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.
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.
