Depending on who you ask, there are two prevalent definitions of a sustainable business model.
The first definition posits that a sustainable business model is one that creates value for all stakeholders without depleting the resources that produced it.
The second interpretation is much simpler and one that many are more familiar with.
In this context, the company prioritizes sustainable, positive, long-term impact by striving to balance economic, social, and environmental pillars.
With those definitions in mind, below is a look at some sustainable business models from companies in a variety of industries.
Both companies have massive scale. With Coca-Cola over $35 billion revenue, compared to PepsiCo over $63 billion. Where Coca-Cola has a large chunk of revenues in Europe, Middle East, and Africa. PepsiCo has its primary operations in the US. Coca-Cola is the largest beverage company in the world. PepsiCo got diversified between beverages and food, where food represented 53% of its revenues in 2017. Both companies have massive distribution strategies and nonetheless the size, they have a relatively quick decision-making process. That is critical as both companies top into consumer habits, therefore need to be fast in adapting to them. Both companies also spend massive resources on demand generation via marketing activities.
PepsiCo’s business model is built around a belief that there is an opportunity to improve how the world produces, distributes, consumes, and disposes of food and drink.
The company’s strategy permeates every aspect of its circular value chain to reduce GHG emissions, recycle packaging materials, and rejuvenate vital water supplies.
In 2021, the company announced the pep+ (PepsiCo Positive) strategy to drive positive action for people and the planet.
Among many other initiatives, Pepsi wants to improve farming communities that provide crucial raw materials and inspire customers to make sustainable choices that benefit the planet.
Nike’s vision is “to bring inspiration and innovation to every athlete in the world.” While its mission statement is to “do everything possible to expand human potential. We do that by creating groundbreaking sports innovations, by making our products more sustainably, by building a creative and diverse global team, and by making a positive impact in communities where we live and work.”
The “Move to Zero” sustainability campaign is part of Nike’s commitment to reduce its carbon emissions and waste production to zero.
Importantly, Nike realizes that its sustainable business model can only work if the entire industry works together.
To that end, the company plans for its factories in Vietnam, China, and Indonesia to be 100% solar-powered by 2025.
Nike is also revolutionizing its manufacturing and fabric production processes.
For one, it is reducing the size of its cardboard shoe boxes so that less tissue paper and wrapping are required.
The company also eradicated single-use plastic bags at the end of 2021 and has implemented a system where customers can identify which of its products contain more than 50% reused materials.
Founded in 1903 by Henry Ford and is the fifth-largest family-owned company in the world. Ford is a globally recognized brand in the automotive industry for a couple of reasons. First, Henry Ford is well-known as the inventor of the production line and thus the modern automobile industry. Today, Ford has also maintained relevance as the seventh-largest car manufacturer worldwide, selling a range of passenger cars, trucks, and vans.
Ford has a broad sustainability strategy based on three key aspects:
Hard data – Ford employs a team of climate scientists to predict its future carbon emissions. Then, the team works backward to determine the acceptable fuel efficiency that all future vehicles need to demonstrate.
Short-term and long-term challenges – while Ford is taking advantage of the hype surrounding electric vehicles, it is also enhancing its internal combustion engine fleet with advanced technologies and innovation.
Pragmatism – Ford acknowledges that while 9 billion will be on the planet by 2050, this is not an open invitation for it to sell more cars. Here, Ford is placing the needs of the planet and society above revenue and market saturation.
Ben & Jerry’s
Ice cream brand Ben & Jerry’s has a long history of utilizing a sustainable business model.
As early as 2002, the company was implementing carbon offset programs and investing to increase the efficiency of its supply chains and manufacturing operations.
The company’s main environmental impact stems from dairy cow emissions on farms in which it sources milk and cream.
Like Ford, Ben & Jerry’s has established science-backed GHG reduction goals which are verified by third parties.
Specific actions to reduce emissions include no-till cropping, crop rotation, and investment in manure separators and digesters that limit the amount of methane gas produced.
Key takeaways:
Sustainable business models are those that create value for stakeholders without depleting the resources that produced them. Other definitions incorporate value creation that is sensitive to environmental, social, and economic factors.
PepsiCo’s sustainable business model permeates every aspect of its value chain to change the way people consume and dispose of food and drink. Nike’s model relies on industry cooperation and alignment to be successful.
Sustainability at Ford involves setting realistic, relevant, and science-based objectives. Ice cream manufacturer Ben & Jerry’s has also utilized scientific research to develop ways to reduce methane emissions.
Key highlights of sustainable business models
PepsiCo:
Sustainable business model focused on improving the food and drink production, distribution, consumption, and disposal processes.
Introduced the pep+ (PepsiCo Positive) strategy to drive positive action for people and the planet.
Initiatives include reducing GHG emissions, recycling packaging materials, and supporting farming communities that provide raw materials.
Nike:
Sustainable business model centered around reducing carbon emissions and waste production to zero through the “Move to Zero” campaign.
Committed to making products more sustainably and building a positive impact in communities.
Plans to have factories in Vietnam, China, and Indonesia running on 100% solar power by 2025.
Ford:
Broad sustainability strategy based on hard data, short-term and long-term challenges, and pragmatism.
Employs climate scientists to predict future carbon emissions and sets fuel efficiency goals for all future vehicles.
Balances advancements in electric vehicles with improvements in internal combustion engine fleet.
Ben & Jerry’s:
Long history of utilizing a sustainable business model, implementing carbon offset programs since 2002.
Focuses on reducing environmental impact, particularly dairy cow emissions on farms.
Implements science-backed GHG reduction goals, including no-till cropping, crop rotation, and methane reduction measures.
Sustainable Business Model Ideas
Sustainable Business Model KPIs
Description
Formula to Measure
When to Use
Advantages
Drawbacks
Carbon Emissions Reduction
Measures the reduction in greenhouse gas emissions by the business.
(Previous Emissions – Current Emissions) / Previous Emissions
To track progress in reducing carbon footprint.
Demonstrates environmental commitment.
Data accuracy may be challenging.
Energy Efficiency
Evaluates the efficiency of energy consumption and reduction efforts.
(Energy Saved / Total Energy Consumed) x 100%
To reduce energy costs and environmental impact.
Lowers energy-related expenses.
Requires investment in energy-saving tech.
Waste Reduction
Tracks the reduction in waste generation and landfill contributions.
(Previous Waste – Current Waste) / Previous Waste
To minimize waste and promote recycling.
Reduces waste disposal costs.
May involve process changes and costs.
Water Conservation
Measures the reduction in water consumption by the business.
(Previous Water Usage – Current Water Usage) / Previous Water Usage
To minimize water usage and costs.
Supports sustainable resource management.
May require equipment upgrades.
Sustainable Sourcing
Assesses the percentage of materials and resources from sustainable sources.
(Sustainable Materials / Total Materials) x 100%
To promote ethical and eco-friendly sourcing.
Enhances brand reputation.
Sustainable materials can be costly.
Circular Economy Adoption
Tracks the extent to which the business adopts circular economy practices.
(Circular Economy Revenue / Total Revenue) x 100%
To reduce waste and maximize resource use.
Fosters resource efficiency.
Transition may require new processes.
Social Impact Metrics
Measures the positive social impact generated by the business model.
(Total Social Impact Value / Total Revenue) x 100%
To assess the company’s social contributions.
Enhances brand’s social responsibility.
Impact measurement can be subjective.
Biodiversity Conservation
Evaluates efforts to protect and enhance local biodiversity.
(Biodiversity Enhancement Activities / Total Activities) x 100%
To support ecosystem conservation.
Demonstrates ecological commitment.
Requires ongoing monitoring and investment.
Fair Labor Practices
Assesses adherence to fair labor practices and workers’ rights.
(Total Fair Labor Audits Passed / Total Audits Conducted) x 100%
To ensure ethical treatment of workers.
Builds a socially responsible image.
Non-compliance can damage reputation.
Supplier Sustainability
Measures the sustainability efforts of the company’s suppliers.
(Sustainable Suppliers / Total Suppliers) x 100%
To ensure the supply chain aligns with sustainability.
Enhances supply chain resilience.
Limited control over supplier practices.
Stakeholder Engagement
Evaluates the level of engagement and feedback from stakeholders.
(Total Stakeholder Engagement Activities / Total Stakeholders) x 100%
To strengthen relationships and transparency.
Improves decision-making and trust.
Requires dedicated resources for engagement.
Economic Impact
Measures the positive economic impact on local communities.
(Economic Contributions to Community / Total Revenue) x 100%
To assess the company’s community support.
Enhances brand’s local reputation.
Impact measurement can be subjective.
Green Product Development
Tracks the percentage of new products designed with sustainability in mind.
(Green Products Developed / Total Products Developed) x 100%
To promote eco-friendly product offerings.
Meets growing customer demand.
R&D investment may be required.
Sustainable Packaging
Measures the adoption of sustainable and eco-friendly packaging.
(Sustainable Packaging Used / Total Packaging Used) x 100%
To reduce packaging waste and environmental impact.
Aligns with consumer preferences.
May require changes in packaging suppliers.
Social Equality
Assesses efforts to promote social equality and inclusion.
(Equality Initiatives Implemented / Total Initiatives Implemented) x 100%
To foster diversity and inclusion.
Supports a diverse and inclusive workforce.
Impact measurement can be subjective.
Supply Chain Transparency
Measures the transparency of the supply chain, from sourcing to delivery.
(Transparency Efforts Implemented / Total Supply Chain Efforts) x 100%
To enhance visibility and accountability.
Builds trust with customers and partners.
May require technology investments.
Employee Well-being
Evaluates initiatives to improve employee well-being and work-life balance.
(Well-being Programs Implemented / Total Employee Programs) x 100%
To support employee health and satisfaction.
Enhances employee retention and morale.
Impact measurement can be subjective.
Sustainable Transportation
Tracks the use of eco-friendly transportation and commuting options.
(Sustainable Transportation Utilized / Total Transportation) x 100%
To reduce the carbon footprint of transportation.
Aligns with environmental goals.
May require investment in green vehicles.
Green Energy Adoption
Measures the adoption of renewable and green energy sources.
(Green Energy Usage / Total Energy Usage) x 100%
To reduce reliance on fossil fuels.
Lowers energy-related carbon emissions.
Initial investment in green tech.
Ethics Training
Assesses the training and education on ethical practices provided to employees.
(Ethics Training Hours / Total Employee Training Hours) x 100%
To promote ethical conduct within the organization.
Supports ethical decision-making.
Impact on employee behavior can vary.
Sustainable Reporting
Evaluates the transparency and quality of sustainability reporting.
(Sustainability Reports Published / Total Reports Published) x 100%
To communicate sustainability efforts to stakeholders.
Builds trust and credibility.
Requires dedicated reporting resources.
Social Impact Investment
Measures the percentage of revenue allocated to social impact initiatives.
(Social Impact Investment / Total Revenue) x 100%
To allocate resources for social responsibility.
Demonstrates commitment to social impact.
Impact measurement can be subjective.
Environmental Audits
Tracks the frequency and results of environmental audits.
(Successful Audits Conducted / Total Audits Conducted) x 100%
To ensure compliance with environmental regulations.
Identifies areas for improvement.
Audit process can be resource-intensive.
Sustainable Agriculture
Measures the adoption of sustainable and eco-friendly agricultural practices.
(Sustainable Agriculture Practices Used / Total Agriculture Practices) x 100%
To promote eco-friendly food production.
Aligns with sustainable sourcing goals.
May require education and training.
Community Engagement
Evaluates the level of engagement and support provided to local communities.
(Community Engagement Activities / Total Community Initiatives) x 100%
To strengthen relationships and social impact.
Enhances brand’s community reputation.
Requires dedicated resources for engagement.
Emissions Offset
Tracks the offsetting of carbon emissions through eco-friendly initiatives.
(Total Emissions Offset / Total Emissions) x 100%
To neutralize carbon footprint.
Demonstrates commitment to carbon neutrality.
Offset effectiveness may vary.
Sustainable Procurement
Measures the sustainability of procurement practices and sourcing decisions.
(Sustainable Procurement Actions / Total Procurement Actions) x 100%
To align procurement with sustainability goals.
Ensures ethical and eco-friendly sourcing.
Limited control over external suppliers.
Sustainable Innovations
Tracks the development and adoption of sustainable innovations and technologies.
(Sustainable Innovations Implemented / Total Innovations Implemented) x 100%
To drive eco-friendly product or process improvements.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
A four-step innovation process is a simple tool that businesses can use to drive consistent innovation. The four-step innovation process was created by David Weiss and Claude Legrand as a means of encouraging sustainable innovation within an organization. The process helps businesses solve complex problems with creative ideas instead of relying on low-impact, quick-fix solutions.
Innovation in the modern sense is about coming up with solutions to defined or not defined problems that can create a new world. Breakthrough innovations might try to solve in a whole new way, well-defined problems. Business innovation might start by finding solutions to well-defined problems by continuously improving on them.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
