What is a ‘business model for sustainability’?

Research on ‘business models for sustainability’ (BMfS), a.k.a. ‘sustainable business models’ (SBM), is developing very dynamically. But many scholars and also practitioners deal and struggle with the question how to define a BMfS. This post highlights three elements that we think are necessary for such a definition:

  • a general definition of a ‘business model for sustainability’,
  • a general definition of a ‘sustainable value proposition’, and
  • an extended notion of ‘value creation’.

Defining a ‘business model for sustainability’ (BMfS)

Based on the present literature and what we learned from the authors and reviewers of our Organization & Environment special issue on “Business Models for Sustainability: Entrepreneurship, Innovation, and Transformation”, we propose the following definition:

“A business model for sustainability helps describing, analyzing, managing, and communicating (i) a company’s sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries.” (Schaltegger et al., 2016, p. 6)

This definition highlights major conceptual characteristics of business models, which were also highlighted in the initial and still very influential definition by Osterwalder, Pigneur and Tucci (2005), as well as the need to integrate multiple stakeholders and their diverse value perceptions.

The many synergies, tensions and trade-offs related to BMfS are discussed e.g. in the paper by Upward and Jones (2016) who propose a theory and framework to develop and represent ‘strongly sustainable business models’.

‘Sustainable value proposition’ as centrepiece

A centrepiece of a BMfS is the notion of a sustainable value proposition. To define this major element of a BMfS we can refer to the work of Patala, Jalkala, Keränen, Väisänen, Tuominen, and Soukka (2016):

“We define sustainable value propositions as a promise on the economic, environmental and social benefits that a firm’s offering delivers to customers and society at large, considering both short-term profits and long-term sustainability.” (Patala et al., 2016, p. 144)

The development of sustainable – read: multi-stakeholder – value propositions has also been studied. The challenges and possibilities to develop such value propositions has been discussed e.g. by Bocken, Rana, Short and Evans (2013) who propose a corresponding ‘value mapping tool’.

An extended concept of value creation

Understanding and developing BMfS and their potentially sustainable value propositions requires an extended concept of value creation, going beyond the traditional triad of value creation, delivery and capture. Yang, Evans, Vladimirova and Rana (2017) developed an extension that distinguishes different forms of ‘value uncaptured’. They elaborate on…

… the four forms of value uncaptured (i.e. value surplus, value absence, value missed and value destroyed), and identify the main sources of value uncaptured … (read their Paper in Brief (XIV))

References

Bocken, N.; Short, S.; Rana, P. & Evans, S. (2013): A value mapping tool for sustainable business modelling, Corporate Governance: The International Journal of Business in Society, Vol. 13, No. 5, 482–497.

Osterwalder, A.; Pigneur, Y. & Tucci, C. L. (2005): Clarifying business models: Origins, present, and future of the concept, Communications of the Association for Information Systems, Vol. 16, Article 1.

Patala, S.; Jalkala, A.; Keränen, J.; Väisänen, S.; Tuominen, V. & Soukka, R. (2016): Sustainable value propositions: Framework and implications for technology suppliers, Industrial Marketing Management, Vol. 59, 144-156.

Schaltegger, S.; Hansen, E. & Lüdeke-Freund, F. (2016): Business Models for Sustainability: Origins, Present Research, and Future Avenues (Editorial), Organization & Environment, Vol. 29, No. 1, 3-10.

Upward, A. & Jones, P. (2016): An Ontology for Strongly Sustainable Business Models: Defining an Enterprise Framework Compatible With Natural and Social Science, Organization & Environment, Vol. 29, No. 1, 97–123.

Yang, M.; Evans, S.; Vladimirova, D. & Rana, P. (2017): Value uncaptured perspective for sustainable business model innovation, Journal of Cleaner Production, Vol. 140, pp. 1794-1804.

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