‘Degrowth’ for Growth?

Sustainability in business models is set to be the key for an inclusive Digital Revolution

The COVID-19 pandemic has not only created new economic demands and tested business’ resilience to its core but has also forced businesses to innovate, alter and sometimes even entirely upend their existing business models. Experts worldwide now agree that while organisations figure out a better way to carry out business in a post-crisis economy, stress must be laid on ecological sustainability and social justice with primary focus being shifted from growth to quality of life. The business models of tomorrow must revolve around organisations and networks creating value for stakeholders whilst being wary of the natural and ecological impacts of their actions.

The Degrowth Blueprint

The newest industrial revolution is nigh. The previous one, whilst arguably adding immense value to global growth, did disregard the ecological repercussions of the means of growth. Today, with digitisation leading the ongoing revolution, experts agree that businesses must follow “sustainability principles such as circularity, inclusiveness, local and green supply chains, or sufficiency”. Circularity, for example, aims to close the production-consumption cycle by stressing on improved and recurrent usage of resources, leakage and waste (such as in offering improved repairing services and promoting recycling). This will require emphasising on sufficiency, such as “consciously avoiding material over- and under consumption in absolute terms to improve quality of life while preventing rebound effects on the natural environment.”

This has given birth to a concept that has picked up a considerable amount of traction from global communities over the past few months: a normative framing of ‘degrowth’ for the sustainably-oriented transformations of industries, firms and national economies. Sustainable ‘degrowth’ is an effort towards a greater level of socio-economic equitability whilst maintaining a reasonable level of economic throughput. Research from the London School of Economics on degrowth formulates an economy that includes “local sharing, repairing and self-provision, unpaid family care, and many other non-commodified activities. This comprehension of economic activities beyond merely monetary and reciprocal transactions is essential in order to imagine, creatively experiment with, and implement new solutions to pressing sustainability challenges.”

Further research from LSE advocating degrowth stresses on sustainable business model innovation as alternatives to current economic models through the use of actionable blueprints as a ‘heuristic device to systematically capture knowledge of experience-based best practice solutions for sustainability’. To do this, a business model pattern describing the economic, social and ecological problems attached to organisations creating value, whilst aptly describing design principles and value-creating activities to provide an actionable problem-solution combination needs to be set up. This would, in turn, improve firms’ abilities to create and maintain social, natural and economic capital beyond organisational boundaries by altering its value proposition for stakeholders and consumers: i.e. the way that value is created and captured.

Value Propositions

In research carried out on degrowth, a proposed methodology is of ‘community prosumption’, such as in the case of community-supported agriculture. In a socio-economic context where an economic relation is set up through citizens being consumers of a final product produced by firms through intermediaries such as supermarket chains, the major problem is that there is no space for non-material or non-monetary forms of value creation. This leads to (i) consumers becoming disconnected from the source of value creation, (ii) producers being in a condition of fierce competition, whilst (iii) individuals remain most vulnerable to local conditions (such as drought).

According to research from the LSE, “A solution then is to share the risk with local citizens who pay a fixed yearly amount, regardless of how successful the production is. Moreover, local citizens engage in local manufacturing or harvesting, build social connections, experience mutual learning processes, and spend leisure time, for instance, in a green environment. Hence, economic relationships are diversified, monetary exchanges are, to a certain degree, deprioritized, and consumers eventually turn into ‘community prosumers.’ This reduces producers’ workload and frees up time to invest in the quality of organisational processes.”

Broad research on sustainable business model evolution is set to be the norm in the coming years, with several major global organisations already taking concrete steps towards the process (such as Apple aiming for carbon-neutrality by 2030). Being proactive about the process could allow firms a head-start in a future that aspires to be much more sustainable, democratic, and inclusive for all.

Reference:  Lüdeke-Freund, F. and Froese, T., 2020. ‘Unlocking sustainable business model innovation for a post-crisis economy’. ESCP Business School.

The original paper is available at https://academ.escpeurope.eu/pub/IP 2020-31-EN.pdf