, he co-edited a
special issue of Organization & Environment on “Business Models for
Sustainability” (2016, Vol. 29, No. 1). In 2013, he launched the collaborative
platform as a hub for academic and practically-
oriented research. Florian is currently involved in various research and transfer
projects dealing with sustainable business models, such as a review and synthesis
report for the international Network for Business Sustainability (NBS).
... The first principle consisted of teaching and proposing tutorials about different concepts in the literature to support the training of 'sustainability engineers,' i.e., have the skills to create and develop sustainable products and BMs. This teaching programme included concepts such as sustainable design and sustainable innovation (Charter and Clark 2007), designing cradle-to-cradle products (Bakker et al. 2009), circular economic patterns (Ademe 2013), lifecycle assessment methods (ISO 14040; Wimmer, Züst, and Lee 2004), analysis and management of threats and opportunities (Porter 1985), management of environmental quality (Carayannis, Sindakis, and Walter 2015;Krishna and Manickam 2017), BMI for sustainability (Evans et al. 2017;Lüdeke-Freund 2016;Casadesus-Masanell 2011;Chesbrough 2010;Demil et al. 2015), partnership theory (Levin and Tadelis 2002;Sachs and Rühli 2013), and sustainable marketing and consumers' behaviour (Charter 2017;Jellil, Woolley, and Rahimifard 2017). These concepts were intended to make the engineering students aware of the nature and role of resources, knowledge, entrepreneurships and partnerships, and societal needs in the dynamics of food innovation. ...
The environmental, nutritional, and socio-economic issues in the globalised agro-industrial food system are at the center of political agendas, reform programmes, and sustainable curriculums in higher education institutions to accelerate the sustainability transition of food sociotechnical systems. Despite the societal importance of these issues there is little proposals aiming to address sustainable development goals in food science and engineering curriculums. However, promoting project-based learning by students on how to develop eco-designed business models and eco-innovated food products seem to be an essential lever for the sustainability transition. This paper describes how a consortium of French agri-food engineering colleges implemented sustainable development goals via the governmental Idefi-EcoTrophelia programme. Through two cases, we show how the students used engineering and managerial knowledge to eco-design business models and to develop entrepreneurial capabilities to establish green ventures to commercialise their innovation. To analyse these projects we propose a sustainable business model canvas that describes the processes through which food eco-innovations were developed and transferred from the research institutions to industries and consumers. This model facilitates understanding how the sustainable development goals transform food sociotechnical systems to create societal values.
In today’s competitive business scenario, the pivot in supply chain is consumer satisfaction. Apart from this some other factor like the environmental issue plays an important role in making the business model sustainable, which leads to an agile nature of the manufacturer. Consumer being important entity of supply chain become part of this continuously changing innovative environment. These will also affect consumer satisfaction level during the use of the product and at the time of use end. The purpose of this study is to focus on these factors and access the level of satisfaction and belief of consumer regarding Indian car business model. For this a research tool is developed, surveys of existing car customers were carried out and the data collected is analyzed with the help of exploratory factor analysis. Four latent factors considered important named impact of agility, unorganized secondary market, environmental issue, and eco-leasing, which can be related to customer satisfaction and belief. On the basis of factors evaluated and business model suggested for Indian car market, a sustainable business model can be implemented, which can be tested for the present challenging scenario of automobile sector. Study focuses on long term leasing model with concept of circular economy for Indian car market.KeywordsAgilityEco-leasingSecondary marketSustainability
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Investment in infrastructure is recognised as a key enabler of economic prosperity, but it is also important for addressing social and environmental challenges, including climate change mitigation and addressing fuel poverty. The UK Government Strategy Investing in Britain’s Future argues that significant investment in “resilient, cost effective and sustainable energy supplies” is needed to meet these challenges. However, current methods of assessing the costs and benefits of infrastructure investment, and the subsequent design of business models needed to deliver this investment, often prioritise partial economic gains over social and environmental objectives. This paper extends the business model canvas approach to allow designing business models and evaluation methods that can incorporate social and environmental value streams and propositions as well as economic values in order to facilitate genuinely sustainable infrastructure investment. It demonstrates the usefulness of this extension through two case studies of the development of smart grids for electricity distribution and local heat delivery networks in the UK. Smart grids are essential for maintaining the security and reliability of electricity systems whilst incorporating increasing amounts of low carbon generation in distribution networks. District heat networks can facilitate the efficient supply of low carbon heat. However, both will require significant levels of investment, co-ordination between public, private and regulatory actors, and will deliver a range of economic, social and environmental costs and benefits to these actors. Drawing on empirical interviews with local actors involved in smart grid and heat network developments, and recent work on valuation and business model canvas analysis, the paper challenges the traditional view of a business model as only creating one form of value. Accounting for multiple types of value helps to identify business models that are more likely to achieve the environmental and social goals of infrastructure transformation and opens the door for new actors. Finally, the paper introduces an approach to complex systems modelling of infrastructure investment decisions to take into account the range of actors and the diversity of motivations of these actors.
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Business is increasingly employing sustainability practices, aiming to improve environmental and social responsibility while maintaining and improving profitability. For many organizations, profit-oriented business models are a major constraint impeding progress in sustainability. A formally defined ontology, a model definition, for profit-oriented business models has been employed globally for several years. However, no equivalent ontology is available in research or practice that enables the description of strongly sustainable business models, as validated by ecological economics and derived from natural, social, and system sciences. We present a framework of strongly sustainable business model propositions and principles as findings from a transdisciplinary review of the literature. A comparative analysis was performed between the framework and the Osterwalder profit-oriented ontology for business models. We introduce an ontology that enables the description of successful strongly sustainable business models that resolves weaknesses and includes functionally necessary relationships.
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Business model innovations are recognised as a key to the creation of sustainable business, but their adoption by firms has been slow. Organisations can only be sustainable when the whole societal system is sustainable. Both structural and cultural changes are required to facilitate firm- and system-level sustainability. The central idea of this paper is to examine how societal transition towards sustainable business models (SBMs) can be achieved. Through a qualitative Delphi study, we assess and categorise the key structural and cultural barriers to sustainable business model innovation (SBMI). By applying the innovation system approach, we explain how to overcome existing barriers by strengthening the functions of the innovation system. We analyse how these barriers can be overcome through the activities of governments, firms, and consumers, and discuss the wider implications of our research for practitioners, policy-makers, and researchers.
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Eco-innovations, eco-efficiency and corporate social responsibility practices define much of the current industrial sustainability agenda. While important, they are insufficient in themselves to deliver the holistic changes necessary to achieve long-term social and environmental sustainability. How can we encourage corporate innovation that significantly changes the way companies operate to ensure greater sustainability? Sustainable business models (SBM) incorporate a triple bottom line approach and consider a wide range of stakeholder interests, including environment and society. They are important in driving and implementing corporate innovation for sustainability, can help embed sustainability into business purpose and processes, and serve as a key driver of competitive advantage. Many innovative approaches may contribute to delivering sustainability through business models, but have not been collated under a unifying theme of business model innovation. The literature and business practice review has identified a wide range of examples of mechanisms and solutions that can contribute to business model innovation for sustainability. The examples were collated and analysed to identify defining patterns and attributes that might facilitate categorisation. Sustainable business model archetypes are introduced to describe groupings of mechanisms and solutions that may contribute to building up the business model for sustainability. The aim of these archetypes is to develop a common language that can be used to accelerate the development of sustainable business models in research and practice. The archetypes are: Maximise material and energy efficiency; Create value from ‘waste’; Substitute with renewables and natural processes; Deliver functionality rather than ownership; Adopt a stewardship role; Encourage sufficiency; Re-purpose the business for society/environment; and Develop scale-up solutions.
Increasing numbers of reports reveal that planet Earth is at significant risk. There are mounting calls to address the damage caused by the unprecedented demand for land, energy and water and environmental destruction, which is attributed to escalating population growth and unparalleled, rising rates of economic growth. Society and its organisations now are expending the Earth’s resources much faster than they can be replenished. Consequently, over the past two decades, sustainability has become an important business issue; growing attention is being paid to organisations’ ecological and environmental performance; and to their impact on the climate and on local and global communities. A number of researchers broadly claim that organisations need to move from Traditional Business Models and adopt Sustainable Business Models, and to deliver a sustainable value proposition aligned with stakeholders’ economic, environmental and social expectations. To achieve this, organisations should expand their perceived stakeholders from customers and shareholders to include all other stakeholders who may be directly or indirectly affected by the organisation’s activities, such as the broader society and the environment. Organisations’ cultures have considerable influence on their attitudes to environmental and social sustainability; their commitment to sustainability; and their environmental and social performance. In order to develop and implement Sustainable Business Models, organisations need to understand their underlying cultural values and develop sustainability-related cultural characteristics. This chapter explains the role of organisational culture and its desired characteristics and discusses actions organisations can take to change their culture. It also discusses steps for embedding sustainability principles across the organisation.
This cumulative dissertation deals with the relationships between business models, sustainability innovations, and the business case for sustainability. Its main purpose is to define theoretical and conceptual interrelations between these concepts. According theoretical foundations are developed and combined with empirical studies on the solar photovoltaic industry. This industry is particularly suitable for this kind of research because of its increasing maturity paired with public policy and market dynamics that lead to a variety of business model challenges. The overarching research question is: How can business models support the commercialisation of sustainability innovations and thus contribute to business cases for sustainability? Theoretical and conceptual foundations are developed from a systematic literature review on the role of business models for technological, organisational, and social sustainability innovations. Further, business model innovation is linked to sustainability strategies and the business case for sustainability. These foundations are applied in an in-depth case study on BP Solar. Moreover, because supportive public policies and the availability of financial capital are important preconditions for commercial success with solar innovations, the dissertation contains a comparative public policy study as well as a conjoint experiment to explore debt capital investors’ preferences for different photovoltaic business models. The main contribution of this work is the “Business Models for Sustainability Innovation” (BMfSI) framework. It is based on the idea that business models are artificial and social constructs that fulfil different functions based on social interaction and their deliberate construction. The framework emphasises the mediating function, i.e. the iterative alignment of business model elements with company-internal and external factors as well as with the characteristics of environmentally and socially beneficial innovations.
The relevance of business models for corporate performance in general and corporate sustainability in particular has been widely acknowledged in the literature while sustainable entrepreneurship research has started to explore contributions to the sustainability transformation of markets and society. Particularities of the business models of sustainable niche market pioneers have been identified in earlier research, but little is known about the dynamic role of business models for sustainable entrepreneurship processes aiming at upscaling ecologically and socially beneficial niche models or sustainability upgrading of conventional mass market players. Informed by evolutionary economics, we develop a theoretical framework to analyze co-evolutionary business model development for sustainable niche pioneers and conventional mass market players aiming at the sustainability transformation of markets. Core evolutionary processes of business model variation, selection and retention, and evolutionary pathways are identified to support structured analyses of the dynamics between business model innovation and sustainability transformation of markets.
While a consensus appears to have evolved among many sustainability researchers and practitioners that sustainable development at the societal level is not very likely without the sustainable development of organizations, the business model as a key initiating component of corporate sustainability has only recently moved into the focus of sustainability management research. Apparently, the usual approaches to sustainable development of philanthropy, corporate social responsibility, and technological process and product innovation are insufficient to create the necessary radical transformation of organizations, industries, and societies toward genuine, substantive sustainable development. More in-depth research is needed on whether both modified and completely new business models can help develop integrative and competitive solutions by either radically reducing negative and/or creating positive external effects for the natural environment and society.
The concept of business models has reached global impact, both for company's competitive success and in management science. Its application by authors from diverse areas has led to a previously very heterogeneous comprehension of the concept. Yet, by means of investigating its origin and theoretical development, we state a recently converging business model view. Further, based on analyzing business model definitions, perspectives and components in the literature, we newly define the concept and portray its essential components in an integrated framework. Finally, the compilation of the current state of business model research yields the article's main findings. In this regard, via database search we quantitatively identify 681 peer-reviewed articles. Further, we qualitatively analyze them according to individual research areas that we adopt from an appropriate heuristic frame of reference. In this way, we identify four essential research foci: innovation, change & evolution, performance & controlling and design. In triangulation with assessing future research perspectives through a survey of twenty-one international experts, they also consider the areas of innovation, change & evolution, and design to be significant for the future development of the business model research field.