Embrace a sustainable business model: profit with purpose!

In today’s rapidly evolving marketplace, sustainability is no longer a niche consideration but a critical component of a forward-thinking business strategy. Companies that integrate sustainable practices into their business models not only contribute to the well-being of the planet but also ensure long-term profitability and market relevance. In this blog, we’ll explore the sustainable business model of Philips Refurbished Systems and I:CO.

What is a sustainable business model?

A sustainable business model integrates economic success with environmental and social responsibility, aiming to create long-term value while minimizing negative impacts on the planet and society.

Why are sustainable business models important?

Sustainable business models are crucial for several reasons:

Environmental protection: They reduce waste, conserve resources, and mitigate climate change by lowering carbon footprints.
Long-term viability: Companies adopting sustainable practices are better positioned for long-term success and resilience in a changing market.
Consumer demand: Increasingly, consumers prefer brands that prioritize sustainability, enhancing customer loyalty and brand reputation.
Regulatory compliance: Governments are enacting stricter environmental regulations; sustainable models help businesses stay compliant and avoid fines.
Cost savings: Efficient resource use and waste reduction can lead to significant cost savings over time.
Attracting talent: A commitment to sustainability can attract and retain employees who value corporate responsibility.
Innovation and competitiveness: Embracing sustainability can drive innovation and provide a competitive edge in the marketplace.

The risk of not embracing a sustainable business model

The costs of doing nothing can potentially be high when it comes to sustainable entrepreneurship. Neglecting a sustainable business model presents several key risks:

Regulatory pressure: Stricter environmental regulations can lead to fines or legal challenges for businesses that fail to comply with sustainability standards.
Loss of market share: As consumers increasingly prefer eco-conscious brands, companies that don’t prioritize sustainability may lose customers to competitors.
Reputational damage: A lack of commitment to sustainability can harm a company’s reputation, making it harder to build trust with stakeholders and customers.
Higher operational costs: Inefficient resource use and wasteful practices can drive up costs, reducing long-term profitability.
Competitive disadvantage: Companies that ignore sustainability risk falling behind competitors who integrate sustainable practices as a core growth strategy.

By not embracing sustainability, businesses expose themselves to long-term vulnerabilities that can impact both profitability and brand strength.

Example: Criticism over the environmental impact can harm a company

By not embracing sustainability in its business operations, a company can reach a point where things quickly go downhill. The phenomenon of ignoring market trends is also called the Kodak-moment.

Forever 21 thrived for years by offering cheap, trendy clothing, but the company failed to respond to the growing consumer demand for sustainable fashion and ethical production. While competitors like H&M and Zara began investing in sustainability initiatives—such as recycling programs and the use of eco-friendly materials—Forever 21 stuck to its fast, low-cost production methods without regard for environmental concerns.

The company faced increasing criticism over its environmental impact and poor labor conditions in production countries. This reputational damage, combined with shifting consumer trends and a lack of sustainable business models, ultimately led to Forever 21 filing for bankruptcy in 2019.

Although Forever 21 remains in operation after restructuring, its story highlights the risks of delaying the embrace of sustainability.

It’s not (always) easy to switch to a sustainable business model

Certain industries face significant challenges in adopting sustainable business models due to their reliance on the current business, resource-intensive practices or complex supply chains. Below are examples where making the switch to a sustainable business model is challenging.

Oil and gas: The shift to renewable energy is slow, and the environmental damage from fossil fuels remains a major barrier.
Aviation: High carbon emissions and dependence on fossil fuels make sustainability difficult, despite advancements in alternative fuels.
Fast fashion: Overproduction, waste, and unsustainable supply chains hinder the transition to eco-friendly practices.
Meat production: The environmental impact of livestock farming is significant, with high emissions, water use, and land demands.
Construction: The use of energy-intensive materials like concrete and steel creates obstacles for achieving sustainable practices.
Heavy industry (e.g., steel, cement): These sectors rely on energy-heavy, polluting processes, making large-scale sustainability difficult without major technological advances.

While progress is being made, these industries must innovate rapidly to meet growing environmental demands and regulations.

Get inspired by our handpicked sustainable business model examples

To inspire you, we have selected 2 sustainable business model examples for you.

1. Sustainable business model example: Philips Refurbished Systems

Below you see our Business Model Canvas example of Philips Refurbished Systems.

Customer segments: Hospitals, clinics, and healthcare providers looking for cost-effective medical imaging solutions.
Value propositions: High-quality, reliable, and affordable refurbished medical imaging equipment with warranty and support.
Channels: Direct sales, online platform, and partnerships with healthcare distributors.
Customer relationships: Dedicated customer service, maintenance and support services, and training programs for healthcare professionals.
Revenue streams: Sales of refurbished equipment, service contracts, and extended warranties.
Key resources: Skilled technicians, refurbishment facilities, and a steady supply of used equipment.
Key activities: Sourcing used equipment, refurbishment process, quality assurance, and distribution.
Key partnerships: Healthcare providers, equipment suppliers, and logistics companies.
Cost structure: Procurement of used equipment, refurbishment costs, labor, and logistics.

2. Sustainable business model example: I:CO

Below you see our Business Model Canvas example of I:CO.

Customer segments: Fashion retailers, brands, and consumers who are conscious about sustainable fashion.
Value propositions: Convenient take-back system for used textiles, promoting sustainable fashion and reducing waste.
Channels: In-store collection points, partnerships with fashion retailers, and an online platform for recycling information.
Customer relationships: Collaboration with fashion brands, consumer education programs, and incentives for recycling.
Revenue streams: Service fees from retailers, sales of recycled materials, and upcycled products.
Key resources: Collection infrastructure, recycling facilities, and partnerships with retailers.
Key activities: Collection of used textiles, sorting, recycling, and upcycling processes.
Key partnerships: Fashion retailers, recycling plants, and environmental organizations.
Cost structure: Collection logistics, recycling processes, marketing, and partnership management.

Need more inspiration? Here you find the circular business model Patagonia.

Discover our Circular Canvas!

Are you looking for a great tool to design sustainable business models? Discover our Circular Canvas. It’s based on the popular Business Model Canvas, but the questions on the building blocks are adapted to help you think circular.

Can you need some help?

I hope that our article has inspired you and provided a clear answer to the question: ”What is a sustainable business model?”. Go on a journey of discovery and find new ways of sustainable value creation. Do you need help creating winning, sustainable business models? Then consider using our services: Business Growth Consultancy.

You’re lucky! Limited-offer: Subscribe to Business Model Hacking and get the digital version of the book and the cards for free. In the book there are also more great sustainable business model examples.