Sustainable business models

Sustainable Business Model

Prof.ssa Silvia Rita Sedita

SUSTAINABLE BUSINESS MODELS

1980: The concept of sustainable development appeared for the first time in World Conservation Strategy (WCS)

1987 “Our Common Future” Report (Brundtland Report) For the first time “sustainable development” was defined establishing

à

links between social, economic, cultural and environment issues radical perception change of sustainability

à

1972:1st UN Conference on the Human Environment (UNCHE) and Creation of the United Nations Environment Program (UNEP)

1988: Creation of the International Panel on Climate Change (IPCC) It is responsible for the scientific processes of global warming.

à

1992: Earth Summit – United Nations Conference on Environment and Development in Rio de Janeiro

1995: World Summit on Social Development in Copenhagen

2000: United Nations Millennium Summit in New York Eight Millennium Development Goals (MDGs) set for 2015

à

2005: Signature of the Kyoto Protocol

2012: Rio+20 Summit – UN Conference on Sustainable Development (UNCSD) Sustainable development goals (agenda 2030)

à

focus on reduce inequalities to increase sustainability social economic goals, not only for the environmental side

à à

Triple bottom line

People considers all stakeholders (versus solely shareholders) including employees, communities

within which an organization operates, individuals throughout the supply chain, future generations,

and customers—just to name a few

Prosperity considers the economic indicators over which an organization or business has

influence— for example, paying livable wages, ethical sourcing, and workplace health and safety.

Planet considers the relationship between an organization or business and the natural

environment and its ecological systems.

“Business as usual” are heading for trouble Earth’s resources are limited:

• Precious metals are ending due to pervasive mining in the past

250 years.

• Water, air, and forests are technically renewable but are

increasingly stressed.

• Strong population growth, exploding demand among

consumers for more goods and services.

• Planet’s ability to absorb and process the waste diminishes by

the years.

Linear economy

The linear economy is a term for the current economic growth model,

where “linear” refers to the cradle-to-grave (= dalla culla alla tomba)

flow of most natural resources (also described as “take-make-waste”).

This linear flow is the consequence of historically cheap and abundant resource supplies leading companies and nations to focus

on supplying customers an ever-increasing throughput of goods. In the linear model, environmental impact is largely unaccounted

for and incentives to minimize waste during use and product end-of-life are weak. Little attention is paid to ensuring discarded

goods are put into new use or back into a production process as raw material.

As it’s known today, it refers to the decoupling of economic growth from the extraction and consumption of constrained natural

resources, i.e., scarce resources with negative footprints, like fossil fuels or hard-to-recycle metals and minerals, where

dependency creates a competitive disadvantage over time. 1

Circular advantage

The circular advantage is the competitive edge gained by organizations adopting circular economy principles as a core element of

their growth strategies. By decoupling scarce resource use and growth, organizations protect themselves from rising and volatile

commodity prices, become more resilient to supply disruptions and reduce their environmental footprint. They also gain access to

a range of tools to sharpen the core customer value proposition as their value chain now extends beyond design, production, and

sales into product use and take-back – where most actual customer value and convenience are created.

IN ITALY: According to the survey conducted by the Milan Polytechnic on seven macro-sectors of the Italian economy:

• automotive,

• construction,

• consumer electronics,

• food & beverage,

• industrial plant engineering,

• furniture and furnishings, and

• textiles

the number of companies that have adopted at least one circularity practice has risen to 57% 14.4 billion euros saved in 2021

à 2

CIRCULAR ECONOMY PRINCIPLES

3 principles of the circular economy:

1. design out waste and pollution

2. keep products and materials in use

3. regenerate natural system

1. Design out waste and pollution:

The problem and the solution starts with design

The first principle of the circular economy is to eliminate waste and pollution.

Currently, our economy works in a take- make-waste system. We take raw materials from the Earth, we make products from them,

and eventually we throw them away as waste.

Much of this waste ends up in landfills or incinerators and is lost.

This system can not work in the long term because the resources on our planet are finite.

Can you recycle crisp packet plastic, and if so, how? Although crisp packets may appear to be foil, they are actually made of

metallized plastic film, which is dimicult to recycle at home. THE SOLUTION OF A COMPANY: Every year countless pieces of crisp

packets end up in landfill sites across the UK. We are working with TerraCycle* to put an end to this enormous loss of resources. The

Crisp Packet Recycling Scheme allows us to recycle your crisp packets and prevent them from ending up in landfill. Not only are you

helping the environment, but the waste you recycle with us also helps to fund schools or organisations.

THE SOLUTION:

• The environmental harm caused by plastic waste has been well documented. According to a recent report, more than 8

million tons of plastic enter the ocean each year.

• As a result, a company in the United Kingdom is attempting to solve this issue in a unique way: by compostable crisps,

popcorn, and pretzel packets.

• Two Farmers, a small business with a family history in Herefordshire, has developed a compostable packaging system made

up of a mixture of plant-based and recycled materials.

Although it sometimes seems like waste is inevitable in certain situations, waste is actually the result of design choices

2. Keep products and material in use

The second principle of the circular economy is to circulate products and materials at their highest value.

This means keeping materials in use, either as a product or, when that can no longer be used, as components or raw materials.

This way, nothing becomes waste and the intrinsic value of products and materials are retained.

3. Regenerate natural system

The third principle of the circular economy is to regenerate nature.

By moving from a take-make-waste linear economy to a circular economy, we support natural processes and leave more room for

nature to thrive.

Connect the Dots is a city-led initiative to promote local regenerative agriculture in the rural zone of the state of São Paulo, protecting

natural systems threatened by urban sprawl and conventional agricultural practices.

São Paulo’s project is designed to strengthen the local agriculture value chain. 3

it aims to improve production by empowering local farmers through technical assistance and capacity building. This allows

è farmers to adopt agroecological farming practices that will increase their revenue and protect vital watershed areas.

it encourages entrepreneurs to start businesses that support farmers participation in the value chain.

è Composting: use waste to create and produce energy for farmers in this way they are independent from energy producer

è à

CIRCULAR ECONOMY = INNOVATION 4

SUSTAINABILITY TRANSITION AND BUSINESS MODEL INNOVATION

Sustainability transitions is a burgeoning (=crescente) field of research that seeks to understand how transitions from unsustainable

to more sustainable systems across a range of sectors including energy, transport, food and water can be initiated, as well as working

with policy actors to implement such changes

Particularly prevalent in this literature has been the development of the ‘Multi Level Perspective’ (MLP) (Geels and Schot, 2008).

The MLP focusses on the interactions between ‘niche’, ‘regime’ andn‘landscape’ levels in understanding how incumbent (and

unsustainable) technological regimes can be ‘destabilised’ through ‘niche’ developments (= new way to do business for ex: new

technologies).

“Fundamental changes in socio-technical systems (the core of sustainability transaction)…to address grand challenges in way that

meets the needs of the present without compromising the ability of future generations to meet their own needs” (Markard et al., 2020,

p.1) Multi-dimensional and co-evolutionary (technology, culture, policy, markets) culture: people are not aware about

è à

sustainability

Involves dimerent social groups young people are more likely to change their behavior for sustainability

è à

Co-existence of innovative and established practices (i.e. renewable energy provision and fossil fuel use) co-existence of

è à

new and old

Niches refer to protected spaces including new innovations, technologies, actor configurations and institutional arrangements that

replace and transform technological systems in energy, food, transport, and water, as part of transitions to sustainability (Geels,

2002, Kemp, 1994, Kemp et al., 1998; Rip and Kemp, 1996).

• Experimentation – coevolution of technology, user practices, and regulatory structures

• Zero-waste cities

• Living labs (i.e. 5G technologies) usually adopted to experiment new technologies

à

• Energy communities

• Composting communities

• …

Niche experiments can influence regimes (upscaling or empowering)

In the Multi-Level Perspective on transitions, four condensed pathways or trajectories can be summarised based on Geels and Schot

(2007) and Geels (2019):

• Dynamic equilibrium where regime change is minimal, despite niche innovations. Established regime actors resist

à

restructuring efforts from niche innovations, often reflecting a high degree of lock-in or path dependency we

have to reduce both

• Convergence where niche experiments unify around a leading design, prompting systemic and regulatory shifts

as this design gains acceptance among actors.

• Disruption where a significant innovation challenges the status quo, driven by external pressures and internal

regime tensions, opening avenues for substantial change.

• Transformation where a new regime emerges, gradually phasing out the old system and establishing a fresh

equilibrium, underpinned by the gradual buildup of pressures and the active involvement of regime members in

à

adapting to or fostering competitive and socio-technical changes transformation is more gradual than disruption

5

THE BUSINESS MODEL

A business model describes the rationale of how an organization

creates, delivers, and captures value.

A business model is a conceptual tool containing a set of objects,

concepts and their relationships with the objective to express the

business logic of a specific firm.

Therefore, we must consider which concepts and relationships allow

a simplified description and representation of what value is provided

to customers, how this is done and with which financial

consequences.