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 it's the right thing
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
- Pollution prevention such as waste discharge into waterways:
- Energy consumption;
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
- 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
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
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 Capital's "1"
Hotel and Residences, Starwood Hotel and
Resorts Element and Hyatt's 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 hotel's efforts and attracts new
clientele, such as corporations that need to
conduct business with socially responsible
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
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 guest's 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
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
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:
- 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 hotel's 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
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
Benefit: 'cause it's the right thing
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.