In October 2012, the State of Sustainable Business Poll found that two-thirds of businesses believed that the most important leadership challenge businesses face is the integration of sustainability into core business functions.
A working definition of “sustainability” in this context is “that which meets people’s needs without compromising the ability of other people to meet their needs…individuals or households would not systematically contribute to environmental increases in synthetic substances or substances extracted from the Earth’s crust. Their consumption would not contribute to increasing environmental degradation, and it would in no way hinder the ability of other people to consume adequately and sustainably.”
Although businesses may initially find it challenging to integrate sustainable practices into their core businesses models, consumers and businesses will each benefit from the emergence of service-centered businesses.
In an economy with service-centered businesses, companies will focus not on selling a product, but rather the service a product provides. This change in thinking is critical to sustainability because service-centered businesses eliminate the need for individual consumer ownership.
When businesses begin to focus on services people need, the need for individual products will decrease, and society gets a more sustainable means of providing people with their needs.
To compare the idea of a product-centered business model versus a service-centered business model, consider residential cleaning products. In a traditional product-centered business, the company sells product in volume. A homeowner buys a cleaning product, uses it occasionally, and stores it in their home.
Conversely, a service-centered business would be a house cleaning company. A cleaning company purchases cleaning products and uses them to provide the service of cleaning many residences. Simply put, one cleaning product is used more frequently and to service many homes, in comparison to one cleaning product which is used infrequently and stored in one home. The cleaning service eliminates the need for homeowners to buy and store their own cleaning products.
If a service-centered business can accomplish the same basic need that a product can, the need to produce those products will drop, as will – eventually – the volume of product produced. Additionally, service-centered businesses will more efficiently use of those products which are produced.
In order to accomplish this in a way that entices consumers, a service-centered company must offer a service that is equally convenient to, or more convenient to the consumer than if they had a product that provided the service.
This model has been present for many years in some industries such as the cleaning industry, but is expanding into other industries such as rideshare programs like Lyft, Uber or ZipCar, residence-sharing programs such as Airbnb, and digitally-based mediums of data sharing such as Netflix.
Rather than buying a car, ZipCar allows a consumer to enjoy all of the services of a car without paying for maintenance, insurance, or storage. The product has become the service of transportation. ZipCar eliminates these barriers by providing a car without all of the expenses.
Airbnb allows someone to temporarily rent a living space without buying, insuring, or entirely maintaining it. In reference to the definition of sustainability, renting out rooms in existing housing does not “contribute to increasing environmental degradation.” Homeowners have a monetary incentive to capitalize on their extra space.
Netflix provides video entertainment without the need to purchase physical DVDs. It provides the service of movies and TV shows without ownership of them; it is equally as, or more convenient than going to rent a movie from a movie rental business. It adheres to the sustainability requirement of not adding to “environmental increases in synthetic substances or substances extracted from the Earth’s crust.”
The service-centered business model is a realistic approach for businesses to take while addressing the sustainability challenge. It lowers barriers for consumers to consume while still achieving the goal of the business. Consumers are drawn to sustainable options because it is more convenient for them, even if they are unconcerned about the environment. Meanwhile, businesses benefit from lower production costs by serving customers with fewer resources.
Consumers, businesses and the environment all benefit from service-centered businesses in the elimination of the need to own and store physical products, in lower production costs, and in reduced environmental degradation. One small step for businesses; one giant leap for the environment.
Jackie Jeffers is a graduate of the University of Portland in Portland, Oregon, with a B.B.A. in Marketing and Sustainability. Jackie has a broad academic background in math, science, music, art, and has extensive travel experience to many European countries, as well as Taiwan. She currently lives and works in Seattle.