Why Go Green? The Business Case For Sustainability

Several studies have indicated that economic benefits can be gained in hotels through implementing environmental and social initiatives; many with little or no capital. In addition to cost benefits, there are also benefits to choosing an environmentally sustainable strategy. These include:

• Gaining competitive advantage by being a leader in the sector;
• Customer loyalty;
• Employee retention;
• Awards and recognition;
• Regulatory compliance;
• Risk management;
• Increased brand value.

But most of all, because its the right thing to do!

The hotel industry has been pursuing green practices since the 1990s due to fluctuating economic levels and a strong focus on customer service (Claver-Cortes et al. 2007).

There are many green practices that hotels can implement as preventative measures to save unnecessary costs. Examples of these practices are:

• Pollution prevention such as waste discharge into waterways:
• Energy consumption;
• Recycling;

Other popular cost cutting measures for the short-, mid- and long-term include:

• Use of compact fluorescent lights — saves energy.
• Reuse of linens — saves water, detergent, energy and greenhouse gases.
• Low-flow shower systems — saves water and energy.
• Local products — save transportation costs.
• Installation of green roofs — saves energy.
• Installation of solar heaters or other renewable energy source — saves energy.

The ultimate result of these actions is a win-win situation; to reduce hotel operational costs and harmful environmental impacts (Claver-Cortes et al. 2007).

Reports by hundreds of businesses around the world illustrate that by implementing appropriate management processes they have:

• Reduced energy and water consumption costs by more than 20 percent.
• Solid waste and waste water disposal costs by more than 15 percent.
• Improved the quality of the environment in which they operate.

• Improved staff motivation and community relations (Travel Life, 2008).

The following illustrates in more detail the benefits of going green!

Benefit: cost savings

Brebbia and Pineda (2004) claim that financial savings are one of the most significant factors that influence the implementation of environmental initiatives in a hotel. This is especially evident for hotel businesses that operate in a highly competitive market and where the cost of energy, water and waste disposal are high. Hotel operators that can maximize their efficiency and reduce waste will be more cost-effective than their competitors. For example, a hotel can reduce its energy consumption by 20-40% without adversely affecting performance.

Hotels also use large amounts of energy to keep guests cool in hot temperatures, and equally large amounts of energy to keep them warm during the winter.

In some destinations, hotels place an additional, sometimes unsustainable demand on local water resources and generate large quantities of food and packaging waste.

Some examples of environmental initiatives and cost savings include:

Holiday Inn on King in Toronto reports saving Cdn $14,852 per year through the installation of low flow showerheads and faucet aerators (Graci 2002).

The Fairmont Royal York in Toronto invested Cdn $25,000 in an energy conservation program to replace leaky steam traps and fix leaks, which resulted in an annual savings of over Cdn $200,000 (Graci 2002).

The Holiday Inn in North Vancouver, British Columbia has saved approximately USD $16,000 annually and reduced 28 percent of its energy consumption through installing an in-room energy management system. The system features occupancy sensors that automatically monitor and adjust individual room temperatures. The system was able to ensure a return on investment within 14 months (Green Lodging News 2008).

Despite the setup costs and the possible lengthy return on investment associated with environmental initiatives, the economic benefits usually outweigh the cost of implementation. Starting with projects that are less capital intensive — such as retrofitting light bulbs, energy metering, and training staff to be conscious of energy use — can lead to substantial cost savings.

Benefit: competitive advantage

Green programs can provide a competitive advantage to leaders as long as green activities continue to be voluntary. Over time, however, green practices in the hospitality industry will become a baseline requirement, particularly as the cost of non-renewable energy continues to rise, regulatory pressure increases, and consumers become more demanding. Therefore, hotels with business models that revolve around green practices will have the strongest opportunity to achieve a competitive advantage by being ahead of the emerging sustainability curve.

New brands including Starwood Capitals 1 Hotel and Residences, Starwood Hotel and Resorts Element and Hyatts Andaz, which feature LEED certified buildings as part of their brand standards, offer a variety of green products, such as green spas and restaurants. These are anticipated to test consumers appetite for a greener hotel industry.

There is also a competitive advantage for being recognized for your green efforts. The Fairmont has received many awards relating to their green practices, such as the 2008 Environmental Leadership Award from the Professional Convention Management Association and the 2008 Green Leadership Award from Hotelier Magazine (Fairmont, 2008). Awards and recognition spread the news of the hotels efforts and attracts new clientele, such as corporations that need to conduct business with socially responsible companies.

Benefit: employee retention

Employees are identified as one of the greatest benefits of going green. Employees, like hotel guests, are increasingly sophisticated and tuned into current thinking in society and are far more likely to identify with an employer whose principles and practices are aligned with their values.

Environmental programs have proved to be an effective means of generating enthusiasm and motivating staff to work as a team to achieve a common purpose. Many hotel companies use environmental programs as a staff incentive — the financial savings earned are translated into cash or other rewards such as in-house events or trips.

Employee turnover rate in the hotel sector is relatively high therefore increasing the retention rate will also save the business money in training of new staff.

Benefit: customer loyalty

Over the past 25 years there has been a shift in the expectations and demands of consumers. The typical hotel guest of today is more sophisticated and to varying degrees is likely to be concerned about environmental issues such as recycling bottles, cans and paper at home as well as making greener lifestyle choices, such as organic food or fuel-efficient vehicles.

Many guests however, make their decision to stay at a hotel facility based on location, amenities, and service. The implementation of environmental initiatives may play a smaller role in a guests choice of a property. The influence from customers however occurs when their level of awareness increases and they come to expect environmental practices such as recycling.

Despite first-time guests basing their decisions on location, amenities and service, customer loyalty may increase once they have experienced a hotel which has demonstrated a level of environmental commitment.

Benefit: regulatory compliance

Hotels must anticipate future regulatory changes and implement initiatives to mitigate the possible costly effects of emerging regulation. Savvy businesses are aware that regulations do not have to be a negative restraint on their daily operations — in fact, they can offer opportunities to gain an advantage over competitors. Some environmental regulations are good for economic competition as they stimulate innovation that can offset the cost of compliance. By implementing measures in the face of societal and regulatory pressures, unexpected, but substantial cost savings as well as potential new areas of profit may be found.

The hotel industry worldwide is increasingly being regulated for:

• Waste
• Water
• Greenhouse gas emissions
• Energy use.

Being aware of pending rule changes will allow you to adopt measures in advance, and avoid potentially higher future costs which may be associated with compliance.

Benefit: risk management

Risk minimization is now viewed as increasingly intertwined with good corporate social responsibility and governance. Managing risk is as much about minimizing the potential damage from decisions and actions taken from within a company as it is about managing external exposure.

Traditionally, a hotels risk management strategy has been focused on health and safety concerns around food and water, pest infestation, fire or water damage, outbreaks of disease, and guest security and safety. In recent years however, environmental and social issues are emerging as a key risk issue for the lodging sector.

Environmental risks include:

• Water and land contamination.
• Air and noise pollution.
• Supply chain environmental practices.
• Waste management.

Environmental risks also have an impact on the cost of capital for businesses of various types and sizes, and may affect the value of a company over the long term. In addition, the investment community is increasingly regarding excellence in environmental management and performance as an indication of the quality and aptitude of management in general. Some insurance companies and lenders are beginning to selectively adjust their rates based on environmental criteria stipulated by ethical funds.

Companies that integrate the environment into their business decisions and reduce their environmental risk and potential liabilities are in a better position to secure investment and reduce their financial and reputational market exposure (Graci and Dodds, 2009).

Benefit: cause its the right thing to do!

Beyond regulation and compliance, many environmental and social initiatives are voluntary. Whether driven by cost savings or a principled strategy, the hotel industry is recognizing the environment, the community and their human capital as a valuable resource to be protected. Long-term business sustainability will depend on this.

Many hotels have implemented social initiatives and corporate social responsibility (CSR) into their regular day-to-day practices. Corporate social responsibility in the hotel industry ideally exists in human resources management, the local community, and through promoting and practicing environmental initiatives (Bohdanowicz & Zientara, 2008) and is heavily influenced by internal and external forces. CSR has been widely expanding throughout the hotel industry, mainly to prove that corporate unethical behavior is no longer a problem. Thus, hotels are embarking on being ethical through social initiatives by protecting and supporting communities, their human resources, and by implementing environmental initiatives (Bohdanowicz & Zientara, 2008). Many international and local hotels are becoming involved in corporate social responsibility in order to extend their brand knowledge to different types of audiences, to gain employee retention and improved competitive advantage (Bohdanowicz & Zientara, 2008), and lastly because it is the right thing to do.

Sixty-five percent of the top 100 companies in the world employ some sort of corporate social responsibility statement featured on their websites (Holcomb et al. 2007). Several multinational companies have gained a very negative brand reputation based on their past unethical practices.

Larger companies have been criticized as being the main culprit in releasing excess greenhouse emissions, climate change, environmental devastation, and unfair treatment of employees. Due to such criticisms and negative publicity, many businesses have increased the focus on corporate social responsibility.