Wheel of Change: What It Is & Why It's Important

Business leaders who want to create a positive impact often ask the same question: How can one organization make a meaningful difference? Fortunately, sustainable business strategies often have ripple effects across industries, leading to an outcome called the “wheel of change.”

Here's an overview of the wheel of change and how it contributes to industry-wide sustainability.

Sustainable Business Change

Sustainability is an increasingly popular business initiative. While many companies experience the positive effects of sustainable business practices, others invest in environmentally damaging ones.

A report by the Carbon Majors Database shows that 100 companies in the energy sector have been responsible for approximately 71 percent of industrial emissions since 1988.

The good news is that businesses can impact their industries in several ways:

• Discover new business models: Persuade competitors to adopt sustainable business strategies to produce industry-wide ripple effects of positive change.
• Create new sustainable technologies: Reduce costs and persuade competition to switch to newer, greener, more sustainable alternatives.
• Inspire consumers to value sustainability: Change consumer perceptions and prompt them to demand increased sustainability from the products and services they purchase.
• Increase employee compensation: Pay employees more or give them a stake in their companies to persuade competitors to do the same.
• Encourage investors to demand sustainability: Show investors the benefits of sustainable behavior on an organization’s bottom line to encourage them to demand it from companies they invest in.

Related: What Does "Sustainability" Mean in Business?

Companies that take advantage of these practices are often catalysts for positive change. They receive the "first mover advantage" of pioneering developments while improving their reputations and gaining market share. Promoting global sustainability encourages competitors to follow suit, sparking the wheel of change.

What Is the Wheel of Change?

The wheel of change describes the positive, self-sustaining impact one firm can have on its industry. When a company reaps the benefits of sustainability, others are likely to follow suit.

The wheel of change has three sections, each of which affects the others.

1. Shared Value

The first section of the wheel of change involves making the business case for sustainability. Shareholders and business leaders need to recognize it's possible to adopt sustainable practices without sacrificing profits.

The triple bottom line demonstrates this by focusing on a firm's profit and the impact its actions have on people and the planet.

There's a strong business case for sustainability that several companies have capitalized on. The benefits of a sustainable business strategy include:

• Fostering innovation: Sustainability encourages workers to solve environmental problems that don't hurt a company's bottom line.
• Expanding security over energy sources: Companies that use renewable resources have greater control over their energy sources and are often protected from rising costs of finite resources, like coal.
• Increasing workplace attractiveness: Employees are drawn to sustainable businesses. A recent survey by energy company Swytch reports that 70 percent of prospective employees take sustainability into account when deciding to stay with a company long term. Furthermore, 75 percent of millennials would exchange a lower salary for the prospect of working at an environmentally friendly organization.
• Building brand loyalty and attracting new customers: Sustainability isn't just attractive to prospective employees but modern consumers, too. Most sustainable businesses have higher profits than unsustainable ones.
• Decreasing production costs: Renewable resources—or a reduced amount of resources used—can save businesses money by decreasing production costs.
• Improving public perception: Diverging from previous unsustainable practices or industry standards can significantly improve public relations.
• Differentiating from competitors: Sustainability can provide a competitive edge in the market because it's incredibly appealing to consumers.
• Influencing competitors' behavior: When competitors see the benefits of sustainability, they’re more likely to follow suit.

Sustainability’s influence on competitors is largely due to the effect of the wheel of change’s second segment.

2. Industry Cooperation

If the business case for sustainability is compelling enough, competitors follow suit. This increases the speed the wheel of change spins because its positive effect rapidly spreads across an industry.

In the online course Sustainable Business Strategy, Harvard Business School Professor Rebecca Henderson explains this effect.

”Individual firms can be an enormously important catalyst when there's a clear business case for change,” Henderson says, “when a single firm, acting against one of the big problems, can see a clear way to profitability.”

3. Change Consumer and Investor Behavior

The wheel of change’s third section is how it impacts the behavior and expectations of consumers and investors. When these groups realize sustainability’s benefits, they often demand it from all the companies they buy from or invest in.

Sustainable investing pressures firms that don't have sustainable business strategies to adopt them, producing an industry-wide ripple effect that spreads to multiple businesses and spins the wheel of change.

Why Is the Wheel of Change Important?

The wheel of change promotes sustainability in business by demonstrating that one organization can spur sustainable change across an industry.

For instance, the problem of business-related pollution is highly pressing. The United Nations reports that the world is currently using the equivalent resources of 1.6 Earths to maintain its way of life.

This is where the tragedy of the commons comes into play. Individuals with access to a public resource act in their own interest and deplete resources, creating a major roadblock to global sustainability. The tragedy of commons theory suggests that people tend to make decisions based on their personal needs, regardless of how it might negatively impact others. In some cases, an individual’s belief that others won’t act in the group's best interest can lead them to justify selfish behavior.

As the wheel of change impacts more businesses, the pollution they produce will ideally decrease. It will also become increasingly evident that there isn’t a conflict between sustainability and profit.

How to Make a Positive Difference

Many individuals believe they must be the CEO of a large company to positively impact the environment, but there are other avenues to becoming a purpose-driven leader.

If the actions of one company can affect an industry at large, why can't the actions of one person impact a company? If you hope to enact positive change, you have a responsibility to develop sustainable business strategies within your organization. In turn, you can produce ripple effects across your industry.

Even if your actions don't directly impact your industry, your small-scale behaviors can have large-scale effects on the environment and prompt widespread adoption of sustainable business practices. Adopting the phrase “reduce, reuse, recycle” is a suitable place to start. For example, departments can pledge to use recycled materials to reduce waste production.

If you're interested in learning more about how you can make a difference, consider taking an online course, such as Sustainable Business Strategy. You'll discover how to become a purpose-driven leader and how companies can drive positive change while simultaneously growing profits.

Are you interested in helping your business pioneer positive, purpose-driven change? Apply to Sustainable Business Strategy—one of our online courses related to business in society—to learn how to leverage the wheel of change in your organization.