Original content provided by BDO Belgium.
According to a survey conducted by BDO Belgium and Mercuri Urval, 97% of respondents believe that sustainability will reshape their company, while 22% of these say that it will completely reshape their business model and activities.
So, we can safely say that sustainability is more than just a trend or buzzword. It is a long-lasting revolution that is reshaping businesses across all sectors.
However, making your organisation more sustainable is not a transformation that happens overnight. For most companies it is a slow process of incremental improvement towards more sustainable practices (e.g. switching to renewable energy sources by installing solar panels, electrifying your fleet, or implementing a personal development or well-being plan for your workforce).
While all such initiatives are a good first step, the transition to sustainability will require much more. To be truly impactful, you will need to integrate environmental, social and governance (ESG) considerations in all business decisions and rethink your entire business model.
Adopting circular principles to transform your business model
One strategy to increase the sustainability of your business model is introducing circular economy principles. The circular economy is a model that aims to keep resources in use for as long as possible, minimising waste and pollution. It is a regenerative system that promotes the reuse, repair and recycling of materials, creating a closed-loop system where waste becomes a valuable resource.
In a linear economy, companies follow a ‘take-make-dispose’ model, which leads to the depletion of natural resources and generates waste. This model is not only unsustainable, it is also costly, as companies have to constantly extract new resources and dispose of waste. In contrast, the circular economy enables companies to reduce their dependence on virgin resources and minimise waste, resulting in cost savings and increased efficiency. This approach has the potential to transform traditional business models into circular business models and make them profitable, sustainable and future proof.
Some example of circular business models are:
- Product as a service: Philips shifted its business model from selling light bulbs to offering light as a service, resulting in a 50% reduction in energy usage and the development of lighting fixtures that last 75% longer than other conventional fixtures
- Design to enhance durability: Fairphone aims to design and produce longer-lasting modular smartphones, encouraging consumers to replace only the parts of their phone that are broken or need updating, instead of the whole phone
- Materials recovery and recycling: ROCKWOOL, a company producing insulation materials, launched a collection and recycle programme. With it, the company takes back stone-wool material from construction, renovation and demolition sites and recycles it in its own production process to make new products.
These examples show that innovating the business models allows organisations to align their strategy with their pursuit of a sustainable transition. Therefore, by integrating circular principles into the business models, companies can create a more sustainable and resilient business that aligns with their values and meets the needs of all stakeholders. This approach can also help companies to differentiate themselves from competitors, attract new customers and investors and build a strong reputation for corporate responsibility.
How can you approach this? What should you consider?
- Incorporate eco-design principles when redesigning products. Consider making products modular to make them easier to repair and reuse
- Keep the full life cycle of your products and materials in mind and always look at a product and its packaging as a whole
- Explore the Product-as-a-Service (PaaS) model, which can lead to more sustainable material usage and better end-of-life services. Take-back programmes can be a key component of a circular business model
- Collaborate with stakeholders. Engage with suppliers, companies from other sectors and even competitors to ensure that sustainable practices are implemented throughout your value chain.
" At BDO Norway, we believe that ESG isn't just a trend, but a strategic move that will shape the way we do business for years to come. To create value in their transition to sustainability, companies must rethink their business models, by changing production methods, their supply chain, the characteristics of their products and their downstream activities, from waste handling to recycling and reuse. My impression is that frontrunner companies already investing in the transition now will be those who create the most value for both themselves and society in the next 2-3 years.”
MORTEN THUVE, Partner – Head of BDO Consulting, Head of Sustainability Services, BDO Norway
Kick-start your ESG journey
In conclusion, sustainability is here to stay and will have a lasting impact on businesses. Embracing sustainable practices requires a transformational change in business models and operations, and only those who take this transition seriously will benefit from stronger resilience, reputation and competitiveness in the long run: read more here.
If you want to future-proof your business, it is time to embrace sustainability and make it a core part of your business model.
Contact your local firm’s ESG advisers today to learn how BDO can help your company transition to sustainable business practices and meet the growing demands of stakeholders.