/ EXPAND THE VALUE CHAINS . Innovate by layering onto the business ecosystems of customers or of partners in other industries . In Chile , Algramo ’ s innovative bulk distribution system replaces single-use plastic with RFID-equipped reusable containers . Since 2013 , the startup has scaled up its business by partnering with more than 2,000 family-owned stores across Santiago . They dispense affordable food and staple products “ al gramo ” ( Spanish for “ by the gram ”) and reward customers for reusing containers . Algramo ’ s model not only helps the environment but also benefits the urban poor , who previously had to pay high prices for small quantities of products , in wasteful , individually wrapped packets .
/ RE-LOCALIZE AND REGIONALIZE . Shorten and reconfigure global value chains to bring societal benefits closer to home . In Brazil , BASF has developed a solution to a local issue : waste certificate fraud . Some collectors and recyclers claim credits for recycled materials that they didn ’ t actually process or that aren ’ t actually recycled . Partnering with Kryha , a digital blockchain studio , and Recicleiros , an NGO that supports waste collectors and their cooperatives , BASF developed an online platform called ReciChain . This platform enables accurate and secured data tracking throughout the recycling value chain , to improve the quality of operations and guarantee the validity of manufacturers ’ certificates and claims .
/ ENERGIZE THE BRAND . Encode , promote , and monetize the full environmental and societal value of products and services , and use that leverage to engage customers in novel ways . The innovative manufacturing company 3M released the latest version of its Thinsulate insulation product in 2019 . This is “ 100 % recycled featherless insulation ” made from recycled plastic bottles . Building on this accomplishment , 3M worked with the highend apparel brand Askov Finlayson to create “ the world ’ s first climate-positive parka ,” producing 3,000 parkas in 2019 as an inspiring demonstration project .
/ BUILD ACROSS SECTORS . Create new business models in collaboration with government and nonprofit organizations , particularly in rapidly developing economies , to improve the business ecosystem and societal proposition . Together , SC
Johnson and the social enterprise Plastic Bank have opened nine recycling centers in Indonesia to collect and recycle plastic before it reaches the ocean . This partnership also plays an important societal role , helping families in impoverished areas who collect plastic waste by buying it at a premium from them . In 2019 , the partnership announced a groundbreaking , three-year deal to create 509 plastic collection points , including locations in Thailand , the Philippines , Vietnam , and Brazil . In aggregate , these points are expected to collect 30,000 metric tons of plastic over three years — the equivalent of stopping 1.5 billion plastic bottles from entering waterways and the ocean . On the business side , among other benefits , this collaboration will secure a steady supply of high-quality recycled plastics and help SC Johnson meet its 2025 packaging goals .
These seven archetypes can be starting points for developing your own business model innovation . Adapt them , and combine several together to develop a more comprehensive solution to environmental and societal issues relevant to your enterprise . Interestingly , among the 102 in-depth SBM-I cases that we explored in our research , 75 % of the SBM-I leaders ( the “ front-runners ”) combine three or more archetypes . This contrasts with less than 30 % in the two other groups : the “ ecosystem leaders ” and the “ initiative leaders ,” whose efforts tend to be more narrowly focused .
STEP
3
Link to Drivers of Value and Competitive Advantage
In the third stage of the cycle , test , iterate , and refine your business model ideas or concepts ( from the second step ) to ensure that they will yield the environmental and societal benefits intended , and that the benefits will translate into value and advantage for the company . A business with weak profit margins cannot invest in innovation to amplify and scale environmental and societal benefits .
The objective of this step is to keep assessing and reengineering the business model , so that it continually improves the resilience of the business and the benefits to society . ( See “ Assessing the Business Model ,” opposite page .)
STEP
4 Scale the Initiative
The full potential value of sustainable business model innovation is achieved only when the new business model is brought to scale : engaging people in the company , across the supply chain , in the company ’ s networks , and in its ecosystems to expand impact and advantage .
To accomplish this , companies can leverage three enablers . First , partnerships with other organizations , within or across industries or sectors , can help a company pool resources , fill capability gaps , and unlock new markets . Almost 90 % of the front-runners have broadened their efforts this way . Second , digital technology ( leveraged by 80 % of the front-runners ) can help create new distribution channels that reach previously unserved or underserved populations at a fraction of the cost of their predecessors . Third , companies that adopt SBM-I tend to develop cultures and leadership values that attract and engage people inside and outside their boundaries . Indeed , all of the front-runners explicitly mention the environmental and societal impact they seek to deliver in their vision , purpose , or mission statements .
The four-step innovation cycle we propose in this article offers companies a way to systematically integrate and solve for social and business value in one business model . Most of the companies that begin this journey are already skilled at optimizing for business advantage . They may already recognize the importance of taking into account their environmental and societal impacts . With this approach , they are now ready to take on innovation for a business that optimizes for both business and social value .
David Young is a managing director and senior partner in the Boston office of Boston Consulting Group and the global leader of the firm ’ s work in total societal impact and sustainability . He is a BCG Henderson Institute fellow researching new forms of competitive advantage .
Marine Gerard is a project leader in BCG ’ s San Francisco office and a former BCG Henderson Institute ambassador .
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