Did you know that? According to the 2022 edition of the National Footprint and Biocapacity Accounts the mother Earth now requires one year and eight months to regenerate what humans consume in a year. This means that humans are consuming Earth’s resources faster than they are being reproduced. Excessive unsustainable consumption and production effects planet Earth’s carrying capacity, resulting in resource scarcity, environmental degradation, and economic loss.
As per report total annual demand for human consumption of raw materials have surpassed 100 billion tons in 2021. If unsustainable business continues constantly by 2060 then the global extraction of natural resources will increase 110 percent. The unsustainable businesses are constantly keeping pressure on the limited resources of Earth.
It becomes now essential for businesses to replace their conventional business models with green business models to maintain sustainable production and a healthy environment. To build a green economy, produce green, and save green, businesses must have to adopt sustainable development and green production innovations like green business models or sustainable business models.
Green business models are sustainable enough to maintain equilibrium between resource availability and demand of the current and future market and to regenerate what the Earth has lost from unsustainable business practices. Therefore, being mindful of the importance of green business models to the economy, environment, and society businesses now have to think and understand how these sustainable business models work and benefit their companies.
A green business model is a key to sustainable development
Governments, businesses, and development agencies all over the world are now recognizing that businesses that operate on the principles of green business models compete more in the market, attract investors and have the potential to meet sustainable developmental goals while developing a green economy.
Green business models are sustainable business models that aim to achieve environmental stewardship. Green business models concentrate on the stages of product development, design, and distribution because they have a direct impact on the environment. During manufacturing processes, raw materials, power, fuel, water, and various chemicals are utilized. As a result, greenhouse gases, wastewater, and other wastes are released into the environment. These business activities cause environmental impacts such as global warming, climate change, and natural resource depletion. Therefore, the Green business model ensures environmental pollution control by reusing and recycling post-consumption products.
Companies and the private sector is recognizing that green business models can be a source of innovation that can assist businesses to become more competitive by either developing sustainable products or providing services based on green and clean technology. These sustainable business models provide green services and various benefits for the companies and hence becoming the essential principles of modern-day businesses.
Ten Green business models essential for green businesses
A study revealed that 70 percent of global emissions are emitted by 100 business companies. Now is the time for businesses to adopt green business models to limit global greenhouse gas emissions and reduce their carbon footprint. Green business models provide sustainable steps for companies to reduce carbon in their supply chains.
Naturalist and ecologist ‘Sir- David Attenborough’ said in his speech at Cop 26 that, “No nation has completed its development because no advanced nation is yet sustainable.” There are no specific or clearly defined green business models; however, no business can be declared as green business or sustainable unless it adheres to the green business models.
It becomes now essential that to run a green business, companies must practice the following main green business models or sustainable business models.
Green businesses must ensure the presence of these main green business models:
- Green product design.
- Green efficient and localized production.
- Product service systems.
- Prosumers and co-creation.
- Consumer choice influencing.
- Collaborative consumption.
- Waste as a resource.
- Green supply chain management.
- Closed-loop.
- Organic and Biodegradable production.
1 – Green product design
The materials that are used to design the product can cause a direct impact on the environment, and eco-conscious consumers. Green product design is an eco-friendly approach of the green business model to address the environmental impacts of the product in the early stages of development to reduce the adverse environmental impacts throughout the product’s life cycle.
Designing and delivering products while utilizing sustainability, and fewer resources are more resource-efficient during the consumption phase and recycling phase at the end.
2 – Green efficient and localized production
Green efficient, eco-friendly, and production from local resources is a sustainable way to development. This green business model emphasized green efficiency and localized production and aims to promote green businesses in the local communities while adding value to the local resources.
The utilization of local resources in the production cycle means that products are produced in a high resource-efficient manner with minimum negative environmental and social impacts.
3 – Product service systems
A product with quality service can satisfy customers’ needs and demands, increase customer loyalty, and mitigate the risk and cost of overhauling faulty products. Such product plus service and/or warranty bundle is a customer-centric and eco-friendly model which aims to provide efficient and quality product services leading to the happier clients, less waste, and less adverse environmental impacts.
Product service systems focus more on the efficient function of a product rather than the physical product itself, that’s why it’s attracting more customers.
4 – Prosumers and co-creation
This green business model work on two different concepts. Prosumers are individuals who not only consume resources but produce as well. Co-creation in business is a symbiotic relationship where stakeholders, customers, and experts share innovative business ideas to value each other.
When a large number of prosumers collaboratively create in the market then sustainable and innovative services arrive at the market. These sustainable business models also tend to utilize local resources to contribute to the green economy.
5 – Consumer choice influencing
Eco-conscious consumers don’t prefer products that cause adverse impacts on the environment. This business model analyses consumer behavior and consumer choices of products, utilizing this model, green companies determine which green products and services are in demand.
Companies interact with customers to raise the importance of sustainable production and consumption to boost the green economy and meet the supply and demand for green products.
6 – Collaborative consumption
Green business models strive for collaborative consumption to achieve the common goal of sustainable development and emit fewer greenhouse gases. The shared use of green products and services provides various benefits to both the environment and a large number of green consumers. It lowers the cost of purchasing new goods.
Customers in collaborative consumption do not have to spend money on buying new products. Sharing more and buying less contribute to a sustainable lifestyle and reduce waste.
7 – Waste as a resource
A conventional business model is based on ‘open loop systems’ that extract raw materials to produce products, then use them and discard them as waste, as a result, produce waste and affect the environment. This green business model utilizes waste as a resource to make new products rather than disposing of it as waste.
The concept of this business model encourages companies to use waste as a valuable resource to contribute to the green economy. Companies can achieve their zero waste target by applying this model.
8 – Green supply chain management
The concept of this green business model refers to the integration of sustainable production processes into conventional supply chain management. This model ensures the utilization of clean and green raw materials in product development, product design, and product delivery.
The objective of green supply chain management is to reduce the environmental impacts of waste by incorporating green processes into product design.
9 – Closed-loop
Under this green business model circular economy is generated through closed-loop systems. Companies focus more on their supply chain to reduce waste in the production processes. Companies reuse the disposed of products over and over again to make new products and ensure that no material is wasted.
This model reduces the extraction of new resources and shows sustainable processes for companies to conserve nature and reduce their carbon footprint. More companies are working now on this model.
10 – Organic and biodegradable production
Demand for organic food and biodegradable products is increasing in the global market because consumers are now more conscious about their health and the environment. Consumers prefer food and products which has no health and environmental impacts.
This green business model fulfills the demand and supply of organic and biodegradable products and services by growing more green businesses and thus contributing to in green economy and sustainable development.
Green business models are ethical business models
Ethical considerations are very important both in linear and sustainable business models. Traditional business models merely focus on the benefit of business owners while drawing adverse environmental and societal impacts. However, green or sustainable business models are ethical business models which do not compromise on the environment, and through their sustainable practices provide value to companies, shareholders, and society.
Business activities can cause direct and indirect negative impacts on the environment. Ethical requirements for the green businesses are the principles on which green businesses work, such as green supply chain, reusing, recycling, emergency plan, health and safety of employees, net-zero waste, and eco-friendly production.
Further reading:
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Author: Saqib Ali holds a BS in Environmental Science from Bahria University, Islamabad. He is an Environmentalist, Naturalist, and freelance content writer passionate about Environmental management systems, Sustainable development, Climate change, Natural resource management, Eco-tourism, Green building, Wildlife and conservation, and Disaster risk management.