The Role of Sustainability in Business Model Innovation of Start-ups in Indonesia

Abstract

The environmental awareness in business practices has grown to be a central issue in corporate social responsibility for many multinational companies. Unfortunately, it remains a way of brand management for many companies, rather than a drive for structural change in business practices.Business models should therefore be reshaped, to deliver environmental sustainability based on the core logic of a firm. While previous studies are concerned with the typological and antecedent factor of start-ups’ environmental orientation, this study seeks to explore how start-ups incorporate their environmental orientation into their business model and (re)design their business model to respond to changing market demand for ecological sustainable solutions. An important distinction is made between sustainability practices that are innovating the business model as a whole (e.g. architectural innovations) and sustainability practices that are affecting single components of the business model (e.g. modular innovations). It is argued that environmental sustainability can position itself within the architecture of a business model, influencing all business decisions, or environmental sustainability can position itself outside of the business model, allowing for modular business model innovations. To explore the role of environmental sustainability for business model innovation of start-ups within Indonesia, a multiple case study design has been set up. Two startups that are in the process of designing their initial business model are selected, one company that has ecological sustainability embedded in the design of the product, and one that is focused on other, mainly economic brand related, values to remain competitive. Also two startups that have already commercialized their product and thus have an established business model are scrutinized. Again, one company that has ecological sustainability embedded in the design of the product, and one that is focused on other, mainly economic brand related, values to remain competitive. The research design allows for cross case comparison on the different axes whilst aggregated data may reveal more general approaches towards environmental sustainability. All four cases were found to consider the environment in their business model to a certain degree. Seven sustainability practices have emerged from the aggregated data and is linked to business model components. It was found that, however space for improvement, the cases on the sustainable value dimension did place environmental sustainability within the architecture of their business model, considering the environment from the core logic of their business and affecting to a certain extent the interdependencies of the subsystems. The cases on the economic, brand related dimension showed to position environmental sustainability outside of the architecture of their business, not regarding the natural environment as a stakeholder. Consequently, they merely allowed modular business model innovations regarding environmental sustainable practices. However progressive, the ecological orientation of the cases on the sustainable value dimension can be said to eco-open rather than eco-dedicated, whilst the ecological orientation of and are to be placed on the spectrum between eco-open and eco-reluctant.