Archetypes for Sustainable Business Models

Archetypes for Sustainable Business Models

Illustration of categories. Illustration

There are many ways to define a sustainable business model (SBM). Often, you may also hear the term, business models for sustainability. While the debate continues among academics, we’ll use the explanation below to frame our general understanding:

SBMs work to incorporate the principles of and goals for sustainability into their value proposition, value creation & delivery, and value capture activities. This means integrating innovative activities and a wide-range of stakeholders, including society and the natural environment, and planning for the long-term viability of the organization along environmental, social and economic lines.

A new organization may design and implement its SBM from the start, while an existing organization may choose certain strategies to innovate the ways it creates and captures environmental, social and economic values.

Below you will find theory and examples of some types of SBMs that may serve as inspiration for your organization. Archetypes are common patterns, models or prototypes, and SBM Archetypes therefore help demonstrate some common innovation strategies for increasing sustainability. You can think through each of the archetypes and how you might innovate your organization’s business model across environmental, social and economic aspects. Keep in mind that archetypes can be combined across different parts of your value chain, and that there is no one-size-fits-all approach.

Circular Economic Business Models

The Circular economy (CE) is a system that is designed to be restorative and regenerative in order to transition current linear production and consumption patterns to cyclical ones that remove waste from the system. CE is increasingly seen as way to contribute to sustainable development. To contribute to redesign for the CE, we must all make changes in the way we produce, consume and manage waste.

For more information on the Circular Economy, see the Ellen MacArthur Foundation

One way for organizations to contribute to the CE is through circular economy business models (CEBM). CEBMs work to reduce resource use and waste within production, but also to extend product life cycles and employ strategies that allow the consumer to do more than buy, use and dispose.

Some common archetypes for CE business models:

  • Circular supply chains – Reform the use of resources by e.g. using completely recyclable materials or renewable energy
  • Sharing platforms – Increase product usage through collaborative ownership, use and access models
  • Product as a service – Maintain product ownership and encourage responsible use and resource productivity throughout the full value chain
  • Product life extension – Extend the life cycle of a product through e.g. repair, maintenance, resale and remanufacturing
  • Resource recovery – Recover value in waste through resource and energy recycling and recovery

*This material is largely adapted from: Circular Advantage: Innovative Business Models and Technologies to Create Value in a World without Limits to Growth (Accenture, 2014)

More resources and CBM theory:

Environment focused Archetypes

These archetypes are based in environmentally oriented business model innovation that curbs negative environmental impact and resource use.

Maximize material productivity and energy efficiency (note similarities to the Circular supply chain archetype)

Use fewer resources and less energy, especially from non-renewable sources to generate less waste, reduce pollution and emissions to land, sea & air

Examples:

  • Dematerialization of products and packaging
  • LEAN manufacturing principle
  • Low-carbon manufacturing
  • Increased functionality of products
  • Moving from non-renewable to renewable energy sources
  • Local energy solutions

Substitute with renewables and natural processes

Reduce environmental impacts and improve company long-term outlook by using renewable energy sources, e.g. wind or solar. Also avoids resource constraints associated with non-renewable resources and current production systems.

Examples:

  • Moving from non-renewable to renewable energy sources
  • Local energy solutions

Close resource loops (note similarities to the Circular supply chain and Recovery & recycling archetypes)

Remove waste by reusing products and materials. Waste streams turned into useful and valuable input to other production streams.

*This material is largely adapted from Bocken, et al. (2014) and Ritala, et al. (2018)

Social Archetypes

These archetypes depend on social innovation to offer sustainable value. Social archetypes aim ultimately to restructure consumption and production patterns, or to involve the needs of stakeholders in design and production.

Deliver functionality rather than ownership

Provide services that satisfy users’ needs without having to own physical products

Examples:

  • Product includes maintenance and extended warranty
  • Product or service is rented, leased or shared, e.g. leasing programs for children's articles that are quickly outgrown
  • Pay per use of product or service, e.g. car, bike or scooter sharing

Stewardship role

Proactively engaging with all stakeholders to ensure their long-term health and well-being

Examples:

  • Biodiversity protection
  • Consumer care – promoting consumer health and well-being
  • Ethical trade, e.g Fair Trade
  • Radical transparency about environmental or social impacts, e.g. Certified B Corporations
  • Upstream stewardship, e.g. requiring suppliers to meet certain social standards (HSE, human and labor rights) or environmental standards (certifications, reduced emissions, no harmful chemicals)
  • Downstream stewardship, e.g. producing consumer products that reduce waste like reusable food storage products

Encourage sufficiency

Solutions that actively seek to reduce consumption and production

Examples:

  • Consumer education
  • Demand management
  • Product durability and longevity, e.g. durable outdoor clothing designed to last
  • Market places for second hand goods, e.g. Finn.no, clothing swaps
  • Premium branding/ limited availability
  • Responsible product distribution/ promotion

*This material is largely adapted from Bocken, et al. (2014) and Ritala, et al. (2018)

Base of the Pyramid Archetypes

Base of the Pyramid (BoP) is a term used to describe the world's population and markets with the lowest income. BoP Archetypes therefore give companies an opportunity to bring livelihood and access improvements to markets and people in the developing world.

Build a new market

This archetype surrounds creating a new market for a company's product(s) in a responsible way. However, this doesn't just mean creating a new product that fits the needs of that market. It also likely includes aspects of consumer education, developing local partnerships and bundling with micro-finance, technical support and maintenance to allow the customer to buy and use the product. When building a new market, it is essential to consider the importance of a business model that is engrained in the needs and values of the customer's it intends to reach.

Examples:

  • Developing a product that meets the need of a specific market, e.g. a new or adapted food product that meets nutritional needs or deficiencies of the targeted community
  • Varying pricing structures
  • Education programs to teach consumers about benefits of a untraditional, inaccessible or unknown product, e.g. in regions lacking healthcare, training about over-the-counter medicines
  • Micro-finance and leasing of necessary goods and materials

Differentiated pricing structures

This archetype requires recognizing that different customers and markets may not be willing or able to pay the same price as other customers. This way, companies can sell more widely by recognizing that subsidizing their prices for BoP and other low income markets and raising them for those that can pay a higher price provides access to all.

*This material is largely adapted from SustainAbility (2014)