Reference Work Entry

Handbook of Sustainable Engineering

pp 859-879

New Business Models for Sustainable Development

  • Renate van DrimmelenAffiliated withSection Technology Dynamics & Sustainable Development, Delft University of Technology

Abstract

This chapter provides an overview of various ways by which companies can earn money with sustainable practices.

When a company turns to a more sustainable way of working, up-front investments and cost often increase and products and markets change. Therefore, it requires a shift to new business models. If the business model of the company does not change, the company cannot expect to receive the rewards of value creation, and the continuation of the activities might be threatened. The challenge is to contribute to all three sustainability goals of the business model: environmental goals, economic goals, and social goals. To do so is a challenge, and not many companies manage to strike the right balance.

Section 2.3 provides examples of innovative business models that aim at contributing to at least two out of these three goals. It also covers business models that combine all three strategic goals. Business models are thus given to:
  • Achieve economic and environmental goals

  • Achieve economic and social goals

  • Achieve economic, social and environmental goals

The category where social and environmental goals only are achieved can only exist if funded by charity, public interest organizations, or government subsidies.

From a sustainable engineering perspective, business models that aim for economic and environmental goals are the most interesting. Engineering can especially contribute to a reduction of the environmental burden of companies.

Business models are grouped into four categories, which correlate to the four types of strategies a company can choose to implement sustainable practices:
  • Eco-efficiency strategy

  • Beyond compliance leadership strategy

  • Eco-branding strategy

  • Environmental cost leadership strategy

These are the existing sustainable business models. Sustainable value innovations are totally new strategies and business models, in which economic and environmental goals are combined, that do not fit into any of the previous strategies. New companies are often in a better position to go for a completely new business model. Not being limited by existing protocols, they have the opportunity to be really creative and think of new sustainable ways of making money.

Section 2.4 illustrates, using stock market performance data, that new sustainable business models do not necessarily lead to better economic performance. However, economic performance does not get any worse either. This makes sustainable business models a serious alternative for companies.

Section 2.5 gives an insight on the role of governments in supporting new business models for sustainable development. National governments have economic, communicative, and legal policy instruments and can use these either positively or negatively for specific business activities.

Section 2.6 focuses on public-private partnership as a successful policy tool to support sustainable business models in large, mostly infrastructural, projects.