Business Model Innovation Yields Sustainability Profits

by Brigid Milligan, Feb 6, 2013, 1:09 PM

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We’ve said before that sustainability – and being green – is good for business. The recent MIT Sloan Management Review / Boston Consulting Group study is another testament to that, finding that more companies are profiting from sustainable business models. 

Now in its fourth year, the study found that the portion of respondents reporting profit from sustainability went up 23%. As more and more companies realize that sustainability is good for the bottom line, there has been an increase in the number of companies actively changing their business model for sustainability opportunities – namely nearly 50% reporting having changed business models and profited from it. Sixty percent said they profited by including sustainability as a permanent fixture in their management agenda. The report authors call this “business-model innovation” and cite it as being the crux of sustainability profits. 

It’s exciting to see that there are substantive success metrics validating sustainability efforts – and as the world recovers from a global financial crisis, such success gives hope for recovery. Unfortunately, the study also found that North American companies are lagging behind the developing world when it comes to focusing on and integrating sustainability into their business models. The study hypothesizes that sustainability demands haven’t taken hold in North America in the same way that they have in the developing world (restricted resources, etc), so companies haven’t been motivated into action in the way they have in the rest of the world. 

As marketers, the report reminds us of the importance of establishing a clear business case to ensure that innovations deliver value – and overall, the percentage of respondents who say their company developed a sustainability business case over the year has grown. Of the companies who were most profitable, 54% had developed a business case. 

The study recommends five best practices common to companies that are profiting from sustainability that are applicable to executives, marketers and communicators: 

1. be prepared to change business models
   
   
2. lead from the top and integrate the sustainability efforts
   
   
3. measure and track sustainability goals and performance
   
   
4. understand how much customers will pay for sustainability efforts; and 
   
   
5. collaborate with external individuals, customers, businesses and groups.

As David Kiron, executive editor at MIT SMR and a co-author of the report said in the study’s press release, the top companies “don't dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency, and build competitive advantage." 

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