Delft University of Technology Sustainable business model archetypes for the banking industry

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Delft University of Technology

Sustainable business model archetypes for the banking industry
Yip, Angus W. H.; Bocken, Nancy
DOI
10.1016/j.jclepro.2017.10.190
Publication date
2018
Document Version
Final published version
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Journal of Cleaner Production
Citation (APA)
Yip, A. W. H., & Bocken, N. (2018). Sustainable business model archetypes for the banking industry.
Journal of Cleaner Production, 174, 150-169. https://doi.org/10.1016/j.jclepro.2017.10.190
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JournalofCleanerProduction174(2018)150e169
ContentslistsavailableatScienceDirect
Journal of Cleaner Production
journal homepage: www.elsevier.com/locate/jclepro
Sustainable business model archetypes for the banking industry
Angus W.H. Yip c,d,1, Nancy M.P. Bocken a,b,c,*
aLundUniversity,IIIEE,Tegn(cid:1)ersplatsen4,22350Lund,Sweden
bDelftUniversityofTechnology,IndustrialDesignEngineering,Landbergstraat15,2628CEDelft,TheNetherlands
cUniversityofCambridge,CambridgeInstituteforSustainabilityLeadership,1TrumpingtonSt,CambridgeCB21QA,UnitedKingdom
dUniversityofHongKong,InstituteofChinaBusiness,9/F.,T.T.TsuiBuilding,PokfulamRoad,HongKong
a r t i c l e i n f o a b s t r a c t
Articlehistory: Sustainable business model innovation is increasingly viewed as a lever for systems change for sus-
Received28April2016 tainability across businesses and industries. Banks hold a unique intermediary role in sustainable
Receivedinrevisedform development,butalsohaveadifficultpositionafterthe2008financialcrisis.Thispaperaimstoexplore
28September2017
business models for sustainability in the service industry, particularly banking. Itexploresthe recep-
Accepted18October2017
tiveness of customers towards sustainable business models pursued by banks. The retail banking in-
Availableonline27October2017
dustryinHongKongisthefocusofthiswork.First,apracticereviewandsemi-structuredinterviewsare
usedtodevelopandvalidateasetofsustainablebusinessmodelarchetypesforthebankingindustry.
Keywords:
Second, surveys are conducted to test customer receptiveness for the archetypes. Eight sustainable
Serviceindustry
Businessmodelinnovation businessmodelarchetypesforbankingaredevelopedandvalidated.“Substitutewithdigitalprocesses”,
Businessmodelforsustainability “adopt a stewardship role” and “encourage sufficiency” are most welcomed by customers. Some ar-
Sustainablebusiness chetypesseematdirectoddswithcurrentbusinesspractice,suchas“encouragesufficiency”.Thisstudy
Banks givesaninsighttohowto“dogoodanddowell”inthebankingindustry.Furtherresearchontheat-
Sustainablefinance tributes of these archetypes can be conducted togain a deeper understanding whycustomers prefer
bankstousethesearchetypes.
©2017TheAuthors.PublishedbyElsevierLtd.ThisisanopenaccessarticleundertheCCBY-NC-ND
license(http://creativecommons.org/licenses/by-nc-nd/4.0/).
1. Introduction safeguard the environment while generating profit. It originates
from terms such as ethical banking and ethical banking policy,
Consumption of products and services is far exceeding the illustratedbythecaseofCooperativeBankascommunicatingwhat
world's capacity of natural resources. According to WWF (2012), a business is and stands for, and strict guidelines on who the
theequivalentof1.5planetsisbeingusedtosupportcurrenthu- businesswill,orwillnotdobusinesswith(Harvey,1995).Accord-
manactivities.Despiteeffortstoreduce“unsustainability”,global ingtoLynch(1991),ethicalbankingisaboutethicalpractices-not
resource consumption continues to grow, and the catastrophic merelycorporategivingandinvestingin‘ethical’funds.Inlinewith
consequencecanbeeasilyforeseen.Thereisanurgentneedfora this,GABV(2012)definesasustainablebankasnotjustdoingno
betterunderstandingofthedynamic,adaptivebehaviorofcomplex harm,butactivelyusingfinanceto‘dogood’.Thefinancialcrisisin
systemsandtheirresilienceinthefaceofdisruptions(Fiksel,2006). 2008wasacrisisofunsustainabilitywherebanksdidnotaddress
Sustainabilityforanorganizationisaboutlookingafterdifferent the balance of interests of different stakeholders, with a skewed
internalandexternalstakeholders(Freeman,2010)andinpartic- focus on senior management's personal benefit (Polonskaya and
ular,thetriplebottomlineofPeople,PlanetandProfit(Fisk,2010). Babenko,2012).Thecrisistriggeredtherethinkof‘unsustainable’
Hence,sustainablebankingreferstodeliveringfinancialproducts business models adopted by banks (Stephens et al., 2012). Banks
andservices,whicharedevelopedtomeettheneedsofpeopleand needtore-buildtheirimageandcutcoststoregaincompetitive-
nessafterthecrisis.Nevertheless,greenwashingcanneverbefully
ruledout,asitisdifficulttomeasureandassesstheoverallimpact
onindividualsustainabilityperformanceandintentions.
* Correspondingauthor.UniversityofHongKong,InstituteofChinaBusiness,9/F.,
Businessmodelsforsustainabilitycanbeausefulframeworkto
T.T.TsuiBuilding,PokfulamRoad,HongKong.
create‘systemschange’inorganisations(BockenandShort,2015).
E-mail addresses: [email protected] (A.W.H. Yip), [email protected]
(N.M.P.Bocken). Businessmodelsconceptualisethewaybusinessisdone(Magretta,
1 Presentaddress:FlatC,15/F,Block3,10RobinsonRoad,HongKong.
https://doi.org/10.1016/j.jclepro.2017.10.190
0959-6526/©2017TheAuthors.PublishedbyElsevierLtd.ThisisanopenaccessarticleundertheCCBY-NC-NDlicense(http://creativecommons.org/licenses/by-nc-nd/4.0/).
A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169 151
2002) and help to understand the drivers of a firm's objective, mainstream and have not seem to have led yet to a significant
whichcouldbefinancialornon-financial.AccordingtoOsterwalder transformationofthebankingindustry.Hence,thispaperseeksto
etal.(2005),abusinessmodelcanbeusedforanalysis,innovation, map possible sustainable business model opportunities for the
performanceassessmentandcommunication.Thegrowinginterest bankingindustry.
of analyzing business models in corporate innovation implies its This research addresses the following research and sub
usefulnessinsustainabilityinnovation(StubbsandCocklin,2008; questions:
Lüdeke-Freund, 2010; Boons and Lüdeke-Freund, 2013; Bocken Whichsustainable business model archetype(s) would benefit
etal.,2014).Assuch,sustainablebusinessmodelsmaybethekey thesustainabilityofbankingindustry?
to unlock the power of business to combat global sustainability
issues. (cid:1) Whicharchetype(s)wouldreceivethebestcustomertraction?
Banksholdauniqueintermediaryroleinsustainabledevelop- (cid:1) Whicharchetype(s)wouldenhancecustomers'loyalty?
ment.Theyplayafundamentalroleinpublicpolicyandeconomic
performance as well as in all forms of commerce and industry
(Jeucken,2010).Forexample,banksweighrisksandattachaprice 2. Background
to these risks in the credit approval process. Through such price
differentiation,bankscanfostersustainability(JeuckenandBouma, This section reviews the literature on sustainable business
1999). According to the semi-structured interviews conducted in models and the need to focus on banks as a key industry to
this paper, in practice, banks today have environment and social transform.Theselectionofsustainablebusinessmodelarchetypes
assessment guidelines in place for negative screening within the isdiscussed.Finally,theroleofcustomerperceptionandcustomer
lending process, but very few banks adjust the interest rate ac- tractiontowardssustainablebusinessmodelsisexplored.
cordingtotheirborrowers'degreesofsustainabilityperformance.
The first objective of this paper is to understand the current 2.1. Sustainablebusinessmodelinnovation
businessmodelssupportingsustainability,usedbytheservicein-
dustry,particularlythebankingindustry,and totry to categorize The term “Business Model” is often used rather loosely
theminasetofgenericarchetypes.Thisisimportantandusefulfor (SustainAbilityLtd,2014),butthereisageneralviewofitsdefini-
furtherbusinessmodelinnovationanddefiningaclearerresearch tion in academic field. Value is the focus. Chesbrough and
agendaforsustainabilityinbanking.Toachievethisobjective,the Rosenbloom (2002) emphasize the connections that a business
sustainable business model archetypes in Bocken et al. (2014), a model provides between a firm's potential and the realisation of
comprehensiveoverviewofsustainablebusinessmodels,areused economic value. Osterwalder and Pigneur (2010) use a modular
to identify an appropriate set of sustainable business model ar- perspectivewhichincludesninebuildingblocks:keypartners,key
chetypes for banks. As Bocken et al. (2014) focused on the activities, value propositions, key resources, customer relation-
manufacturingindustryacriticalassessmentisneededtoevaluate ships, customer segments, channels, revenue streams and cost
whetherthosearchetypescanbeappliedtothebankingindustryor structure.Richardson(2008)adoptsamoreconsolidatedview,by
whetherarevisedsetwouldbebeneficial. dividing the business model intothree components fromavalue
Thesecondobjectiveofthispaperistoexplorethereceptive- perspective: 1. The value proposition, 2. The value creation and
nessofcustomerstowardsthesustainablebusinessmodelarche- deliverysystemand3.Thevaluecapture.SustainAbilityLtd(2014)
typescurrentlyusedbybanksandtherelationshipwithcustomer publishedaresearchreportdefiningbusinessmodelsforsustain-
traction.Theeconomicelementinthetriplebottomlineofpeople, abilitybyusingvaluechainanalysis.Throughpracticereviewthey
profit and planet is a crucial motivator for businesses to adopt a identified 20 distinct business models falling into five categories
particular sustainable business model(s). The Natural Marketing based on the sustainable outcomes, namely, 1. environmental
Institute and MIT's 2011 study, “Sustainability Nears a Tipping impact,2.socialinnovation3.financinginnovation,4.baseofthe
Point”, indicates that 67% of U.S. customers are now looking for pyramidand5.diverseimpact.
greenerproductsandsustainabilityisnowapartof70%ofcorpo- Businessmodelinnovationaimsatfindingnewwaysofdoing
rate agendas. As such, not directly focusing on the customer businessthatwilldisruptanindustry'sexistingcompetitiverules,
acceptanceisadeficiencyincurrentsustainabilitystrategies(Sheth leadingtothedevelopmentofnewbusinessmodels(Irelandetal.,
etal.,2011). 2001). Business model innovation is important to both
The focus of this study is the retail banking industry in Hong manufacturing and service industries. According to Girotra and
Kong. Hong Kong is an international financial centre; 70 of the Netessine (2013), business model innovation is deeply rooted in
largest 100 banks in the world have an operation in Hong Kong the laws of economics and operations management that are uni-
(HongKongMonetaryAuthority,2016).HongKongwasrankedthe versallyapplicabletoawidevarietyofindustriesandallowsforthe
firstintheglobalIPOrankings(TheWallStreetJournal,2015).Ithas systematisationoftheprocessofidentifying,selectingandrefining
the second largest stock exchange in Asia after Tokyo (Clarke- innovations. There is an urgent need for fundamentally different
Billings, 2016). Furthermore, the Hong Kong banking system has approachestovaluecreation(Coulteretal.,2013).Itisvitaltomove
been a role model for China, which is now the second largest beyond product and process modifications to business model
economyintheworldaftertheUnitedStates.Nevertheless,Hong innovation(Lüdeke-Freundetal.,2016|).
Konghasalsobeenquotedasoneoftheworld'sfastestgrowingtax Innovation for sustainability specifically targets societal or
havens, amongst countries such as Switzerlandand Luxembourg, environmental impact (Cooperrider, 2008). Sustainable business
whocouldbecriticisedfornurturingcorporatetaxevasion(Clarke- models as a form of sustainable innovation, balance both the
Billings,2016;OxfamInternational,2016).Assuch,thispaperfo- competing and complementary interests of key stakeholder seg-
cuses onthepositivesustainable innovationsthattheHong Kong ments,andcontextuallybusinesssustainabilityshouldmanifestas
bankingindustrycouldpursueinlightoftherecentfinancialcrisis economic viability and contribute to both societal and environ-
andthe needtograduallytransformthebankingindustry.While mentalsustainability(Edgemanand Eskildsen,2013).Sustainable
more sustainable banks with a changed corporate purpose have business model innovations seek to “create significant positive
emergedindifferentcontexts,suchasGrameenBank(Yunusetal., benefits or significantly reduce negative impactsfor the environ-
2010) and Triodos Bank, these types of banking are not yet mentandsociety;throughchangesinthewaytheorganizationand
152 A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169
its value-network create, deliver and capture value” (Bocken and businessarchetypes(Table1),categorizedunderahigh-leveland
Short,2015,p.44). generic classification, namely technological, social and organisa-
tional innovation, based on the major innovation types in Boons
2.2. Sustainablebusinessmodelsforservices/bankingindustry andLüdeke-Freund(2013).
Thearchetypeswereselectedbasedoncomprehensiveness,the
Thegrowingsignificanceofservices(Sheehan,2006)indicates value-based approach and its methodologygroundedin research
the importance of investigating their business models. Service is andpractice.First,thesustainablebusinessmodelarchetypesseek
created not just by the supplier and the customer but also by a to unify the various examples in literature as well as emerging
networkofactivitiesinvolvingahostofstakeholders(Gummesson, sustainabilitypracticeintoausefulcategorizationundertheover-
2008).Thisfurtherechoesthedefinitionofvaluecreationinsus- arching theme of business model innovation. Second, the meth-
tainablebusinessmodels,whichshouldextendtodifferentstake- odology in Bocken et al. (2014) was found to be rigorous by
holders,notonlythevaluetoshareholders(Bockenetal.,2013). reaching data saturation, through iteratively exploring examples
Commercial banks, as a service industry, playa crucial role in fromliteratureandpractice.Third,thebusinessmodelsaredefined
allocatingfinancialresourcesforhumanandeconomicactivityto bythreevaluecomponents-thevalueproposition,valuecreation
thriveenotonlyfortodaybutalsotomorrow.Inaddition,therole and delivery, and value capture - based on highly cited work by
ofbanks is tofund astable andsustainable economy(Alexander, Osterwalder et al. (2005); Osterwalder and Pigneur (2010) and
2014). BankTrack, a global network of non-governmental organi- Richardson(2008).Otheroverviewsofarchetypeswereevaluated
sationscooperatinginthefieldofcommercialbanksandsustain- such as those proposed by SustainAbility (Clinton and Whisnant,
ability,launchedCollevecchioDeclarationin2003.TheDeclaration 2014), but these seem too broad tobe linked to industry-specific
wasendorsedbyover200civilsocietyorganisations.Itstates: elements.
Themainlimitationisthatthesustainablebusinessmodelar-
“FinancialInstitutionsmustexpandtheirmissionsfromonesthat
chetypes build on cases in the manufacturing industry predomi-
prioritize profit maximisation to a vision of social and environ-
nantly. Hence, a further review of examples from practice was
mental sustainability. A commitment to sustainability would
conducted to identify banking-specific examples as described in
requirefinancialinstitutionstofullyintegratetheconsiderationof
section3.
ecologicallimits,socialequityandeconomicjusticeintocorporate
strategiesandcorebusinessareas(includingcredit,investing,un-
2.4. Customerperceptionandloyaltytowardsbanks'sustainable
derwriting, advising), to put sustainability objective on an equal
businessmodels
footing to maximisation of shareholder value and client satisfac-
tion, and to actively strive to finance transactions that promote
Thepreferencesofcustomersforanybusinessareimportantto
sustainability.”(Declaration,2003)
change its strategy to pursuing sustainable business models.
However, companies appear to realise that they can create win-
Thoughthedirectenvironmentalimpactofbankingoperations win,orevenwin-win-winsituations,wherecustomers,suppliers
maybelow,theindirectimpactsarevast.Thereisanopportunityto andthefocalcompanybenefitwhenpursuingsustainableoptions
usethepowerofbankstoaddressthepressingneedsfromsociety (BockenandAllwood,2012).AGMA/DeloitteGreenShopperStudy
throughsustainablebusinessmodelinnovationforbanking. for example shows that “green” consumers shop more often and
spendmorewhentheydo(Fay,2012).Thisisconsistentwiththe
2.3. Focusonsustainablebusinessmodelarchetypes general perception that the “Green Movement” is getting mo-
mentum,whichisreflectedinthegrowthofbusiness.Hence,itis
Fewcomprehensiveframeworkshavebeendevelopedforsus- importanttounderstandwhicharchetype(s)is/arewellreceivedby
tainablebusinessmodels,exceptperhapsingrey(i.e.,notacademic customersbecausethiscontributestotheeconomicfactorthatcan
peerreviewed) literature (SustainAbility Ltd, 2014)andacademic motivatebusinessestopracticesustainability.
literaturefocusingonProductServiceSystemsasonetypespecif- Mostcustomersalreadyhaveclosebusinessrelationshipswith
ically(Tukker,2004).Besidesbroadanddispersedacademicliter- their banks, as competition has become increasingly fierce, and
ature on sustainability covering themes from eco-innovation customer loyalty has become a priority concern for banking in-
(Carillo-Hermosilla et al., 2010) to Fairtrade (Reinecke, 2010), stitutions (Ferreira et al., 2015). Høgevold and Svensson (2012)
severalinnovationsforsustainabilityareemergingatarapidpace comment that business sustainability becomes a real customer
inpractice,suchasthemovetobenefitcorporations(bcorporation. concern and when a sustainable business gets respect from cus-
net)tosustainsocialandenvironmentalgoalsaspartofaprofit- tomers, the corporate image is raised. Previous research has also
makingbusiness,andthedrivetodomore‘netgood’thanbadas shownthatattitudestowardabrandsignificantlyimpactthecus-
partofabusiness(net-positive.org). tomers' intention to buy the brand (Brown and Stayman, 1992;
ThearchetypesinBockenetal.(2014)wereselectedasastarting Homer,1990).ErdemandSwait(2004)findthatasthecredibility
pointasacomprehensiveframeworkbringingtogetherinnovations ofabrand increases,there isagreaterchanceofaspecificbrand
from research and practice. These include eight sustainable beingincludedinacustomer'spurchasingchoiceset.Thelinkbe-
tweenthearchetypesadoptedbybanksandcustomertractionhas
practical implications for businesses wanting to achieve growth
Table1 and sustainability simultaneously. From the bank's perspective,
Originallistofsustainablebusinessmodelarchetypes(Bockenetal.,2014).
highercustomerloyaltycanleadtoastrongercompetitiveposition
Technological Maximizematerialandenergyefficiency resultinginlargermarketshareandprofitability(Bayraktaretal.,
Createvaluefromwaste 2012). This research will also investigate which archetype(s)
Substitutewithrenewablesandnaturalprocess
wouldreceivethebestcustomertraction.
Social Deliverfunctionalityratherthanownership
Adoptastewardshiprole Specifically, banks in Hong Kong started their sustainability
Encouragesufficiency agendassomeyearsago,and,tocertainextent,areabletoachieve
Organisational Repurposeforsociety/environment thegoaloftriplebottomline.Forinstance,BankofEastAsia,the
Developscaleupsolutions
largestlocalHongKongpeople-ownedbank,savedaroundHKD5
A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169 153
million(aboutUSD640,000)peryearwhentheyencouragedcus- 2. The current sustainable banking practices were categorized
tomerstoacceptdigitalinsteadofpaperstatements(SCMP,2016). againsttheoriginalsustainablebusinessmodelarchetypes.The
Cost was mainly saved through reducing paper and mailing ex- qualifiedexampleswerechosenbyusingtheselectioncriteria,
penses. Hang Seng Bank, a major bank in Hong Kong and a sub- i.e. innovations that generate environmental and/or social
sidiary of HSBC reduced 65.5 million sheets of paper and 6% in benefitsinbusinessoperations.Someobservedexampleswere
greenhouse gas emissions by using e-Statements, e-Advice and relatively radical for the banking industry as a whole. For
shareholders e-communication services (Hang Seng Bank, example,TriodosBankisonlydoingbusinesswithsustainable
CorporateSustainability Report, 2016). Hang Seng Bank has been companies.Furthermore,avoidingover-sellingasanexampleof
implementingsustainability for years in Hong Kong, which has a “Encourage sufficiency” would go against conventional sales
positiveimpacttoitscorporateimage.Itreceivedawards,e.g.,The practices and banking practices. Some are incremental and
Reader's Digest Trusted Brands Awards 2016 and Hong Kong create clear immediate win-win situations, such as reducing
Leaders' Choice Brand Awards 2016 and it was the most recom- paper usage, which would also cut cost, as an example of
mended bank by customers in an annual Banking Study for 12 “maximizematerialandenergyefficiency”.Allexampleswere
consecutive years since 2004 (Hang Seng Bank, Corporate evaluatedagainstwhethertheycouldfittheoriginalarchetypes
Sustainability Report, 2016). These examples demonstrate how orwhetheranewarchetypeisneededtoaccommodatethem.
specificbanksinHongKongcanbenefitfromsustainablebusiness Basedonthis,arevisedsetofarchetypesisdevelopedbypartly
modelinnovation. usingormodifyingtheoriginalarchetypesandpartlybysetting
upnewarchetypes.Thearchetypesshouldrepresentunderlying
3. Methods mechanisms of transformation in business model innovation;
they should be clear and intuitive, mutually exclusive and
Thisresearchinvestigatesthefollowing:1.Thecategorizationof explanatory,butnotoverlyprescriptive(Bockenetal.,2014).
the sustainable business model archetypes for banks and 2. 3. The last step was to conduct semi-structured interviews (in
Customer traction in relation to these new ‘financial archetypes’. person or telephone) with 15 bankers in Hong Kong from
Greyliteraturereviewandexamplesfrompracticewerecollected differentbanksanddifferentfunctions(Table2)byconvenience
todevelopaninitialnewsetofsustainablebusinessmodelarche- sampling.Thereasonforchoosingbankingpractitionersasin-
typesforbanking.Tothisend,thesustainablebusinessmodelar- terviewees is that the sustainable business models are mainly
chetypes by Bocken et al. (2014) were checked for comparison. practicedrivenandlittleacademicresearchwasavailable,soit
Second, semi-structured were used to check this initial set and was moreappropriateand relevant togetinsights from those
makeimprovementsandadditionswherenecessary.Thisledtoa workinginbankingindustry.Theywereinvitedtocommenton
revisedsetusedforthesurveyoncustomertraction.Astructured andvalidatetherevisedsetofarchetypes.Thepurposewasto,
questionnaire surveywas conducted totestcustomer traction on onbesteffortbasis,findoutthemostup-to-datemarketprac-
eacharchetype, based on thenewsetof archetypes found in the tice,ifany,untilsaturation,i.e.nonewthemeemerges.Inthe
firstpartofthestudy.Fig.1showstheoverallmethodologyofthis interviews,datasaturationwasreachedatthe7thinterviewee,
researchandfurtherdetailisgivennext. because similar responses were received. However, multiple
interviewshadbeenplannedtoincludedifferentperspectives.
3.1. Researchmethodtodevelopsustainablebusinessmodel Assuch,the15invitedintervieweesweredeemedsufficient.
archetypesforbanks
Someinterviewswereconductedinpersoniftheinterviewees
The first part of the research method was qualitative. The wereavailable;ifnotthesewereconductedbyphone.Eachinter-
following question was investigated: Which sustainable business view lasted 40e60 min, starting with the objectives of this
model archetype(s) could benefit the sustainability of the banking research, followed byexplaining the concept of sustainable busi-
industry?Toinvestigatethis,amethodsimilartotheoriginalonein nessmodelsinbankingandelaboratingonthemeaningofeachof
Bocken et al. (2014) was adopted (upper partof Fig.1). Selection thearchetypes.Sincetheconceptofsustainablebusinessmodelsin
criteriaaresetforchoosingtheinnovativeexamples:Innovations bankingwasnewtomostinterviewees,eachofthearchetypeswas
thathavethepotentialto,oractuallychangethevalueproposition explainedindetailaccordingtothenewdefinitionsdevelopedin
totheenvironmentorsociety,eitherbycreatingnewvalue,orby thispaper(seeAppendixBforfulldefinitions).Notesweretaken
significantly reducing negative impacts on the environment or duringtheinterviewsbutnorecordingwasmadeinordertonot
society.TheupperpartofFig.1summarisestheprocessofdevel- createabarrierbetweentheinterviewerandintervieweeandallow
opingsustainablebusinessmodelarchetypesforbanks. them totalk freely. Transcribed interviews were shared with the
Thestepsforansweringresearchquestion1aresummarisedas interviewees within 2e3 days after the interview to verify
follows: completeness and correct interpretation. Verification was done
throughafollow-upphonecall.
1. Real-lifeexamplesandpracticeswerecollectedandreviewedby
reading predominantlygreyliterature (i.e., not subject to aca- 3.2. Researchmethodtoassesscustomertraction
demicpeer-reviewed),suchasbanks'sustainabilityreports,the
sustainabilitysectionintheirwebsitesandtradejournals(e.g. Thesecondpartoftheresearchmethodwasquantitative.The
Chartered Banker, Banking Today, The Banker), where such ex- followingquestionswereinvestigated:Whicharchetype(s)would
amplesappear.37banks'sustainabilityreportswereselectedfor receive the best customer traction? Which archetype(s) would
review from the banking industry leader table in RobecoSAM enhancecustomers'loyaltyandpurchaseintention?
Sustainability Yearbook 2015 (Appendix A). These 37 banks Toinvestigatethisandmakethetopicresearchablewithinthe
were selected from 2800 companies based on their Corporate limitsoftimeandresources,HongKongretailbankingcustomers
Sustainability Assessment. In addition, some emerging entre- wereselectedforasurvey.Retailbankingcustomers(i.e.,personal
preneurial forms of sustainable banking which were not banking)wereselected,becausetheywouldprovidea‘non-expert’
included in the Yearbook were also examined, for example, consumer perspective on the banking industry. A practical
TriodosBank,ASNBank,andGrameenBank(Yunusetal.,2010). consideration was that retail banking customers are more
154 A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169
Original Sustainable Business Model archetypes
Compare, contrast & modify
Real-life qualified examples collected from practice and
review of (grey) literature
Revised set
Semi-structured interviews with bankers on the revised set of
sustainable business models for banks
Comment & validate until maturity
validation
Sustainable Business Model Archetypes for Banks
-------------------------------------------------------------------------------------------------------
Structured questionnaire survey by customers
Perception of customer traction on the Archetypes
Fig.1. Overallmethodologyofthedevelopmentofthesustainablebusinessmodelarchetypesforbanksandtheassessmentoftheirimpactoncustomertraction.
Table2
Detailsofthe15bankersselectedforsemi-structuredinterviews.
BankName Department JobTitle Lengthandtypeofinterview
HSBC Sustainability Manager About50minonthephone
StandardChartered PrivateBanking SeniorRelationshipManager About45minin-personinterview
Llodys Sustainability Manager About1honthephone
BankofChina,HongKong CorporateBanking OperationalSupport About40minin-personinterview
OCBCWingHang CorporateBanking RelationshipManager About40minin-personinterview
DZ RiskManagement VicePresident About45minin-personinterview
ChinaCiticBankInternational RetailBanking BranchManager About45minin-personinterview
DeutscheBank Anti-fraud VicePresident About45minin-personinterview
BankofTokyo-MitsubishiUFJ Operations Head About40minonthephone
Citibank SpecialAssets SeniorVicePresident About40minonthephone
ANZ PrivateBanking SeniorRelationshipManager About35minonthephone
UBS PrivateBanking Director About40minonthephone
CreditAgricole ProjectFinance SeniorVicePresident About1hin-personinterview
BankofEastAsia Securities&Futures GeneralManager About1hin-personinterview
Rabobank CorporateBanking SeniorRelationshipManager About40minin-personinterview
accessibleforcollectingdatathancorporatebankingcustomers.In Q2 AssumeyourmainbankadoptsthisArchetype,howdoes
addition, a greater number of respondents from retail banking it impact your preference for this bank when you have
customerscouldbeattainedforbetterstatisticalsignificance. additionalbankingserviceneeds?(5-pointscale)
A structured survey was adopted because of speed and
simplicity.Toincreaseresponserates,thesurveywasdesignedto The required Likert scales used in these two questions were
takelessthan10mintocomplete.Theonlinesurveyconsistingtwo createdforthisresearchforsimplicityandeaseofansweringwhen
questions for each archetype aims to find out the customers' considering a multitude of future options from a customer
preferenceforthearchetypesandtheirimpactontheirpurchase perspective.Questionswerethusdevelopedbasedonsimplelan-
intention. The two questions in the survey questionnaire (trans- guage, which are unambiguous and easily understandable
latedtoEnglish)areasfollows: (Meadows,2003)intheHongKongcontext.Questionswerepilot-
testedwithtwonativespeakers.Q1focusedonattitudesandQ2on
Q1 Assumethatabankadopts(ArchetypeX),howattractive purchaseintentions,whicharenotalwaysthesameforcustomers
doesitsoundtoyou?(7-pointscale) (Ajzen,1991).Havingapositiveattitudedoesnotnecessarilyinduce
A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169 155
purchaseintention,andpurchaseintentiondoesnotresultinactual archetypes was developed for further comment and validation
purchase. A7-point Likertscalewasusedfor Q1becauseit gives (Table4).Anexampleofcodingofexamplestodeveloptherevised
peoplemorechoicestogivenuanceabouttheirattitudestowards setcanbefoundinAppendixD.
thedifferentarchetypes.Attractivenesswasusedasubjectiveterm During the interviews, all interviewees agreed that the arche-
to understand the positive attitudes towards a business model typesandexamplesgeneratedfromthegreyliteraturecouldhave
innovation. In contrast, Q2 focused on “purchase intention”. The triplebottomlinebenefits,intheshortorlongterm.Itisnoticeable
less dispersed 5-point scale was used for purchase intention, thatnonewarchetypewasproposedbytheinterviewees;noteven
because it was considered sufficient to describe a more action- by the two interviewees who are specialists in sustainability de-
oriented intention, requiring fewer nuances. “Repatronage in- partments. A few of the original archetypes (Bocken et al., 2014)
tentions”(i.e.purchaseintention)wasselectedformeasuringloy- werefoundtobelessapplicable.Othersneededmodification.
alty because it directly links to profitability (So€derlund, 2006; Thefollowingwerefoundtobelessapplicable:
Bayraktar et al., 2012). The rationale of the design was based on
consumer research practice on closed-end questions. The scales (cid:1) “Createvaluefromwaste”-becausenosignificantamountsof
werepresentedinChinesetoovercomelanguagebarriers.Similar wasteareproducedintheprocessofdeliveringbankingservice,
to the questions, the scales were also validated by two native especially when the consumption of paper is cut down by
speakerstoensuretheywereappropriatetoexpresstheiropinions. digitalization.Unlikethemanufacturingindustrywherewaste
Questions 1 and 2 were repeated for each of the eight arche- streams may be significant and are easily observable and
types (i.e.16 questions, 8 pairs). In order to lower the sequential traceable. In the banking industry, paper waste may be the
biasinquestioning,these8pairswereshowntotherespondentson majorone,butitwasnotperceivedtobesufficientlysignificant
arandombasis.Themeaningandexampleswereprovidedforeach andacorepartofthebusinesstomakecommercialvalueoutof
archetypebeforeaskingthesetwoquestions. themthroughbusinessmodelinnovation.
The survey questionnaire (Appendix C) was sent via email to “Deliverfunctionalityratherthanownership”-nophys-
retail banking customers in Hong Kong. This online survey was icalproductsaresoldbybanks;henceownershipofphysical
opentothegeneralpublicaged18to64inHongKong.Atotalof products is not relevant. In addition, shared usage is com-
1586peoplewererandomlyselectedandinvitedforthesurvey,and plex, because the banking service is personal and
300responseswerereceived(responserate19%).Table3includes confidential.
the demographics of the respondents. The gender and age per-
centages werecalculatedfromthe Hong Kong population figures Thefollowingneededmodification:
accordingtoHongKongCensus2014.Thesamplewasselectedto
represent the Hong Kong population actively using banking (cid:1) “Substitute with renewables and natural process” needs
services. modification to reflect the nature of service. Since one of the
distinctive characteristics of the service industry is “insepara-
3.2.1. SignificanceoftheresultperarchetypeinQ1andQ2 bility”(Kotler,1991),whereservicedeliverycombinesthepro-
Z-testswereconductedtofindoutwhethereachofthearche- cessandthecustomers,whiletheprocessofproductionandthe
typesisattractivetothecustomer(Q1)andwhetheritwouldaffect customers are separable in manufacturing. Therefore “Substi-
theirpreferenceforabank(Q2)(95%confidencelevel). tute with digital processes” is used to emphasize the linkage
between the process and the customers in delivering value.
3.2.2. Significanceofcross-comparisonofeacharchetypeinQ1and Digital processes would replace traditional paper-intensive
Q2 bankingservices.
Secondly,across-archetypecomparisonwasconductedbyusing (cid:1) “Developscaleupsolutions”
one-way repeated ANOVA to find out ‘favourite archetype(s)’ for
theretailbankingcustomers(Q1)andthemostinfluentialarche- Scalingupisimportantandcanbeachievedbyprovidingsus-
type(s) for their loyalty (Q2). Mauchly's test was conducted to tainable financial products in the banking industry. The name of
validate the repeated ANOVA by testing whether the data have thisarchetypewaschangedto“Sustainablefinancialproducts”to
violatedtheassumptionofsphericity,i.e.whetherthevariancesof reflect this. An example of this is sustainable investment funds,
the differences between conditions were equal. For the scores, which allow customers to participate and widen the funding
whichwereclosetoeachother,theTukeytestwasusedasapost source.Crowdfundingcouldfitinhereasagrowingandsustainable
hoctesttocomparethemultiplearchetypestofindoutthemost scale-up model for financing. However, from this research it
preferredone(s). emergesthatcurrentlybanksarenotreadytodothisyet,although
theycouldhaveimportantintermediaryroles.
4. Results In the following section, each of the eight archetypes is dis-
cussed in detail in light of the grey literature and the semi-
4.1. Resultsforsustainablebusinessmodelarchetypesforbanks structured interviews with the bankers. The value-based analysis
ofeacharchetypeisincludedinTable5.
Afterreviewingthegreyliteratureandtheiterativeprocesswith Archetype 1: Maximize material and energy efficiency
theselectedbankers(semi-structuredinterviews)arevisedsetof (Technological)
Definition: Do more with fewer resources, generating less
waste,emissionsandpollution(Bockenetal.,2014)
Table3 Driver: This model centres on optimising resources use and
Sampledemographics.Note.Thenumberinbracketsreferstothetotalnumberof
targets for zero waste as a driver for sustainable business model
responsesineachcategory.
innovation.
Age Male Female Examplesofsupportinginnovations:digitalizationofinternal
18e29 10%(30) 11%(33) documents, electronic writing pads for transactions, e-learning,
30e44 14%(42) 20%(60) tele-conferencinganddouble-sidedprinting.
45e64 21%(63) 24%(72)
Whywasitselectedasanarchetype?
156 A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169
Table4 environmental and social aspects, this can be viewed as a sus-
Thesustainablebusinessmodelarchetypesforbanks. tainable business model having dual objectives: saving costs and
Technological 1. Maximizematerialandenergyefficiency promotingsustainability.Itdiffersfromarchetype1,whichfocuses
2. Substitutewithdigitalprocesses(modified) ontheinternaloperationprocessofbanks,asthisarchetypeapplies
Social 3. Encouragesufficiency tothemodeofservicedelivery.
4. Adoptastewardshiprole This archetype is particularly beneficial to the transactional
5. Inclusivevaluecreation(new)
Organisational 6. Repurposeforsociety/environment bankingbusiness,whichisadeal-basedbusinessthatbanksofferto
7. Resilienceinloangranting(new) support theirclients financially in reciprocal exchanges of goods,
8. Sustainablefinancialproducts(new) cash or securities. For example, the securities department deals
Note.IncludesreviseditemscomparedtothearchetypesonBockenetal.(2014)as withmanytradingtransactionseverydayanddailystatementsare
highlightedinbold. sent to customers. One interviewed banker estimated that e-
statement practice saves around 5% of total operating costs by
reducingcostofpostage,paper,andlaborforexample.Ontheother
Although banks are considered to have a relatively low envi-
hand, the ease of transacting encourages customers to purchase
ronmentalimpactperproductunit,considerablevolumesmakethe
morefrequentlythroughdigitalbanking.Digitalbankingcouldbea
totalsignificant(Jeucken,2004).Inthebankingsector,paperusage
good alternative forbanks inlessdevelopedcountriestoprovide
isimpactfultotheenvironment,whichismainlyduetothelarge
banking services to the poor because it overcomes the under-
consumption of paper used in various document files, e.g. credit
developed infrastructure and the cost of travelling. Last but not
files, customer information, etc. In addition, banking operation
least, this archetype is different from mainstream banking as it
occupies office space and it leads to the consumption of water,
intendstocreateatotallydigitalizedtransactionplatformforcus-
energyandcoolingagentforcomputerservers.Thisarchetypeaims tomers and ultimately replaces branch network by ‘fintech’
toreduceextractionofnaturalresourcesandthisinturnleadsto (financialtechnology).
lesslandfillandcarbondioxideemission.Throughstreamliningthe Archetype3:Encouragesufficiency(Social)
internal process by digitalization, office space can be reduced. In Definition:Solutionsthatactivelyseektoreduceutilisationof
thesemi-structuredinterviews,manybankerssaidthatitisamust
bankingproductsorservice.
do, and some even think that this archetype is very effective in
Driver: This model focuses on solutions that actively seek to
environmental protection because it is visible in their daily
reduceconsumptionandavoidover-provisionofservicesinorder
workplaces.
toreducereputationalriskandincreasecustomerloyalty.
Thisarchetypeisdistinctfrommereprocessinnovation,which
Examplesofsupportinginnovations:Incentivisingsalesstaff
justreducespaperconsumptioninaparticularoperation.Itshould byneed-basedselling,adopting“compliance”asakeyperformance
runthroughtheentirebankandfinallyenhancethevaluepropo-
indicatorforsalesstaff'sappraisal,promotingsensibleborrowing,
sition, e.g. a zero-paper operation as a bank-wide policy, which matching suitable products against customer's risk profile, and
leads to significant cost saving. Sustainability adds the value of raisingthefixedsalaryportionwhileloweringthesalescommis-
promotingabank-widereformratherthanapiece-mealsavingin
sionportion(HSBCHongKongBranch).
someparticularaspects.Thereboundeffect(Herringetal.,2009)is
Whywasitselectedasanarchetype?
notsorelevantbecausethisarchetypeismorerelatedtointernal
Oversellingloansandinvestmentproductscouldbedisastrous
processofbanks.However,socialsustainabilityissues,e.g.unem-
to banks because it sometimes involves mis-selling. The costs
ployment, due to enhanced productivity, could be a problem includeheavyfinancialpenaltiesimposedbyregulatorybodiesand
(Ashfordetal.,2012).Therefore,othersustainablebusinessmodel
detrimentalimpactonabank'simage(brand)andcustomerrela-
archetypesconcerningsociety,suchas“Adoptastewardshiprole”,
tionship.Oversellingofinvestmentproductscouldbecomeasocial
mightbeacomplementarysolution.
problem if it involves mis-selling that makes lots of customers
Archetype 2: Substitute with digital processes sufferfromfinanciallossduringthedownturnofeconomiccycle.
(Technological) Currently,especiallyafterthefinancialcrisisin2008,buildingtrust
Definition: Reduce environmental impacts and increase busi- seems to be the objectiveof mostbanks, encouraging sufficiency
nessresiliencebyusingdigitalchannelstodeliverservices.
via need-based selling helps banks to rebuild the image. This
Driver:Thismodelfocusesontheservicedeliveryinnovationby
archetypespansacrossvariousbusinesssegmentsandbecomesa
usingelectronicmeanstominimizephysicalcontactsandhenceto
newsalescultureand,moreaccurately,arightwaytodobusiness.
reduceenvironmentalimpactsandincreasebusinessresilience.
More and more banks are changing the reward system from
Examples of supporting innovations: Internet trading plat-
volume-based to a need-based method. All interviewed private
forms, digital branches, e-statements, robo-advisor (the “Merrill
bankerssaidthatthecustomers'neediscentralratherthanpush-
EdgeGuidedInvesting”launchedbyBankofAmerica),andmobile
ing particular products. Key Performance Indicators (KPIs)
payment.
including measurement of customers' need and satisfaction are
Whywasitselectedasanarchetype?
used.Moreandmorebanksarechangingtheremunerationpack-
Bankingisaserviceindustryanditsproductsareintangible.The age of sales staff that fixed salary portion is enlarged while the
deliveryprocessisinseparablewithpeople, andpaperisamajor
variable portion is lowered. However, one banker raised the
medium for the communication in daily banking transactions.
concernofthedropofbusinessafterthenewrewardsystemwas
Utilisingdigitalbankingwillresultinreductioninpaperusageand
implemented.
face-to-face contact between staff members and customers. This
Archetype4:Adoptastewardshiprole(Social)
also reduces operating space, which can further reduce carbon Definition:Proactivelyengagingwithallstakeholderstoensure
emissionsandcosts.Digitalizationisabusinessmodelinnovation
theirlong-termhealthandwell-being(Bockenetal.,2014).
in banking because it changes the traditional ‘brick-and-mortar’
Driver: This model centres around giving positive impact on
mode of contact. Simultaneously, while digitalization becomes a
environmentandsocietyforincreasingbrandequitythatleadstoa
bank-wide policy, which may have a very positive impact on longertermmutualbenefitstoboththebanksandthecustomers.
A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169 157
Table5
Valueanalysisoftheeightfinancialsustainablebusinessmodelarchetypes.
Archetype Valueproposition Valuecreation& Valuecapture Differencefrom
delivery mainstreambanking
businessmodel
1.Maximizematerial Servicesthatusefewer Focusisontheinternal Costsarereducedthrough Banksintendto
andenergyefficiency resources,generating operationalprocess increasedoperationalefficiency implementabank-
lesswasteand innovation. leadingtoincreasedprofits. widestrategyto
emissionsthanthe maximizematerialand
servicesthatdeliver energyefficiency
similarfunctionality. insteadofapiece-meal
approach.
2.Substitutewith Reduceenvironmental Innovationinservice Revenueisenhancedby Bankskeepinnovating
digitalprocesses impactsandincrease deliverydesign(e.g. providingcustomersmore withdigitalprocesses
businessresiliencein deliverychannels) convenience,whichmayresult forcustomercontact
termsofspeed, enhancesthespeed, inmorefrequenttransactions. withatargetto
convenience,costand convenience,costand Costsavingisachievedby minimizeoreliminate
accuracybyusing accuracyofservice reducingmanpowerand traditionalbranch
electronicmeansin deliverytocustomers. relatedexpenses. networkbyfintech.
servicedeliveryprocess
3.Encourage Solutionsthatseekto Thismayinvolve Customersatisfactionand Banksgiveupthe
sufficiency reducedemand(which changingthefrontline loyaltymayincreasedthatmay approachof“selling
wasgenerallyinflated salesstaff's leadtomorebusiness. more”byreplacingit
before)bycorrect remunerationtoa Complianceriskisloweredand withpremierservices/
assessmentofcustomer higherportionoffixed reducesthechanceofpenalties productstomatchthe
needsandreducing salary,promotingneed- byregulators.Societalbenefitis exactneedsof
mis-sellingoffinancial basedsellingbycorrect captured:customersgetwhat customers.
productsandmoral matchingofproducts theyreallyneedintheright
hazardinlending.The andadvocatingsensible quantityandquality.
focusisonthecustomer borrowing.
relationshipandreward
system.
4.Adoptastewardship Provisionofservices Ensuringactivitiesand Stewardshipstrategiescan Inadditiontothe
role intendedtogenuinely partnersarefocusedon generatebrandvalue,potential traditionalCSR
andproactivelyengage deliveringstakeholders' costsavingsandsecurefuture activities,bankstendto
withstakeholdersto well-being.Thevalue business.Stakeholders'well- adoptasharedvalue
ensuretheirlong-term chainisensuredto beinggenerateslong-term approachtoleverage
well-being.Broader deliverenvironmental businessbenefits.Forexample, andbenefittheircore
benefitstostakeholders orsocialbenefits. healthyandhappystaffmay business,e.g.re-employ
oftenbecomean claimlesssickdaysandbemore theirretiredstaffon
importantaspectofthe productive. part-timebasis.
valuespropositionby
engagingcustomers
better.
5.Inclusivevalue Inclusivevalueis Processinnovationisthe Increaseofmarketshare.More Bankshelpthemselves
creation createdthrough keytoreducetherisks businessopportunitiesmaybe byhelpingthe
productandservice associated,forexample, securedbycustomerloyalty disadvantagedwho
innovationsthatserve usingcreditscoringand whencustomersbecomemore maybecometheirloyal
previouslyun-served portfoliomanagement profitableinthefuture.Societal customersinthelong
marketsorhigh-risk methodstomanagethe benefitisalsocaptured. run.Moreover,itmeans
customers. risksinSMElending. morebusinessinshort
runiftherisk
manageable.
6.Repurposefor Creatingsocietal Banksareusing Onlyprovidebankingservices Bankssegmentits
society/environment benefitsand sustainabilityasa tosustainablecompaniesand businessmore
environmentalbenefits criterionforselecting thedisadvantaged,including accuratelyon
throughspecializingin customers;beingan “positivescreening”against sustainablebusinesses
providingbanking expertinproviding socialandenvironmental only,notjustusingthe
servicesthatmatchthe bankingservicestothis benchmarks. currentnegative
needsofthecustomers. particularsegmentand screeningapproach.
achievingeconomiesof
scale.
7.Resilienceinloan Useloanapproval Asthesustainability Lendingtocustomerswithno/ Banksuseamore
granting processinnovationwith riskislowered,thecost minorsustainabilityrisk.This comprehensivesystem
sustainabilitycriteriato ofcapitalandthe candirectlyreducefinancial toscreenout
screenout potentialbaddebt resourcestocompanieswith unsustainable
unsustainablebusiness couldbereduced. adversesustainabilityimpacts. borrowersinevery
(i.e.negative aspectincluding
screening). commercialand
personalcustomers.
8.Sustainablefinancial Asset-sideandliability- Productinnovation Productinnovationenables Banksfocusonthenew
products sideproductsare opensupnewmarkets participationinsustainability, marketdemandon
createdforsavers/ insustainablefinance whichmayprovideaplatform sustainablebusinesses
investorsand andsupports forbothsaversandborrowers byprovidingcustomers
borrowersrespectively sustainable topursuefinancialreturnin withnewfinancial
development. sustainablebusiness. platforms.
158 A.W.H.Yip,N.M.P.Bocken/JournalofCleanerProduction174(2018)150e169
Examplesofsupportinginnovations:internshipopportunities benefitsratherthaneconomicprofitmaximisation,throughclose
for students, supporting social enterprises, re-employing retired integration between the firm and local communities and other
staff on contract basis, employ physically disabled persons, and stakeholdergroups(Bockenetal.,2014).
encouragingstafftodovolunteerworkbygivingpaidleave. Driver:Thismodelcentresonprioritisingdeliveryofsocialand
Whywasitselectedasanarchetype? environmentalbenefitsthatcouldbeanewmarketwithlowerrisk.
Thebrandandcredibilityofbanksarecrucialtotheindustryas Examplesofsupportinginnovations:TriodosBank,ASNBank
bankingisanindustryofconfidence.Banksareactivelyseekingto and Grameen Bank are applying this archetype with a specific
contribute to the wellbeing of their value networks. Hence, this sustainabilitymission.Aruralbankasawholly-ownedsubsidiary
archetype contributes partially towards the systemic objective to of a major bank to support farmers (e.g., Rural Bank Limited, a
create a flourishing society and planet. The positive societal and wholly owned subsidiary of Bendigo and Adelaide Bank Ltd.) is
environmental impacts are helpful for a “license” to operate anotherexample.
becausebankingisahighlyregulatedbusiness. Whywasitselectedasanarchetype?
Intheinterviews,itwasfoundthat“adoptastewardshiprole”is Thisisadistinctsustainablebusinessmodelarchetypeasitisa
themostcommonandtraditionalCSRactivity,andatrendisseen shift of the focus of traditional business from maximising share-
thatmoreandmorebankstendtousethisarchetypenotonlyfor holder value to social/environmental value. Banks adopting this
branding purpose, but also for enhancing staff morale and team archetype only do business with the customers having positive
spirit.Theultimategoalistoimplanttheconceptof“doingwelland impact to the environment or society. This archetype adopts a
doing good” in employees' mindset that makes the bank a good positivescreeningforprovidingbankingservicesonlytosustain-
corporatecitizen.Thisisdistinctfromjustusingcharityworksasa able companies which benefit society/environment. On a system
window-dressing for sustainability reports. This archetype may level,itchangesthefundamentalpurposeofbusinessestodeliver
benefit from a combination with other archetypes, for instance, environmental and societal benefits. However, the traditional
“inclusivevaluecreation”. bankshardlyadoptthisarchetypeinfull.Onebankercommented
Archetype5:Inclusivevaluecreation(Social) thatthismodelistooriskyandmayneedlongtimetoseethere-
Definition:Provideand/orimproveaccesstofinancialproducts sults.Therefore,a“hybridmodel”ismorecommonandviablethat
andservicesformeetingdiverseneeds. traditional banking model and “repurpose for society/environ-
Driver: This model focuses on social concern by providing ment”modelco-exist.Forexample,HSBCRuralBankisawholly-
innovative banking products and services to the underserved, owned subsidiary of HSBC; it focuses on aiming at helping
vulnerableortraditionallyless/non-bankablecustomers. farmersthroughtailoredmadebankingservices.Ahybridmodelis
Examples of supporting innovations: supporting first-time more appropriate for banks to start off because the traditional
homebuyers,reducingfeesforNGOs,restructuringloansforcus- business model can subsidize the newone at least in earlystage
tomersfacingfinancialdifficulty,grantingunsecuredloanstoSMEs, until the “repurpose for society/environment” model becomes
and being more inclusive to LGBT (Lesbian, Gay, Bisexual and financiallyindependent.
Transgender)(e.g.,HSBC's“PRIDE”support),andbankingservices Archetype7:Resilienceinloangranting(Organisational)
forunderservedmarkets(e.g.M-Pesabranchlessbankingservice; Definition:Lendingcriteriathatseektoscreenoutborrowers
seeBatchelor,2012).DBSBanklaunchedaSocialEnterpriseSpecial withnegativeimpacttoenvironmentand/orsociety.
Package offering social enterprises preferential rates on business Driver: This model focuses on risk management that a bank-
loans and unsecured overdrafts, and fee waivers for certain wide loan approval criteria toborrowers with no/minor negative
services. impacttoenvironmentand/orsociety.
Whywasitselectedasanarchetype? Examples of supporting innovations: application of the
This archetype promotes banks to rethink its core business Equator Principles for project financing, environment and social
strategytobemoreinclusivewhenitcomestolendingtotheless assessmentguidelineforlending,settingupanindependentsus-
bankable customers. The risk could be reduced by innovative tainabilityriskcommitteeforcreditapproval,andOECDcountries
business processes. For instance, unsecured lending to small and adopting the “Sustainable Lending Practices in the Provision of
mediumsizedenterprises(SME)ispossiblebyusingcreditscore- OfficialExportCreditstoLowIncomeCountries”(OECD,2008).
cards and portfolio management, and the excessiverisk is finally Whywasitselectedasanarchetype?
offsetbycharginghigherinterestmarginpaidbyalargenumberof AccordingtoJeucken (2010),environmentalrisksmayinclude
SMEs.Anotherprominentexampleistosupportsocialinnovation; 1)Thefinancialrisksassociatedwiththeclient'scontinuityprob-
inadditiontogivingloanstosocialenterprises,banksalsoprovide lems caused by environmental legislation or changing market
businessknow-howtosocialentrepreneursthatlowerstheriskof conditions;2)directliabilityforenvironmentaldamagemadebyits
lending.Onebankersaidthatthisarchetypeisaperfectblendwith borrowing clients; and 3) reputation risk and negative publicity
the archetype “Adopt a stewardship role” because it serves two fromenvironmentalissues.Fromariskmanagementpointofview,
purposes, helping the needy in society and tapping into new this archetype safeguards banks from the direct impact onprofit
markets,whichmayleadtoshorter-termfinancialreturn.Thelong- and loss accounts bylowering cost of capital and reducing repu-
termsuccessofthisarchetypemayrelyontheexpansiontonew tationalrisk.Theindirectimpactisonthecreditside,inwhicha
marketsthroughinclusion,anditisforeseenthatmoreandmore stringent pre-lending assessment lowers the environmental and
bankswillfollowiftheriskiseffectivelycontainedwithreasonable socialrisksfacedbytheborrowers.Mostinternationalbankshave
profit.Thisarchetypeisdifferentfrom“adoptastewardshiprole”, generalassessmentguidelineswithspecificindustrypolicies.They
as “inclusive value creation” predominantly targets potential or also have sustainable risk managers, reputational teams, etc. To
existing customers, while “adopt a stewardship role” can benefit participateintheapprovalprocessandmayhaveavetoondecision
anyone. making.
Archetype 6: Repurpose for society/environment Archetype8:Sustainablefinancialproducts(Organisational)
(Organisational) Definition: Scaling up through sustainable financial products,
Definition: Prioritising delivery of social and environmental whichallowmorecustomerstoparticipateintheeconomicreturn