Everyone is looking for their impactful business model… What if in this quest that almost borders on that of the Holy Grail, the answer lies close to what companies are already doing? Demonstration by example for the distribution sector, with this point of view from Arnaud Florentin, associate director, and Elisabeth Laville, founder, of the Utopies agency.
In a context where companies are called upon to embark on the path of more sustainable growth (or even post-growth), the question of Impact Business Models (Impact Business Models in English, i.e. IBM¹ — the acronym that we will use for simplification here) becomes unavoidable. It’s a paradigm shift for business — to understand how to impact society through the business model and not only through operational excellencehow to generate positive impacts intrinsic to the activity and not only limit the negative impacts.
The growing pressure exerted on companies to integrate into their business model 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 fingers at, drive many of them on the difficult quest for an IBM, a business model that is intentionally designed to create a specific positive outcome for stakeholders and that represents a significant part of the company’s activity (rather than a marginal activity, serving as a green alibi).
The game is worth the candle for retail: a customer who positively perceives the commitment of a brand displays a purchase intention 2.7 times higher
In the distribution sector, the game is worth the candle: a customer who perceives a brand’s commitment positively displays an average purchase intention 2.7 times higher to that of a customer who does not perceive this commitment in a positive way². For retailers or retail brands, the impact that is persuasively written at the heart of their DNA is therefore a powerful lever for creating value and differentiation.
However, the walk is not so easy to climb. The very demanding B Corp certification, which federates nearly 6000 companies of all sizes and all sectors in more than 80 countries (including already nearly 200 in France), is today the only one to offer a working framework on IBM, which represents nearly 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 rating finally 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 glean maximum points. Converselye-commerce players and platforms (physical or digital) that offer a form of disintermediation and a direct link with producers, are more and more numerous within the B Corp community to offer business models with impact (like CAMIF or la Ruche qui dit Oui in France⁵).
Why this difficulty for distributors to incorporate impact at the heart of their DNA and their activity? Several reasons can be put forward : a market historically driven by demand more than by supply, price pressure inherent in the sector, the difficulty of playing the role of « selector » and imposing codes or specifications, green marketing which is caught at its own game (launching additional green ranges rather than transforming conventional ranges), the difficulty for retailers to manage the additional cost of impact products, the relative lack of agility of the physical channel to think about the impact (and the difficulty of using the digital channel without coming up against other ethical or environmental issues).
What path can brands take? Because an IBM according to the terms of B Corp is by definition rare and exceptional, one can think that its design must be by nature resolutely disruptive, contrary to conventional models. Paralyzed by this complexity, companies often set off in search of a “Big Idea” or a complex pattern of innovation that rarely proves capable of shaking up the market.
The adjacent opportunity has a huge advantage – that of not starting from scratch, and maintaining some continuity with the current business model
However, if we carefully analyze the companies (all sectors combined) that have succeeded in developing such virtuous business models⁶, we realize that they excel above all in what the biologist Stuart Kauffman calls « adjacent possibilities », those that are at hand, not far from what the company already knows or knows how to 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 co-products, they rent or repair the products they already market, they open their factory or co-manufacture thanks to another located nearby, they exploit the premises (production or sales) more efficiently to create a laboratory or a local hub, they develop more synergies between businesses and offer global offers (contracts for integrated services), they are based on networks of micro-producers who lack clarity when they are isolated, they promote local heritage (crafts, art or land) or a number of good ideas left on the side of the road during the ‘story…
In short, they explore the adjacent by the valorization of know-how or available, dormant or under-exploited resources, which allow them to take advantage of a breach, then discover new ones and thus truly rethink their business model. The adjacent opportunity also has a huge advantage — that of not starting from scratch, and maintaining some continuity with the current business model.
It is exactly this logic of innovation by the immediate neighborhood that has enabled certain brands to shape in recent years, and sometimes in record time, a real impact distribution model which goes well beyond simple responsible management of activities:
Athletica (GAP group), through its 234 stores in North America, creates and markets clothing designed by female athletes. Remarkably, almost 80% of Athleta products are made from recycled and sustainable materials (a figure that has doubled in just a few years). The secret sauce of Athletica is to have been able to rely on the most prominent producers of sustainable fibers such as the Italian Aquafil or the Austrian Lenzing, and to launch co-creation partnerships with them to best incorporate 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 developed an ingenious circularity program over the past ten years based on its points of sale. . The brand first developed an ambitious clothing take-back program, then launched the « Lab Store » to sell these recycled clothes and recently opened the « Tiny Factory » where new designs are made with recovered clothes – a space that has become a real incubator for creators. The brand quickly moved towards circularity (thus reducing its environmental footprint by 47%) by transforming salvaged clothing into an economically viable collection of upcycled clothing;
Zingerman’s and Bi-Rite Market brands offer a “Community of businesses” type model in which they bring together a family of businesses whose products are sold in delicatessen shops. Eager to maximize their local roots, these two brands, rather than developing a network across the United States, have opted for verticalized local development. Since 1982, Zingerman’s has thus gradually developed, within a radius of a few square kilometers around its initial Delicatessen store in Ann Arbor (Michigan), an impressive ecosystem of 15 companies and 700 jobs, with its own farm and its own businesses (coffee , bakery, confectionery, cheese, restaurants, and even business services). Using a similar modus operandi, Bi-Rite has transformed a simple gourmet boutique in San Francisco into one of the most influential signs on community engagement across the Atlantic.
The Unto Store, in the heart of London, manufactures furniture made to order and made to measure in a workshop located at the back of the shop. The process makes it possible to produce without transport or storage costs, without the risk of overstocking and without packaging, which allows them to be competitive on prices, despite the production volumes. The brand has found the miracle formula by adopting the lean manufacturing at the local level, a kind of concept mixing the IKEA approach with the Toyota methods, in which the team members have been trained. A development of the Unto This Last method in franchising is currently in the works.
In conclusion, in distribution as in other sectors, you can only knock on doors that you can see… Eyou the successful construction of an impact economic model depends more on contiguity than on the complexity associated with a potential “big leap” towards a “regenerative” or “symbiotic” model. Simplicity is the ultimate sophistication, said Leonardo da Vinci. Keeping it simple means probing the multiple limits of the company, finding an opening and changing perspective. For brands, the key to impact is probably in their ability to explore the limits of the present by reconnecting with a certain entrepreneurial spirit.
¹ IBM and Impact Business Model are the terms used by the B Corp benchmark, which we used for the study on which this article is based.
² This elasticity ratio rises to 3.3 for catering, 3.7 for cosmetics or 4 for fashion (Source: Observatory of positive brands, 2018, Utopies).
³ Which is, let’s remember, free and accessible online to any company that wants it, even if it is not 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 remedy pollution or toxins” while Natures et Découvertes performs on the IBM “Donation policy”.
⁵ Which performs especially on the IBM « Local Economic Development »
⁶ Empirical study carried out by the firm Utopies on a sample of 228 international companies certified B Corp, displaying economic viability and a very high score on at least one IBM of the B Corp questionnaire.
To find out more, discover the study “Impact business models: innovating through the adjacent” which will be available for download on the website utopias.com next Tuesday, September 13.