Literature Review Inthe current paperwork has been used diversified sources depending on the topic to be presentedand analysed. This includes reports from articles, reports from internationalorganisations and institusions and their vision, policy and actions such as BaselConvention, EU Directives, United Nations, the World Wildlife Fund (WWF), books(some of them found online) related to the topic. Research methodologyTheresearch consists of three parts:1) Focuson the sustainable business model(SBM) and innovation – definitions, concepts, methodsof the main topics- sustainability, sustainable development, innovative businessplans, the Triple-Bottom-Line (TBL), needs for innovation, market-pull andtechnology-push model;2) Hereinformation and analysis are presented for the SBM in the circular economy andcomparison with the traditional open-ended economy, definitions and the wayeach of them works, Basel Convention on waste disposal and Waste Framework Directive(European Union) are presented in relation to the circular economy;3) Inthis part, an example from the business practice is taken, showing theinfluence of sustainable resources on the company’s productivity and profit,applied Lewin’s Change Model for the global carpet manufacturer Interface, analysisof their financial statement and achievements. I. IntroductionKahle & Gurel-Atay, (2013)explain sustainability as the practice of retaining processes ofproductivity either natural or human-made by replacing used resources withresources of identical or greater value without degrading or endangering naturalsystems.
The concept of sustainable development (SD) dates back to the ideas aboutsustainable forest management – management of forests, which were developed inEurope in the seventeenth and eighteenth centuries. This management focused onpreserving the balance between the threemain pillars, also known as triple-bottom-line (TBL): ecological, economicand social, framework proposed by the economist Rene Passet in 1979. Later on,a fourth pillar was included by some authors – culture, since the TBLdimensions do not reflect enough to the complexity of the contemporary society. By successful implementation of thosefour dimensions, the results will bring integrated benefits to locallivelihoods, biodiversity, ecosystems, reduction in some of the effects ofclimate change (LEDS GP, 2015). In the released report Our CommonFuture, also called the Brundtland Report1, the definition of sustainable development (SD), one ofthe most widely recognized, is as follows: SD is “the development that meetsthe needs of the present without comprising the ability of future generationsto meet their own needs” (United Nations, 1987).
The issue of sustainability by and large is featuredas a global issue, since we are using 50% more resources than the Earth canoffer, and it is predicted that in 2030 even two planets are not going to beable to supply our resource demands (WWF, 2012,p.8). According to (United Nations DESA,2015), the world population of 7.3 billion is expected to reach 8.
5 billion by2030, 9.7 billion in 2050 and 11.2 billion in 2100. Since, the number ofthe world’s population keeps growing up, logically, there comes the need toproduce more food to satisfy the human needs.
In addition to this, we, as apopulation of the planet, face problems concerning deficiency in naturalresources and space availability. Furthermore, we have underwent vast changesin the climate from overly dry periods to excessive rainfalls. Lately, manynatural disasters have taken place and inflicted serious damage to regions andfamilies around the world. Due to such concerns and figures, the number ofcountries, organisations and institutions worldwide committed to achieve theSustainability Development Goals (SDGs) 2 areincreasing vastly. Also, leading international organisations which are relatedto sustainable development, e.g.
the United Nations Environmental Program(UNEP), Organisation for Economic Co-operation and Development (OECD), theWorld Economic Forum (WEF), the World Commission on Environment and Development(WCED), among others, have considerably contributed to different viewpoints anddefinitions of sustainability, sustainable development and Sustainable BusinessDevelopment (SBD). Sustainabledevelopment for the business enterprices (SBD) can be achieved not only byadopting the business strategies and activities that are going to meet theneeds of the company but also protecting, sustaining and enhacing the naturaland human resources that will be necessary later on (IISD, 1992). What is more, themacroenvironmental segments emposed changes in the technological environment,so called induced changes whichrepresent the concequences in the technology created by social, political, oreconomic forces – the three main pillars for achieving the balance. Moreover,the consequences of globalization – allocation of resources to technologydepartment, the location of marnufacturing facilities, multinationalcorporations’ role and the comparative advantage of nations make it even morechallenging for companies today (Narayanan,2001).In this assignment, the focus is oninvestigating sustainable technology and innovation in the business model of a companywho use recycled materials as inputs since achieving the Sustainable Developmentmay be best achieved by using resources who will not lead to deficiency andharmful effects to the nature. Recycling may prevent and reduce the potentialusage of resources by converting waste materials into new ones. Analysing the company’sproductivity and results.
II. Researchresults, critical analysis and main findings 1. Sustainable businessmodel and innovationA sustainable business model is defined as “a business model that creates competitiveadvantage through superior customervalue and contributes to the sustainable development of the company and society” (Lüdeke-Freund, 2010). The business model innovationnot necessarily means to discover a new product or service but it uses new waysto plan, create and manufacture/deliver the existing ones and capturing valuefrom it. The question is how to do businessrather than what to do and it goesfurther than just pure innovations in technology, product and process. Thecreated sustainable value represents environmental,social and economic sustainability.
It is no longer the traditiotalsituation when business is focused on profit only but social and environmentalprinciples and goals are considered. What is meant is that businesses are stillprofit-oriented but they take into consideration the social and environmentalaspects. The business model consistsof two important elements: The value proposition – answers the question What are we offering to whom? and follows three dimensions: target segments, product/service offering and revenue model The operating model – answers the question How do we profitably deliver the offer? and includes three critical areas: value chain, cost model, organizationWhen talking about business models, theneed of innovation should be considered because of the threat that currentlyused models will ulitimately slip or fail behind. Business practices that havegone transformation are, e.g the decline of print due to Internet (newspapers),retail shops (the rise of online shopping trends), eduction (many online degreeprograms are offered and can be taught to students regardless of their currentlocation) and so on. The concept of innovation can be definedas “the total set of activities leadingto the introduction of something new, resulting in strengthening the defendablecompetitive advantage of a company” (Van der Meer, 2007). According to(Narayanan, 2001, p.
69), the framework describing the innovation at firm-levelconsists of drivers, process and outputs.The company innovates in response to the environmental demands when aproblem or a need is recognised. This action is triggered by themacroenvironmental trends which include economic, social, political andregulatory trends. Moreover, the two main environmental factors that oftenstimulate innovation are market factorsand input factors.
Where the firsthave a primary influence and the latter (input factors) are emposed to the theneed of reducing costs. When it comes to the process of innovation, they are market-pull where the business pullssustainable technology innovation and Technology-push– where the technology pushes sustainable business. Technology and business arein constant relantionship and creating innovation is inevitable for forming thestrategy fo the Sustainable Business Development related to the latest market trendsand needs. Moreover, “aninnovation that is commercially successful often requires improvements intechnical performance while simultaneously fulfilling a market need” (Narayanan, 2001, p.70). The technology whichis used in the business operations impacts the environment, economy and society.
The business enterprises are executants of potential damage and may causeredundant effects on the three mainpillars. On the other side, companies along with technology and R sectorhave major role in solving existing or possible problems where they developsustainable technology for the sustainable businesses. According to (Sempels& Hoffman, 2013, p.20), “the business model should be innovated byintegrating sustainability in order to build or keep a competitive advantage inan ever changing economy”. The competitiveadvantage is assigned to a variety of factors, including cost structure, qualityof product, distribution network, intellectual property, brand and customer support.
It can be comparative advantage derivedfrom economies of scale, offering a product or service at a lower price and differential advantage where the company’soffers differ from its competitors since they are using more advanced technology,strong brand identity, innovation. 2. Circulareconomy and sustainable business modelExperts in business and sustainabilityacross the world are making a move towards ‘going circular’, implementingbetter processes in the name of sustainable inputs, improved product design andclosing material loops. Achieving the Sustainable Development Goals couldcreate at least $12 trillion in business value by 2030 and generate up to 380million jobs (Commision, 2017).
Theconcept of a circular economy (CE) pointed out the way the traditionalopen-ended economy is structured and built – take, make, dispose, and thefollowing consequences, staying negligent to the usage of waste and recycledmaterials (Pearce, 1989). The concept ofthe linear economy consists of raw materials, production, distribution channel,consumption and ends with waste, disposal. On the other side, the circulareconomy, shown in the figure below, is a closed-loop process – by eliminatingwaste, value is created. What’s more, the circular economy integrates theeconomy and the system of waste management, where the products are designed fora cycle of disassembly and reuse.Figure 1Circular EconomySource: Sustainable BrandsIn the same period, when the concept of the circulareconomy was defined, another significant occasion occurred.
In 1989, the Basel Convention3 was designed with the aim to eliminatethe risks arising from the trasboundary movements of hazardous and other typesof wastes from industrial to developing countries. Any movement should belegally and writtenly approved under the Basel Convention in order to ensurethat countries have the full ability to protect their own environment from anyadverse effects such as the hazardous waste. In the end, the Ban Amendment wasadopted in March 1994 and it prohibits any export of hazardous wastes fromBasel Conventie Parties that are members of the EU, OECD and Liechtenstein tothe other Parties to the Convention (Basel Convention).
The European Union’s approach to waste management isbased on the ‘waste hierarchy’ (see the graph below) which sets the followingpriority order when shaping waste policy and managing waste at the operational level: starting from mostfavored option – prevention, preparing for re-use, recycling, recovery anddisposal (which includes landfilling and incineration without energy recovery),the least favored. This Directive 2008/98/EC incorporates provisions onhazardous waste and waste oils and sets two new recycling and recovery targetsby 2020: 1) certain waste materials from households and other alike to be 50%prepared for re-use and recycling; 2) 70% preparing waste for re-use, recyclingand other recovery.Figure2Waste Framework DirectiveSource: WasteFramework Directive4In line with this, (The7th Environment Action Programme , 2016) set priority objectives for the wastepolicy in the EU including the reduction of the amount of waste generated,maximizing recycling and re-use, limiting the incineration to non-recyclablematerials, termination of landfilling to non-recyclable and non-recovarablewaste and succesuful implementation of the targets of the waste policy amongstall Member States. 3. Influenceof sustainable resources on the company’s productivity and profitThe global carpet manufacturer Interface has implemented the conceptof circular economy in its business since the founder Ray Anderson set the goalfor eliminating the negative impact on the environment by 2020. The company ismanufacturing sustainable closed-loop products and has reduced their dependenceon virgin raw materials by increased use of recycled and bio-based ones.
Duringthe first three years from 1994 to 1997 and company’s drive towardsustainability, its net income reached about $84 million. The company saved $50million by reducing material costs, energy and waste. The strategy and the waythe company achieved those results today can be concluded using the Lewin’sChange Model (see Table 1).Table1Lewin’s Change Model UNFREEZEING MOVING REFREEZING Recognizing the potential of business model Establishing the desired vision of sustainability Reinventing the business model to leverage the green vision Reconfiguring the business ecosystem for sustainable business practices Source: AuthorIn theunfreezing stage, the founder Ray Anderson challenged the company with the new vision 5to be the first company that shows theentire world what sustainability is in all its dimensions.In the changingstage, the launch of the Entropy carpet which becamean all-time bestselling product (2000). Three years later the company launchedthe Cool Carpet which was the first carbon-neutralcarpet in the industry. The Mission Zero program was launched in 2006.
A yearlater, the company has implemented a process for the “clean separation” of carpet fiber from backing. Remarkably, thecompany won the US EPA’s ClimateProtection Award 2004 (for Cool Carpet and internal climate programs) and USEPA’s Green Power Purchasing Award 2004.In therefreezing stage, Interface announced Environmental Product Declaration on all products;Nowadays, the company is the world’s largest manufacturer of modul carpets,having 3500 employees and selling their products in over 110 countries.According to the (Interface AnnualReport, 2016), the company realised net sales of $958.6 million and net incomeof $54.2 million.
Nowadays, the company’s energy comes from renewable sourceswith 96% in the USA and 100% in Europe, they use 58% of recycled or bio-basedsources as raw materials and have reduced the carbon footprint by over 60%since 1994. Furthermore, the company has significantlly managed to reduce thewater usage – using 9.1 liters per square meter in 1996 down to approximately1.8 liters per square meter (see the following fig.3 & fig.
4 ).Figure3Figure4 III. Conclusions Keeping with the latest market trends and needs makes it morelaborious for companies since sustainability approach is taken. Many companies havealready focused on using recycled materials as their inputs since it is not onlyenvironmentally-friendly but also economically–oriented – increase in profits. Theconcern for the future has been an issue and topic for many international organizationsand institutions, who combine their effort to achieve better environmental resultsfor the future and the upcoming generations. The accomplishment of a circular economyis an arduous task for all companies but not impossible. Also, people should notneglect the current situation and statistics, but instead play a major role as customersand households, act responsibly and eco-oriented by: · buying eco food productsthat have less pesticides and chemicals in the production process and beingmore concerned about the ‘fuel’ that we give to our bodies,· reducing the number ofplastic products that we use for everyday needs – finding an alternativesolution that will be eco-friendly and why not using products that aredegradable,· being attentive to theusage of paper products by involving alternatives to reduce deforestation,· choosing renewable energyso that to minimize the usage of coal, oil and natural gas and the followingconsequences;Thecurrent paperwork is fundamental and can be further developed with a full analysisof companies in the carpet industry and their practices.
Also, there are many otherindustries involved in the usage of paper, plastic, glass and wood as raw materials,which are not analyzed here but have full potential and the author does not neglectthem. Circular economy is the key to cope with the current situation since it keepsproducts, materials and components at their highest utility and value at any time.It helps companies to reduce their carbon footprint, meet their climate goals whilemanaging the risks of security of supply of natural resources. In doing so, companiesfocus on reducing costs, improving efficiencies and transforming business modelsfor competitive advantage.
1 In recognition of former Norwegian Prime Minister Gro HarlemBrundtland – Chair of the World Commission on Environment and Development.2 A collection of 17 global goals which are set by the UnitedNations, started in 2016, also known as “Transforming our World: the 2030Agenda for Sustainable Development” and called Agenda 2030 in short3 Basel Convention on the Control of Transboundary Movements ofHazardous Wastes and Their Disposal- The Basel Convention Ban Amendment4 More information can be found at http://ec.europa.eu/environment/waste/framework/5 http://www.interfaceglobal.com/company.aspx