7 Green business models for 2020
The necessity for environmental responsibility, both corporate and individual, has grown significantly in the past couple decades. This is evidenced by governmental policy changes incentivizing green initiatives, the proliferation of renewable energy sources and an increased societal focus on corporate responsibility. These macro environmental changes are hard to ignore and have left organizations with outdated and pollutant heavy processes looking to green their businesses. Implementing green solutions into an existing business model can range in difficulty however both the immediate and long term financial and environmental return make these changes worth the investment? Below is a list of green business models that are spurring change while creating unique market positioning for the companies adopting them.
Quality focus (product service systems)
Product service systems aim to reduce negative environmental output by focusing on increased product quality and efficiency. This is done by bundling products and services. Typically the product is bundled with a service package that reduces post purchase maintenance costs resulting in increased product efficiency. Examples of this might be buying a washing machine with a service warranty or automobile with a warranty. This approach has a multitude of financial and environmental benefits. A more efficient product means less waste. Additional product value and efficiency with product/service mix can increase revenue and marketing efforts by attracting customers that want reliability and a greener product.
Energy Reduction
Energy consumption can vary depending on your business and industry. A company with manufacturing intense processes is going to have higher energy requirements than an insurance agency. In today’s climate, consumers like to see socially conscious businesses and often look for accreditations from independent organizations like Green Business Bureau. While this can attract eco-conscious consumers there are significant cost savings to be realized as well. Many large utilities are now seeing the value in offering a mix of products and services in attempt to lower consumer energy consumption. But it’s not just the large utilities. NEST, for example, is a relatively small brand that sells smart home thermostats. NEST thermostats learn homeowner behavior and tailor usage to create energy cost savings. Phillips is another great example of a company that has recognized macroeconomic trends and adapted to greener market requirements. Phillips sells smart home lights and that use efficient LED technology and can be controlled remotely and set on timers. Rooftop solar and in home battery power banks are examples of other new tech pushing the boundaries of the energy saving industry.
Closed loop
Closed loop business models focus on improving sustainability by recovering waste and depleted materials at the bottom of the product life cycle and re-introducing them at various stages in the supply chain. This becomes especially important when non-biodegradable materials are present in manufacturing, packaging and other stages of the product life cycle. Businesses are fundamentally producers of goods and services. This makes implementing a closed loop strategy evermore important to being socially responsible. Temperpack is one such company that has implemented a closed loop model. Temperpack mitigates downstream environmental impacts through design and bio-degradable materials. Redesigned and eco-friendly packaging are low hanging fruit if you run a product based company.
Green Supply chain Management (GSCM)
In broad terms, supply chain management refers to the flow of raw materials into a business and ends at point of delivery to the consumer. Green supply chain management is the process of analyzing individual components of the supply chain to identify areas that can be restructured to reduce waste and make businesses more environmentally friendly. GSCM is typically effect upstream supply chain areas such as sourcing raw materials but can be applied to many different supply chain activities. For example, replacing older machinery, using eco-friendly solutions instead of more toxic chemicals and opting for greener packaging are all green supply chain modifications being used by today’s socially responsible businesses.
Downstream Waste Re-use
This application is often implemented by larger organizations as an addition to the existing business model to aid in environmental sustainability. This process involves collection of environmentally harmful materials for re-use within the business or distribution of those materials for repurpose externally. This can be achieved at the distributor level or through customer awareness campaigns. Alternatively, many brands have built large followings by harvesting unwanted materials otherwise considered trash from larger businesses. Looptworks for example collects used airline seats to produce beautifully crafted handbags for women. As a startup or smaller organization this can be a fantastic way to source material at lower cost as well as produce very unique products likely to garner attention from eco conscious consumers.
Organic and Biodegradable
The list of organic products has grown significantly in recent years. Pioneering states like California have passed legislation banning plastic straws. In lieu of this, consumers are now using biodegradable and reusable straws. In the 1990’s Congress passed the organic food production act. The organic agriculture movement has since gained momentum with annual sales rising into the multi billions. Incorporating an organic or biodegradable approach into your business model isn’t all or nothing. This can be as easy as sourcing biodegradable cutlery for employee break room areas. Customer facing businesses electing to use substitute current synthetic materials for organic solutions can position themselves as responsible, adaptive and progressive while potentially gaining a leg up on the competition.
Industrial / Urban Co-ops
This is an emerging and forward thinking green business model that makes use of surplus and underutilized resources. Examples of this might include a shared resource management agreement between businesses or locally grown produce in a vacant inner city lot. Co-opting underutilized resources creates efficiency thereby reducing necessity create from nothing. Using surplus resources, such as water or power in the example above, reduces waste.
Considering a greener approach to your business model can yield both economic and environmental benefits. Businesses are always looking to become more profitable but our long term impact on the environment should be considered even if there isn’t financial incentive. Consumers are now more aware of the impact that our industrially revolutionized society is having on the planet. Providing a greener product or service will impact a variety of business functions in coming years.
