The traditional business process model has long been the linear model of take, make, and waste. A linear economy takes raw materials, manufactures them into a usable product, sells the item, and discards it when it loses its utility thus creating a waste.
While it sounds a bit utopian, there does exist a more desirable, more sustainable model that not only drives economic growth but also nurtures the environment and fortifies communities. It is known as regenerative or circular economy.
In contrast to the traditional linear economic model, in a regenerative economy, businesses don’t just aim for profit but strive for a net-positive impact on the world. This model reimagines economic success, intertwining it with the health of our ecosystems and the well-being of communities. It’s about thinking beyond the balance sheet, where value creation extends to multiple aspects of our planet and society.
Understanding Regenerative Economy
The linear economy takes raw materials, manufactures them into something, sells the item, and then when it is no longer in use, discards it as waste. This is a terribly unsustainable model, although efficient for businesses. Consider a phone charger that breaks after just a year of use. It is a logical extrapolation that the phone charger’s fragility is less about the charger manufacturer’s capabilities and more about the charger seller’s desire to increase their profits.
Unlike the traditional linear economy, which often follows a trajectory of resource extraction, production, and disposal, a regenerative economy is designed to create systems that are restorative and sustainable by nature. A regenerative economy reveals and designs the negative impacts of economic activity that cause damage to human health and natural systems. This includes the release of greenhouse gases and hazardous substances, the pollution of air, land, and water, as well as structural waste such as traffic congestion. A regenerative economy favors activities that preserve value in the form of energy, labor, and materials. This means designing for durability, reuse, remanufacturing, and recycling to keep products, components, and materials circulating in the economy.
Regenerative systems make effective use of bio-based materials by encouraging many different uses for them as they cycle between the economy and natural systems. A regenerative economy avoids the use of non-renewable resources and preserves or enhances renewable ones, for instance by returning valuable nutrients to the soil to support regeneration or using renewable energy as opposed to relying on fossil fuels.
While companies have taken unhedged bets on the environmental future and neglected the broader future of the planet, younger generations are reluctant to accept wasteful business practices that abandon the environment and leave them feeling morally inadequate.
In the regenerative economy, systemic thinking guides decisions, acknowledging the interconnected impact of economic activities on social, environmental, and economic systems. This model champions resource regeneration, focusing on replenishing and enhancing natural resources, not just reducing harm.
It embraces a circular economy, creating closed-loop systems where waste is minimal, and materials are reused, mirroring natural ecosystems. Community well-being is paramount, with an emphasis on social equity and community health. The principle of long-term resilience prioritizes sustainable practices for businesses and ecosystems, while ecosystem stewardship involves careful management of resources for overall ecological health. In this economic model, value creation transcends financial gains, incorporating significant social and environmental benefits.
But is this only feasible at the enterprise level?
A professional contact recently raised this question to me as she thought that only large companies have the wherewithal to aspire to create regenerative systems. I firmly believe that each business has the potential to adopt the regenerative model and gain revenue accretion in the long term by being conscientious and intentional.
While larger organizations certainly have scale, they also have bureaucracy and alignment hurdles. Small businesses are uniquely positioned to pivot quickly and make prompt decisions that can create an impact in the real world immediately.
Practical Steps for Small Businesses in the Regenerative Economy
Transitioning to a regenerative economy requires a strategic and mindful approach. Businesses looking to make this shift can begin by adopting practical steps that align with regenerative principles. Some key steps are:
1. Systemic Thinking and Strategic Partnerships
Systemic thinking is the bedrock of a regenerative business, prompting leaders to consider their business’s role within the broader economy. Businesses should assess their position in the local and wider economy, exploring opportunities for meaningful collaboration and mutual benefit. Such partnerships can foster resource sharing, innovative solutions, and a stronger, more resilient local economy. To illustrate this point, in place of laying off your admin assistant, you can ask your business contacts, if one of them can offer her a part-time role thus creating a shared resource model.
2. Resource Regeneration and Circular Economy Practices
It’s crucial to ensure resources are sustainably preserved and not uniformly depleted. We can employ metrics to gauge sustainability, focusing on minimizing waste throughout the sales process, product lifecycle, and service delivery. This can make an impact on everything from the manufacturing process to the end user’s disposal of a product or offboarding from a service. At all touchpoints, the experience can be made less wasteful. Any chance to repurpose, reuse, or recycle materials should be maximized to create a closed-loop system. For example, a bakery that closes at 6 PM can, in place of throwing away its end of the day inventory, sell it to a quick service restaurant that is busiest 7 PM to 10 PM.
3. Community Well-Being and Empowerment
A thriving community contributes significantly to the economic ecosystem. For people to be effective and contribute to the economy, they need to feel a sense of loyalty, trust, and overall belief in the mission that they are a part of. Fair labor practices, equitable opportunities, empathetic leadership, and investments in local development can help to cultivate a community of empowered individuals who are committed to being part of something larger than themselves – a resilient, regenerative economy. A chamber or community organization where businesses mingle with each other and share expertise and experiences in an informal setup provides a place to build a community feeling.
4. Measuring and Reporting Impact
Business leaders should establish systems to measure the environmental and social impact of business activities using recognized standards and metrics. This can include measuring carbon emissions, water usage, energy efficiency, waste reduction, and the sustainability of sourced materials. Use the findings to engage stakeholders, inviting feedback and collaboration—and commit to transparency in reporting these impacts. This can include customer surveys, stakeholder meetings, and community forums.
Consider social impact metrics like employee well-being, community engagement, fair labor practices, and the economic impact on local communities. Educate and involve employees across the organization in understanding these metrics and how their roles contribute to the company’s environmental and social goals.
Business leaders should establish processes for continuous improvement based on data and stakeholder feedback. They should set clear targets for improvement and regularly assess progress against these goals. Hold the business accountable for its impact, using the metrics to make informed decisions and adapt strategies where necessary.
As small businesses create value beyond monetary gains through a regenerative economy, they will measure success not just by profit margins, but by net-positive impact on society. The increase in profit margins will be a bonus because millennials, generation Z, are environmentally and socially conscious and prefer to work with and do business with organizations that share these values.
The Promise of a Regenerative Future
The shift to a regenerative model requires leaders to champion the change, demonstrating a genuine commitment to sustainable practices. Fostering a culture that values sustainability and regeneration is crucial. This involves training, educating, and engaging employees at all levels, encouraging innovation and collaboration in sustainable practices.
One of the primary challenges is overcoming internal and external resistance to change. This can stem from a lack of understanding, perceived cost implications, or disruption to established practices. Shifting to regenerative practices often requires upfront investment in technology, training, or process restructuring, which can be a significant barrier, especially for smaller businesses. Navigating market pressures and staying competitive while implementing sustainable practices can be challenging, particularly when competitors are not following similar practices.
Businesses must find ways to integrate environmental and social considerations into financial decision-making processes, aligning sustainability goals with business objectives by emphasizing long-term gains and sustainability over short-term profits. This might require redefining success metrics, conducting comprehensive cost-benefit analyses to factor in the long-term benefits of sustainable practices, like risk mitigation and enhanced brand reputation, alongside immediate costs, and then educating stakeholders about the long-term financial benefits of a regenerative approach.
A successful transition to a regenerative model requires a blend of strategic foresight, strong leadership, cultural alignment, and a commitment to balancing economic success with environmental and social stewardship. It challenges the linear mindset that for too long has been accepted as the norm. No business is too small to think regenerative and that thinking will help it grow in a truly balanced way.
Anupam Satyasheel is the Founder and CEO of Occams Advisory.