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Green business model innovation challenges and solutions

Green business model innovation challenges and solutions
Photo by Singkham: pexels

The green company model has grown in popularity over the past decades. The debate surrounding the concept, as well as other concepts such as green economy, eco-industries, and green company growth are also at the centre of the debate on whether or not the sustainable use of resources can be implemented in an economy to minimize the human impact on the environment.

Progressively, a growing number of companies turn their attention to this approach in their practices and try to change them to solve some of the burning environmental concerns today.

Change is inherent to companies; they evolve gradually, depending on different trends and approaches in the industry. Ultimately, they don’t have to make big investments or fundamentally change their internal processes to keep up with the latest innovations and to challenge the ways they carried their business previously.

Traditionally, the northern economies – the UK, and the Northern-European Countries – are the best at designing and implementing innovative strategies to eliminate waste from their processes and bring their businesses to the brim of eco-friendliness. Below are some of the factors that lead to green innovation across a series of businesses and some strategies to make green innovation more approachable and easier to implement.

Types of Green Business Model Innovation

Commonly, specialists identify two different types of processes when it comes to greening a business.

  • Incentive model – This model is based on performance operative sales or systems of product services, having green effects on the economy (Energy Saving Companies – ESCOs, Water Saving Companies – WASCO, Material Saving Companies – MASCO, Chemical Management Systems – CMS, and Design, Build, Finance, Operate – DBFO, etc.
  • Life-cycle model – The model is based on green supply management strategies and industrial synergy. The model is also frequently called a circular economy model because of the fact that companies try as much as possible to eliminate waste at the end of the product’s life cycle.

Drivers of Green Business Model Innovation

The main change driver across industries is the consumer. Both businesses and private consumers are growing aware of the environmental impact different sectors have. Today, all businesses have come to use their green agenda as a way to attract new consumers and improve the satisfaction levels and retention rates of the existing ones.

Another attractive aspect of a sustainable business model is the opportunity offered to businesses to differentiate their products and services from the competitors’.

Another motive why businesses start to consider sustainable business models is the increasing resource costs and the high risk identified across the supply chain. The resource uncertainty and the need to lower their operational and production costs make businesses seek alternatives. Usually, these are found in simple green solutions.

Green business models offer enterprises a new revenue stream by expanding their activity area. This opportunity usually comes from finding new ways to use surplus materials and design recyclable products or services. Most components and parts are successfully recycled and reused in circular business models.

The sustainability idea is appealing to a growing number of businesses. More and more enterprises choose to collaborate closely with recycling and waste management enterprises like Miltek to offer their workflow a green, sustainable edge.  Balers and other waste management solutions can now be found in enterprises all over the world, regardless of their dimensions and activity profile.

Green business model innovation challenges and solutions
Photo by Bill Mead on Unsplash

Challenges to Green Business Model Innovation

However, implementing green business models is not as easy as it looks. Challenges and barriers ranging from issues inside the teams and financial challenges are frequent in implementing sustainable business models. Maintaining a proper balance between sustainability and profits is a bit complicated, according to sustainability experts.

  • Not enough capital allocations to support green initiatives. Frequently, companies lack the internal mechanisms to implement sustainable initiatives. The issue is rooted in reduced capital allocations for this purpose. For instance, decision-makers inside companies overlook the importance of reducing exposure to energy price volatility and the environmental impacts of their internal processes, mainly because they think the costs associated with similar decisions are too high.
  • Poor collaboration between sustainability teams and financial teams. This is yet another challenge rooted in financial matters. Poor collaboration and divergent opinions and priorities of these two teams make the implementation and engagement in green initiatives difficult. In most cases, sustainability teams are brought into the project management team too late to make significant changes or to influence the project towards a sustainable path. This obstacle is also supplemented by the financial team’s unwillingness to allocate sufficient funds for such initiatives.
  • The lack of metrics to account for the level of environmental sustainability. Most companies are not fully aware of their expenses over time. They lack proper methods to measure their external costs and other costs associated with traditional business models. This makes them unable to properly measure and assess the overall savings or expenses involved with a greener approach. Climate change, and the shrinking water supply, are not accounted for in these companies’ cases.
  • The lack of comprehensive and integrative strategies. Most companies that work on greening their internal processes don’t factor in climate change, water supply shrinkage or land pollution. They neglect to integrate into their sustainability strategies numerous aspects that have the potential to improve their profitability and productivity, in the long run.

Overcoming sustainability barriers

Fortunately, a growing number of businesses find new, innovative ways to overcome some of the challenges above. In most cases, the opportunities for change can be found in their already-existing processes and strategies. The simplest and most cost-efficient way to achieve sustainability, in the long run, is by adapting and modifying those to meet green standards and practices.

Going green has the potential to help both businesses and the environment. Considering the rates at which different industries pollute and damage the environment, considering the shrinking material supply, finding new solutions to environmental challenges should be integrated into business development strategies as soon as possible.

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