Evaluating business model environmental performance with BM-LCA: a comparative case in an automotive company

Main Presenter: Jens Sandquist 

Co-Authors: Hannes Westberg Henrikke Baumann

Business models are identified as the “engines” of the economy and economic growth is identified as a driver for increased environmental impacts. It is therefore not surprising that sustainable business model innovation (SBMI), not at least circular business models, have gained increased interest to achieve sustainability and impact decoupling (Bocken et al., 2019).

A review of sustainable business models (Nosratabadi et al., 2019) makes it clear that there is a research gap when it comes to assessment of environmental parameters of business models. If the environmental performance of business models isn’t assessed, there is a risk of assuming, without knowing, that certain types of business models are more sustainable than others with a risk of greenwashing. This is a pressing issue since it often is uncertain if sustainability labeled business models delivers on the promise of being sustainable (Baumann et al., 2022).

The focus in traditional LCA’s is on environmental impacts related to function of the product and targets product and process improvements. It’s not an assessment of the environmental performance of the business models.

A new LCA methodology for the assessment of environmental performance of business models called Business Model-LCA (BM-LCA) has been introduced and successfully applied on a first case in the garment sector comparing a sale and a rental model for jackets (Goffetti et al., 2022). It switches the focus from impacts related to product function to impacts related to business value. The functional unit can e.g., be “1M€ in profit per quarter”.

Our main aim is to test BM-LCA on a different type of case and assess the relevance of the tool for BM assessment and sustainable business model innovation in this context. A case study performing a carbon footprint BM-LCA on two different BM’s, traditional sales and a subscription model, in an automotive company was used to achieve this aim. The automotive case significantly differs from the previous case in the garment industry by more complex products and financial structures, larger company, and active products. Another difference compared to the previous BM-LCA case is that an existing product LCA will be used and complemented with business model data.

Findings will be explored with regards to the feasibility to perform a BM-LCA, the usefulness of BM-LCA as a tool for environmental assessment of BM’s as well as for SBMI. The result from the specific case will indicate if there is a difference in “CO2-eq per profit” between the different business models for the same product.

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