When building a business, a corporation wants to ensure they are building something that lasts for the long term with the sustainability at the centre of its business. Understanding the market and customers as well as value chain, having sustainable business model, planning well and putting in the work early on will set the company up for the competitive advantage and sustainable success.
In the face of the volatile, uncertain, complex and ambiguous (VUCA) business environment, every company needs to prioritise. For corporate responsibility and sustainability leaders, a strategy sets out the priorities and goals to attain a competitive position. It provides an agreed framework for deploying resources, creating an impact and communicating results. When done effectively, the process of developing a strategy can help to allocate resources and drive performance for lasting business which eventually can achieve sustainable business.
A sustainable business can support itself and offer a profit to its owners and shareholders as well as an overall value encompassing the environmental, social and economic values which are embedded the sustainable value at the centre of the business. For a company to develop real sustainability, it must meet its consumers' demands while balancing the needs of its employees and stakeholders. The larger a company gets, the more difficult it is to attain sustainability. Yet, it's large corporations that benefit most from implementing sustainability in their company structure.
From a broader perspective, a sustainable company is one whose purpose and actions are equally grounded in financial, environmental and social concerns. But unfortunately, the road to sustainability for most businesses is not easy. Sustainability is crucial to longevity in a business. Unsustainable businesses tend to be a drain on resources, and their owners shut them down after they fail to prove viable. The more sustainable a business, the much longer it will last in the market.
Developing a Sustainable Business Model
Over the years, many companies still focus on past traditional business models in creating value for the business owner which is clearly outdated in the ever changing, competitive and cut-throat business landscape. This was later expanded to include internal stakeholders such as shareholders. However, these business models are still incomplete in terms of sustainability and thrivability. This is because those companies don’t calculate and measure the effect a business has on the environment, society or the impact of those effects on the business itself. They just merely focus on the financial impact.
In the larger perspective, a sustainable business model (SBM) is one that takes a holistic approach incorporating the environmental, social and economic aspects of the business or industry that companies operate and compete. No business operates in isolation; it competes fiercely with other peers or competitors. it exists within an ecosystem comprising of the industry landscape, political environment, international trade barriers and local as well as global communities. At the very least, it relies upon a supply chain and a delivery chain in the value chain architecture. The sustainable value model shows how an organisation creates value from this ecosystem. To continue generating value from the environment, an organisation must calculate its effects on that environment (Evans et al. 2009).
Society is pressuring business leaders to look beyond creating shareholder value. People want companies to generate value for the environment and society as well. Long-term financial gain is only possible through sustainable development. A company must include the full impact of sustainable business practices on external stakeholders to determine the net value it produces.
The Relationship of Sustainable Business Model and the Value Chain
As supply chains have become increasingly globalised, complex and competitive, companies make payments to numerous suppliers annually, including those in local communities or markets as well as in the international markets. At the same time, consumers demand for green and ethical products, environmental regulations on business activities and investors’ sustainability expectations are growing.
Nicole Oertwig et al., discussed that in order to successfully achieve sustainable corporate development, enterprises have to define and implement a pragmatic strategy. The firm’s overall objectives thus become multidimensional and have to be broken down to the individual departments and business fields ultimately balancing economic, ecological and social performance factors, to ensure optimised decision-making (N. Oertwig, et al., 2017).
As companies operate globally, they strive to work with their customers, suppliers and other value chain participants to promote sustainable practices across the full life cycle of their products and services. Michael Porter brilliantly shared in his influential book called the Competitive Advantage of Nations (1985) that the value chain analysis can be adopted and used widely as the strategic tool for companies to create value and look for ways to add more value which are critical elements to build competitive advantage for sustainability.
As global corporations, they have to take an integrated systems approach to value chain sustainability and sustainable business model (SBM) strongly supported by the right people and strategy, enterprise resource planning (ERP) and the technology platforms, which are designed to assess and work with others to improve the sustainability impacts of their upstream global supply chains, inbound and outbound logistics, and their products as they move through the value chain from raw materials (inbound logistics), processing (operations) and delivery of their products and services (outbound logistics) greatly supported by their marketing and sales and after sales services as well as other corporate teams globally.
Furthermore, businesses can broadly categorise their value chain sustainability which is primarily driven by their sustainable business model as follows:
Responsible procurement and sourcing – integration of sustainability considerations into procurement and logistics in their inbound and outbound supply chains including shipping, delivery, quality, etc
Operations and process stewardship – meeting the responsible procurement and sourcing expectations of the market across geographical areas.
Product and services stewardship – influencing the sustainability performance of their downstream value chain where they do not have operational control, taking into account of the aspects and environment and society as the sustainable business values.
Human capital, marketing, technological and financial stewardship – greatly supporting and integrating the support activities in adding more value across the value chain architecture and business landscape.
They seek to identify and improve performance across a wide range of relevant issues, including people, environment and communities and its impact areas. In determining where to focus, they consider financial impact as well as environmental and social materiality to attain business sustainability.
Benefits of Sustainable Business Model
When strategically implemented and executed, companies that use sustainable business models are more likely to succeed (Lindgardt et al. 2009). Additionally, business sustainability is the single most effective way to ensure long-term success (Fedeli, MD 2019). Economic growth needs to be coupled with social value and mitigation of environmental impacts. A sustainable business model identifies risks in the current supply and value chain. It then integrates innovation to combat those risks and ensure prosperity.
Adopting an SBM also helps to create a positive brand image. People are becoming more critical of corporate impacts on the global environment and society. SBMs are ethical business models, providing value to both shareholders and society. This makes them more attractive to eco-minded consumers, as well as potential employees and investors. It also promotes a better economy where there is little production waste and pollution, fewer emissions, more jobs, and a better distribution of wealth and prosperity for all nations.
