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The Evolution of Research on Sustainable Business Models: Implications for Management Scholars

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The Evolution of Research on Sustainable Business Models: Implications for Management Scholars Journal of Environmental Sustainability Volume 7 Issue 1 Article 3 2019 The Evolution of Research on Sustainable Business Models: Implications for Management Scholars Sandra Rothenberg Rochester Institute of Technology, [email protected] Erinn G. Ryen Wells College, [email protected] Anne G. Sherman Rochester Institute of Technology, [email protected] Follow this and additional works at: https://scholarworks.rit.edu/jes Part of the Business Administration, Management, and Operations Commons, Business Law, Public Responsibility, and Ethics Commons, Environmental Policy Commons, and the Environmental Studies Commons Recommended Citation Rothenberg, Sandra; Ryen, Erinn G.; and Sherman, Anne G. (2019) "The Evolution of Research on Sustainable Business Models: Implications for Management Scholars," Journal of Environmental Sustainability: Vol. 7 : Iss. 1 , Article 3. Available at: https://scholarworks.rit.edu/jes/vol7/iss1/3 This Article is brought to you for free and open access by RIT Scholar Works. It has been accepted for inclusion in Journal of Environmental Sustainability by an authorized editor of RIT Scholar Works. For more information, please contact [email protected]. Journal of Environmental Sustainability RESEARCH ARTICLE The Evolution of Research on Sustainable Business Models: Implications for Management Scholars Sandra Rothenberg Erinn G. Ryen Anne Sherman Rochester Institute of Technology Wells College Think Impact [email protected] [email protected] [email protected] ABSTRACT: Business models that lead to reduced consumption of resources and energy and sup- port a Circular Economy can help businesses address the world’s pressing environmental problems. At the same time, they are concepts that have taken decades to garner serious attention in manage- ment literature. In this paper we review patterns in scholarship across a wide range of disciplines (sciences, humanities and management) on the Circular Economy and related business models like Extended Producer Responsibility, Product Service Systems, Collaborative Consumption, Sharing Economy, and Voluntary Simplicity. We find that management scholars have primarily focused on less radical business models, such as Extended Producer Responsibility (EPR), and have been slow to research more radical business models, such as Collaborative Consumption. In addition, govern- ment policies in Asia and Europe are associated with faster growth of research in these geographic regions. From this review, we discuss how business scholars might learn from these trends, and the implications for future research on business models that lower material consumption. KEYWORDS: Circular Economy, Product Service rent and future global challenges like resource limi- Systems, Sharing Economy, Collaborative Con- tations, ecological degradation, and the occurrence sumption, Extended Producer Responsibility, Vol- of more severe and frequent weather disruptions re- untary Simplicity, Consumption, Business Models quire new approaches to business (Winston, 2014). Currently, companies employ a range of strategies to I. INTRODUCTION meet these environmental challenges, including im- As our consumption of resources, materials, and proving operational efficiency, pollution prevention, products and generation of waste continues to rise, and developing and using innovative technologies individuals, firms, and governments are seeking (Nidumolu et al., 2009). These strategies primar- ways to address concerns about resource scarcity ily focus on eco-efficiency: improve a company’s and climate change impacts with new business and operational efficiency by designing green prod- personal models of consumption. Initially, many ucts and services that reduce energy and resource companies began viewing environmental challeng- consumption, ease dependence on fossil fuel, limit es as a compliance issue and focused on meeting waste generation, and lower costs and compliance minimal standards (Nidumolu et al., 2009), but cur- risks (Nidumolu et al., 2009; OTA 1992). 28 While operational efficiency improvements reduce place products with a mix of goods and services, the environmental footprint industrial and consumer to models based on the sharing of material goods. activity, they do not address reduced material con- Some models, like EPR, require new relationships sumption, something that some see as essential for up and down the supply chain. The latter models sustainability (Nicol & Thompson, 2007). In fact, require a shift in the traditional economic relation- as industry increases eco-efficiency, it may encour- ship between the consumer and a firm, from prod- age increased consumption, commonly known as uct manufacturing and personal ownership of goods the rebound effect (Berkhout & Hertin, 2004). As towards a ‘Sharing Economy,’ in which the firm or one example, improved computational efficiencies, consumer provides services and/or shares goods reduced prices, and increased active use of consumer with other consumers (Hu et al., 2012; Tan et al., electronics over time has led to the rebound effect 2010; Puschman & Alt 2016). by stimulating increased demand for devices and increased energy consumption (Berkhout & Hertin, In this paper, we are interested in the extent to which 2004; Ryen, Babbitt, & Williams, 2015). This re- academic disciplines have been involved with the bound effect has also been seen at the industry scale emergence of scholarly research related to the Cir- as well (Dahmus, 2014). Thus, without a systematic cular Economy and related business concepts. As approach to address resource and climate change noted by Nohria & Eccles (1998, 283), “Critics of challenges that includes reduced consumption in at business school research charge that it places aca- least developed nations, significant losses will con- demic rigor over managerial relevance, and that it tinue to occur along the supply chain (EMF, 2013). fails to take the kind of interdisciplinary approach that is necessary for addressing practical problems To move beyond eco-efficiency, some companies in the real world.” We would add that research needs are rethinking their business models and practices to be socially relevant as well. The growing global to reduce consumption and share resources (Mont problems with waste, climate change, and other sus- 2002; EMF, 2013). By challenging basic assump- tainability issues suggests that management schol- tions about customer needs and economic growth, ars are failing at this task. The Circular Economy collaborating with a variety of stakeholders, and is one solution to these problems, but it is a concept developing new sustainable product designs and that has been around since the late 1960s (Boulding, services, companies can be positioned to grow 1966) and has taken decades to be addressed into while also meeting the changing demands and ex- mainstream management literature (EMF, 2013). pectations of customers with business models that reduce consumption (Winston, 2014; Nidumolu et There have been prior attempts to take a wider view of al., 2009). Adoptions of these business models re- the research on low consumption business models, but quire an understanding of how the models enhance the articles are primarily focused on one type of model value creation (Abdelkafi and Hansen, 2018). (Product Service Systems, or PSS, for example) (Ba- ines, Lightfoot, Evans, et al., 2007; Baines, Lightfoot, The Circular Economy sits within a larger range Benedettini et al., 2009; Taticchi et al., 2013; Sakao of business models and concepts that reduce mate- et al., 2009; Lightfoot et al., 2013; Reim et al., 2015; rial consumption (Botsman, 2013). Models range Tukker, 2015). A holistic perspective is explored in from traditional, firm-driven models of Extended a recent literature review synthesizing the intercon- Producer Responsibility (EPR), to ones that re- nections between the Internet of Things (IoT) sector, The Evolution of Research on Sustainable Business Models 29 Circular Economy, and PSS model, noting the need of the changing nature of the consumer/firm or con- for further cross sectional and longitudinal research sumer/consumer relationship, and explain how these between concepts (Alcayaga et al. 2019). categories drove our choice of search terms. Then we present our methodology. The final section analyzes Most of these studies focus primarily on management the literature and discusses the themes associated with disciplines (Lightfoot et al., 2013; Taticchi et al., 2015; each search term. We conclude with thoughts about Reim et al., 2015; Tukker, 2015). Several of these re- how we might learn from these trends as new busi- views, however, do call for a broader review of the ness models emerge, and the implications for future research on sustainable business models. Lightfoot et research in the area of the Circular Economy. al. (2013), for example, recognizes their review’s weak linkage to the engineering and science research com- II. BUSINESS MODELS IN THE CIR- munity, in that 90% of the literature they review are CULAR ECONOMY dominated by the broader management field. They state In this section, we will review the concept of the Cir- that there is value provided in understanding how dif- cular Economy, as well as a number of related con- ferent research communities view the topic of servitiza- cepts, including Extended Producer Responsibility tion. Bocken et al. (2014) also conduct a broad literature (EPR), Product Service Systems (PSS), Collabora- review on sustainable business models and
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