What Is a Sustainable Business Model?

Estimated read time 3 min read

Amidst supply chain disruptions caused by the pandemic and renewed attention on climate change after COP26 in Scotland, the subject of sustainability in business has come under focus over the last few months.

For instance, beginning 1 October 2021, UK companies bidding for government contractors worth over £5 million annually are required to demonstrate their actions to achieve net-zero emissions by 2050.

However, while much of the conversation around business sustainability revolves around Environmental, Social, and Governance (ESG) factors, this is just one aspect of a sustainable business model.

What Is a Sustainable Business Model?

A sustainable business model can be defined as a set of business principles that take a holistic approach to creating, capturing and providing value to all of an organisation’s stakeholders. Rather than focus solely on maximising profits for the business owner and its investors, a sustainable business model seeks to reduce — even eliminate —  its negative impact on the environmental, economic and social capital supporting the enterprise.

Key Elements of a Sustainable Business Model

Moreover, a sustainable business model also ensures the organisation’s long-term survival by fueling innovation, driving employee satisfaction and providing care to all of its stakeholders.

Key Elements of a Sustainable Business Model

While there is no single accepted definition of business sustainability, organisations that embrace sustainable business practices typically have the following qualities.

1. Sustainability Is Part of the Culture

Sustainability is not just a set of activities people do within an organisation. It requires a cultural change — one that influences how the organisation behaves and how it delivers value to all stakeholders.

Creating this culture begins with the organisation’s leadership, who are responsible for making the commercial, environmental and social case for sustainability.

2. Commitment to Profitability

Contrary to popular belief, a business can be sustainable and still be profitable. In fact, a sustainable business should have a strong value proposition to ensure it can generate enough profits to scale and succeed. This is where innovation comes into play — a sustainable business model seeks to drive consistent research and development and customer satisfaction.

3. Focus on Long-Term Success

Businesses that capitalise on trends or rely on limited resources may be profitable for months, perhaps even years. But how will they fare over the next five to ten years? The availability of finite resources is never fixed, and sudden shifts in customer behaviour can be temporary. A sustainable business must consider the long-term viability of its business model and whether it guarantees its survival.

4. Giving Back to Stakeholders

Giving back to stakeholders, whether employees, customers or the general community, is a core tenet of business sustainability. Rather than extracting resources from society or the environment, a sustainable business seeks to borrow resources and replenish them in time. This borrow-use-return model creates a circular economy, reducing waste and negative effects on stakeholders.

How to Take the First Steps toward Sustainability

How to Take the First Steps toward Sustainability

Demonstrating your commitment to reducing your business’s negative impact on the environment is perhaps the simplest way to incorporate sustainability into your operations. For building companies, accreditation schemes such as the Common Assessment Standard can verify whether your business has taken steps to reduce its social and environmental impact. The accreditation you receive can then be used to pre-qualify for tenders with specific sustainability requirements.

Sarah Cantley

Editorial Head at UK Blog for Business & Startup.

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