Part One: Rethinking Business Models for Sustainability

One of the great challenges of the Sustainable Development Goals will be finding ways of lifting populations out of poverty, which is often associated with increased consumption and production, while at the same time dealing with emissions and meeting environmental targets. The question is how to create economic value which also benefits society. Smart technologies, sustainable business models and circular economy solutions are already being developed, but experts say they need to be scaled up, and fast.

“Until we seriously and sincerely change the way we produce and consume, there will be no real answer to the majority of the SDGs,” said Janez Potočnik, co-chair of the UNEP International Resource Panel (IRP). Speaking at the European Development Days in Brussels, he emphasized that a focus on climate change and decarbonisation will not be enough on its own. We need to find a way of “decoupling our economic activities from resource use and environmental pollution.”

“Energy and materials have been very cheap over the last hundred years,” explained Anders Wijkman, IRP panel member and former Member of the European Parliament. “That’s because as a producer or consumer, you don’t pay for the externalities – the costs you put on society.”

As a result, many businesses depend on overusing resources, leading to scarcity and pollution. “Whether steel, cement, aluminium or biological materials, we tend to squander them,” said Wijkman. “From an economic point of view we throw away money – we buy products, they don’t last long – the producer builds obsolescence into them, or because of fashion we want new stuff all the time – and we throw away a lot of value.”

The kind of resource-heavy industrialisation process which many developed countries went through “cannot be repeated in the developing world,” said Potočnik. “We must share solutions so they can leapfrog and not repeat some of the mistakes we have made.”

Several companies are experimenting with new approaches, such as shifting from products to services, partnering with the public sector for community-based schemes, and putting the sustainability of resources at the heart of their business model.

Products to services

For example, Dutch electronics company Philips has started to sell light instead of lightbulbs. Homeowners can rent the bulbs, and Philips is responsible for replacing them when they blow. The crucial difference is that it alters the producer’s incentives: a company selling bulbs wants to sell as many as possible, with a higher environmental burden. But a company selling light has entirely different interests – to make the bulbs last as long as possible. Philips are involved in ASEAN SHINE, funded partly by the EU’s SWITCH Asia programme – for more about SWITCH, see our next Voices & Views.

This kind of business model isn’t entirely new - tyre producer Michelin has been selling kilometres of road travel to bus and haulage companies, rather than tyres, for over 80 years.

“These new business models are changing the logic in which we are operating,” said Potočnik. “You and me, the consumers, have exactly in the same way satisfied our needs,” but the environmental burden is lowered. “This is how we need to change to save resources.”

Community approach

Another way companies can contribute to sustainability is by taking a community-based approach when designing their services, and meeting several needs at once.

Together with the United Nations Population fund (UNFPA), the medical side of the Philips brand set up a community healthcare centre in Kenya’s Mandera County in 2016, following Philip’s first centre in Kiambu County in 2014 in collaboration with the County Government. Both communities have high infant and maternal mortality rates and a range of development challenges, including a lack of electricity and safe water.

The main draw of the centres is their medical technology, including ultrasound monitoring equipment, and staff training. Within eighteen months of opening in June 2014, the centre in Kiambu saw the total number of outpatients visiting per month increase from 900 to 4080; the number of children being treated quadrupled from 533 to 2370; and the first antenatal care patients grew by fifteen fold from 13 to 188 patients each month.

The centres go beyond treating patients. “They become areas where economic activity is developed,” said Ronald de Jong, Executive Vice President at Philips. People can buy clean water and sustainable products like Philips’ smokeless cooking stoves and home solar lighting. “And people come to exercise after hours, because we have solar-powered lighting, so when the sun sets children can still play. And we also see children [do] their homework after hours in those communities, and those communities attract teachers. So you really see the activity goes beyond what was originally intended.”

Sustainability of resources

Coca Cola Company, the world’s largest beverage business, is putting increasing focus on water sustainability. It uses an enormous amount – about 300 billion litres a year – to produce about 151 billion litres of beverages; and that doesn’t include the water needed to grow the other ingredients involved in its 3,800 brands, from sugar and fruit to coffee and tea. This has a huge impact on the communities in which the company operates, some of whom were affected by unsustainable practices in the past.

“We built a water stewardship programme early on to address how we impact water resources worldwide, and how we can manage them better,” said Ulrike Sapiro, Director of Sustainability at Coca Cola Company. “We have replenished 100% of the water we use in our operations and in our product back into the environment – we are aiming for a water neutral position of our direct water use.”

The water used in running the factories and cleaning equipment which can be treated is recycled into local supplies; and the equivalent of the beverages consumed by humans is recouped through community water projects and supporting watersheds and reforestation.

Coca Cola shares its best practices through the CEO Water Mandate, the World Business Council for Sustainable Development and more supply chain-oriented initiatives like SAI Platform. “We also use our experiences to call the industry to action or to engage our peers in collaborative projects with us, for example on social development through our EKOcenters or women empowerment projects,” said Sapiro.

On this front, Coca Cola aims to support 5 million women by 2020, through ‘5by20’ programmes in 60 countries, the majority in Africa. With bottling and distribution centres worldwide, “that exposes us and engages us in the issues important there, social or environmental,” said Sapiro. “It also gives us a role and probably a responsibility to be part of improving, addressing impacts and moving society and communities forward, as we know we only have a sustainable business if the communities we operate in and sell to are sustainable.”

While strategies like this make an impact, experts suggest that companies could go even further towards supporting communities and the environment by paying a fair contribution of corporation tax in the countries in which they operate.

DEVCO’s support

Sustainable consumption and production is a priority in the EU’s development cooperation, with SWITCH programmes in Asia, the Mediterranean and Africa helping businesses shift to more sustainable ways of operating.

“It’s hugely important in terms of jobs in developing countries, in terms of livelihoods and combating poverty,” said Thibaut Portevin, Thematic Officer on Green Economy at DEVCO. “We support organisations in many sectors, including agriculture and processing industries, garment and textiles, eco-tourism, the waste industry and the chemical sector.”

Groups

• UNEP - Environment for Development
• Environment, Climate Change and Green Economy
• Public Group on Private Sector Trade & Regional Integration

Further reading

For more on Philips’ primary healthcare centres and details on the solar power aspect, see our blog.

Teaser image credit: DEVCO image library - 'Mechanic Repairs an Engine', copyright European Commission.