New study maps low-carbon business models for the first time

Companies need to understand how their business models can reduce carbon emissions or sequester carbon to harness such models in their operations and at value chain level. The classification, which includes ten different types of low-carbon business models, addresses this need. 

Tampere University’s study is among the first to comprehensively analyse low-carbon strategies from a business perspective. In addition to benefiting companies, the classification also aids policymakers by guiding business practices and society towards low-carbon production and consumption.

“The classification helps companies in carbon-intensive industries to chart a path towards carbon neutrality. At the same time, it provides legislators with information on what kind of operating environments can encourage companies to utilise the full range of low-carbon business models,” says Doctoral Researcher Mikko Sairanen from Tampere University.

The study by Sairanen and Professor Leena Aarikka-Stenroos was published in the prestigious Industrial Marketing Management journal which focuses on research on the management of industrial and business-to-business markets.

According to the researchers, businesses and policymakers have lacked research-based knowledge on how different business models impact emissions and carbon sequestration. This is because previous research on circular and sustainable business models has not sufficiently considered the specific characteristics of the decarbonisation transition and low-carbon strategies.

Low-carbon business models generate economic value and environmental benefits

The study identifies ten types of low-carbon business models. These include using low-carbon raw materials and energy in production, producing products that reduce carbon emissions during use, and providing decarbonisation technologies to customers.

Aarikka-Stenroos explains that the economic profitability of low-carbon business models often comes from reduced production costs and new revenue streams.

“Our research shows how these business models can support a company’s profitability while also creating value for the customers,” she says. The market for products that promote low-carbon solutions is evolving through regulatory advancements, with positive effects on the demand and pricing of such products. Market development is also influenced by the low-carbon and sustainability strategies of companies and sectors, as well as the need to develop new renewable substitutes to replace fossil raw materials in the future,” Aarikka-Stenroos notes. 

The study highlights strategies that companies can use to reduce atmospheric carbon dioxide levels. The researchers emphasise that the best results are often achieved by combining different business models. 

“For example, in the forestry industry, atmospheric carbon dioxide can be effectively reduced if the carbon dioxide captured from industry emissions is reused in the production of long-lasting products such as concrete-based building materials. This carbon-based circular economy not only reduces the emission intensity of various production processes but also sequesters carbon in durable products and can ultimately reduce the need for fossil carbon,” Sairanen says. 

The study distinguishes business models that reduce carbon in companies’ own operations, in customers’ operations, and across the customers’ value chains more broadly. 

Business models emerging from circular economy and sustainable energy systems can be widely applied

The low-carbon business models and decarbonisation strategies defined by the study can be broadly applied across various industries. 

“Our classification especially benefits sectors that are the most burdensome for the climate, such as energy and process industries, construction, and primary production, but companies operating in consumer markets can also utilise the results,” says Sairanen.

The findings help companies to understand the climate impacts of their current business operations. The study also supports the development of a low-carbon business portfolio.

“This research can help companies to develop clearer value propositions for their customers and design genuinely low-carbon value chains," Aarikka-Stenroos points out. 

Sairanen and Aarikka-Stenroos emphasise the crucial role of the energy transition as well as political and regulatory developments, such as emissions trading and public sector support for low-carbon business. The researchers aim to provide policymakers with a comprehensive overview of low-carbon business models and highlight important policy instruments for each model.

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Doctoral Researcher Mikko Sairanen and Professor Leena Aarikka-Stenroos conducted the integrative review study by analysing nearly 200 scientific articles and high-quality publications from various organisations. 

The research is part of the BioCCU project funded by Business Finland, which concluded in the autumn of 2024 and focused on the capture and utilisation of biogenic carbon dioxide. The article is also part of Mikko Sairanen’s doctoral dissertation research which he is conducting at the Faculty of Management and Business (MAB). Sairanen’s doctoral work has also been supported by the Finnish Foundation for Technology.

The research article

Sairanen, M., & Aarikka-Stenroos, L. (2024). Low-carbon business models: Review and typology. Industrial Marketing Management, 123, 222–250. 

Contact:

Doctoral Researcher Mikko Sairanen, mikko.sairanen [at] tuni.fi (mikko[dot]sairanen[at]tuni[dot]fi), +358 45 773 04515
Professor Leena Aarikka-Stenroos, leena.aarikka-stenroos [at] tuni.fi (leena[dot]aarikka-stenroos[at]tuni[dot]fi)+358 50 301 5476