The transition of society from agrarian to industrial to an information era has created fundamental shifts that have changed the way we live and catapulted our aspirations regarding our standards of living. Societal transitions are reflected as well in primary motives for consumption, which have evolved from addressing basic survival needs in earlier times, to achieving profitability and wealth creation during the industrial era, to significantly improving the quality of life in current times. Hyper-competitive growth aspirations dictate the pursuit of profitability and wealth creation. Growth, prosperity, and consumption have new meanings today that differ from when common resources were more abundant and competition was less aggressive than it is today.
Although our understanding of the interdependence of common resources and life has evolved fairly well, we may not have a similar comprehension of the connection between the economy and the environment. It’s possible the profundity of such interdependence has been buried by our search for happiness through materialism and economic growth. Perhaps we would not know what to do if our nations failed to attain higher gross domestic product (GDP) and our businesses did not make profits. Would it be possible, in that case, to flourish as individuals?
Figure 1 illustrates the interdependence between the reinforcing loops of consumption, the economy, and resource depletion. Material desires instigate purchases intended to bolster significance, which fosters increased materialism. Purchases increase GDP, which creates jobs and financial well-being and facilitates more purchases. Increased production to raise GDP uses carbon-based resources and further depletes them. This interdependence has locked society into what psychologists call a “social trap,” in which the pursuit of short-term individual gains leads to a loss for the group as a whole in the long run.
These counterbalancing forces undermine the foundation upon which economic growth is built and, over time, create a sinkhole that threatens the economy, the environment, and society. Moreover, the toxic by-products of carbon-based resources are detrimental to health and life overall. Thus, our continued emphasis on the economic growth we know today, which is pursued by most for-profit enterprises, is diametrically opposed to the sustainability of our planet.
Institutions and enterprises understand the urgent need to attend to this paradox and have responded by developing sustainability visions and goals. However, the forces at play that define business and growth imperatives have, to a large extent, tilted the balance toward limitless growth and competition at the cost of sustainability course corrections that have failed to occur at the required pace and momentum.
The recipe for restoring the skewed balance toward a sustainable economy is rooted in human psychology and addressing our unabated consumerism, which may lead to a fundamental shift in the purpose of business and how it is conducted. Though this might sound unrealistic, our hopes hinge on the innovative use of technology to lead us toward transformation. Digital exponential technologies offer much-needed agility, flexibility, and scalability to guide the gradual but necessary business model transformations.
A review of existing literature and business practices indicates a wide range of mechanisms and solutions that can contribute to business model transformation for sustainability. Archetypes have been proposed to describe groupings of mechanisms and solutions that may contribute to building up the business model for sustainability. The aim of these archetypes is to develop a common language that can be used to accelerate the development of sustainable business models in research and practice and propose the following:
Maximize material and energy efficiency.
Create value from waste.
Substitute with renewables and natural processes.
Deliver functionality rather than ownership.
Adopt a stewardship role.
Repurpose the business for society and the environment.
Develop scale-up solutions.
[For more from the author on this topic, see: “Balancing Growth & Sustainability: Technology-Led Business Model Transformations.”]