Let’s unpack this a bit.
Business Model Impact
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:
- reliance on fossil fuels,
- a once through model where all waste generated is disposed of in landfill,
- a chemical process that produces hazardous by products through the various reactions, including CO2.
- an obsolescence model where profits come from relying on users of a product to frequently upgrade perfectly functioning items to the new generation, or pay exorbitant fees as users are unable to freely repair “proprietary” products when minor issue occur.
Balance Sheet Cost Accounting
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.
The Four Matrix Quadrants
With the parameters of this matrix established we now have 4 zones to investigate:
- Ongoing Viability
- Wealth to the Commons
- Buying time
- Death Zone