When a company seeks strategic integration of sustainability, they are working out how to:
- Protect their current business model; and
- Increase value creation
at their intersect with society and the natural environment.
Protecting the current business model (BM) requires companies to work out which social/environmental impacts (inside-out) and which social/environmental trends or pressures (outside-in) pose risks to the way they do business. Increasing value creation requires companies to work out how they might improve the profit formula or the delivery system while enhancing their delivery of positive social/environmental impact.
ESG disclosure guidance – including that from the JSE, the TCFD and the IFRS – tends to focus on value protection. Investors are worried about risks to their investments and have categorised the obvious ESG risks on a sectoral basis. Opportunities to increase value creation (the second point) are less obvious. These generally result from new products, process improvements and ecosystem enhancements. A myriad combinations of tech, capabilities, assets and partnerships exist that might deliver positive social/environmental impact through the BM. The trick is to whittle this down to a few options with genuine scale potential because you can’t afford to invest in every option. You also can’t afford to ignore the potential for scalable social/environmental impact already present in your operating system.
Whether you’re looking at ESG risks or opportunities for profit-enabled impact, the starting point is the business model. How your business creates value. Business models get depicted in various ways and it makes sense to use the framework you know the best. The one we use is adapted from on Clayton Christensen’s basic four elements.
We make a point of highlighting differentiators within the model. What makes you different from your competitors? You already know the answer to this question and the business has channelled investment into these areas over time. If you can link these to your potential for positive social/environmental impact, you have greater prospect of scaling your sustainable proposition. Repurposing existing capabilities to deliver positive impact is less energy intensive and quicker than creating new ones. This improves speed to market and allows a more urgent response to social/environmental trends.
See how to turn your Business Model Canvas into a Profit-Enabled Impact Canvas here.