A ‘Green’, ‘Sustainable’ and ‘Ethical’ business model?
INTEGRITY BEAT - Henry J. Schumacher (The Freeman) - December 6, 2019 - 12:00am

It is increasingly evident that customers favor suppliers that can give the ‘right answers’ to the above headline:

Green – Sustainability – Corporate Social Responsibility = These notions are often used but they mean different things to different people. At best, each of these terms covers only on part of what a growing segment of the market will want in  future. A concept that covers all three elements, AND also recognizes that a business still needs to make a profit, a Triple Bottom Line.

The 3 Ps stand for Profit, Planet and People. It is all about a company’s ability to achieve its business goals by integrating the 3Ps elements into its business strategies:

• Profit is the economic benefit obtained from a commercial activity

• Planet is about the reduction of the ecological footprint on the environment

• People refers to the fair treatment of everybody involved in bringing the product / service to market.

You will see the same elements and a few additional ones in the Integrity Pledge of the Integrity Initiative:

- Long-term survival over short-term benefit

- Respect the environment

- Adhere to the labor laws

- Pay the right taxes

- Don’t smuggle

- Don’t bribe.

Introducing fair and clean business and the Triple Bottom Line Model affects everything in the end–to–end supply chain! It will require a step-by-step approach.

Traditionally, supply chain focuses on the steps between the supplier, via transport and production, to the trade or end-user to whom the product is sold.

Triple Bottom Line – Phase I : To move towards the 3P model companies first need to look at the carbon footprint generated by production, including the footprint generated by suppliers.

Triple Bottom Line – Phase II : After that it is necessary to expand those steps with considerations on how the user will use the product and will dispose of it. Those considerations will likely have an impact on the steps from supplier to production.

Triple Bottom Line – Phase III :  The full value of 3P will come from designing products in such a way that a product, after disposal, can be recycled into components that can be used for new products. This phase will require a new business model – going beyond the usual planning cycles, and holds many promises for innovation and competitive differentiation.

Benefits of a 3P Approach: Cost savings and opportunities for innovation!

• Economic benefits from increased efficiency - By reducing wastes, companies decrease handling expenses, fines, and even costly inputs. Supplier’s savings may be passed along to buyer companies, increasing competitiveness.

• Competitive advantage through innovation - Efficient production is enhanced through the use of cleaner technologies, process innovation, and waste reduction.

• Improved product quality - Supply chain partnerships help maintain relationships between buyers and suppliers leading to increased control over product quality.

• Improved public image - Consumers, investors, and employees respond positively to companies with a reputation for good environmental performance.

Therefore, ask yourself the following questions:

Do your products meet real needs without creating new problems?

Conscious companies understand the full impacts of the products or services they introduce into society. Taking a systematic approach to the design and delivery of products or services may allow for the discovery of other unintended impacts — both good and bad. Adding benefits beyond the core value can enhance customer perceived value, expand markets and make positive contributions to the world.

Do your products help customers be sustainable?

For many products or services, the biggest impact is downstream; how consumers use them or behave in the process of using them. Companies have an enormous opportunity to encourage sustainable customer behavior by the way they design or shape their offerings. As customers’ behaviors change, their demand for sustainable products and services increases. This "virtuous cycle" moves the society in a more sustainable direction and builds market opportunities at the same time.

What costs make us vulnerable to future risks? 

Current regulatory policies and standard business practices allow business in all industries to externalize some of the costs of their operations. By "legalizing" pollution, for example, we have passed on the cost of harmful effects of emissions and effluent to the public. Similarly, businesses are seldom held responsible for the "end of life" expenses related to the products they put on the market. What would happen to the bottom line if public sentiment changed and organizations suddenly were expected to bear these burdens?

The question to ask here is: How would you operate if you had to incorporate these expenses into your ledgers? What would that imply you would need to do differently to stay profitable? As with many sustainability considerations, the opportunity is in getting ahead of these risks so that they do not blindside you later.

What is fair distribution of your revenues?

Enterprises should consider what portion of revenues ideally should go to each stakeholder group (shareholders, employees, key partners and the community, for example) to maintain the long-term viability of the entire system upon which their business model is built.

Feedback is more than welcome; email me at Schumacher@eitsc.com

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