The buzz around supposedly innovative ways of sharing or reusing resources often proves delusional, says Peter Knight
You just don’t get it! That was the cry from frustrated entrepreneurs seeking funding for crazy online ideas before the dotcom crash of 2000. You hear it now from the sustainerati as they chatter excitedly about supposedly new business models that promise to take us to an eco-balanced nirvana in a profitable flash.
Most business models purporting to provide a sustainable future economy are like levitation: more puff than proven. I blame Airbnb and Zipcar. Their success has interfered with our ability to think rationally about how business can best contribute to sustainable development.
It all starts with our love affair with social enterprise. This is the idea that you can boost the efficiency of social services by applying the language of business to socially necessary but unprofitable activities, such as reforming prisoners or providing affordable housing. The “profit” in this business model is the social benefits that accrue to society, say, in a crook going straight, or housing a nurse.
Deconstruct the social enterprise model and you find that someone is still plugging the big gap between the cost of the service and the revenue that the “enterprise” generates. The plug comes from a range of sources, including tax breaks for investors, or companies that feel more comfortable “investing” in social enterprises than providing philanthropic gifts. That’s fine but let’s not delude ourselves that social enterprise is anything more than good old-fashioned philanthropy with a modern haircut.
The delusion continues and is especially prevalent in the “sharing” business model. This is where the internet has made it easier for us to get information about objects that we can rent for a short while – like your spare bedroom or a Volkswagen Golf. The success of Zipcar (owned by Avis) and accommodation service Airbnb has created a great upwelling of ideas predicated on rental – from power tools to baby clothes.
Such sharing brings many environmental benefits by maximizing the use of resources, but there is nothing fundamentally innovative about the model. Forty years ago, the Brits rented televisions from a now dead company called Radio Rentals until the gadgets became cheap enough to own outright. And for years you have been able to rent anything from a holiday cottage to a camera lens and a tuxedo.
Entrepreneurs will offer us more opportunities to share in the Zipcar style, but it is unlikely that the current rash of experiments in renting low-value goods, like a power drill or baby clothes, will take off. Why arrange to use a Black & Decker for the weekend when you can buy a machine that will pierce bullet-proof armour for less than the cost of a round of drinks?
Delay, but still dump
Then there is the upcycling business model, as popularised by Terracycle in the US. This is where you plunder other people’s trash for your raw materials to make things that people use for a while and then … throw in the trash. This has been happening for a long time – the Japanese used to make toy cars from old tin cans – but it has recently been glamorised by businesses paying people to upcycle their waste.
Upcyclers make all manner of everyday items, such as children’s backpacks, from hard-to-recycle packaging. The environmental and social benefits of this model are questionable because it fails to provide a long-term solution to the problem. Upcycling only delays the time taken for the materials to reach their final resting place in municipal landfill. Worse, upcyclers take the pressure off companies that can’t (or won’t) find alternative packaging.
A similar model is that practised by the early Brooklyn Industries and lately by Elvis & Kresse, which uses unwanted but durable materials such as billboard fabrics and old fire hoses to make classy bags and belts. This provides a wonderful story to enliven the marketing literature, but there is nothing fundamentally different from this business model from that of, say, Topshop: only that Topshop pays for its raw materials.
The sustainerati’s infatuation with such models should be redirected to the less glamorous Ikea, which is quietly finessing its well-tested business model to make it more sustainable. Ikea has built a global business by focusing on good design at prices most people can afford.
It is now including sustainability into the mix and is quietly demonstrating that you can create an ethical supply chain and reduce your environmental impacts with a policy of straight talk and a clear understanding that customers should not have to pay more for sustainability. So simple.
Peter Knight is president of Context.
Disclosure: Ikea is a client of Context’s
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