Why and How Businesses Should Create Non-Growth Business Models in a Post Covid-19 Climate
Updated: Aug 3, 2020
In 2009, Jay Forrester argued ‘I think the biggest management problem is going to be to understand how to manage a successful non-growing company’ - prompting the question as to how we can move past a frame of mind that success is only measured by growth.
Needless to say, at the turn of a new millennium just nine years before, we began the 21st century with our priorities set on economic growth. However, to have infinite economic growth, would suggest we live on a planet with infinite resources. Except we do not.
Like most things, covid-19 turned the concept of relentless economic growth on its head. We experienced global economic pause and pending recession for the wellbeing of our wider society. Prior to this health crisis, macroeconomic growth had largely been assumed to be linked with the wellbeing of our society. However, this cannot be true because our society suffers from mental illness more than ever before. Chartered Psychologist Kimberly Wilson starts her March 2020 book ‘How to Build a Healthy Brain’ with the statistic that ‘in ten years time, depression is said to be the leading cause of global disease burden - a measure of how illness impacts quality of life, life expectancy and the economy’.
So what happens when growth does not serve the wellbeing of society and creates an over exploitation of our resources? One answer is to build business models centred on degrowth.
Degrowth has been widely written about by thought leaders and economists, however the main assumption stems from French professor, Serge Latouche’s creation of decroissance, whereby we build a society that achieves the wellbeing for all of humanity and sustains our natural environment and basis of life.
Whilst this may seem esoteric and conceptual, we can see recent examples whereby degrowth is becoming the barometer for successful economics. Canada recently announced that businesses will only receive economic help, if they disclose their commitment to environmentally friendly decisions and climate impacts. This conditional aid is part of Canada’s new Large Employer Emergency Financing Facility, in efforts to help the country’s largest companies counter the damage of coronavirus.
Equally compelling, Amsterdam has embraced British Economist Kate Raworth’s doughnut model as the starting point for policy decisions and efforts to repair their post-coronavirus economy. Through degrowth tactics, the goal is to use the donut to ensure the city and its habitants thrive in harmony with the planet.
So if governments are embracing degrowth strategies in a post-covid climate, what does this mean for businesses and how can they shape their business models? A case study in practice is Patagonia who has a business model founded on the principle of degrowth.
Their e-commerce homepage reads ‘we are in the business to save our home planet. We aim to use the resources we have—our voice, our business and our community—to do something about our climate crisis’. The company produces sustainable and durable products, promotes recycling and seeks to inspire the reduction of unnecessary consumerism via campaigns such as ‘Don’t Buy This Jacket’. Consumers are invited to consume less and to repair their clothing via the brand’s iconic ‘Wear Worn Tour’ that now takes place globally. Fundamentally, Patagonia is engaging with the circular economy, whereby people share resources to have their needs met.
As well as a commitment to environmentalism, the company does more to serve the wellbeing of its employees including benefits like onsite childcare, onsite organic food and free yoga and hiking trail access. In addition, the company provides financial support to employees during and after their employment.
Rather than defining growth in terms of monetary value, the company measures success based on environmental and community impact. This is a key lesson for business models moving forward - the redefinition of the value of growth and how we measure success.
So what lessons can businesses take moving forward in a post covid-19 climate?
Degrowth is the new economic paradigm we need to regrow our society and reshape our business models. Our post-covid19 goal should be to establish non-growing companies that have degrowth value propositions as their KPIs.
Refine value and establish holistic brand measurements for success
In order to build a non-growing company that is successful, business models must seek to depart from the value of growth being determined in monetary terms. Instead, they should focus on value as development for actual wellbeing, not just through the output of materials, products and services, but commitment to the environment and societal health. Business models of the future should replace the former GDP metric for more holistic brand measurements such as ecological stability and wellbeing for both consumers and employees.
Engage in the circular economy
Finally, post-covid19 business models should increasingly engage in a circular economy and encourage consumers to share and cooperate when it comes to using resources. The same applies to brand materials and services. Collaboration will be at the heart of how we create moving forward.
Originally featured at Elluminate: https://www.elluminateme.com/magazine/