When we all went home for the COVID-19 lockdown in March many non-essential businesses were forced to stop manufacturing and shipping products. Even essential products like toilet paper, face masks, hand sanitizers, and cleaning products quickly became difficult to find. So I wanted to understand how businesses can avoid these issues in the future.
I spoke to Deborah Lindsay, Sustainable Business Coach and Director of Operations and Sustainability at SellHound, about how companies can reduce the risks that lead to supply chain disruptions and develop resilient and circular business models in a changing climate and economy. But before I go further, let’s start with the basics of what a sustainable business model looks like.
What is a sustainable business model?
A business model is the structure of your organization, how it makes money, and what its purpose is. Sustainable business models have a mission to the Triple Bottom Line.
The Triple Bottom Line
The Triple Bottom Line was introduced over 25 years ago by John Elkington. It's the financial success of the business, the wellbeing of its stakeholders, and the planet. A sustainable business model is good for people, planet, and profit. There’s a commitment to reducing the companies environmental footprint by lowering CO2 emissions, reducing or decreasing toxic materials, and conserving water while still making a profit.
The Triple Bottom Line encourages a "system change — pushing toward the transformation of capitalism" according to Elkington.
Sustainable business standards
Sustainability-minded businesses often follow third party standards to help guide them. The International Standards Organization (ISO) and B Corporations offer a framework for companies interested in becoming more resilient and sustainable.
- ISO 2600 - offers guidance on how your business can operate in a socially responsible way.
- ISO 1400 - provides a framework to set up an effective environmental management system.
- B Corporations balance purpose and profit by becoming legally required to consider their impact on their employees, customers, and the environment.
What is a circular business model?
Now that you understand what a sustainable business model is, let's look at circular business models. Circular business models have the same mission as sustainable business models, but specifically seek to narrow, slow, and close resource loops.
- Narrowing loops - You can narrow a loop in your business by using fewer materials to make a product. Ecodesign strategies can be used to narrow resource loops when designing new products.
- Slowing loops - When you slow a resource loop the product can be used over and over again. Product as a Service (PaaS) is one way to slow loops and often used in circular business models. More about creating Products as a Service below.
- Closing loops - Recycling and upcycling are examples of closing resource loops. Cradle to Cradle certifies products that are designed to close the loop.
Circular business model examples
If you’re interested in learning about circular business models, the circulator is a tool that can help you explore circular business models used by companies around the world. A few examples:
- Interface - Interface sells modular carpet squares that are designed to be repaired, cleaned, redesigned, and eventually returned for recycling. Carpet squares allow you to only replace one square at a time when there's a hole or stain, keeping carpets out of landfills. The company also keeps their relationship with customers by eventually taking old carpets back to be recycled into new products. This business model allows Interface to reduce waste while also keeping customers loyal to the company.
- Caterpillar - Caterpillar's remanufacturing business is an integral part of their business model. Caterpillar takes back all machines to be repaired and eventually remanufactured and sold at a cheaper price. Customers pay a deposit to ensure machines will be returned for further repair, remanufacturing, and resale. This business model keeps their machines coming back to be resold and reused again and again. This is good for the business and also keeps materials out of landfills.
- iFixIt - iFix it helps people repair their own computers and devices through instructional videos and DIY how-to's on their website. Revenue comes from selling parts and tools that help people repair their own products.
How to develop a resilient and sustainable business
Now that you understand some basic circular economy business strategies, Deborah explains how your company can develop a more circular and sustainable business model. The questions are mine, the answers are hers.
What is the first step to developing a sustainable business model?
If you want to develop a sustainable business the first thing to do is brainstorm and write a green mission statement. This becomes a guiding set of principles built by the founders and board of directors of the company that all others take directive from. It’s easy to “greenwash” your business by changing a few things here and there. But when the fabric of the company is committed to weaving sustainable principles into the construction of the business, then you’re on the right track.
What is a risk analysis?
Risk factors like COVID-19 and climate change will require forward-thinking businesses to adjust their business models to stay ahead of the competition. A risk analysis will help you determine whether your company is positioned for success in a changing climate and economy.
During a risk analysis, a company's business model, leadership structure, supply chains, target customers, employee management, financial health, and overarching corporate purpose are reviewed. A variety of scenarios are presented to determine how resilient the company will be given different risk factors. A system map and other circular economy tools are used to build resilient systems.
What is a systems map?
Our lives and companies depend on inputs that come from around the world. Everything we purchase has come from somewhere else, often hundreds of inputs and connections are made to bring goods to us. These systems can make for a solid, formidable structure or a fragile, easily disrupted structure depending on many variables relating to the inputs.
System mapping allows us to visually explore these relationships. A systems map will help provide insight into the benefits and risks to our business. A well-done systems map creates an opportunity to develop flexible and adaptive circular and sustainable solutions and business models.
Your company's supply chain is a long network of resources and connections that provide products to your company so it can conduct its business. A supply chain includes the materials used to make a product, how and where that product is manufactured, and how it will finally be distributed to customers.
How can companies reduce risks in their supply chain?
As we’re seeing with COVID-19, it’s essential to build a supply management infrastructure that can weather disruptions when “normal” systems are compromised. Circular economy principles require these systems to be built with smart, innovative designs to strengthen our livelihoods by making them less dependent on fragile networks.
What do innovative designs look like in a circular business model?
As availability to goods shifts due to disruptions in the supply chain, companies that have well-developed service offerings will prosper more than those that do not.
Product as a service (PaaS) - Providing services can differentiate a business from another, and allows a business to build stronger relationships with customers and retain them for longer. The more a customer is loyal to a company the more money the company can make per customer without the cost of acquisition. Services often require less physical inputs than products, so their impact on the planet is much less weighty and potentially less toxic; two important circular economy principles.
Cradle to Cradle - Cradle to Cradle is a certification standard for products that are safer for people and the planet, and designed for a circular economy. The standards created by Cradle to Cradle are part of the foundation of the current circular economy movement.
Eco-design - Eco-design is a way to design products that reduce or eliminate environmental and human health risks. Products using eco-design techniques seek to either be durable, easy to repair, can be adapted to be used in a new way, designed to be disassembled and reassembled.
Deborah Lindsay is a Sustainable Business Coach and Director of Operations and Sustainability at SellHound. Visit DeborahLindsay.com to learn more about how she can help you develop a circular business model.