Lewis Group Sustainability Model and Business Strategy

The Lewis Group Business Model

The Lewis Group is a retail furniture company operating in South Africa that sells its furniture primarily to low-income customers. Approximately 60% of the company's merchandise is imported from Brazil and China. As a leading retailer of household furniture, home electronics, and electrical appliances, the Lewis Group sells its products mainly on credit through three brands: Best Home and Electric, Lewis, and My Home. The company's success and profitability are associated with the scope of its business and its underlying business model. Currently, the company has more than 600 stores across major metropolitan areas and maintains a strong presence in rural South Africa. Additionally, 56 of the firm's stores are located in neighboring southern African nations, including Namibia, Botswana, Swaziland, and Lesotho.

The Lewis Group business model revolves around creating value for its stakeholders in order to promote productivity and market success ("Integrated Annual Report," 2012). As a result, the firm is committed to a decentralized, store-based business model that helps ensure sustainable performance across every market condition. The model is grounded in the principle that furniture sales and the provision of credit are fundamentally interdependent — a philosophy the Lewis Group has maintained since its inception. Every aspect of customer relationship management is handled by store staff, while credit provision is handled centrally to promote consistent decision-making and sound credit risk management.

Through this business model, the Lewis Group's personal and relationship-based interaction with consumers builds trust and confidence, creating high levels of customer loyalty and recurring sales. During the economic slowdown of recent years, the Lewis Group's model proved resilient and well-suited to its target market, as customers are drawn in by the merchandise offering and then rely on the retailer's credit facilities. Together with a clear strategic focus, this resilient business model has positioned the Lewis Group favorably within the growth segment of the South African consumer market, making it an attractive option for investors seeking equity exposure to the local retail sector.

Lewis Group's Position in the Sustainability Space

According to its annual report, the Lewis Group has not yet done enough to ensure sustainable operations, as it has mainly focused on carbon emission reporting. The company's position in the sustainability space is reflected in its environmental sustainability report, which acknowledges the need to launch and maintain environmentally sustainable business practices to meet the company's responsibilities to the environment in which it operates ("Environmental Sustainability," n.d.).

The Group pursues this objective through an Environmental Management System that identifies the direct and indirect environmental impacts of the company's activities. The system also supports the development of an achievable and relevant environmental policy, creates stakeholder awareness through appropriate levels of reporting, and works to improve the direct environmental effects of business activities where economically feasible. Through environmental principles, economic pillars, and a commitment to responsible corporate citizenship, the Group aims to evolve its environmental practices over time.

The relatively poor sustainability position of the Lewis Group can be partly attributed to the fact that South Africa's retail sector does not perform well in terms of sustainability overall ("Supermarket Sustainability," 2012). This is notable given that the retail sector sits at the center of the consumer goods value chain, which gives industry players the power to influence other elements of that chain. There are significant differences in the quantity and quality of information found in the sustainability reports of many companies, as different metrics are used, making comparisons difficult. Consequently, there is a growing need for companies to report on a broader range of factors — including environmental and social impacts, governance processes, risks, strategy, and financial results — in order to give investors a clear and comprehensive picture (Merwe, n.d.).

Like many of the largest retailers in South Africa, the Lewis Group does not perform well on sustainability measures. This is partly attributed to the absence of warehouses: every store holds its stock either in the outlet itself or in a central warehouse located close to surrounding outlets. As one of the major players in the retail industry, the Lewis Group's sustainability performance is a fundamental matter of accountability. According to Chamberlain (n.d.), product distribution is a core process in the retail sector that demands fuel-efficient and low-pollution methods, given the environmental risk that large retailers pose and their corresponding responsibility to mitigate that risk.

Conclusion

The Lewis Group can incorporate sustainability into its business model by positioning itself across four strategic quadrants: eco-efficiency, eco-branding, beyond compliance, and environmental cost leadership. According to Orsato (2006), these four quadrants are essential for transforming a firm's environmental investments into sources of competitive advantage. The Lewis Group can adopt these quadrants as part of its environmental policy within its broader corporate strategy. Positioning across these quadrants should be informed by the structure of the industry, the organization's capabilities, and its position within the industry structure (Orsato, 2006). Furthermore, the Lewis Group can pursue this positioning by conducting a comprehensive analysis of the components of competitive environmental management to identify opportunities, enabling management to focus environmental initiatives where competitive advantage is most attainable.

The Lewis Group can also incorporate sustainability by framing sustainable development as a multi-dimensional opportunity. Many organizations have struggled to address sustainable development strategically because they treat it as a one-dimensional concern (Hart & Milstein, 2003, p. 56). In most of its sustainability operations to date, the Lewis Group has focused primarily on eco-efficiency, beyond-compliance measures, and environmental cost leadership. Throughout its history, Lewis has been able to convert costs into profits by identifying hidden environmental opportunities, increasing the efficiency of its organizational processes, and engaging customers and the broader community to recognize these efforts. Its environmental cost leadership has also involved earning premiums for ecologically oriented products.

However, the firm can create greater sustainable value by expanding its focus to include eco-branding and product stewardship — approaches that involve managing the entire product lifecycle and actively engaging stakeholders. Product stewardship ensures the integration of stakeholder perspectives into business practices and is primarily driven by transparency, civil society engagement, and connectivity. Unlike pollution prevention, which focuses on internal operations, this strategy extends beyond the company's boundaries and is therefore better positioned to generate broader sustainable value.

This strategy creates sustainable value — particularly shareholder value — by integrating the voices of shareholders and other stakeholders into business practices through increased interaction with partners such as suppliers, shareholders, customers, communities, and regulators. It thereby provides a means to reduce environmental impacts across the value chain while improving the company's legitimacy and reputation through ongoing stakeholder engagement.

Like many retailers in South Africa, the Lewis Group has continued to perform below par in terms of sustainability. This relatively poor performance is also attributable to the absence of a comprehensive sustainability development policy within its business model and corporate strategy. In order to enhance its competitiveness, the Lewis Group needs to incorporate sustainability into its business model through a range of strategic initiatives. The most suitable strategy for creating greater sustainability value is product stewardship combined with eco-branding, as these approaches extend beyond internal operations to engage the full value chain and all relevant stakeholders.

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Hart, S. L., & Milstein, M. B. (2003). Creating sustainable value. Academy of Management Executive, 17(2), 56–69.

"Integrated Annual Report." (2012). Lewis Group Limited. Retrieved August 25, 2012, from

Merwe, C. (n.d.). South Africa's largest retailers: How do they weigh in at the sustainability arena? Retrieved August 25, 2012, from

Morton, J. (2012, January 5). Sustainable furniture specification guide. Retrieved August 25, 2012, from

Orsato, R. J. (2006). Competitive environmental strategies: When does it pay to be green? California Management Review, 48(2), 127–143.

"Supermarket sustainability — how do South Africa's major retailers stack up?" (2012). Greenindustries.org.za. Retrieved August 25, 2012, from