Digitalizing sustainability: 3 business models for a better future
In 1983, the movie Star Wars: Return of the Jedi was released. While audiences oohed and aahed at science fictional starships, in a galaxy not so far, far away, something even more astounding happened: the internet was born.
From that moment on, we haven’t stopped digitalizing. By the end of 2022, 70% of the globe’s GDP will have undergone digitization. By 2025, 200+ zettabytes of data will be in cloud storage around the globe. And by 2030, there will be 25.44 billion IoT devices globally.
Digitalization has huge impacts for sustainability. Looking to the future, we need to develop not only sustainable digital technologies and practices, but also processes that support these innovations. Because digital sustainability is more than new technology – it’s also innovative business models. Let's explore the top three business models for digital sustainability.
1. Servitization: Transforming products into services
Ernesto Ciorra, Chief Innovability® Officer at Enel, explains in an interview with Internet of Business that “the potential of digital can be fully captured if transformation is embraced by all functions and incorporated into value chains and processes”. Indeed, “we see digitalization as an opportunity to become a veritable smart company through the redesign of business models”, he adds.
One of these new business models is servitization. This means transforming physical products into services to reduce environmental externalities. The most common examples include companies like Netflix and Spotify that deliver media via subscription models, saving customers from buying DVDs and CDs.
Because the customer pays a fixed fee per unit of service consumed, the ownership of the system remains in the hands of the service provider. As such, the service provider is incentivized to think about the long-term design, maintenance, and lifecycle of their technology, because they are responsible for all operation costs. One of the biggest operation costs is energy usage, meaning that companies will be looking for new ways to increase energy efficiency.
Energy efficiency is important for sustainability – a report from the International Energy Agency shows that end-use energy efficiency alone could achieve 35% of the cumulative CO2 savings required by the Paris Agreement by 2050. However, even though we have the proper digital tools, barriers such as high up-front costs and the perception of greater performance risk means that companies may be less likely to invest in these sustainable technologies. As the World Economic Forum affirms, servitization is crucial to overcoming these barriers and developing clean energy and decarbonization. Incorporating this model into circular city infrastructure and equipment, including e-mobility, makes renewable energy sources more feasible, adaptive, and widespread.
2. Circularity: Closing the product lifecycle
Another business model that supports the principle of digital sustainability is circularity. This paradigm rethinks the production and consumption of materials to combine market competitiveness with environmental sustainability. Circularity is especially important for mitigating the downsides of digitalization, like electronic waste. Reports show that electronic waste (e-waste) is the fastest growing stream of waste. In 2022 there were 59.4 million metric tons of e-waste globally – this number is expected to increase to 74.7 million by 2030.
To mitigate these negative externalities, companies need to develop sustainable circular business models. For example, we’ve designed a circular approach for the lifecycle management of our digital assets to extend their useful life by recovering, recycling, and reusing materials. We’ve also developed a code of conduct for digital technologies in accordance with the UN Sustainable Development Goals (SDGs), so that we limit the environmental damage of these tools.
In addition, we encourage this initiative externally: Enel Open Innovability® continues to launch countless challenges related to circularity and other sustainable models. For instance, we are currently hosting challenges in which we seek the best solutions to, for example, recovering Secondary Raw Materials (SRM) from end-of-life PV modules and redesigning Primary Substations.
3. Inclusivity: Bringing everyone on board
Sustainability is not just a commitment to the planet, but also to people. We must develop digital tools that are sustainable and empower people to thrive. However, there’s currently an innovation gap for people with disabilities – whereas people with disabilities make up 15% of the global population, they often lack the resources and support they need. According to a study by the International Labor Organization, digitalization can help close this gap by providing broader access to the labor market and the flexibility of remote work.
To bring together these new digital tools and inclusive values, you need organization-wide initiatives. Enel achieves this through our Valuability® model. At its core, this business model creates value by providing solutions to social needs. Our mission is to develop products and services that are suited to people’s unique needs in a sustainable way. Through this business model, we’ve created the Disability Inclusion Community of almost 300 co-workers and caregivers that support the conceptual design and testing of inclusive products like the Avanchair wheelchair. In this way, not only are our products inclusive and sustainable, but so are our methods.
These three business models – servitization, circularity, and inclusivity – are essential for sustaining digital sustainability. By embedding these practices within the structures of your organization, you can foster synergies between digital tools and new business models. What once may have seemed like science fiction is now our reality, so finding new ways to sustainably innovate has never been more challenging and necessary.