Sustainable Dreams, Overlooked Realities: Closing the Design–Outcome Gap in Sustainable Business Models

ABSTRACT Sustainable business models (SBMs) are enablers of the circular economy ( CE ) and sustainability. However, its adoption does not always improve environmental performance. This study investigates the conditions under which SBM design does (or does not) produce the expected environmental benefits. We conducted a secondary cross‐case analysis of three use‐oriented product–service–system (PSS) business model (BM) implemented by three distinct Swedish companies that previously had been assessed using business model life cycle assessment (BM‐LCA). Across the cases, environmental performance outcomes were not primarily determined by BM main property (i.e., reuse, sharing, or rental) as such, but by a set of conditions (e.g., product return rates, enabling infrastructure, location, and consumer behavior). Overall, the results show that sustainability benefits are not inherent to SBM archetypes. A key learning is that the singular design focus, institutional pressure to “show” sustainability, and lack of quantitative assessment contribute to the poor environmental performance of the SBM in the studied cases. We also show that the absence of empirical validation can foster a wishful thinking that well‐intentioned environmental efforts are enough. The study contributes by specifying conditions that shape SBM's environmental performance, clarifying when and why environmental performance outcomes of SBMs can diverge from their design expectations. We further show how BM‐LCA can be integrated into SBM analysis to operationalize and test the sustainability assumptions embedded in BM design. This positions BM‐level, life cycle–based assessment as a structured decision‐support and learning tool for assessing and refining SBMs.