Give people what they want: A sustainable business model

Consumers, investors, and partners are increasingly making decisions about your business based on sustainability. These stakeholders have always demanded value, quality, and speed. Today, a sustainable business model is just as important.

According to the old maxim, if you want something cheap and fast, it won’t be good. But if you value speed and quality, what you get won’t come cheap. Companies have long had to view their complex and nuanced priorities, goals, and KPIs through this reductive lens. Now, they also need to factor sustainability into this equation.

But consumers and stakeholders don’t want to pick between sustainability and speed, price, or quality. They want a sustainable business model as a default.

Sustainability in business: Key to brand survival, large and small alike

Sustainability in business is critical for brand survival as consumers want brands who share their values. For small and midsize businesses - which have no margin for error - it’s especially critical.

Sustainable business model: Value for all

The “shareholder value” model of capitalism can be blamed in part for our dedication to fast, cheap, or good.

The world’s major capital markets are dominated by this model, where a company’s success is measured only by how well it generates returns for shareholders. In the shareholder value model, firms need to consistently maximize shareholder return.

However, a new business model is on the rise and becoming pervasive in more markets, giving greater control to more than shareholders. The “stakeholder value” model advocates maximizing value for all stakeholders — including customers, employees, community members, and others — when making business decisions.

What sustainability means depends on who’s talking

While sustainability is more important than ever, it’s also more ambiguous than ever. Sustainability means something different to virtually everyone, and stakeholders’ concepts of sustainability may differ wildly from yours.

Your investors may be focused entirely on the sustainability of your supply chain, while consumers might prioritize eco-friendly products that reaffirm their own beliefs.

But beware: More-discerning consumers have coined the term “greenwashing” to describe companies who spend a lot of time and effort trying to make themselves seem sustainable without truly becoming sustainable. Product packaging that merely looks “green,” paired with unfulfilled promises about your environmental impact, may do more harm than good when it comes to winning over these consumers.

Sustainability in fashion: Industry teeters on ethical catwalk

Fashion is a $2.5 trillion industry, producing 10% of global carbon emissions, 20% of global wastewater, and vast biodiversity loss. Consumers are demanding change, forcing sustainability in fashion as a requirement, not a trend.

Building a sustainable business model

Sustainability and the stakeholder value model go hand in hand. Companies that want to make their supply chains more sustainable often collaborate with a wide range of stakeholders including suppliers, distributors, retailers, local communities, technical experts, nongovernmental organizations, and governments.

A few steps are needed in order to build successful multi-stakeholder partnerships:

1. An ambitious shared purpose and common goal
2. A healthy dose of realism about the amount of time and effort required to achieve goals
3. Mutual accountability and clear goals, roles, and responsibilities for each partner
4. A governance mechanism to enable accountability and, potentially, an independent third-party partner to monitor and evaluate performance
5. Time invested into building respect and understanding of each partner

Closed loop production: Sustainability across the supply chain

Closed-loop production systems drive sustainability across the entire supply chain by eliminating waste and clearing the path for a circular economy.

Determine your metrics

Environmental, social, and governance metrics (also known as ESG metrics) can give investors a more holistic view of your company’s operations, including its investments in sustainability.

These kinds of metrics can help investors more accurately value these investments and ensure that companies aren’t judged purely on short-term financial results. To focus on your ESG metrics, you first need to define what sustainability means for you – and your stakeholders.

Win over all your stakeholders – be they consumers or investors – by investing in a wide range of sustainable opportunities, especially those supported by third-party sustainability organizations.

US companies can become “benefit corporations,” which are recognized for their established purpose of creating general public benefit. B corporations are legally required to consider the impact of their decisions – not only on their shareholders, but also on society and the environment.