How to create a sustainable business model

In this article, NatWest provides a guide to creating a sustainable business model and why it is so important for an SME.

Running a modern business effectively isn’t just about boosting your profits and retaining high-performing staff. As attitudes shift in the modern world, the priorities of businesses and staff have followed suit. This has meant issues like sustainability have become more prominent as customers and investors look to be more responsible and do their bit for the environment. 

Factors such as carbon emissions and renewables are now key when people are deciding where to spend their money. Around half (51%) of global consumers say environmental sustainability has become more important to them in recent years, according to IBM research. And 49% have paid a premium for sustainable or socially responsible products as a result. 

What is sustainability in business? 

Sustainability is all about meeting the needs of the current generations, without depleting the resources – and potential – of those still to come. It’s a long-term way of thinking. 

It’s a growing concern for many businesses that means taking stock of your environmental footprint or wider social impact – and highlighting areas for improvement. 

While each business will have different priorities, sustainability strategies often target: 

• Reduced carbon emissions. 
• Lower reliance on fossil fuels. 
• Partnerships with fair-trade suppliers. 
• Responsible waste management. 
• Better working conditions along the supply chain. 
• Fair wages and equality policies. 

The main thing to remember is that sustainability requires a genuine commitment right across your company. It should influence your overall business model and strategy. 

While you can add sustainable goals at any stage of the business journey, it’s often easier to embed them into your culture from the start, which is why it’s important for new business owners to think carefully about sustainability. 

Why is sustainability important in business? 

Sustainability efforts deliver a range of business benefits, while safeguarding the planet for future generations. They include: 

• Increased customer engagement: as more people look for ways to be greener, they’ll be prioritising companies driven by the same ideals. Tangible sustainability commitments can help you stand up to this scrutiny.  

• Protecting your image: poor environmental or supply chain practices can create PR headaches. From unsafe working conditions to irresponsible waste disposal, think hard about the potential impact on your brand, plus the associated costs. Strengthening your image might also attract new investors. Sustainability has become a growing concern for shareholders in recent years. So much so that 54% of shareholders would welcome new taxes on unsustainable business activities, according to PwC. 

• Creating a mission for employees: it’s not just customers calling for environmental action. Nearly half (46%) of office workers want to see genuine environmental, social and governance commitments from their employers, according to KPMG. As a result, sustainability pledges could go a long way to retaining and attracting top talent in what is a competitive job market. 

• Cutting operating costs: tactics like energy efficiency measures and electric vehicles can lead to savings in the long run. Utility and fuel bills could significantly decrease once you’ve covered the installation and set-up costs. 

7 tips to create a sustainable business model 

Building your reputation as a forward-thinking, sustainable business involves much more than slogans and buzzwords. A half-hearted approach could lead to accusations of ‘greenwashing’, where you suggest you’re doing more for the planet than you really are. 

A clear, sustainable business model removes this risk, while helping you drive meaningful change. Specific goals and deadlines will ensure everyone stays focused, from junior staff all the way to executives. 

Here are some tips on how to create a sustainable business model that works for both you and your customers. 

1. Research and identify priority areas 

As a starting point, think about the issues and areas where your company may be falling short. For example, you might be: 

• Creating too much waste. 
• Causing more pollution than necessary. 
• Failing to use sustainable ingredients or manufacturing processes. 
• Unclear on working conditions across different supply chains. 
• Out of touch with local communities. 

It’s important to be honest with yourself at this stage. While listing all your shortcomings is often disheartening, it’s a vital first step. 

2. Set realistic short-term goals 

If you’ve ended up with a long priority list, it may be tempting to rush in and try to solve everything at once. But launching a series of big initiatives could threaten your profitability and overstretch resources. 

Taking things step by step can lead to steady progress instead and stop you from over-reaching. Short-term goals could be as simple as switching lights off when they’re not needed, installing insulation, or investing in recycling points around the office. 

3. Create a long-term vision and values 

After a few quick wins, it’s time to look at the bigger picture. Start thinking about what you hope to achieve in the long term. This could involve cutting your carbon footprint over a specific period or expanding the diversity of your workforce. 

A company’s core values can also set the right tone, keeping all employees on the same page. Whatever stage your business is at, take some time to review your existing values.  

4. Learn lessons from competitors 

As part of your long-term planning, take note of any successes achieved by your competitors. For example, did an overhaul of suppliers or a switch to cleaner energy drive savings and efficiencies? 

Just remember to review any failures too. For instance, should you have conducted more market research before launching a new product? 

5. Involve staff members and customers 

An effective sustainability model is a two-way street. You’ll need an open dialogue between those at the very top and the rest of the company. 

Staff brainstorming sessions and customer surveys are easy ways to gather feedback and fresh ideas that can feed into a long-term strategy. They can also secure buy-in and engagement from the very start. 

6. Hold yourself accountable 

Identifying targets and setting sustainability goals is the easy part. It’ll all be for nothing, however, if you fail to turn words into action. 

Detailed timelines and rigorous deadlines can help maintain your focus – and hold different stakeholders to account. Regular progress reviews should flag problems early too, and boost transparency for investors and customers. 

7. Seek support whenever you need it 

Creating and following a sustainable business model isn’t something you have to do alone. Investors, employees, customers and external advisers can all shape your vision of a cleaner, greener organisation. Communities like NatWest Business Builder offer another way to gain fresh insights and perspectives. 

Start your sustainability journey today 

Explaining why sustainability is so important to different stakeholders often takes time and patience. But the long-term rewards can include happier customers, more engaged workers and a true sense of purpose. 

This article was originally published on the NatWest Business Insights website here. 

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