Evaluating business model environmental performance with BM-LCA A comparative case in an automotive company

Abstract

Business models are identified as the “engines” of the economy, and economic growth is identified as a driver for increased environmental impacts. It is therefore not surprising that sustainable business model innovation, not at least circular business models, has gained increased interest to achieve sustainability and impact decoupling (Bocken et al., 2019).

A review of sustainable business models by Nosratabadi et al., (2019) makes it clear that there is a research gap when it comes to the assessment of environmental performance of business models. If the environmental performance of business models is not assessed, there is a risk of assuming, without knowing, that certain types of business models are more sustainable than others with a risk of greenwashing. This is a pressing issue since it often is uncertain if sustainability-labeled business models deliver on the promise of being sustainable (Baumann et al., 2022).

A new LCA methodology for the assessment of environmental performance of business models called Business Model Life Cycle Assessment (BM-LCA) has been introduced and successfully applied on the first case in the garment sector comparing a sale and a rental model for jackets (Goffetti et al., 2022). BM-LCA switches the focus from impacts related to product function to impacts related to business value. The functional unit can e.g., be “1M€ in profit per quarter”.

The aims of this study is to conduct a BM-LCA on a different type of case and assess the relevance of the tool for business model assessment and sustainable business model innovation. A case study performing a carbon footprint BM-LCA on Partner sales, Direct sales, and three types of subscription-based business models, in an automotive company, was performed to achieve these aims. The automotive case significantly differs from the previous BM- LCA case by more complex product and economic structures, larger company, and emissions during the use phase. Another difference compared to the previous BM-LCA case is that an existing product LCA will be used and complemented with business model data to reduce the work needed to perform the BM-LCA. Findings are explored with regards to the feasibility to perform a BM-LCA, the usefulness of BM-LCA as a tool for environmental assessment of business models as well as sustainable business model innovation.

The BM-LCA revealed a significant difference in CO2eq of up to 40% between the business model's environmental performance per contribution margin in favor of the subscription-based business models. However, the results were sensitive to factors such as the influence of external subsidies for low-emission vehicles and market prices of used cars.

This study showed that it is possible to assess both current business models and future scenarios. Thus, BM-LCA fills a knowledge gap when it comes to quantitative assessments of business models. The study followed the methodology of BM-LCA described in (Baumann et al., 2022b; Böckin et al., 2022a, 2022b; Goffetti et al., 2022), although it was not achievable to replicate it step by step, and therefore there are some deviations in the study. When it comes to the usefulness of the result, further research is needed to better understand how to interpret and use the produced results from a company perspective