The Role Of Best Practice In Innovative Business Models For Industrial Sustainability And Energy Efficiency

Mohammed Ali^1,* Steve Evans¹,

¹University of Cambridge

*[email protected]

Extended abstract

Balancing economic growth and industrialization with sustainability is a major challenge that is becoming increasingly pressing. Despite efforts to reduce the environmental impact of industrial practices, current methods often fail to account for all environmental costs fully. As the urgency of this issue grows, there is a clear need for sustainable development that considers environmental, social, political, and economic factors. This is particularly important as public awareness of environmental problems increases and regulations become stricter to limit global warming to 1.5°C above pre-industrial levels. Climate change is a complex and pressing issue that requires long-term solutions. It is a global problem that affects various aspects of society and business operations, including supply chains, organizational resilience, work patterns, social orders, and governance systems. However, addressing climate change is challenging as no single governing body is responsible for it (George et al., 2016). Businesses may initially respond to this challenge with ambitious and visionary strategies, but these efforts tend to weaken over time due to the contentious nature of the issue (Wright & Nyberg, 2017).

Businesses are expected to be impacted by climate change; however, the full extent of these effects is yet to be fully understood, and the challenges of climate change will vary depending on the industry and business model, including the supply chain, organizational resilience, work patterns, social orders, and governance systems. Climate change can potentially have a wide range of complex impacts on businesses and will likely be observable at all levels of organizational analysis. A re-examining of the concepts and issues relevant to organizational studies in the context of climate change may be necessary to fully understand and address the economic consequences of a changing climate (Howard-Grenville et al., 2014).

To tackle the pressing issues related to sustainability, advancements need to target the underlying causes of unsustainability by innovating business models rather than only trying to fix negative consequences after they have happened (Bocken et al., 2014). The literature on sustainable business models has consistently demonstrated that they represent a modification of the conventional business model concept, incorporating characteristics and goals aimed at promoting sustainability. Specifically, sustainable business models can be classified into two broad categories: those that incorporate concepts, principles, or goals that are specifically aimed at promoting sustainability and those that integrate sustainability into their value proposition, value creation and delivery activities, and value capture mechanisms (Bocken et al., 2016; Geissdoerfer et al., 2018a).

Furthermore, there is also a range of subcategories, archetypes, or generic strategies for sustainable business models. These include product-service systems, which involve the provision of a service rather than just a product; base of the pyramid models, which are aimed at serving circular business models, which focus on the circular economy and the reduction of waste (Bocken et al., 2014; Geissdoerfer et al., 2018). These different subcategories, archetypes, or generic strategies for sustainable business models provide a framework for businesses to identify opportunities for sustainable growth and policymakers to design policies that support the development of sustainable business models.

The design of business models enables the reconfiguration of business capabilities to adapt the firm to the changing business environment. The literature on business models recognizes that business models serve as a vehicle for innovation and a necessary means for commercializing technological innovations (Spieth, Schneckenberg & Ricart, 2014). Sustainability innovations refer to not only in novelty in technology, but also inprocesses, operating procedures, practices, business models, systems, and thinking. This highlights the importance of business models to not only achieve commercial success but also to promote sustainability. The significance of business models in fostering sustainability is an area that requires further research to understand how companies can effectively align their business models with sustainable practices (Teece, 2010; Zott, Amit & Massa, 2011).

Sustainable business models are not only achieved through technological, product or service innovations but also through the innovation of the business model itself - – changing the way we deliver and exchange value with our stakeholders (Evans et al., 2017; Girotra & Netessine, 2013; Yang et al., 2017). A small but essential literature points to the impact of best practices on improving the industry's efficiency, sustainability, profitability, and job security (Evans et al., 2009; Lavery et al., 2013). Companies can significantly improve these areas by adopting best practices. This paper will investigate the role of best practices on industrial efficiency gains and the potential impact on sustainable business models. The empirical focus of this study is on the industrial efficiency gains compared to those of best practice companies.

This study is able to demonstrate that companies utilizing best practice approaches are twice as efficient compared to the industry average.  This study compares the efficiency improvements of industry to those of companies using best practices and open innovation approaches, using data on UK industrial energy intensity efficiency from 2002 to 2019.  This will complement eco-efficiency research that addresses studied concepts of utilizing management strategies to do more with less (Caiado et al., 2017; Russo, Pogutz & Misani, 2021; Russo & Pogutz, 2009). A deeper examination of best practice approaches in enhancing energy efficiency within the industrial sector can provide a greater understanding of the benefits it can bring. These benefits are not limited to addressing climate change but include economic advantages and job security. A more detailed examination of the role of best practices in energy efficiency can lead to a better understanding of how companies can optimize their performance, decrease their environmental footprint, and become more competitive.

The results highlight the importance of the role of best practices for businesses model innovation in the industrial sector. Implementing such practices can decrease a company's energy expenses and carbon footprint, enable them to remain competitive in an environment with increasing energy costs, and protect them and its workforce from the detrimental economic impacts of energy price fluctuations and shortages and ultimatitely highlighting the value exchanges within the industrial sector

Keywords 

Industrial Sustainability, Energy Efficiency, Business Model Innovation, Best Practice

References 

Bocken, N.M.P., de Pauw, I., Bakker, C. & van der Grinten, B. (2016) Product design and business model strategies for a circular economy. Journal of Industrial and Production Engineering. 33 (5), 308–320. doi:10.1080/21681015.2016.1172124.

Bocken, N.M.P., Short, S.W., Rana, P. & Evans, S. (2014) A literature and practice review to develop sustainable business model archetypes. Journal of Cleaner Production. 65, 42–56. doi:10.1016/j.jclepro.2013.11.039.

Caiado, R.G.G., de Freitas Dias, R., Mattos, L.V., Quelhas, O.L.G. & Leal Filho, W. (2017) Towards sustainable development through the perspective of eco-efficiency - A systematic literature review. Journal of Cleaner Production. 165, 890–904. doi:10.1016/j.jclepro.2017.07.166.

Evans, S., Bergendahl, M., Gregory, M.N. & Ryan, C. (2009) Towards a sustainable industrial system: with recommendations for education, research, industry and policy. Cambridge, University of Cambridge.

Evans, S., Vladimirova, D., Holgado, M., Van Fossen, K., Yang, M., Silva, E.A. & Barlow, C.Y. (2017) Business Model Innovation for Sustainability: Towards a Unified Perspective for Creation of Sustainable Business Models. Business Strategy and the Environment. 26 (5), 597–608. doi:10.1002/bse.1939.

Geissdoerfer, M., Morioka, S.N., de Carvalho, M.M. & Evans, S. (2018) Business models and supply chains for the circular economy. Journal of Cleaner Production. 190, 712–721. doi:10.1016/j.jclepro.2018.04.159.

Geissdoerfer, M., Vladimirova, D. & Evans, S. (2018) Sustainable business model innovation: A review. Journal of Cleaner Production. 198, 401–416. doi:10.1016/j.jclepro.2018.06.240.

George, G., Howard-Grenville, J., Joshi, A. & Tihanyi, L. (2016) Understanding and Tackling Societal Grand Challenges through Management Research. Academy of Management Journal. 59 (6), 1880–1895. doi:10.5465/amj.2016.4007.

Girotra, K. & Netessine, S. (2013) OM Forum —Business Model Innovation for Sustainability. Manufacturing & Service Operations Management. 15 (4), 537–544. doi:10.1287/msom.2013.0451.

Howard-Grenville, J., Buckle, S.J., Hoskins, B.J. & George, G. (2014) Climate Change and Management. Academy of Management Journal. 57 (3), 615–623. doi:10.5465/amj.2014.4003.

Lavery, G., Pennell, N., Brown, S. & Evans, S. (2013) Next Manufacturing Revolution. Cambridge, University of Cambridge.

Russo, A. & Pogutz, S. (2009) Eco-Efficiency vs Eco-Effectiveness. Exploring the Link Between GHG Emissions and Firm Performance. Academy of Management Proceedings. 2009 (1), 1–6. doi:10.5465/ambpp.2009.44263752.

Russo, A., Pogutz, S. & Misani, N. (2021) Paving the road toward eco‐effectiveness: Exploring the link between greenhouse gas emissions and firm performance. Business Strategy and the Environment. 30 (7), 3065–3078. doi:10.1002/bse.2789.

Spieth, P., Schneckenberg, D. & Ricart, J.E. (2014) Business model innovation - state of the art and future challenges for the field: State of art and future challenges. R&D Management. 44 (3), 237–247. doi:10.1111/radm.12071.

Teece, D.J. (2010) Business Models, Business Strategy and Innovation. Long Range Planning. 43 (2–3), 172–194. doi:10.1016/j.lrp.2009.07.003.

Wright, C. & Nyberg, D. (2017) An Inconvenient Truth: How Organizations Translate Climate Change into Business as Usual. Academy of Management Journal. 60 (5), 1633–1661. doi:10.5465/amj.2015.0718.

Yang, M., Evans, S., Vladimirova, D. & Rana, P. (2017) Value uncaptured perspective for sustainable business model innovation. Journal of Cleaner Production. 140, 1794–1804. doi:10.1016/j.jclepro.2016.07.102.

Zott, C., Amit, R. & Massa, L. (2011) The Business Model: Recent Developments and Future Research. Journal of Management. 37 (4), 1019–1042. doi:10.1177/0149206311406265.