Does Your Business Model Need to Change? Do the Math.

A seismic shift in global demographics is underway. In the two decades between 2009 and 2030, the global middle class will expand by 3 billion people—ten times the population of the U.S. This is an exciting market opportunity for companies that serve middle-class consumers, but how they offer products and services must change if we are to meet market needs within the limitations of available resources.

Many companies today are making sustainability commitments that would have been viewed as radical ten years ago. Many of those decisions, like sourcing 100% renewable energy or buying back used products, lessen production’s impact on the natural environment. Combined with ensuing technological innovation, they may prevent us from tripling the amount of natural resources we use by 2050, which is what the United Nations Environment Programme predicts will happen under conventional modes of production and consumption.

But even if companies continue to invest in sustainability, the best-case scenario is that natural resource use increases by 40 percent, enough to sabotage the Global Goals for sustainable development. This is because growth in consumption outweighs efficiency—each product might be produced with less energy, water, and virgin materials, but so many are produced that the producer’s total environmental footprint expands.  

Something must give, and unless we make it consumption, what gives is development and the associated growth in businesses and the economy.

Business growth and environmental sustainability do not need to be mutually exclusive in the decades ahead. But companies must embrace new business models that do not rely on selling more stuff to more people, such as models that rent, resell, recycle and repair products.

The first step is to do the math. What will your production volume be in 2030, given your hope for market share and the demographic trends described above? How much smaller must your per-unit environmental footprint be to meet those production levels without increasing your company’s overall environmental footprint? Is that level of resource efficiency realistic, and if not, what other business models can allow your company to meet customer needs?

It is often difficult to start a conversation on consumption within business circles. This is why we called our recent research paper on this topic “The Elephant in the Boardroom,” and doing the math gives business leaders an objective starting point for that conversation.  

The companies that have this conversation first will be the ones that turn resource constraints from a threat into a competitive advantage in meeting the needs of the exploding middle class of tomorrow’s markets. As an investor and consumer as well as a sustainable development advocate, I am excited for the conversation to begin—and for companies to innovate and find success in new ways.

Kevin Moss will be speaking about how tomorrow’s markets can thrive without the need to sell more stuff to more people in perpetuity at the Sustainable Brands New Metrics ’17 conference on November 13th-15th.

Kevin Moss
Global Director of the Business Center
World Resources Institute
November 6, 2017

Image Source: www.wri.org