A way to characterize a business is to consider how it uses resources and whether or not the costs (or benefits) associated with their use are fully captured on their balance sheet.

This concept can be set up in a 2x2 matrix, which I have dubbed the “Sustainable Futures Matrix” as follows:

Let’s unpack this a bit.

On the vertical access we have the source of wealth for a business. At the bottom this comes from extractive and non-renewable sources. This might be include:

At the other extreme a business might have a regenerative model, one that:

The horizontal axis, plots how the business accounts for its impact on the world. At one extreme, are the companies that fully externalise their costs. Waste products, social impacts, economic risks and benefits are not captured by the business on their books, instead relying on the broader environment and community to ameliorate any impacts. Think here about the tragedy of the commons.

Of course an entity might not just be distributing negative externalities — there are positive externalities as well. Employment, environmental improvements, distributive economic wealth. A business may be happy in allowing positive externalities to be given away without fully monetising them.

On the other extreme, are businesses that fully internalise the impacts they have, capturing costs and benefits on their balance sheet. In the case of non-renewable businesses this might come about in the form of a tax or end of pipe treatment (for example carbon capture on a coal fired power station). In a circular regenerative business this might be a capital investment in new technology that gets away from the negative impact an older technology might have had — think here about the transition car companies are making from internal combustion engines (ICE) to electric vehicles.

With the parameters of this matrix established we now have 4 zones to investigate:

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