Sustainable business model: what it is and how to build it

Improve reputation and competitive position on the market through a sustainable business model

What is a business model?

The Business Model is the conceptual tool used to describe the logic with which an organization creates, distributes and captures value.

The model represents the organizational and strategic plan that the company will use to identify the feasibility of a product or service, to identify the target market and make a profit taking into account the expected expenses.

A business model is fundamental for every company, as it facilitates the evolution of the initial idea, its growth, the acquisition of new customers. This tool is used to study a business strategy, differentiate your business on the market, optimize business processes, not lose your customers and reach new ones. In short, the business model serves first and foremost to clarify your business idea, precisely because it will be written down and carefully analyzed.

The strategic scheme commonly used for the creation and development of business models is the Business Model Canvas which shows the infrastructure, products, customers, suppliers and other elements that distinguish a company.

It can be useful to innovate and update your business model when, for example, new competitors arise, new needs of your customers or when the profit margins of your product or service begin to drastically halve.

Adopt a sustainable business model

The transition from a traditional business model to a sustainable one allows the company to concretely implement sustainability in its activities, thus producing positive effects and creating value for the environment, society and people.

A sustainable business model allows companies to integrate sustainability in every area of action, from defining corporate objectives to carrying out daily activities.

Following the definition of the sustainability strategy, its integration into company policies becomes necessary. The three key elements that must therefore coexist in a sustainable business model are:

• the environment. Company activities can cause damage to nature and its resources. The sustainable approach would require the company to review its practices and adopt low impact methods through circularity, regeneration and reduction of waste, reduction of waste and pollution;
• people. The organization must be aware of the impacts it has on the local community and society in general. On a daily basis, the company interacts with various stakeholders both internally involved in their activities (e.g. employees) and externally (e.g. suppliers);
• governance. The economic paradigm of businesses is evolving. Despite the common belief that sustainability is not compatible with generating profits, more and more companies moving towards sustainability demonstrate that this can make their businesses even more profitable.

The model will therefore be geared not only towards economic growth, but also towards the generation of positive impacts on the environment and people.

The Sustainability Business Model Canvas is the tool to be used to outline and represent sustainability-oriented business modelsibility. This framework is enriched by an analysis of the effects of corporate activities in the three spheres of sustainability: environmental, economic and social.

Advantages of a sustainable model

Orientation towards sustainability represents not only an opportunity for innovation, but a fundamental necessity to ensure long-term competitiveness for the company. This concerns all companies, from large to small ones, as stakeholders, from the supply chain to banking institutions, are increasingly sensitive to the issues of sustainability and circularity.

According to Global Buying Green 2022, 68% of consumers purchase products based on companies' sustainability credentials.

The main advantages of a sustainable business model are:

• greater propensity for innovation and ability to adapt to changing markets and laws, knowing how to seize the opportunities for expansion and progress that the sustainable approach offers;
• creation of a concretely sustainable offer in line with current consumer needs;
• better risk management;
• improvement of reputation, anticipating the dangers deriving from superficial sustainability strategies that could lead to accusations of greenwashing.

The challenge consists in finding innovative solutions to remain competitive, without compromising or relegating other objectives to the background.