Everyone is looking for their impactful business model… What if in this quest that almost borders on the Holy Grail, the answer is close to what companies are already doing? Sample demonstration for the distribution sector, with this point of view from Arnaud Florentin, associate director, and Elisabeth Laville, founder of the agency Utopies.
In a context where companies are being called upon to embark on the path of more sustainable growth (or even post-growth), the question is Impact business models (Impact business models in English, ie IBM¹ — the acronym we will use here for simplification) becomes unavoidable. It’s a paradigm shift for business — to understand how to influence society through the business model and not just through operational excellencehow to generate positive effects inherent in the activity and not just limit the negative effects.
The increasing pressure on companies to address the major issues of our time (such as climate change, biodiversity, territorial impact, social inclusion, etc.) and the risks of ‘impact washing that their stakeholders are quick to point the finger at drives many of them on the arduous quest for an IBM, a business model deliberately designed to create a specific positive outcome for stakeholders and which is a significant part of the company’s activity. (rather than a fringe activity, which serves as a green alibi).
The game is worth the candle for retail: a customer who positively perceives a brand’s engagement has a purchase intent that is 2.7 times higher
In the distribution sector, the game is worth the candle: a customer who positively perceives brand engagement has an average purchase intent that is 2.7 times higher to that of a customer who does not experience this commitment positively². For retailers or retail brands, the impact convincingly written at the heart of their DNA is therefore a powerful lever for value creation and differentiation.
However, the walk is not so easy to climb. The highly demanding B Corp certification, which unites nearly 6000 companies of all sizes and all sectors in more than 80 countries (already nearly 200 in France), is today the only one that provides a working framework for IBM, which accounts for almost half of the full questions in its self-assessment framework³. The evaluation questionnaire offers in each section a section dedicated to impact models. B Corp identifies more than twenty impact business models that appear in the details of the overall assessment that is eventually published when the company is certified.
Today, very few retail (in-store) brands make the B Corp list — only two in France (Naturalia and Nature & Découvertes⁴) — while a handful of them manage to “trigger” an IBM and rack up maximum points. Other way arounde-commerce players and platforms (physical or digital) that offer a form of disintermediation and a direct link with producers are increasingly numerous within the B Corp community to offer business models with impact (such as CAMIF or la Ruche qui dit Oui in France⁵).
Why this difficulty for distributors to put impact at the heart of their DNA and business? There are several reasons to : a market historically driven more by demand than supply, price pressures inherent in the industry, the difficulty of playing the role of “selector” and imposing codes or specifications, green marketing getting caught playing its own game (launching additional green ranges rather than transforming conventional ranges), the difficulty for retailers to manage the additional costs of impact products, the relative lack of flexibility of the physical channel to think about the impact (and the difficulty using the digital channel without running into other ethical or environmental concerns).
Which way can brands go? Since an IBM is by definition rare and exceptional according to B Corp terms, one might think that the design must be resolutely disruptive by nature, unlike conventional models. Paralyzed by this complexity, companies often looked for a ‘big idea’ or a complex innovation pattern that rarely proves capable of shaking up the market.
The adjacent opportunity has a huge advantage: not starting from scratch and maintaining some continuity with the current business model
However, when we carefully analyze the companies (all sectors together) that have succeeded in developing such virtuous business models⁶, we realize that they particularly excel in what the biologist Stuart Kauffman calls “adjacent capabilities”, which are available not far from what the company already knows or can do: these companies verticalize the agricultural or industrial upstream, they support suppliers in their transformation, they develop their own recycling platforms, they fully exploit their by-products or by-products, they rent or repair the products they already market, they open their factory or co-manufacturing thanks to another nearby, they operate the buildings (production or sales) more efficiently to create a laboratory or a local hub, they develop more synergies between companies and offer global offers (integrated services contracts), they are based on networks of micro-producers who don’t have clarity when they are isolated, they promote local heritage (crafts, art or land) or some good ideas that come up during the ‘story…
In short, they explore the adjacent the valorisation of know-how or available, dormant or underused resources, which allows them to capitalize on a breach, then discover new ones and really rethink their business model. The adjacent opportunity also has a huge advantage: not starting from scratch and maintaining some continuity with the current business model.
It is precisely this logic of innovation through the immediate environment that has allowed certain brands to shape a true impact distribution model that goes far beyond simple responsible management of activities:
Athletica (GAP group), through its 234 stores in North America, makes and sells clothing designed by female athletes. Remarkably, nearly 80% of Athleta’s products are made from recycled and sustainable materials (a figure that has doubled in just a few years). The secret sauce of Athletica must be able to rely on the leading producers of sustainable fibers such as the Italian Aquafil or the Austrian Lenzing, and to start co-creation partnerships with them to optimally integrate these fibers into their sport;
Eileen Fisher, a women’s ready-to-wear brand (60 stores and more than 1,000 employees worldwide), known for its minimalist designs, has been developing an ingenious circularity program based on its points of sale for the past ten years. The brand first developed an ambitious clothing take-back program, then launched the “Lab Store” to sell these recycled clothing and recently opened the “Tiny Factory” where new designs are made with reclaimed clothing – a space that has become a real breeding ground for makers. The brand quickly moved towards circularity (reducing its carbon footprint by 47%) by turning salvaged clothing into an economically viable collection of upcycled clothing;
Zingerman and Bi-Rite Market Brands offer a “Community of companies” model in which they bring together a family of companies whose products are sold in delicatessens. Eager to maximize their local roots, these two brands opted for vertical local development rather than developing a network in the United States. For example, since 1982, Zingerman’s has gradually built up an impressive ecosystem of 15 businesses and 700 jobs within a few square miles of its original Delicatessen in Ann Arbor, Michigan, with its own farm and businesses (coffee, bakery, confectionery, cheese , restaurants and even business services). With a similar modus operandi, Bi-Rite has transformed a humble gourmet boutique in San Francisco into one of the most influential signs on community engagement across the Atlantic.
The Unto shop, in the heart of London, manufactures furniture to order and custom made in a workshop at the back of the store. The process makes it possible to produce without transport or storage costs, without the risk of overstocking and without packaging, allowing them to be competitive on prices despite production volumes. The brand has found the miracle formula by de lean manufacturing at the local level, a kind of concept that mixes the IKEA approach with the Toyota methods, in which the team members are trained. A development of the Unto This Last method in franchising is currently in the works.
In short, in distribution as well as in other sectors, you can only knock on doors that you can see… Eyou the successful construction of an economic impact model depends more on contiguity than on the complexity associated with a potential “great leap” to a “regenerative” or “symbiotic” model. Simplicity is the ultimate sophistication, said Leonardo da Vinci. Keeping it simple means exploring the many boundaries of the company, finding an opening and changing perspective. For brands, the key to impact probably lies in their ability to explore the boundaries of the present by reconnecting with a particular entrepreneurial spirit.
¹ IBM and Impact Business Model are the terms used by the B Corp benchmark, which we used for the research on which this article is based.
² This elasticity ratio increases to 3.3 for hospitality, 3.7 for cosmetics or 4 for fashion (Source: Observatory of positive brands, 2018, Utopies).
³ Which, let’s not forget, is free and accessible online for any company that wants it, even if it isn’t interested in certification (200,000 companies have already used it worldwide): bimpactassessment.net
⁴ Naturalia performs on the IBM “Products and services that permanently reduce or eliminate pollution or toxins”, while Natures et Découvertes performs on the IBM “Donation Policy”.
⁵ Which performs mainly on the IBM “Local Economic Development”
⁶ Empirical research conducted by the firm of Utopies on a sample of 228 international companies that are B Corp certified, demonstrating economic viability and a very high score on at least one IBM or the B Corp questionnaire.
For more information, discover the study “Impact business models: innovating through the adjacent” which will be available for download on the website utopias.com next Tuesday, Sept 13.