The power of this diagram (versus more traditional, linear depictions) comes in part from its ability to reveal where delays, rebound effects, or tipping points might be active in the system. For instance, the node labeled “environmental and recycling awareness” will influence changes in several consumer habits—but only after a delay. Such awareness cannot be seen as a quick-fix solution, but over time it will help change the dynamics of the entire system.

Companies that bring viable solutions to the plastics problem will gain enormous goodwill and likely build high-growth businesses.

The boxes in the exhibit represent the opportunity spaces or strategic intervention points (SIPs) that become evident during this step. In this example, a few of the SIPs for our CPG company are as follows: shifting to new packaging formats; setting up plastic collection initiatives; lobbying for government programs like deposit return systems; joining precompetitive coalitions that invest in recycling infrastructure and new recycling technology; and educating and nudging consumers to consume and dispose of packaging in more sustainable ways.

2. Innovate for a Resilient Business Model

The first step in the cycle will have led you to identify the opportunity spaces that hold potential for both financial returns and societal value. You must then transform your business model, or imagine an entirely new one, so that you can seize these opportunities. In this second step, you innovate and develop new aspects of that new business model. You are seeking to bypass current constraints, break tradeoffs, deploy technological advances, and perhaps integrate activities that were previously kept separate. You should ideate a new business model to integrate and reinforce both business advantage and environmental and societal benefits.

In related research, we introduced and defined seven archetypal business models that optimize for both societal and business value. Here we illustrate how they might apply to the plastics waste challenge.

• Own the origins. Change production inputs to generate societal and environmental benefits. For instance, HP is working with waste collectors in a partnership with the First Mile Coalition in Haiti. HP has invested $2 million in a local facility to produce clean, high-quality recycled plastics that can then be used as input in an array of HP personal computer products and ink cartridges, reducing the environmental footprint of those products. Four years after its launch in 2016, the program had already diverted approximately 1.7 million pounds (771 metric tons) of plastic materials (equivalent to more than 60 million plastic bottles) from waterways and oceans and created income opportunities for 1,100 Haitians (with 1,000 more expected in coming years). Thanks to this and other efforts, HP boasted the world’s most sustainable PC portfolio in May 2020. This included, for example, the HP Elite Dragonfly, the first PC manufactured with ocean-bound plastic.
• Own the whole cycle. Create environmental and societal impact by influencing the product usage cycle from cradle to grave. Since the 1990s, Grupo AlEn, a leader in home cleaning products based in Monterrey, has invested and scaled up its in-house plastic recycling operations to become one of the largest plastic recyclers in Mexico. AlEn now operates 30 routes and 6,200 collection points in the Monterrey area, recycling more than 50,000 tons of PET and HDPE per year. This business expansion has given AlEn an exclusive supply of recycled plastics, enabling it to create distinctive, greener packaging at a relatively stable cost.
• Expand societal value. Expand the environmental and societal value of products and services, and capture value in pricing, market share, and loyalty. In 2018, PepsiCo acquired Sodastream, the world’s leading at-home sparkling water maker. Building on this technology, PepsiCo has begun to bring packaging-free, customizable beverages to workplaces, college campuses, and airports. This new business positions PepsiCo to win in the increasingly personalized beverage market and to save an estimated 67 billion single-use plastic bottles by 2025.
• Expand the value chains. Innovate by layering onto the business ecosystems of customers or of partners in other industries. In Chile, Algramo’s innovative bulk distribution system replaces single-use plastic with RFID-equipped reusable containers. Since 2013, the startup has scaled up its business by partnering with more than 2,000 family-owned stores across Santiago. They dispense affordable food and staple products “al gramo” (Spanish for “by the gram”) and reward customers for reusing containers. Algramo’s model not only helps the environment but also benefits the urban poor, who previously had to pay high prices for small quantities of products, in wasteful, individually wrapped packets.
• Re-localize and regionalize. Shorten and reconfigure global value chains to bring societal benefits closer to home. In Brazil, BASF has developed a solution to a local issue: waste certificate fraud. Some collectors and recyclers claim credits for recycled materials that they didn’t actually process or that aren’t actually recycled. Partnering with Kryha, a digital blockchain studio, and Recicleiros, an NGO that supports waste collectors and their cooperatives, BASF developed an online platform called ReciChain. This platform enables accurate and secured data tracking throughout the recycling value chain, to improve the quality of operations and guarantee the validity of manufacturers’ certificates and claims.
• Energize the brand. Encode, promote, and monetize the full environmental and societal value of products and services, and use that leverage to engage customers in novel ways. The innovative manufacturing company 3M released the latest version of its Thinsulate insulation product in 2019. This is “100% recycled featherless insulation” made from recycled plastic bottles. Building on this accomplishment, 3M worked with the high-end apparel brand Askov Finlayson to create “the world’s first climate-positive parka,” producing 3,000 parkas in 2019 as an inspiring demonstration project.
• Build across sectors. Create new business models in collaboration with government and nonprofit organizations, particularly in rapidly developing economies, to improve the business ecosystem and societal proposition. Together, SC Johnson and the social enterprise Plastic Bank have opened nine recycling centers in Indonesia to collect and recycle plastic before it reaches the ocean. This partnership also plays an important societal role, helping families in impoverished areas who collect plastic waste by buying it at a premium from them. In 2019, the partnership announced a ground-breaking, three-year deal to create 509 plastic collection points, including locations in Thailand, the Philippines, Vietnam, and Brazil. In aggregate, these points are expected to collect 30,000 metric tons of plastic over three years—the equivalent of stopping 1.5 billion plastic bottles from entering waterways and the ocean. On the business side, among other benefits, this collaboration will secure a steady supply of high-quality recycled plastics and help SC Johnson meet its 2025 packaging goals.

These seven archetypes can be starting points for developing your own business model innovation. Adapt them, and combine several together to develop a more comprehensive solution to environmental and societal issues relevant to your enterprise. Interestingly, among the 102 in-depth SBM-I cases that we explored in our research, 75% of the SBM-I leaders (the “front-runners”) combine three or more archetypes. This contrasts with less than 30% in the two other groups: the “ecosystem leaders” and the “initiative leaders,” whose efforts tend to be more narrowly focused.

In addition to exploring the possibilities inherent in these seven archetypes, take inspiration in the lessons learned from SBM-I front-runners. Front-runners see sustainability as a source of competitive advantage. In line with their long-term strategies, they continuously iterate and fine-tune their business models, always seeking to deepen their beneficial impact. They explicitly seek to understand and fix the root causes of environmental and societal challenges—as some of our plastics recyclers did, addressing not just the environmental concerns but also the social aspects of the issue. These companies also use digital technologies wherever possible, to break economic constraints and unlock new solutions. They practice an intensive form of stakeholder engagement: partnering with nonprofits and governments, operating across organizational boundaries, and pooling resources with other enterprises, even competitors. Last but not least, they experiment with new forms of value capture, such as blended financing sources, to de-risk and amplify their own investments. After all, notwithstanding their environmental and social track records, the front-runners are still in business to show a profit and return investment to shareholders.

3. Link to Drivers of Value and Competitive Advantage

In the third stage of the cycle, test, iterate, and refine your business model ideas or concepts (from the second step) to ensure that they will yield the environmental and societal benefits intended, and that the benefits will translate into value and advantage for the company. A business with weak profit margins cannot invest in innovation to amplify and scale environmental and societal benefits.

The objective of this step is to keep assessing and reengineering the business model, so that it continually improves the resilience of the business and the benefits to society. The following questions, based on our research into the characteristics of robust, resilient business models, can help you navigate this part of the process:

• Can the business model scale effectively? Can it be replicated across all your business units or the markets you serve, without diminishing returns?
• Will the business model differentiate your brand or product and make it more competitive in the marketplace?
• Will it reduce the risk of commoditization, by being hard for others to imitate? Will its distinctiveness help you retain some control over pricing?
• Can it leverage network effects? For example, can it attract the kinds of customers and suppliers that make other customers feel compelled to join?
• Does the business model harness business ecosystems—including the larger industry, the value chain, and everyone who interacts with your products, services, and practices—for advantage and sustainability?
• Does the business model naturally create meaningful environmental and societal benefits?
• Will the environmental and societal benefits remain durable against changing trends over time, even as the business model scales up?
• Does the business model increase returns to shareholders as well? Are the financial benefits linked to the environmental and societal benefits in some significant way?
• Finally, does the model animate your company’s purpose? Does it boost engagement and loyalty between the company and its employees, customers, investors, and other stakeholders?

Exhibit 3 shows how a company might assess its business model against these nine questions. The resulting footprint reveals how robust and resilient the business model is and identifies where it could be improved to unlock further advantage and value for the company.