August 27, 2019
According to some experts, the world’s population is currently consuming about 1.7 times the planet’s regenerative capacity — a destructive pace that is quickly torching the planet’s finite resources.
Adrian Wain, a United Kingdom-based UL consultant focused on the development of low carbon and circular economies, agreed.
“If you look at the current economy and the rate at which we are extracting virgin resources, it's really unsustainable,” Wain said, referencing a United Nations environmental report showing that virgin resource extraction is responsible for half of global emissions and 80% of global biodiversity loss.
This extreme rate of consumption means that companies are now evaluating standard practices with an eye toward change. But, while it may be important to build a more environmentally sustainable business, no factor is likely to result in a more rapid change than the goal of achieving business success over the long term.
Indeed, companies have discovered that sustainable practices can be inherently profitable and help drive future operational and financial performance, inverting many traditional business models.
The strategy, according to Christophe Schilling, founder and CEO of Genomatica, which uses bio-based processes to replace petroleum-based materials, makes perfect sense.
“Smart companies are learning how they can deliver more sustainability while focusing on what they do best,” Schilling said.
Nabil Nasr, director of the Rochester Institute of Technology’s Center for Integrated Manufacturing Studies, said sustainability is practically a requirement for today’s top companies.
“There are more consumer demands for a better environmental performance of products as well as growing requirements from governments for managing the environmental impact of businesses,” Nasr said. “Sustainability, when done proactively at the system level, can result in improved competitiveness and financial performance.”
Consumers, stakeholders, front and center
Beyond meeting nascent environmental regulations and minimizing the use of finite resources, large and small companies around the globe are focusing on the demands of consumers who want to purchase greener and safer products. Meanwhile, according to UL’s Sheehy, initiatives developed to support the European Union’s Circular Economy Strategy helps companies employing environmentally sound business practices interact with other companies that have similar ideologies.
“Specifically, the European Union’s Circular Economy Stakeholder platform provides a virtual open space for stakeholders to share best practices and to identify challenges and opportunities for the transition to a circular economy,” Sheehy said. “The beauty of the circular economy concept is that it actually reflects time-honored business practices.”
Schilling of Genomatica said companies can play a role across their industries by shifting priorities and practices.
“A company can tell its suppliers to increase how much they use ingredients made from natural, renewable sources instead of crude oil,” Schilling said. “An example of this is in single-use plastic shopping bags. Now, companies can make bags of the same quality that are both compostable and made from renewable ingredients rather than crude oil. It’s a double win.”
Other sustainable business models
In addition to taking a circular economy approach, there are other sustainability business models that can help shape a greener future, Sheehy noted. These models include:
Regenerative design biomimicry: In this process, companies restore their own sources of energy and materials by relying on what Sheehy characterized as “an imitation of nature's designed processes to solve human problems.”
Closed-loop recycling: Waste is collected and reused to make new products. This method can include everything from simple aluminum can recycling to weaving polyester clothing from plastic bottles. Sheehy described it as “integrating recycled content in product life extension, making the products last longer.”
Sharing platforms: Taking a shared approach to the use of resources through services like Airbnb, VRBO or ridesharing.
Meeting consumer expectations
UL’s Wain stresses the importance of sustainability as it relates to tomorrow.
“Future generations are really expecting us to kind of rewire the economy and make it more sustainable,” he said.
Wain cited a more specific example of how that might be achieved.
“What if, instead of buying a washing machine, and then having to regularly buy detergent, deal with maintenance issues and then replacing the machine after 10 years, you could have one delivered and installed by a company that handles every aspect of the use cycle — from providing laundry supplies on a set schedule, to performing maintenance as required, and then replacing the machine at the end of its useful life?” he asked.
“A company that can provide that level of service is meeting a genuine consumer need, contributing to the customer’s overall level of satisfaction, and simultaneously building a long-term relationship at the same time.”
“This example perfectly illustrates how to reframe the existing business model for everyone’s benefit,” Wain concluded.
Sheehy agreed and noted that sustainable business approaches of this kind are also meeting the consumer demands of a certain generation.
“Extending the life cycle of product or service [means] companies are looking to basically build relationships with their customers over a much longer period of time,” she said. “When you look at statistics on millennials, for example, they're not interested in buying stuff. They want to buy services and experiences. And so, companies are re-examining their models to find new ways to meet those expectations.”
This article was originally published in On the Mark, a UL magazine. Dave Wilson is the author. You can read more stories about the growing connection between sustainability and business by downloading the magazine.