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592930 OAEXXX10.1177/1086026615592930Organization & EnvironmentAbdelkafi and Täuscher

592930 OAE XXX10.1177/1086026615592930Organization & Environment Abdelkafi and Täuscher research-article2015 Article
592930 OAE XXX10.1177/1086026615592930Organization & Environment Abdelkafi and Täuscher research-article2015 Article
592930 OAE XXX10.1177/1086026615592930Organization & Environment Abdelkafi and Täuscher research-article2015 Article
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research-article2015

Article

Business Models for Sustainability From a System Dynamics Perspective

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592930 OAE XXX10.1177/1086026615592930Organization & Environment Abdelkafi and Täuscher research-article2015 Article Business Models for Sustainability From anizar.abdelkafi@moez.fraunhofer.de Downloaded from oae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-0-37" src="pdf-obj-0-37.jpg">

Nizar Abdelkafi 1,2 and Karl Täuscher 1,2

Abstract

To achieve sustainability, a firm has to transform its entire business logic. A business model for sustainability (BMfS) aims at creating value for various stakeholders and the natural environment. This article advances the current understanding of the basic functioning of BMfS by applying a systems perspective. Our BMfS understanding incorporates the natural environment as an essential element, but does not deal with sustainability from a broad perspective. The core logic of a BMfS is built upon the creation of a reinforcing feedback loop between the created value to the customers, the value captured by the firm, and the value to the natural environment. Consequently, we develop a graphical model based on system dynamics notation. First, we conceptualize the basic feedback loops. Then, we propose partial models for the firm, natural environment, entrepreneur/manager, and customer, and then integrate these partial models within a systemic, multilevel model. Finally, we generate propositions that combine insights from the model and extant literature.

Keywords

business models, sustainability, system dynamics, values–beliefs–norms theory (VBN) theory, business case drivers, feedback loops, environmental value proposition, system delays, Bettervest

Introduction

Companies are more than ever requested to contribute to the achievement of sustainable develop- ment. Therefore, entrepreneurial thinking should support the creation of valuable solutions to cope with environmental and social challenges (Senge, Lichtenstein, Kaeufer, Bradbury, & Carroll, 2007). More and more entrepreneurs and business managers are committed to create a positive impact for society and economy without harming the ecological environment (Starik & Kanashiro, 2013). They “contribute to solving societal and environmental problems through the realization of a successful business” (Schaltegger & Wagner, 2011, p. 224). Hence, the creation of economic value is both an end in itself and a means for the generation of value to the environ- ment (Hockerts & Wüstenhagen, 2010).

  • 1 Business Model Engineering and Innovation, Fraunhofer MOEZ, Leipzig, Germany

  • 2 University of Leipzig, Leipzig, Germany

Corresponding Author:

Nizar Abdelkafi, Business Model Engineering and Innovation, Fraunhofer MOEZ, Städtisches Kaufhaus, Neumarkt

9-19, 04109 Leipzig, Germany. Email: nizar.abdelkafi@moez.fraunhofer.de

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So far, the creation of sustainable value is mostly achieved through product, process, and technological innovations (Hansen, Grosse-Dunker, & Reichwald, 2009). These approaches to innovation are insufficient to transform organizations, industries, and societies toward more sus- tainability and should therefore be complemented by business model innovations to decrease the firm’s negative impact on the natural environment or to create a positive value to it (e.g., Hansen et al., 2009; Schaltegger, Lüdeke-Freund, & Hansen, 2012). Sustainability-supporting business models are discussed under different labels such as busi- ness models for sustainability (BMfSs) and sustainability business models. They incorporate sustainability as an integral part of the company’s value proposition and value creation logic. As such, BMfS provide value to the customer and to the natural environment and/or society. Yet one of the key challenges is to design a business that “… is characterized by creating economic suc- cess through (and not just along with) a certain environmental or social activity” (Schaltegger et al., 2012, p. 98). Research has proposed several ways to understand, develop, and analyze these business models. Some approaches focus on how established firms can transform their cur- rent business model toward a BMfS (Sommer, 2012) or how they can create business cases for sustainability (e.g., Lüdeke-Freund, 2013). Other approaches deal with the generation of entirely new BMfSs (Hockerts & Wüstenhagen, 2010; Wells, 2013) or on the classification of existing BMfS into archetypes (Bocken, Short, Rana, & Evans, 2014). Though these approaches generate valuable insights into BMfS, they do not fully conceptualize the relationship between the com- pany, its customers, and the natural environment. Specifically, they do not explain how value creation, natural environment, and profit generation (captured value) can mutually complement and reinforce each other. Effective complementarities between business model components lead to reinforcing feed- back loops (Casadesus-Masanell & Ricart, 2007; Sánchez & Ricart, 2010). Recent business model literature detects the basic reinforcing feedback loops between the firm’s value creation and profit generation (e.g., Abdelkafi & Täuscher, 2014). Several scientific contributions acknowledge the dynamic and complex nature of business models (e.g., Demil & Lecocq, 2010) and the natural environment (e.g., Sterman, 2000). Because of this, system thinking is a promis- ing approach to study BMfS. This is also in line with recent recommendations that propose the investigation of corporate sustainability from a multilevel perspective (Starik & Kanashiro, 2013) and the integration of theories from different disciplines to achieve a broader view of sus- tainability (Sharma, Starik, & Husted, 2007). Consequently, this work aims to investigate the inner logic of BMfS by integrating different perspectives and system levels while developing a graphical representation that supports the design of BMfS. Specifically, we focus on the follow- ing questions:

••

How can we graphically represent a BMfS and its dynamics?

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What are the main causal loops in the system structure of BMfS? To what extent can these loops have an influence on the BMfS?

This article is structured as follows. After the literature review, we introduce a conceptualiza- tion of BMfS as a causal model related to four subsystems: the firm, the firm’s decision maker, the customers, and the natural environment. Causal models are proposed for each subsystem, and the final model integrates all of them. Hence, we adopt a narrower view on sustainability, as in its broad sense sustainability refers to more than environmental aspects and comprehends societal issues as well. Subsequently, we introduce Bettervest (https://bettervest.de), a case example of BMfS that shows how the value to the environment and economic performance can reinforce each other. In the “Discussion” section, we derive propositions based on the insights from the model and extant literature. The last section concludes and derives directions for future research.

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Literature Review

The Business Model Concept

The business model is a broadly discussed concept in academia and practice. It represents the firm’s money-earning logic (Osterwalder & Pigneur, 2010). Within the architecture of the firm, a business model is located between the strategic and operational layer (e.g., Osterwalder, 2004). The meaning of business models underwent strong changes; from a technological to an organiza- tional, and then to a strategic approach (Wirtz, 2011). Still, literature does not agree upon one single understanding. As noted by Abdelkafi and Makhotin (2013) there are two major streams:

an activity-based and a value-based stream. The activity-based view describes the business model as the way activities and resources are used to do the business and achieve growth (Baden-Fuller & Morgan, 2010). The value-based view defines the business model as a “representation of how a business creates and delivers value, both for the customer and the company” (Johnson, 2010, p. 22), or as “the way organizations or individuals communicate, create, deliver, and capture value out of a value proposition” (Abdelkafi, 2012, p. 313). The value-based view typically involves value dimensions and their constituent elements. In general, at least three core value dimensions are included: (1) customer value proposition; (2) value creation, value architecture, or business infrastructure; and (3) value capture or profit generation. Abdelkafi (2012) and Abdelkafi, Makhotin, and Posselt (2013) additionally consider value delivery and value communication. Some scholars actually consider value delivery a part of value creation, whereas others make a stringent distinction between them. In this article, value delivery is integrated into the overall value creation capability of the firm. In addition, value communication will not be considered. Recapitulating, we use a business model framework that consists of three components: value prop- osition, value creation, and value capture. It is very similar to the conceptualization of Boons and Lüdeke-Freund (2013) who, in the context of business models for sustainable innovation, consider four dimensions: value proposition, supply chain, customer interface, and financial model, whereas supply chain and customer interface are clearly elements of the value creation.

Business Models for Sustainability

The concept of BMfSs emerged only a few years ago. So far, “neither theoretical nor empirical research offers sufficient answers to the question what a sustainable business model might be”

(Schaltegger et al., 2012, p. 101-102). Lüdeke-Freund (2010, p. 21) describes a BMfS as a “busi- ness model that creates competitive advantage through superior customer value and contributes to a sustainable development of the company and society.” Schaltegger et al. (2012, p. 112) argue

that a BMfS supports

“. . .

voluntary activities which solve or moderate social and/or environ-

mental problems. By doing so, it creates positive business effects.” Although there is disagree- ment on the dominant value creation category (economic or ecological/social), all BMfS understandings agree on the creation of customer and social value and on the integration of social, environmental, and business activities (Schaltegger et al., 2012). Only a few studies attempt to conceptualize BMfS. So far, the literature identifies ideal types of BMfS (e.g., Stubbs & Cocklin, 2008), analyzes potential BMfS for particular industries (Wells, 2004; Wüstenhagen & Boehnke, 2008), distinguishes archetypes of BMfS (Bocken et al., 2014), investigates the impact of particular archetypes such as product–service systems (Hansen et al., 2009; Tietze & Hansen, 2013; Tukker, 2004), presents case studies of BMfS (Schneeweiss, 2012), develops methodologies toward the innovation of BMfS (Blaga, 2013; Bocken, Short, Rana, & Evans, 2013; Sommer, 2012), or focuses specifically on green business models

(Beltramello, Haie-Fayle, & Pilat, 2013; Høgevold, 2011; Sommer, 2012) by considering col- laborative innovation (Rohrbeck, Konnertz, & Knab, 2011), sustainable value creation (Hart &

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Milstein, 2003),or the network perspective (Bocken & Allwood, 2012; Breuer & Lüdeke-Freund, 2014). These attempts generate valuable insights into BMfS, but still need to be complemented with a general understanding of the BMfS concept that provides a common framework for research in this area. In our conceptualization, a BMfS enables the firm to reinforce the mutual interdependencies between the value created for its customers and the natural environment as well as the value captured for itself. Ideally, the more value the firm can create for its customers and the environ- ment, the higher the value it captures for itself.

Explaining the Rationale of BMfS

There has been a big debate on whether sustainability efforts have a positive or negative impact on the firm’s financial performance (Schaltegger & Hasenmüller, 2005). In the traditionalist view, this relationship is uniformly negative: sustainability-related voluntary efforts (e.g., pollution reduction) decrease the firm’s profit opportunity (e.g., Friedman, 1970; Xepapadeas & de Zeeuw, 1999). Consequently, high environmental performance “correspond[s] to low economic perfor- mance and vice versa” (Wagner, Van Phu, Amazohou, & Wehrmeyer, 2002). In the revisionist view, the relationship between environmental and economic performance is represented by an inverted U-shaped curve (Wagner, 2003). Voluntary ecological activities increase the firm’s finan- cial performance only until a particular optimum (Schaltegger & Synnestvedt, 2002; Wagner, 2001), after which profitability starts to decline with every additional ecological activity. Based on the revisionist view, this research acknowledges the initial positive relationship between voluntary ecological and economic performance. Many scholars have discussed the busi- ness value of sustainability-improving initiatives (e.g., Lüdeke-Freund, 2010; Schaltegger & Hasenmüller, 2005) within existing business models to shift the optimum point of the inverted U-shaped curve further outward. Sommer (2012) analyzes the transformation of firms toward sustainable business models by drawing on several case vignettes. Lüdeke-Freund (2013) focuses on how business models can support the commercialization of sustainability innovations to build business cases for sustainability. Schaltegger et al. (2012) identify six key drivers that economi- cally justify a sustainability-oriented business case. These business case drivers for sustainability are costs and cost reduction, sales and profit margin, risk and risk reduction, reputation and brand value, attractiveness as employer, and innovative capabilities. The activities designed to create value to the environment should support at least one of these drivers, thus indirectly allowing the firm to capture value. Though established businesses often feel strongly constrained in the exploi- tation of these business case drivers, changing the business model leads to new opportunities. There are two types of sustainability with implications for the business model: weak and strong sustainability (Roome, 2012): “Weak sustainability sets out to bring environmental con-

cerns into the framework provided by the structures and systems of

business. . . .

In contrast,

strong sustainability seeks to integrate the company into environmental or socio-ecological sys- tems” (pp. 620-621). Whereas weak sustainability induces incremental change, strong sustain- ability is more radical and is based on system thinking combined with organizational and social innovation. Thus, there are business models that integrate sustainability into the core logic of the

firm (strong sustainability) and profitability oriented-business models that only use some sustain- ability elements to achieve a partial transformation toward BMfS (weak sustainability).

Conceptual Development

Recall that this article aims at developing a conceptual model for BMfS that demonstrates how value creation capacity, value to the customers, value to the natural environment, and captured value can reinforce each other. The value to the environment results from the reduction of

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environmental impacts. For example, a new car introduced to a car-sharing fleet leads to 9 to 13 vehicles taken off the road (Martin, Shaheen, & Lidicker, 2010). Hence, the more cars can be shared, the higher the value to the environment, the higher the total value to the customers, and the more money the car-sharing company can capture. The model to be developed should satisfy four requirements. First, it should support entrepre- neurs and managers in understanding the firm’s impacts on the natural environment and how this impact may be reduced. Second, it should reveal the impact of the natural environment on the firm. Third, the model should clarify the key stocks and flows to actively monitor and manage the performance of BMfS. Fourth, it should allow one to recognize the main loops at the level of the firm and between the firm and the environment. Stubbs and Cocklin (2008) propose an approach, in which the organization is one element of a larger network that includes the natural environment. This perspective can support “sustainability solutions for the whole system, rather than for individual components (organizations) within the system” (Stubbs & Cocklin, 2008, p. 116). For the manager, the multitude of stakeholders and the resulting complexity can detract from a focus on key feedback loops between the firm and the natural environment. Therefore, our model includes only the firm, natural environment, manager or entrepreneur, and customer. The model should be applicable when managers of established companies make decisions to change their business model and when entrepreneurs develop new businesses. The term decision maker is used to refer to managers and entrepreneurs. To understand the emergence of BMfS and its basic functioning, we investigate how the state of the natural environment can call for changes in the management behavior of the firm. In this regard, out of 93 scientific contributions that deal with relationships between the natural environment and organizational behavior, Boons (2013) identifies only three studies that high- light the ecological aspect as an antecedent, and not as a consequence of organizational behav- ior. Furthermore, the impact on the firm is conceptualized via the representation of its individuals; actions in the firm are “heavily influenced by the way actors—both within the organization and external to it—perceive and understand the natural environment and their relation to it” (Etzion, 2007, p. 650). Boons (2013) develops a model that explains the relation- ship between ecosystem dynamics and the firm’s behavior, thus drawing on an environmental sociological perspective. Our model combines an objectivism and a constructivism perspective. It includes the influ- ence of the natural environment (e.g., resource availability) on the firm directly (e.g., resource- efficient processes) and indirectly via the decision maker’s mental model, since with his or her behavior the decision maker can act on the company and its business model (e.g., Elster, 2007). The relationships between the firm and the natural environment are considered through the so- called value to the environment. Interface, for example, changed its business model from selling carpets to leasing floor comfort, while achieving more profits and value to the customer as well as value to the environment by lowering the level of use of energy and raw materials (Sharma, 2014; Stubbs & Cocklin, 2008). The link between the natural environment and the decision maker is the starting point of the model that explains the emergence of BMfS. The decision maker’s mental perception of the natu- ral environment and his behavior can be affected by environmental changes. These changes can also have an impact on the cognition of the customers and their behaviors. Hence, by anticipating changes in the natural environment and their impacts on customers, the decision maker can rec- ognize a sustainability-driven opportunity and adapt the business model correspondingly. The business model in turn has an influence on the natural environment. For instance, the car- sharing model of a car producer offers mobility services rather than car ownership. As such, it affects the firm’s behavior (e.g., production processes) and has a positive impact on the natural environment (e.g., resource consumption, waste production; e.g., Martin & Shaheen, 2011).

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6 Organization & Environment Figure 1. System dynamics approach to the natural environment. Source . Adaptedoae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-5-9" src="pdf-obj-5-9.jpg">

Figure 1. System dynamics approach to the natural environment.

Source. Adapted from Sterman (2012) based on Daly (1991).

System Dynamics Notation

We use a system dynamics methodology to develop and graphically represent the partial models. As a methodology for modeling and simulating complex systems, system dynamics enables the user to recognize the main variables and interdependencies within a system (Sterman, 2000). System dynamics builds on two distinctive modeling notations: causal-loop diagrams and stock and flow models. By applying an intuitive notation of arrows, causal-loop diagrams represent qualitatively the positive and negative impacts of variables on another in a system. Quantitative models in system dynamics involve different types of variables: state variables (stocks), dynamic variables to represent the flow in and out of these stocks (flows), the rate at which these flows change the stock (controlled by a “valve”) and the flows of information between stocks and flows. There are two types of feedback loops: reinforcing (positive) and balancing (negative). In a reinforcing feedback loop, the system is bound to move in one direction, either growth or decline. Contrarily, a negative feedback loop has a balancing effect and counteracts growth or decline, leading the system to threshold values (Sterman, 2012). Since its inception by Forrester (1961), system dynamics has been applied to numerous prob- lems in society, management, and ecology research (Gallati & Wiesmann, 2011; Morecroft, 2007; Sterman, 2012). The methodology has been applied in the field of sustainable development since the seminal simulations in “The Limits to Growth” (Meadows, Meadows, Randers, & Behrens, 1972). One of the frequently cited models in ecological sustainability is the simple stock and flow model by Sterman (2012) based on Daly (1991) represented in Figure 1. The boxes in the model denote the stocks: renewable resources, nonrenewable resources, and pollution and waste. All three stocks decrease by a certain rate (e.g., harvest rate for renewable resources). Renewable resources accumulate through a certain inflow (e.g., regeneration rate). Pollution and waste increase through human activity, but decline through decay or use of recy- cling processes. The ecosystem dynamics influence the rate at which renewable resources regen- erate and the rate at which waste decays or is recycled. The stock of nonrenewable resources, however, only depletes over time. The big arrows show the flows into and out of the stocks; ingoing flows increase the stock level, and vice versa. Valves regulate both the rate of the in- and outflows. The clouds in the model represent the sources and sinks of the flows. Both sources and sinks are stocks outside the system’s boundaries. Their meaning depends on their position in rela- tion to a flow: the stock from which a flow originates (source) or in which the flow drains after leaving the system boundaries (sink). System dynamics models assume that these sources and

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Abdelkafi and Täuscher 7 Figure 2. Stock and flow diagram of a generic business model logic.oae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-6-9" src="pdf-obj-6-9.jpg">

Figure 2. Stock and flow diagram of a generic business model logic.

sinks do not constrain the flows (Sterman, 2000). For instance, a limited stock of drinking water (renewable resource) might be available in a lake. The lake’s water level increases by a water inflow from the source, a nonspecified stock outside the system’s boundaries, and decreases by an outflow of water that drains into an unspecified sink.

Developing a Firm-Level Model of BMfS

Business models can be interpreted as complex and dynamic systems (e.g., Demil & Lecocq, 2010). The integration of sustainable development into the business model further increases complexity (Porter & Derry, 2012). To capture the multilevel systems and to reduce complexity, we use the approach of partial modeling, which consists in dividing a large model into several smaller models. Recall that we consider three business model dimensions: customer value proposition, value creation, and value capture. These dimensions are represented by key stocks in the model. Figure 2 shows a simple stock and flow diagram of a firm’s business model. The value capture represents the value that the firm generates for itself from its value proposition. Value creation is operationalized as the firm’s capacity of creating value and derives from its key resources and processes. The value proposition denotes the value offered by the firm to its customers; it refers to the firm’s offering as a stock that accumulates or depletes over time. Note that the value proposition can be interpreted as the value perceived by the customers, but in this research it is defined from the firm’s viewpoint and supposed to be independent of customer valuation. An increase in the firm’s value creation capacity enhances the firm’s offering to its customers, hence its value proposition (Arrow 1). An enhanced value creation capacity, for example, more staff in a personnel-intensive service industry, also yields an increase in the level of created and captured value (Arrow 2). The created value also depends on the stock level of value propositions to the customer, for example, new products introduced to the portfolio (Arrow 3). A percentage of the generated earnings can be spent to improve the value creation capacity (Arrow 4) or can be invested to generate more customer value propositions, for example, through new product development (Arrow 5). The relationship between these stocks induces a self-reinforcing feed- back loop that leads to continuous growth of the system. This reinforcing feedback loop, how- ever, can be weakened if, for instance, the costs due to the extension of value creation capacity grow stronger than the value provided to the customer.

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8 Organization & Environment Figure 3. Stock and flow diagram of generic logic of business modeloae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-7-9" src="pdf-obj-7-9.jpg">

Figure 3. Stock and flow diagram of generic logic of business model for sustainability.

To conceptualize BMfS, we have to integrate the environmental value proposition (Stubbs & Cocklin, 2008). Following the logic of the customer value proposition, this stock does not repre- sent the actual impact of the business model on the environment, but rather the intended impact from the firm’s perspective. Therefore, it is denoted an “environmental value proposition” rather than “value to environment.” To demonstrate the connections between the four key value dimen- sions, we integrate the business case drivers identified by Schaltegger et al. (2012) as mediating

variables. Schaltegger et al. (2012, p. 102) mention that

“. . .

the business case drivers have the

character of intermediating variables which link the corporate sustainability strategy with the ‘architectural’ business model level of a firm.” Nevertheless, we only consider five business driv- ers out of six, while disregarding innovative capabilities. Since the value creation capacity includes the firm’s key capabilities, that is its key resources and processes, innovative capabili- ties can be seen as an element of value creation capacity. Therefore, innovation capabilities, as such, are removed from the model. The model in Figure 3 represents the most important relation- ships, which have been numbered for easy reference. In the model, the environmental value proposition directly or indirectly influences all business case drivers. To establish the links within the BMfS, we rely on the comprehensive analysis by Schaltegger et al. (2012), who show how sustainability can affect the interrelations between the business model and business case drivers. Hence, the environmental value proposition seems to have a direct positive impact on the follow- ing business case drivers: reputation and brand value (Arrow 1), risk reduction (Arrow 2), cost reduction (Arrow 3), and employer attractiveness (Arrow 4). Risk reduction and cost reduction are used instead of risks and costs, respectively, to get a positive sign on the arrow from the envi-

ronmental value proposition to these variables. By incorporating environmental considerations into the business model, the company can improve its image (e.g., Bhamra & Lofthouse, 2007, p. 29). The company also becomes more attractive to job seekers (Albinger & Freeman, 2000),

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and the level of retention of talented people improves (Ehnert, 2009). In addition, the level of risk for customers and for other stakeholders such as investors can be reduced, and lower costs can be achieved due to higher resource efficiency. Cost reduction can be further supported by employer attractiveness, since increased loyalty and employer attractiveness because of sustainability lead to lower recruitment costs (van Tulder, van Tilburg, Francken, & Da Rosa, 2014, p. 53; Arrow 5). The reduction of customer and stakeholder risks relieves the firm’s cost position through, for example, inexpensive credits (Arrow 6). In effect, companies are charged smaller interest rates for getting bank credits, if the level of risk is estimated low. In this context, Cheng, Ioannou, and Serafeim (2014, p. 16) provide empirical evidence that “firms with better CSR performance face lower capital constraints,” and therefore have a better access to finance. A socially and environ- mentally engaged organization reduces the level of (perceived) risk because it can develop trust- ful and long-term relationships with its stakeholders, whereas trust and long-term orientation of the firm lead to considerable image improvements (Arrow 7). Sales and margin seem to be the only variable that is not directly affected by the environmental value proposition, but rather indi- rectly affected via reputation (Arrow 8), risk reduction (Arrow 9), and cost reduction (Arrow 10). Needless to say, higher reputation and improved image enable the firm to attract more customers and to better consolidate its relationships with existing customers. On the contrary, the reputation damage that a company can suffer due to self-triggered environmental disaster can lead to a con- siderable decline in the number of customers willing to buy the company’s products (Sharma, 2014). Risk reduction on the side of the customers motivates them to deal with their suppliers as established partners and therefore to keep doing business with them. Cost reduction—because of improved efficiency—can lead to more competitive price structures, hence to higher sales. In addition to the effects of the environmental value proposition on the business case drivers, the model explains the relationships between these variables and the other stocks and flows. The stocks of customer value proposition (Arrow 11) and value creation capacity (Arrow 12) deter- mine the firm’s potential in changing the stock level of the environmental value proposition. For instance, some automobile producers took their existing car models (available value proposition) and then used their value creation capabilities to replace conventional engines by electric engines in the vehicles, thus generating an environmental value proposition, since electric cars have zero local carbon dioxide emissions. Thus, the leverage of this value creation capacity to change exist- ing products results in augmenting the stock level of the customer value propositions (Arrow 13), for example, through the electric car. Note that the value creation in itself can have a stronger impact on the environmental value proposition. For instance, BMW increased its commitment to the environment by changing its value creation capacity. For the manufacturing of its i3-model, BMW created completely new electric car models that use self-produced electricity based on wind energy (Vilimek & Keinath, 2014). Through the accumulation of the stock of environmental value over time, the firm is expected to foster its reputation as an environmentally conscious and engaged organization (directly and indirectly via risk reduction). To maintain its acquired reputation, the firm will tend to develop more customer value propositions with a positive impact on the environment (Arrow 14). An increase in the stock level of customer value proposition leads to higher sales or margins (Arrow 15). Willard (2012, p. 46) notes that “the additional revenue generated by the new green products easily recovers the R&D investment.” The sales and margins (Arrow 16) and cost reduction (Arrow 17) again determine the flow rate of value created (Johnson, 2010). In effect, the higher the sales and the lower the costs, the higher the level of captured value. As the stock level of captured value increases, the firm can reinvest it to generate more value to the customer (Arrow 18; Sherwood, 2002), leading to even more value to the environment (Arrow 11). Consequently, a reinforcing loop emerges that strengthens the mutual positive relationships between the envi- ronment, the customer, and the firm.

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Still there are three connections in the model that are worth explaining. As compared with Figure 2, the direct link from the stock of customer value proposition to value created is now replaced by an indirect link that is mediated by sales and margins. That is, an increased stock of value to the customer generates more sales and profits, which in turn influence the value created. The link between value creation capacity and the value created is mediated by cost reduction that stems primarily from resource savings such as eco-efficiency improvements (Arrow 19). In addi- tion, the change in value creation capacity depends on value reinvested (Arrow 20; Sherwood, 2002) and employer attractiveness level (Arrow 21). Employer attractiveness due to the compa- ny’s involvement in sustainability practices increases the commitment and loyalty of employees and supports companies in recruiting talented people, leading to the preservation of the existing value creation capacity and also to its extension (Willard, 2012). The final model therefore high- lights not only possible drivers behind the environmental value proposition but also visualizes several feedback loops that drive BMfS. Because of the model complexity, the business case drivers will not be redrawn in the final model to preserve clarity.

Modeling the Behavior of Individuals

Our model involves two types of individuals: those whose behavior affects the business model (entrepreneur or manager) and those who are affected by the business model (customer). We explore the variables that cause these actors to behave in a sustainable way beyond a purely eco- nomic rationale. In particular, the cognition perspective can uncover the key motives why deci- sion makers develop BMfS. We focus on conceptualizations from environmental cognition, a research area, which studies the behavior of individuals and organizations in favor or against the environment. Henry and Dietz (2012) define environmental cognition as “the way individuals structure their thinking about environmental issues and associated political actions” (p. 238) and argue that environmen- tal cognition is an important perspective for “understanding the environmentally relevant behav- iors of individuals and organizations.” Theories and models explain how specific cognitive elements such as beliefs and values are causally linked, how these links change over time, and how they influence the behavior of individuals (Henry & Dietz, 2012). We focus on the cognition and behavior of entrepreneurs and managers as the individuals who develop the BMfS, and of customers as the individuals who are served by the business model. We select the values–beliefs–norms (VBN) theory to fit the contextual purposes. VBN theory was proposed for the explanation of individual actions that support the environment. Figure 4 shows the system dynamics of the cognitive model of sustainability-related behavior of individu- als based on VBN theory. The theory emerged from social psychology and builds on a causal chain of cognitive processes, including concepts such as altruism and self-interest. In particular, altruism seems to add new perspectives to explain the rationale of BMfS. So far, the theory has mostly been applied to individuals outside the organizations such as consumers (to predict their sustainable consumption choices) or environmental activists. Nevertheless, it can also be applied to individuals in organizations (Henry & Dietz, 2012). The concept of beliefs appears in VBN theory and in the framework of Boons (2013). Boons shows that ecosystem dynamics can affect beliefs and desires and can directly affect the availability of resources, thus influencing the set of opportunities available to the firm. Beliefs and opportunities drive individual actions as well as organizational action, and finally feed back to ecosystem dynamics. Hence, by combining the insights from VBN theory and Boons’s framework, we can argue that ecosystem dynamics con- stitute an antecedent for business model change. Therefore, this research conceptualizes an indi- rect link via beliefs and individual action (behavior), and a direct influence from the environment to the firm’s business model through value creation capacity. Business models, in turn, influence the ecosystem dynamics directly and indirectly through the customers’ behavior. Note that we are

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Abdelkafi and Täuscher 11 Figure 4. Cognitive model of sustainability-related behavior of individuals based on values–beliefs–oae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-10-9" src="pdf-obj-10-9.jpg">

Figure 4. Cognitive model of sustainability-related behavior of individuals based on values–beliefs– norms theory.

Source. Adapted from Stern (2000).

here not using business models and organizational action (in Boons’s framework) interchange- ably. There is, however, a tight connection between both concepts. George and Bock (2012, p. 28) argue that “[a] business model provides a link between an opportunity and the organization that exploits it.” Boons (2013, p. 288) also argues that ecosystem dynamics (e.g., resulting in resource scarcity) may drive companies to embark on alternative business models such as prod- uct service systems and material recycling, thus implicitly assuming the tight interdependencies between business models and organizational action. One disadvantage of VBN theory is that it does not include any social influences or network connections among individuals. We are aware of the fact that some consumer decisions and managerial or entrepreneurial actions are driven by social contexts, which are not represented in the final model.

Connecting the Partial Models Toward a Multilevel Model of BMfS

The last step of the conceptual development integrates the presented subsystems into a compre- hensive model (Figure 5). We discuss the arrows of the model, while focusing on the links between the main subsystems. To improve the readability of the final model, we represent all stocks within the environment by means of one stock, called ecological capital. Obviously, an increase in the ecological capital can be due to the regeneration of the renewable resources, or a decrease in the stock level of pollution and waste. Ecological capital decreases, however, when pollution and waste levels increase; renewable resources are harvested at a higher rate than they can regenerate; or the level of stock of the nonrenewable resources depletes over time. For clar- ity, we use different types of arrows (dotted, dashed, and plain). Furthermore, as aforementioned, the business case drivers and their links are not drawn. In fact, there may be some direct connec- tions between the business case drivers and the variables introduced in the partial models. Nevertheless, we believe that they will not change the implications of the final model. In effect, the business case drivers have been introduced to connect the stocks and flows inside the BMfS. Since these stocks and flows capture the main dynamics of the business model, then the links between BMfS stocks and flows and the variables in the other partial models can be considered to represent major relationships. Hence, it seems legitimate to neglect a priori the links that may connect the business case drivers to the partial models.

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12 Organization & Environment Figure 5. System dynamics-based representation of business models for sustainability. Source .oae.sagepub.com at NORTH DAKOTA STATE UNIV LIB on July 8, 2015 " id="pdf-obj-11-9" src="pdf-obj-11-9.jpg">

Figure 5. System dynamics-based representation of business models for sustainability.

Source. Own figure, based on adapted models of Sterman (2012) and Stern (2000).

Because a BMfS includes the environmental value proposition, it exhibits a major extension

compared with business models with a narrow understanding of profit maximization, that is

those value systems

“. . .

with the greatest appreciation for profit seeking or profit maximization”

(Hansen & Schaltegger, 2015, p. 16). The environmental value proposition is represented by a stock that can accumulate or decline over time. By tracking the stock level of the environmental value, firms can control the sustainability orientation of the business model. The environmental value proposition affects indirectly all other stocks of the business model: the customer value proposition, value capture, and value creation capacity. The firm’s business model has an impact on the environment represented by the ecological capital. The ecological capital stems from the triple bottom line concept that introduces ecologi- cal capital as a monetary equivalent of the natural environment (Elkington, 1997). The impact of the firm’s activities has been studied intensively in the literature (see Etzion, 2007, for a review). Through the consumption of resources, the firm can activate its value creation capacities (Arrow 1). However, it generates pollution and waste, thus decreasing ecological capital (Arrow 2). The higher the consumption of nonrenewable resources, the higher the level of pollution, and the more waste is produced. Examples of such resources that lead to pollution are oil and coal, or industrially created substances that do not occur naturally (e.g., Boons, 2013). A BMfS, however,

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creates value by avoiding as much as possible the consumption of nonrenewable resources and the production of pollution and waste or by keeping nonrenewable resources in closed loops through reuse, remanufacturing, and recycling. Although the stock of renewable resources can regenerate over time, extraction should occur at a sustainable level by avoiding the utilization of practices and technologies with negative ecological impacts (e.g., the use of fertile soil for the production of biofuels). The environment influences the beliefs of the decision maker (Elster, 2007). Environmental dynamics can be considered a cause of social action because of its impacts on the formation of beliefs and desires (Boons, 2013). Entrepreneurs and managers translate their perceptions of the environment into action. This translation can be best explained by VBN theory. Values, beliefs, and norms constitute important drivers of sustainable behavior of firms (Bansal & Roth, 2000). The level of ecological capital and the changes of this level have an influence on the beliefs of decision makers (Arrow 3). These linkages are studied within the scope of environmental cogni- tion (e.g., Henry & Dietz, 2012). The degree of risk perceived to be related to potential threats to the environment, including ecological risk or nuclear power (Hernry & Dietz, 2012), transforms to norms (Arrow 4). “Norm activation refers to a process in which people construct self-expecta- tions regarding prosocial behavior. These behavioral self-expectations are termed ‘personal norms’ and are experienced as feelings of moral obligation” (Harland, Staats, & Wilke, 2007, p. 323). Norms have an impact on the behavior of the decision maker (Arrow 5). Consequently, the resulting action initiates a transformation to BMfS or leads to the activation of a new set of opportunities, which give rise to a new business model. The feedback from behavior to beliefs (Arrow 6) is not a component of the VBN theory, but has been discussed within environmental cognition. This linkage refers to the theory of biased assimilation, which is concerned with the tendency of individuals to interpret events of their actions in a way that tends to support their prior belief system (e.g., Henry & Dietz, 2012; Hoffmann & Henn, 2008). VBN theory states that the individual’s values are rather stable over time and have an impact on beliefs (Arrow 7), whereas beliefs constantly change because of objective external and cognitive internal changes. For instance, a decision maker who designs a BMfS, might improve his or her level of awareness for the environment, increases the perceived power to actively exert an influence, and finds reas- surance in his or her beliefs after successfully implementing the BMfS. Similarly, customers’ cognition with respect to environmental issues is modeled by VBN the- ory. As in the case of decision makers, the environment directly affects the beliefs (Arrow 8), which influence the personal norms (Arrow 9), and consequently the sustainability-related behavior of customers (Arrow 10). For example, the accumulation of pollution and waste leads to a more environmental consciousness of consumers. Nevertheless, this has to be relativized to a certain extent, since the relative power of the social–psychological variables to explain personal behavior (such as values and beliefs) decreases as the efforts and costs increase (Stern, 2000). Sustainable behavior further reinforces the related beliefs (Arrow 11), which are generally shaped—as in the case of the decision maker—by the individual’s values (Arrow 12). Reciprocally, the behavior of the individuals in their role as decision makers or customers has an impact on ecological dynamics (Boons, 2013). Consequently, there are several causal relation- ships from the decision maker to the environment via the business model and from the customer to the environment. As shown by Anderson and Paine (1975), the strategic behavior of firms is dependent on the values and beliefs of managers. The manager or the entrepreneur can influence the environment indirectly through the business model, in particular the value created (Arrow 13), change in customer value proposition (Arrow 14), change in value creation capacity (Arrow 15), and change in environmental value proposition (Arrow 16). A change in the environmental value proposition either increases (Arrow 17) or decreases (Arrow 18) the ecological capital. The behavior of the customers is affected by the stock level of the customer value proposition (Arrow 19) and can directly influence the environment (Arrows 20 and 21). For instance, the customers

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can have lifestyles or habits that induce less pollution or waste; for instance, through the possi- bilities of a car-sharing business model that reduces the need for owning a car. The consumers can also substitute a conventional car for an electric car, thus increasing the consumption of renewable resources instead of nonrenewable resources. In the model, customers have no direct impact on the business model of the firm; however, they indirectly influence the business model through changing the beliefs of the decision maker (Arrow 22).

A Case Example

The developed model applies to two categories of firms: startups that integrate sustainability into their business model core logic, and established firms that aim to achieve a transformation—at least partially—to BMfS. The case example of Bettervest, which is analyzed in this section, belongs to the first category and focuses on those entrepreneurs who have launched new firms based on BMfS. Bettervest GmbH is a German-based startup founded in 2012. Bettervest imple- mented a BMfS that combines sustainability and financial objectives. To collect data, we use published material such as short articles, interviews with the founder, and the company’s website. Bettervest is a crowdfunding platform, on which people can invest small amounts of money in energy efficiency projects initiated by companies, local authorities, and so on. Investors can contribute 50 to 12.500 Euro to the project and earn money by getting a percentage of the energy cost savings that result from project implementation. The cognitive aspect has played a key role in the creation of Bettervest’s BMfS. The founder, Patrick Mijnals, recognized the changes in the ecological environment many years before start- ing the venture. In several interviews, he describes how his beliefs about ecological sustainability and entrepreneurial actions were originally formed:

Inspired by the book of Ernst Ulrich von Weizsäcker I read in high school some years ago, I came up with the idea of focusing on energy efficiency projects, a very lucrative, but unfortunately neglected issue in the energy debate. (vc-magazin.de, 2014)

von Weizsäcker’s book demonstrates that wealth can be doubled while halving energy consump- tion, and that this shift has to be initiated by the private sector (von Weizsäcker, Lovins, & Lovins, 1998). This book shaped the founder’s beliefs about sustainability and the possibility of improving the natural environment through a market-based solution. Few years later, he encoun- tered the crowdfunding idea, on which he based his business model (Bundesministerium für Wirtschaft und Energie, 2013). Five years later, he presented the idea to some like-minded people, and they jointly founded Bettervest. At the beginning, it was difficult to find business investors driven by the need to gen- erate a value to the environment: “We have spent a long time looking for investors that were not only convinced by our business model, but whose values also are in line with our higher-ranking sustainability objectives” (vc-magazin.de, 2014). The business model has a clear environmental value proposition: All projects should be focused on energy efficiency. The customer value prop- osition is that organizations such as private companies get access to funds, and the investors get a return on the invested money (Meyer, 2013). The business model of Bettervest builds on vari- ous reinforcing feedback loops. The environmental value proposition is created indirectly via the customers’ energy savings and has a direct link to the customer value proposition. According to the founder, most organizations should be actually interested in energy efficiency projects because an average of 30% energy costs can be saved, but most organizations lack the financial resources. Consequently, the environmental value proposition complements the value proposi- tion that is offered to the funds-seeking organizations. In addition, the investing individuals

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contribute to ecological sustainability. The individuals that invest in the Bettervest projects equally benefit from increased energy efficiency, as the rent of their investment depends on the actual energy savings. Bettervest captures value by charging a provision fee on cost savings achieved in each project. The reinforcing feedback loop between the value capture, value to customers and investors leads to strong incentives to increase energy savings and hence the value to the environment. For proj- ects that require more than 10,000 Euro, Bettervest involves energy consultants to identify poten- tial savings. At the time of writing, Bettervest is working toward the improvement of its value creation capacities. In the future, their own certified experts should estimate the energy savings. To summarize, Bettervest designed a BMfS, in which the value to all relevant stakeholders com- plement each other and reinforce the captured value for the firm.

Discussion and Managerial Implications

The model draws the attention of entrepreneurs and managers to the environment and the stake- holders who care for it and the relationships between stakeholders, the natural environment, and the company. The recognition of a BMfS opportunity requires the design of a reinforcing loop that feeds back from the environmental value proposition to the value capture dimension of the business model. In the case of Bettervest, the more energy efficiency projects are carried out, the more value the company can capture. Hence, we can derive the first proposition:

Proposition 1: By design, effective BMfS explicitly consider, the reinforcing feedback loops between the environmental value proposition, customer value proposition, and the captured value.

From the system dynamics literature, we know that causal loops from the business model to the environment and then to the manager generally happen with certain delays (Sterman, 2000). The concept of delays makes it obvious that companies striving for the achievement of a com- petitive advantage should be able to uncover the feedback loops from the environment to the business model much earlier than competitors. For instance, the time elapsing between the rec- ognition of societal or environmental problems and the design of effective laws and regulations can be very long. Reactive companies rather adapt their business models after the laws and regu- lations are put into effect. Proactive decision makers, however, anticipate changes by recognizing the causal loops much in advance and by adapting their business models adequately before com- petition. Actually, the companies’ endeavors can be classified along a continuum of several stages that range from a denial or active rejection of environmental and societal issues to a proac- tive integration of corporate sustainability (e.g., Maon, Lindgreen, & Swaen, 2010). In a research study conducted in the Canadian oil and gas industry, Sharma (2000) found that companies’ managers who interpret environmental issues as opportunities are more likely to embark on vol- untary and proactive environmental strategies than those who merely strive for conformance to regulations and standard industry practices. Managers in the latter category consider environ- mental issues a threat and rather exhibit a reactive behavior. In the example of Bettervest, the founder was aware of the level of savings that can be achieved through increased energy effi- ciency (30%) already several years before the EU commission started discussing the implemen- tation of binding policies toward achieving an energy-saving target of 30% until 2030 (Kafsack, 2014). In addition, the act of reading about the entrepreneurial potential to create a more sustain- able society established the link from the environment to the founder’s cognition. In other cases, the customer or other stakeholders can act as a trigger for changing the entrepreneur’s beliefs regarding the environment. Hence, the second proposition:

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Proposition 2: The business model affects the ecological capital directly through the environ- mental value proposition and the firm’s value creation capacity, as well as indirectly via the customer’s behavior. The ecological capital feeds back to the mental model of the firm’s deci- sion maker not only directly but also indirectly through the beliefs of the customers and their behaviors. This feedback is subject to a delay in the recognition of potential and promising BMfS by decision makers.

Consequently, a firm interested in designing BMfS should put mechanisms in place to get knowledge from the outside. It must develop an absorptive capacity (M. W. Cohen & Levinthal, 1990; Hansen & Klewitz, 2012) of environmentally relevant information in order for the decision makers to update and adapt their beliefs about the environment. The earlier the decision makers can perceive the changes in ecological capital, the higher the likelihood that they can recognize environmental opportunities and translate them to BMfS faster than competitors. In this way, the decision maker benefits from an information advantage. Nevertheless, making sense of this information and recognizing an opportunity depends on other factors such as prior knowledge and social capital (e.g., N. M. George, Parida, Lathi, & Wincent, 2014) In addition to the delay that occurs in recognizing and processing information about the eco- logical capital, another delay can occur between the decision maker’s perception of an environ- mental opportunity and the actual change in the business model toward a BMfS. Delays within this link can result from limited sustainability-related beliefs of other stakeholders. Hörisch, Freeman, and Schaltegger (2014) discuss the challenges of managing the sustainability-related acceptance and behavior of the firm’s stakeholders through the mechanisms of education, regula- tion, and sustainability-based value creation for stakeholders. The example of Bettervest illus- trates this challenge; although the founder recognized a sustainable business opportunity, he could not achieve a fast implementation of his BMfS. The reason: He could not easily find inves- tors who were also driven by sustainability objectives. About 5 years elapsed between the recog- nition of the opportunity and the launch of the business. Communicating the multiple value propositions to persuade necessary stakeholders requires additional effort. Hence, we can formu- late the following proposition:

Proposition 3: The beliefs of the decision maker with respect to ecological capital translate into behavior that aims to adapt the business model according to sustainability aspects or to develop a new BMfS. A major delay can occur in the translation of the ecological perceptions into an appropriate business model.

Both delays (Propositions 2 and 3) seem a priori to depend on whether the company is a young business with sustainability designed at its core, or an established business with ambitions to shift to a BMfS. The delay in the feedback loop from the ecological capital to the entrepreneur’s beliefs is higher in companies that are originally focused on profit maximization. Note again that the feedbacks of the ecological capital reach the decision makers via stakeholders who care about the environment. In this way, they do not come directly from the natural environment itself. In effect, as the natural environment is affected, people observe this and develop requests, demands, and expectations that are perceived by managers. Managers of traditional SMEs, however, often have little mental space available for considering environmental issues with no direct influence on their firm. In this context, Sharma (2014) notes that

the bulk of firm’s creative talent (that is, its operational managers) is usually tied up with the day- to-day operations and routines of the current business. It rarely has the “white space” to apply fresh ideas and strategic thinking in innovating to compete effectively for a sustainable future. (p. 103)

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Contrarily, entrepreneurs who start their venture with a BMfS have sustainability-related issues already embedded in the core logic of their business and will therefore be more perceptive to further sustainability-related opportunities. In this context, by drawing on empirical survey data from Germany, Hörisch, Johnson, and Schaltegger (2014) note that knowledge of sustainability management tools is the key difference between small and large companies; it constitutes an important mediator to promote sustainability management. In other words, the firm’s size plays a minor role as compared with knowledge of sustainability management (tools) and the resources allocated to their implementation. More precisely, the authors found that “the indirect, mediating effect of knowledge is roughly three times stronger than the direct effect of company size” (Hörisch, Johnson, & Schaltegger, 2014). Because young companies with sustainability at their core are expected to have a better knowledge of the tools for sustainability management than established profit-focused SMEs that envisage the transition to BMfS, they are in a better posi- tion to cope with the delay from the environment to the decision maker’s beliefs. Concerning the second link that translates the decision maker’s perceptions about the ecologi- cal capital to actual behavior that transforms the business model, neither the young business with built-in sustainability, nor the established firm has a clear advantage. Whereas a young business may lack resources to execute properly the sustainability business model, established profit-ori- ented companies with BMfS ambitions can encounter difficulties due to organizational inertia. Hence, the following proposition can be stated:

Proposition 4: A young business with sustainability designed at its core is more likely to overcome the delay induced by the causal loop that links environmental change to the decision maker’s behavior than an established, profit-oriented company. The lack of resources in young businesses and organizational inertia in established profitability-oriented companies delay the translation of the decision maker’s cognition into appropriate modifications of the business model.

Conclusions and Directions for Future Research

This article provides a new perspective on BMfS and combines many insights from the literature into a coherent conceptual model that uses system dynamics notation. The model connects four partial models: the firm, the environment, the decision maker, and the customer. It explains the functioning of BMfS and how these business models can be initiated. The partial model of the firm, BMfS, builds on a reinforcing feedback loop between the firm’s value creation capacity, value to the customers, value to the natural environment as well as the value that the firm can capture for itself. The environment is conceptualized by means of three main stocks: renewable resources, nonrenewable resources, as well as pollution and waste, in addition to the correspond- ing flows. The partial model of the individual cognition argues that BMfSs are triggered by the decision maker’s cognitive representation of the natural environment. Consequently, the change in sustainability-related beliefs and norms of the decision maker leads to a changing behavior. The final model shows how the changed behavior can result in changes in the firm’s business model, and how the business model feeds back to the environment and to the customer. As such, the developed model satisfies all four requirements formulated in the “Conceptual Development” section. First, it supports decision makers in understanding how the business model can affect the natural environment. Two types of impacts are identified: a direct impact via the environmental value proposition and value creation capacity and an indirect impact through the customer’s behavior. To achieve a faster reduction of the negative impacts on the environment, it is better to start with creating an environmental value proposition and modifying the value cre- ation capacity than to begin with changing the customer’s behavior. Second, the model reveals the direct, and mostly indirect, impact of the natural environment on the firm. The environment affects

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the business model directly because of its impact on the firm’s value creation capacity (e.g., as resources become scarce) and indirectly via the beliefs of the customers and decision makers. Third, the system dynamics model illustrates the different types of stocks and flows that relate the main stakeholders of a BMfS. The important stocks are the firm’s value proposition, environ- mental value proposition, which is the value proposition provided to stakeholders concerned about the environment, the value creation capacity, value capture, as well as the ecological capi- tal. Fourth, the model represents important feedback loops explaining the rationale of a BMfS from a stakeholder perspective. For instance, feedback loops can induce self-reinforcing ecologi- cal beliefs of the decision maker or the customer, leading to a business model shift toward more sustainability. Besides, two relevant links have been identified that can cause delays in the whole system: from the environment to the decision maker and from the decision maker to the business model. The case study of Bettervest illustrates the logic of the proposed model. The case study reveals how the BMfS was triggered by changes in the environment (perceived via a book). It also dem- onstrates the commercial potential of designing a reinforcing feedback loop between the created value to different customer groups, the environment, and the firm’s profit generation. The final discussion has led to the development of four propositions. Hence, this research is a first step toward a large research program. The future research directions proposed in the follow- ing are directly related to the four propositions. First, a database of BMfS case studies can be constructed to investigate in a systematic way the mechanisms by which the environmental value proposition, value to the customer, and captured value can reinforce each other. Second, due to the importance of the decision makers’ cognition in the development of BMfS, it can be insightful to study the mental models of entrepreneurs and managers that operate in businesses that strive for achieving a positive impact on society, the economy, and the natural environment. Research should identify how these decision makers construct their mental models about the environment, how they update their current beliefs, and how these beliefs translate to specific behaviors. Entrepreneurial cognition is a stream of research that can be helpful in this regard. For instance, the systematic literature review of entrepreneurial opportunity recognition, conducted by N. M. George et al. (2014), did not identify research contributions that deal with opportunity recognition driven by sustainability issues. This is another argument why the entre- preneurial cognition literature should focus more on sustainability in the future. Third, the reduction of the delay that occurs when decision makers translate relevant environ- mental information into effective behavior to enact a business model change can accelerate the implementation of BMfS. Mechanisms such as stakeholder education (e.g., investors) during the development and implementation of BMfS can be a suitable approach. Further research can explore empirically additional mechanisms that aim to improve the implementation speed of BMfS. In particular, how can public actors and policy makers enhance this implementation speed through policies and supportive external conditions? Fourth, this work has neglected the organizational characteristics that allow firms to success- fully design and implement BMfS. Some company types, for instance, seem to cope better with system delays than others. Hence, these companies may find it easier to embark on BMfS than others. Thus, future research can identify the contingencies that make certain organizations better prepared for a transition to BMfS. Such a project can capitalize on the work of Sommer (2012) who presents case studies from several industries. The comparison between successful and less successful transformations to BMfS can provide key insights into potential contingencies.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

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Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Author Biographies

Nizar Abdelkafi is head of the research unit “Business Model Engineering and Innovation” at Fraunhofer MOEZ and senior researcher at the department of Innovation Management and Innovation Economics at the University of Leipzig. He holds an Industrial Engineering diploma from the National Engineering School Tunis, a Master degree in Business Administration from the Technische Universität München, and a PhD degree form the Hamburg University of Technology. Nizar Abdelkafi is interested in innovative business models, along with innovation and sustainability management and has published his research in two books, several international journals such as International Journal Journal of Innovation Management and IEEE transactions on Engineering Management, as well as over 30 conference papers and book chapters.

Karl Täuscher is a research fellow and doctoral candidate in the research unit“Business Model Engineering and Innovation” at Fraunhofer MOEZ. He holds a Master degree in management science with specialization in strategic management, innovation management, and marketing. Karl Täuscher has studied at University of Leipzig, Universidad de Chile and ESC Toulouse (France).

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