Evolving Sustainable Business Models Through Digital Ecology and Transformation

Sustainability – a buzzword or the only path to the future?

Sustainability is a word that evokes many reactions and emotions nowadays. Some people see sustainability efforts as a crucial and urgent concept, focusing on the long-term preservation of the planet and its resources. They treat it as a call to action, prompting a change in systems, behaviors, and practices to reduce negative environmental impacts. Others may acknowledge its importance but feel overwhelmed by the enormity of the problem or need clarification about how to take meaningful action. They may also question the feasibility or effectiveness of sustainability initiatives, wondering if individual efforts can truly make a difference.

Some might also dismiss sustainability altogether, perceiving it as a trendy buzzword or a political agenda, mainly when reliable actions do not support it. They might reject the idea that human activities significantly impact the environment or prioritize short-term economic interests over long-term sustainability.

By all means, sustainability is a complex and multifaceted concept that can evoke varying reactions and emotions depending on individual beliefs, values, and understanding of the issue. On the one hand, it indicates a critical approach to our everyday existence based on three pillars: social, economic, and environmental. Thus, it is not a one-time achievement but rather a long-term strategy that recognizes current dependencies between many phenomena and activities and, as in the butterfly effect, places and people distant in space and time. According to the Encyclopedia Britannica:

Sustainability [is] the long-term viability of a community, set of social institutions, or societal practice. In general, sustainability is understood as a form of intergenerational ethics in which the environmental and economic actions taken by present persons do not diminish the opportunities of future persons to enjoy similar levels of wealth, utility, or welfare.

"Sustainability". Encyclopedia Britannica. Retrieved 31 March 2022

In simpler words, by the organization known as Brundland Commission, sustainability represents the state of action that can approve business development, taking into account its broader social and environmental impact:

Sustainable development (...) meets the needs of the present without compromising the ability of future generations to meet their own needs.

Brundland Commission

So in this term, sustainability is an agreement concluded with ourselves from the future and with all other generations who will come after us, no matter where and when they will live on the Earth. We guarantee with it that we will do our best so that our current actions do not negatively affect their future existence. In its most common meaning, sustainability is associated with the environment and all efforts that lead to preventing it from disaster.

On the other hand, sustainability is unfortunately often treated as a buzzword, a trendy and catchy term used in advertising campaigns. Marketers love “sustainability.” It is used as a prefix that gives prestige and a profound, caring, and attentive character to those to whom they are attributed. Sustainability is often treated as synonymous with eco-friendliness and innovation, usually not backed up by other activities. This type of marketing trick discourages both the business community and consumers from using it and, even more so, from following its indeed conveyed values, the purpose of which is by no means to encourage consumption and the possibility of getting rich on it.

Most commonly, sustainability refers to its environmental aspect, which becomes its central theme. Since the 1960s and 1970s, people have become increasingly aware of their actions' social and environmental impacts. They organize climate summits, conferences, sign protocols, introduce international rules and regulations, and impose penalties for non-compliance. However, this movement has taken on a particular resonance over the past decade.

Researchers no longer appeal through peaceful conferences or calmly explain the seriousness of the situation in published articles. They sound the alarm, and their approach is materialized in the movements of such young activists as Greta Thunberg. In their warnings, sustainability is not only a recommended strategy we should implement at individual, corporate, and global levels. This is a call to immediate action and the only possible approach that, if not applied today, will not protect us from an ecological disaster and irreversible ecosystem destruction.

Hence, discussions about environmental pollution are nothing new. They cover all the consequences of climate change related to the ecological impact of human activity, such as loss of biodiversity, soil degradation, air and water pollution, and global warming, which generally affect the slow and irreversible destruction of the entire ecosystem and our planet. In 2000, the chemist Paul J. Crutzen popularized the term Anthropocene, which many scientists unofficially use to describe a new geological epoch whose primary determinant is the significant impact of human activity on the Earth's ecosystem and atmosphere.

We can treat sustainability as a trendy catchphrase that, in some environments, can leverage and promote our business. However, if you reach this article, you are probably already a mindful, aware-minded entrepreneur who knows that a false slogan cannot support sustainable business value creation.

What is sustainable value in business?

Sustainable value captures the business's intention to offer much more to its stakeholders and ourselves. Instead of "business as usual," it refers to a business strategy prioritizing creating long-term value for all stakeholders involved. They include shareholders, employees, customers, suppliers, the environment, and society. The idea is not about maximizing shareholders' profits but ensuring that the business is sustainable and contributes positively to the world.

Creating more sustainable value means limiting negative impacts on the natural environment and society for whole product life cycles across whole value chains and over the long term. It means creating value not just for a company and its shareholders, but for all societal stakeholders. It means respecting the Earth’s planetary boundaries and the foundations of human life.

Florian Lüdeke-Freund, Henning Breuer, et al., "Sustainable Business Model Design - 45 Patterns", 2022

This approach involves considering business operations' social and environmental impact, prioritizing ethical practices, and investing in innovation and growth (or even responsible degrowth). This way, the business can unlock new opportunities, create loyal customers, attract top talent, and enhance its reputation.

The concept of sustainable value capture aligns with the United Nations Sustainable Development Goals (SDGs), which have been adopted by many businesses and governments worldwide as a roadmap for sustainable development. By embracing this approach, companies can contribute to a better future while reaping the benefits of sustainable growth.

Understandably, some of us ignore the sustainability movement, not feeling this fragile connection with future generations and the environment… But we can't ignore our current customers. It turns out that sustainability is what our customers need today:

Sustainability has become one of the most important factors in consumers’ purchasing decisions, and numerous studies have shown that it is nearing price and quality as a decision-making factor. Increasing media coverage about global warming and the role individuals can play in halting this negative development leads to more and more consumers weighing up environmental concerns and taking into account companies’ sustainability reputation when buying goods and services.

Axel Schmidt, Thomas Kwasniok, and Thorsten Timm, “How a green product lifecycle augments brand value”, in: Roland Berger, Green Growth, Green Profit. How Green Transformation Boosts Business, 2011

The concept of sustainable development of a company can include many scopes and several fields of business activities. As a sustainable design agency Dodonut, we focus on a sustainable digital business model that provides for positive practices related to digital transformation and understands the postulates guided by digital ecology.

What is a sustainable business model?

The sustainable business model offers sustainable value and sets sustainability goals. Its creation is based on the belief that the business model can offer its stakeholders much more while respecting the environment and that it can create visions of innovators who are not exclusively profit-oriented but, above all, aware of their impact.

Business and organizations can be designed to contribute to sustainable development. That’s sustainable business model design.

Lüdeke-Freund, Florian & Breuer, Henning & Massa, Lorenzo, "Sustainable Business Model Design - 45 Patterns", 2022

Somewhat in line with the well-known adage from Spiderman that "With great power comes great responsibility," companies that implement sustainable business models are aware of their power to impact the world, both in negative and positive meaning. A sustainable value they offer means they want to use the resources, knowledge, and skills they already have and achievable tools to create a positive change in the world that can still allow them to realize their goals.

The sustainable business model is the opposite of the traditional business models rooted in the industrial era. In fact, focusing on mass production and consumption can be profitable. Still, it will not truly unlock the potential for innovation and offer sustainable value to customers, so this kind that has a deeper meaning to all of them brings innovation and the feeling of doing the right things.

Research has shown that sustainable business models can benefit enterprises by reducing costs, improving brand reputation, and increasing customer loyalty. However, implementing sustainable business models can also present challenges like new skills and knowledge, organizational culture changes, and new partnerships and collaborations.

A sustainable business model integrates sustainability principles into its operations, products, and services. It aims to create economic, social, and environmental value while minimizing negative impacts on the environment and society.

Sustainable business model innovation has various approaches:

• One approach is to integrate sustainability aspects into the planning and operations of enterprises.
• Another is based on CSR and can be achieved through business-NGO collaboration and aligning business and social objectives.
• And there is also another approach that aims to leverage digitization as a way to transform business models and achieve sustainable benefits.

That's the moment when sustainable digital transformation and ecology come into play. We believe that digitization is not only about transforming processes and products but also the whole company strategy. As part of a comprehensive approach, it considers each step's environmental impact. Hence, every digital transformation in a sustainable business model must consider digital ecology and digital sustainability. So let's look at the relationship between digital ecology and digital transformation and how they can support business innovation for sustainability.

Digital transformation through digital ecology and sustainability

Digital ecology is a framework that considers the complex interactions between digital systems, users, and the environment in which they exist. It has been used in various fields, including HCI, education, and media studies, to understand the impact of digital technologies on society and the environment. Its approach is also considered in sustainability, as people are increasingly aware of the environmental impact of digital technology.

According to a paper by Raptis et al. (2014), digital ecology can be defined as:

(....) the study of the relationships between digital artifacts, users, and the environment in which they exist, and the impact of these relationships on the design and evaluation of digital systems.

Raptis, D.A., Kjeldskov, J., Skov, M.B., & Paay, J. (2014). What is a Digital Ecology? Theoretical Foundations and a Unified Definition. Aust. J. Intell. Inf. Process. Syst., 13.

Digital ecology advocates for reviewing the impact of digital technology at many different levels - from mining its components, manufacturing, distribution, and individual and corporate usage.

Digital transformation refers to the process of using digital technologies to change how businesses operate and deliver value to customers.

Digital ecology can be applied to digital transformation in various ways. For example, digital technologies can be used to create more sustainable business models that integrate sustainability principles into their operations, products, and services. Sustainable approaches to creating digital products and services, how they are run, and the inner politics of sustainable management technology and devices can all contribute to creating sustainable business value.

How to implement sustainable digital transformation into a sustainable business model?

With no words, today's digital presence is a must-have for every prospering company that wants to grow sustainably. In this sense, digital transformation can be made by every business. It can relate to online presence and to transforming hitherto services, products, and processes into digital. Transforming into digital can sound more ecological, therefore, also sustainable. But as we've described in previous articles, although digital, these activities also have a carbon footprint, sometimes comparable to their physical counterparts. Fortunately, it is possible to approach this digital transformation sustainably and build upon that sustainable value to the customer.

But in the sustainable development model, businesses can use digital technologies to promote sustainability. For example, green digital transformation is the implementation of digitization and interaction of green technologies into business processes, activities, products, and models, when the company becomes environmentally sustainable. Sustainable technologies can be implemented in various companies to create sustainable value.

Digital technologies can promote sustainable practices in various industries and sectors. The development of digital technologies can help reduce carbon emissions, promote energy efficiency, and enable remote work and education. Digital transformation is bringing profound change to everything we do. Firms can create value through the use of digital technologies. Many digital technologies are enabling digital transformation, including Artificial Intelligence (AI), big data and analytics, cloud computing, mobile technologies, blockchains (DLT), augmented reality (AR/VR), the Internet of Things (IoT), and others.

Sustainable digital technology will minimize its carbon footprint at each stage of its life cycle. It can be applied by companies that rethink the way of purchasing devices and their character, reducing e-waste, using energy efficiency, reviewing the method of production, and all digital behaviors - from creating digital products to generating, transferring, and storing data and the impact on their users.

Our scope primarily focuses on creating sustainable value for knowledgeable businesses through sustainable digital innovations and products. It is related to rethinking and redesigning products, services, processes, and strategies to minimize their negative environmental impact. Sustainable digital products can represent sustainable value and become an innovation in business.

Processes for minimizing environmental impact in sustainable development strategy

A sustainable development strategy requires a deeper understanding of how sustainability fits into the business as a whole, as our efforts will be plugged into these systems and processes. Sustainability is not a one-time achievement. It is a process of being a better version every day, constantly improving and striving to protect the environment and future generations.

There’s no such thing as sustainability. There are just levels of it. It’s a process. Not a real goal. All you can do is work toward it.

Yvon Chouinard, founder of Patagonia

In this continuous process, several stages and frameworks can help, which can be combined, repeated, and reordered to optimally search for and apply sustainable solutions to business.

1. Crafting sustainable strategy

Searching for a sustainable strategy for business should always start by reviewing the current impact. Organizations can do this by analyzing, for example, the accurate amount of emitted CO2, the current inefficiencies, and searching for improvement. Once reviewing many accept in terms of sustainable digitality, the company can rethink the creation of sustainable value for applied solutions. Companies can develop sustainable business model archetypes and implement frameworks to help constitute the long-term goals and the scope of implemented changes.

a) C2C

Cradle-to-cradle (C2C) is a design framework that aims to create products and systems that are regenerative and sustainable throughout their entire lifecycle. The concept was developed by architect William McDonough and chemist Michael Braungart in their book "Cradle to Cradle: Remaking the Way We Make Things."

The C2C framework is based on the idea that waste can be eliminated by designing products, systems, and sustainable supply chains that mimic natural systems. In nature, waste from one organism becomes food for another, creating a closed-loop system. Similarly, in the C2C framework, products are designed to be reused, recycled, or composted at the end of their useful life, creating a closed-loop system that eliminates waste. In digital technology, C2C is represented by Fairphone, a Dutch company that reuses e-waste from Ghana to produce new smartphones.

A company that would like to apply the C2C framework to digital products can't do it in the same ways as with material effect. Even though digital products can't be composted, their parts still can be reused in future need of improvements. C2C in sustainable digital design means that sustainable designers create products and services that are resilient, future-proof, and easy to maintain. They can also be made with reusable components and open-source materials that reduce the need to reinvent the wheel, generate new data and code, eliminate digital waste, and save additional energy on creating something new.

b) C2G

On the other hand, the cradle-to-grave (C2G) approach refers to managing a product or system from its creation to its disposal. It is most commonly associated with LCA (life cycle assessment). This approach has been criticized for focusing on waste management rather than prevention. That’s why C2C is most favorable than C2G due to its closed-loop system.

c) LCA

Lifecycle management refers to the process of managing a product or system throughout its entire lifecycle, from inception to disposal or retirement. It involves various activities like design, development, testing, deployment, maintenance, and end-of-life management. You can use LCA to evaluate your product or service's environmental impact from the first to the last life cycle stage.

LCA’s calculation of environmental impact can include various steps that can help set a direction for sustainable actions:1) Identify the scope and goal - what do you want to achieve? 2) Analysis of inventory - what digital products, services, processes, and technology do you have?3) Impact assessment - what is the carbon footprint of these properties? 4) Interpretation - what does the collected data tell us? Can we draw a conclusion and build upon any plan to reduce the impact?

d) DAM (Digital Asset Management)

Digital Asset Management (DAM) is organizing, storing, and retrieving digital assets in a centralized system, such as images, videos, audio files, and documents. DAM systems allow businesses to manage their digital assets more efficiently, enabling them to find and use them faster and effectively.

DAM systems are used in various industries, such as marketing, advertising, publishing, and media, where digital assets are essential. DAM systems can help businesses save time and money by reducing the need to recreate or purchase new digital assets. They can also improve organizational collaboration and communication by providing a centralized platform for managing digital assets.

e) The Triple Bottom Line (TBL)

Environmental and social performance are considered in the triple bottom line (TBL) model of sustainable performance. An organization's economic sustainability refers to its ability to meet its needs and expectations in a financially sound manner. As part of social sustainability, households develop and realize household demands and requirements, including maintaining long-lasting social ties. In contrast, environmental sustainability refers to preserving and reviving the ecosystem for future generations.

f) Benchmarking

It is crucial to measure results and implement continuous improvements. Benchmarking allows you to compare measurements and outcomes over time (self-review process) and analyze competitors' efforts, solutions, and results. This can help you to search for improvements constantly.

g) Marketing and branding (and greenwashing)

In some cases, sustainability in business is used to meet marketing objectives. However, it should never be the company's only goal because its environmental initiatives can not be treated seriously enough, leading to the dangerous practice of greenwashing. However, creating sustainable value can be a part of marketing campaigns. Instead, their purpose should be promoting the company's mission of creating positive change that can help align profit with purpose, reconciling financial needs while addressing social and environmental challenges.

h) Innovation

Sustainable solutions can come with working on product or service innovations. Those are often born with observing competitions and their patterns and trying to improve them by copying and transforming. Observation and innovation can also come from other sources. For instance, biomimicry allows the search for sustainable solutions by emulating natural patterns and processes.

2. Identifying efficiencies

By identifying efficiencies, companies often not only seek a way to reduce waste but also save money. In terms of digital products and services, those can be efficiencies in the number of needed tools, software to create it, electricity to run it, productivity, performance, and improvements. To identify efficiencies accurately, the company first has to revise what are the sources of waste and what is their impact. Several digital tools to help do it in terms of digital products often provide comprehensive analysis and even tips on improving and making them more sustainable.

3. Implementing best practices, patterns, and tools

To achieve a greater sustainable business strategy, companies can search for the best practices, working patterns, and tools for constant improvements. This can be done both by mentioned earlier benchmarking and competition analysis but also by the knowledge available both from external sources, like books, websites, and courses but also audits, consultation, and cooperation with other companies or agencies that are specialized in the topic, such Dodonut, and together with them build sustainable strategy and products.

4. Learning from others' mistakes to avoid pitfalls

It is always good to check case studies and learn from others. Learning for sustainable development can help implement positive environmental solutions, draw conclusions from others’ mistakes, and avoid pitfalls.

5. Monitoring actual actions, states, and results

Constant measuring the impact of your digital product and services, their efficiency, wastes, and energy needed to their run, and searching for anything that you can do better, help you not only be part of a sustainable community of knowledgable business but also stay ahead of competitors, and inviting others to this competition with a healthy, positive impact on the environment, society and the future of the planet.

6. Seeking improvements

With the result of your calculation on environmental impact, the company is ready to constantly apply improvements that are good for the planet, the business goals, and its future success.

Conclusion

While applied responsibly, digital transformation and sustainable business can go hand in hand. Creating a sustainable business model with digital sustainable products is essential for the planet and presents significant business opportunities. By integrating environmental considerations into product design, adopting energy-efficient practices, prioritizing responsible supply chains, implementing proper e-waste management, engaging customers, and fostering continuous improvement and innovation, businesses can pave the way for a more sustainable digital future.

As we navigate the ever-evolving digital landscape, contact Dodonut and let us recognize the transformative power of sustainable business models. Together, through collective action and a commitment to environmental stewardship, we can search for your product and service innovation and build a thriving digital economy that harmonizes technological progress with long-term ecological sustainability. The time to act is now, and by embracing sustainability, businesses can forge a path toward a better, greener future.