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19 November 2013

A little more conversation and action: The business case for sustainable consumption

In the sharing economy and the media, the business community doesn’t yet know how it will make money – and that’s what’s so great: the willingness to experiment with new, more sustainable business models.

By sally Uren

The move towards a sustainable future is far too big for any single organisation, business or even government to tackle alone. Pioneering organisations can only get so far. We believe that the only way to create true transformation requires thinking and acting collaboratively – and a new role for business.

The good news is we are already on the right path. Collaborative consumption and the sharing economy are on the rise.  Airbnb is the poster child for the sharing economy – a site where you can rent out your spare room, allowing a guest to stay somewhere unique cheaply. It’s quickly seen unprecedented success: nearly 10m nights booked in 33,000 cities in 192 countries in just five years. The company’s founders claim the service attracted 416,000 new visitors to New York City in just one.

We’re also seeing leading businesses experiment with new business models. Take Kingfisher plc, the world’s principal DIY retailer, who understand that sustainable consumption isn’t about selling pieces of kit. They operate in a sector where waste is commonplace: the average DIY drill, for example, is used for less than 15 minutes in its entire lifetime! Kingfisher know that in order to maximise the use of a product and make the most of its embedded carbon and water, then leasing – and providing a service – is the far more sustainable option.

Kingfisher has bought the digital platform, Streetclub, which allows it to lease its goods – it also encourages a whole range of sharing by local communities and encourages new and positive community interactions. But the route to value creation is unclear; in other words, the business doesn’t yet know how it will make money – and that’s what’s so great: the willingness to experiment with new, more sustainable business models.

But there is also an increasingly watertight business case. Take M&S. From an initial £40m per annum investment in 2007 at the start of Plan A, came a total business benefit of £185m in Year 5. A cool 193 per cent return on investment.

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Then there are studies such as this one by Iionis Ioannou and others, where they tracked the performance of low sustainability companies (those with no obvious sustainability policies) and high sustainability companies in the same sectors but with strong Environmental and Social Governance and CSR/sustainability policies. The high sustainability companies consistently out-performed the low sustainability companies.

So, why hasn’t sustainability mainstreamed? 

There are many reasons, but one of the main reasons is because of a lack of understanding of how change happens.

This is why we at Forum have developed a simple change model, which can work at an organisational, sector and whole system level. It starts with Step 1 – experiencing the need for change, moves through into what we call “pioneering practice”, gains momentum until it reaches a tipping point and ends with a new mainstream.  It’s really important to understand where your business is on this kind of change curve. Have all parts of the business understood the need for change? Attempts to tool up departments to embrace sustainability will fail if there is no desire to do things differently. If this is the case, then the focus should be on creating the burning platforms that motivate people to think and act differently. Or are there pockets of pioneering practice flourishing in the business? If yes, then the focus should be on encouraging collaboration to move this practice towards a tipping point.

This change curve also helps us understand that there is no silver bullet. System change happens throughout this curve, but the major moments are between steps 2 (diagnosing the system) and 4 (creating a tipping point). We call this “system innovation” – and it results from a set of interventions working together: behaviour change, plus a new innovation, plus communication and influencing. Right now, the mainstreaming of sustainability in business is between steps 3 and 4.

This is why we need a big shift in collaborative thinking and action. Businesses need to think of themselves as system innovators, both innovating the core business, products and services, understanding their role in the wider system, and working to create the conditions in which they will be successful. One of the best system innovators out there is Unilever. The primary motivation for establishing the Marine Stewardship Council was securing future fish stocks (at a time when Unilever owned a frozen fish business). Unilever understood it couldn’t achieve the future sustainability of fish stocks on its own. The business case for being a system innovator is clear.

Tackling sustainability, creating a shifttowards sustainable consumption demands a system level approach. Not only do we all need to think differently, now is the time for businesses and brands to act differently. Join in the conversation with @forum4thefuture at #theBIGshift.