WE.1.D || Sustainability of Business Models and Innovations

Baumann, Henrikke; Böckin, Daniel; Goffetti, Giulia; Tillman, Anne-Marie; Zobel, Thomas

Recent years have seen much interest in business models as vehicles towards sustainability (cf. Boons & Lüdeke-Freund 2013). However, conventional LCA with its product focus fails to capture the environmental impacts of a business model. Here, a novel LCA methodology for assessing the environmental performance of business models is presented, Business Model LCA. The methodological innovation is underpinned by an understanding of differences between product and business: While a product is anything that can be offered to a market that might satisfy a want or need, it will by itself will not make money — a business is an arrangement of people, processes and tools around a product to enable it to make money. From a business perspective, the product is a means to an end. To reflect this relationship, BM-LCA centres its analysis on the business. A key innovation is made to the functional unit (defined as ‘profit per time unit’). From this follows the coupling of the business system with its monetary flows to the product system with its material and energy flows. To achieve this, a conventional mapping of the product’s technical system is complemented with an actor mapping. Their coupling is made via a set of equations describing socio-material interactions in the form of product-related economic exchanges of the business organisation. BM-LCA was developed through a case study comparing two business models (a sales model and a rental model) of a sustainability-dedicated company in the garment sector. The BM-LCA study produced useful and novel insights and the method enables analysis of economic decoupling in business practice. BM-LCA is also compared to other LCA approaches used for similar aims and discussed with regard to its usefulness to business model innovation for sustainability. In conclusion, BM-LCA represents an important contribution to environmental business analysis and opens up a new avenue of research where LCA and business scholars can collaborate.