Regulation, cost, reputation, revenue and risk management are
driving many organisations to cut their carbon emissions, and
become more sustainable. More businesses are looking at how they
can put environmental sustainability at the heart of their existing
business models. A fast-moving consumer goods (FMCG) company, for
example, may improve manufacturing processes, minimise (or share)
logistics, outsource the provision of physical assets used in
manufacturing, reduce packaging, or educate consumers in minimising
the in-use phase (e.g. use of water) and encourage consumers to
recycle.
To maintain competitive advantage and mitigate reduced demand
from a saturated or simply more tentative market, incremental
improvements may not be sufficient, and step changes may be
necessary. As increasing resource scarcity becomes a significant
issue, and more businesses start to understand the cost savings
that can be realised through minimising resource use, businesses
are turning to disruptive innovation for sustainability.
Innovating products, processes and business models can help to
deliver revenue streams that are decoupled from a reliance on
natural resources. The need for a new approach becomes increasingly
critical when one considers the current landscape in which
businesses are operating. For example: raw materials and commodity
prices are likely to rise in the future; customers increasingly
understand the value of accessing physical products and questioning
their need to own them; social media is also enabling the
development of virtual communities and amplifies customers'
thoughts and opinions to a wider audience than was previously
possible.
Against this backdrop, there is the opportunity for forward
looking organisations to develop alternative ways to deliver the
value of a product or service, rather than focusing solely on their
immediate features and functions. This will result in less
traditional retailing of physical products to consumers - and a
greater focus on developing services and experiences that will lead
to longer-term engagement with customers.
There are a number of important concepts that organisations can
consider when rethinking the products and services they offer:
Dematerialisation involves removing reliance on
the physical product altogether - for example, using video
conferencing rather than face-to-face meetings, or downloading
content to view on eReaders.
Some products are evolving into services through the concept of
access over ownership, which involves providing access to a
product, and minimising the 'idling time' that occurs when it is
not in use, by sharing with others. This is proving a popular model
for durable products like cars, bikes, DIY/gardening tools, sports
and outdoor equipment, homeware, toys and even handbags. Examples
include Peugeot's 'Mu' service, that lets members hire a range of
mobility solutions, including pedal cycles electric cars, and O2's
leasing of Apple iPhones to customers. Alongside products,
peer-to-peer 'collaborative consumption' models even include access
to shared skills and physical spaces.
Product substitution is another approach to a
new way of doing business. It offers an alternative way of
delivering the equivalent value of a product. An example of this is
selling insulation rather than electric heaters.
Samsung is a notable example of a company utilising
upgradeability through their introduction of upgradeable TVs. Some
latest models will have a slot able to take an 'evolution kit' -
these will be available in 2013, with the aim of upgrading TVs to
include the functionality of next year's sets. This extends the
life of the TV and ensures access to the latest new features.
Companies such as Le Creuset cast iron cookware and Miele
electrical appliances differentiate with lifetime/extended
warranties, providing a strong after-sales relationship based
around a durable and serviceable product.
New thinking around consumption and resource
use is also encouraging debate on a more sustainable
attitude to dealing with products when they reach the end of their
'useful' life. For instance the secondary markets model involves
securing a 'second home' for a product once its original owner has
finished with it; a franchised previously-owned car dealership is a
good example of this, and Patagonia help their customers re-sell
their outdoor wear.
Organisations can also consider a closed-loop
approach, which means taking back products at the end of
their life, disassembling/refurbishing components and creating a
'new', upgraded version. Eco-boxes.co.uk offers a service for the
take-back of house removal boxes once customers have finished with
them.
Alternatively, if a business could utilise 'waste streams' at
the end of a product's life it could adopt the
downcycling model. Nike currently utilises this
model through using old trainers to make sports court surfaces and
playgrounds. Conversely, upcycling creates a more aspirational
product from waste - Elvis & Kresse turn old fire hoses into
luxury bags, and Freitag transform lorry tarpaulins into messenger
bags.
The opportunities above may be relevant not only to
manufacturers of durable products, but also for other sectors,
including retailers, providers of insurance, servicing/repairs,
logistics and IT. Collaboration between and within industry
sectors, and in the supply chain, can help stimulate innovation.
Some organisations even run 'open innovation' platforms designed to
enable customers and third-parties to contribute innovative ideas
for new sustainable products and services.
Our Business Advice experts are
experienced in helping businesses benefit from the opportunities of
the low-carbon economy. We assist organisations in developing a
view of carbon emissions and resource use along the value chain,
and in using this information to build a strategy for sustainable
growth. Financial and risk modelling techniques also help these
organisations understand the business case for delivering
sustainable innovation, and build a compelling case for change.