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A first attempt in abstracting a regenerative business model framework

Juan Pablo Casadiego

Even though there is extensive knowledge on corporate sustainability and how to mitigate Anthropogenic impact on social-ecological systems (SESs), the environment is worsening. Such paradox, pointed-out by Dyllick and Muff, raises questions about the effectiveness of actual corporate sustainability and sustainable business models (SBMs) in preventing irreversible damage on the Earth System. Such paradox challenges sustainability scholars and practitioners in how to conceive and adopt corporate sustainability practices that achieve “true” sustainability (see Landrum´s work about corporate sustainability stages).

Willing to apply a novel approach of sustainability to management sciences, my master thesis project inquiries about SBMs in light of the regeneration sustainability paradigm. More specifically, I abstract a first regenerative business model (RBM) by systematically analyzing and comparing value flow characteristics of traditional business models (TBMs) and SBMs in accordance with regeneration claims. The considered value flow elements (main unit of analysis) are the ones previously studied in the business model literature (e.g., Bocken and colleagues’ literature review); (i) value proposition, (ii) value creation and delivery and (iii) value capture (figure 1). 

regenerative business framework model
Conceptual business model (value flow) as main unit of analysis that compares traditional and sustainable business while systematically abstracting a regenerative business model. Note: Conceptual business model framework from Bocken et al., (2014)

What is regeneration and why is it so promising in solving environmental issues?

While there are multiple understandings surrounding regeneration, most of them share similar definitions and approaches. According to Trujillo, regeneration aims to support and sustain life (for both human and natural organisms) while enhancing the capacity of SESs to continue providing ecosystem services and preserving biophysical dynamics (e.g., climate regulation and biodiversity). As stated by Mang and Reed, it differs from previous rationales that constitute sustainability which intend to mitigate or reduce environmental harm. Instead, through a co-evolutionary process, regeneration establishes a mutually beneficial relationship between SES and human activities. Regeneration principles also encompass creating net positive impact on the environment, transitioning from a degenerating human-nature relationship to one that restores and mimics natural biophysical cycles (see figure 2). Net positive impact consists of returning to the environment more than what has been extracted from it.

regenerative business framework model
Figure 2. Contrast of Technical System Design and Living System Design.
Source: Mang and Reed (2012)/Regenesis Group
 

Value proposition

In a TBM, value proposition deals with the products and services being offered and the potential economic return. It also comprehends business-customer relationships, customer targets and how to segment markets (unidirectional value flow interaction). In relation to sustainability concerns, such an approach is market-oriented and focused on satisfying consumer demands, ignoring ecological boundaries and usage capacities of ecosystem services. Furthermore, SBMs consider the environmental impact(s) the business might generate or enforce (typically focused on a single issue, e.g., CO2 emissions). 

In contrast, I argue that a RBM value proposition deals with the value offered to the customer and the environment. Consequently, it’s a cornerstone in creating relationships between ecological systems and businesses.  Echoing Boons and Lüdeke-Freund, the value proposition is a valuable tool to “Provide measurable ecological and/or social value in concert with economic value”. Furthermore, RBMs should comprehend ecosystem-enhancement, biophysical restoration, and net positive impact across SESs, in comparison to SBMs, which usually adopt strategies that reduce or mitigate certain environmental impact. Also, regeneration implies accounting for a broader set of values instead of relying on merely economic domain. As du Plesis and Gladwin argue, adopting an ecological worldview also implies changes in beliefs, values and even culture. 

Value creation and delivery

While TBMs create value based on customer expectations, SBMs create value for a broader set of stakeholders through partnerships or network reconfigurations. Additionally, SBMs provide solutions such as designing products and services that use fewer resources, decrease pollutant emissions, and adopt eco-efficiency technologies. When environmental damage is caused by a third party involved in the value chain, SBMs opt for suppliers’ selection given environmental policies and standards. Similarly, I argue that RBMs can benefit from effective governance mechanisms, especially if businesses promote and encourage positive net impact across value chains. 

Regeneration in value creation and delivery involves seeing nature as a ‘partner’.

In addition, regeneration in value creation and delivery involves seeing nature as a ‘partner’. Businesses can co-create with nature by understanding natural cycles and dynamics, seasonality, and spatial dimensions. One might question how to create value for nature. To create value for nature, we must acknowledge and “try” to understand the complexity behind regenerating SESs. As Trujillo highlighted Regeneration implies creating favorable conditions for the environment to continue its natural cycles to preserve stability and ecosystem resilience. To accomplish such goals, we need to make enormous efforts to involve multiple actors, enforce commitment and design policy strategies that systematically change production and consumption patterns. Unfortunately, businesses lack resources, incentives, knowledge (holistic approach), and/or assistance in how to create appropriate conditions to regenerate the natural ecosystems that their activities disrupt.

Value capture

In business models, value capture is related to financial decisions that concern strategic aspects of value creation (e.g., cost structures). In SBMs, the concern is mainly with the reduction of environmental damage (e.g., bottles made with recycled plastic) while also being economically feasible and sometimes beneficial for the business (e.g., reduction in costs). Nevertheless, SBMs tend to reinforce principles of a weak sustainability stage. As mentioned by Landrum, businesses at this stage preserve economic value principles and attempt to include environmental solutions. Under this logic, value capture is conceived as mitigation and/or reduction of the damage, but not does not truly contribute to a positive net impact. A positive net impact requires effort to enhance SES, guaranteeing a positive tradeoff for the business and the environment. 
 

If ecosystems are not regenerated, over exploitation and/or the lack of collective action and policy would lead to environmental collapse.

According to Ritala and colleagues, regeneration is a business-based solution to the institutionalized asymmetries of managing common goods. Such asymmetries arise when common goods (water, fisheries, healthy air) are used by private entities; however, benefits only return to private and social domains. This is a consequence of our conceptualization of nature as non-human and non-agentic. If ecosystems are not regenerated, over exploitation and/or the lack of collective action and policy would lead to environmental collapse. Thus, entrepreneurial activity is crucial in encouraging environmentally restorative and regenerative practices. 

Accomplishments and research opportunities

The abstracted RBM does not conceive of a normative or descriptive framework. Instead, it bridges elements from the business models literature with main principles of the regenerative sustainability paradigm, offering a novel and alternative approach for corporate sustainability in research and practice of attending socio-ecological systems’ sustainability issues like global warming. However, given the complexity of SESs, more theoretical and empirical work is needed to corroborate findings of this first RBM characterization. This presents an opportunity for scholars to continue exploring innovative research methodologies while promoting transdisciplinary research, especially between management and ecological sciences. We urgently need to adopt strong corporate sustainability practices. According to the latest report of the Intergovernmental Panel on Climate Change (IPCC), we are very soon likely to trigger irreversible changes on the Earth System, risking the safe operating space for humanity.
 

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