The Business Case for Greening Your Property
By Arthur Weissman, President and CEO, Green Seal, Inc.
The biggest obstacle to greening the hospitality industry - that is, trying to make its operations (including purchases) more environmentally sustainable - appears to be its presumption that being green has no real business benefit. In previous articles in this series, we have made a number of points to show ways in which greening can increase business revenue and reduce costs, but a more formal business case still needs to be made. In this article, we will discuss why such a business case is needed; what does and does not constitute a business case for greening; efforts to date to make the case; and what still needs to be done.
Need for Business Case
We have spoken with several major hotel chains, and most of them question the value of commiting to sustainability in any major or public way without a demonstration that it will improve their business. One can show many examples of cost savings and potential market benefits, but what they typically want most to see is evidence of market demand for greening efforts on the part of their potential customers. And that is generally lacking in most geographic markets and market segments.
We have met and worked with management and staff in major chains who demonstrate genuine commitment to sustainability and may even know how to implement it in their properties from a technical or engineering perspective. Yet they confess that they cannot make headway in their company unless they have data to show their CEO or brand managers that there is real demand for the greening of their properties. Theirs is a plea, really, for the business case so they can get their top management to move in a sustainable direction.
What this means, essentially, is that sustainability has to be aligned with the rest of the hospitality business, combining toward a common goal both the tangible and the intangible aspects of the business. It will not suffice for greening to be seen as an outlier, an add-on, to the core business; instead, it must be intrinsic, even a critical component of that business. Such is the way some companies are embracing sustainability: as an integral part of their corporate ethos, identity, and behavior.
We have explored the theoretical and some practical bases for this integration in previous articles, including the way greening can ultimately be aligned with good business practices, such as effectiveness and efficiency. All that remains is to make the demonstration in persuasive, concrete terms in the language of the industry, with a focus on customer demand.
What Constitutes a Business Case
As suggested, to make the business case, greening initiatives have to demonstrate that they promote growth in the business and increased revenues and profit. It is not usually sufficient to demonstrate benefits from cost-cutting, for example, lowering the electricity bill by putting in energy-efficient lighting or HVAC systems. Many chains are already pursuing energy efficiency and other efficiencies in their operations because of their obvious cost-reduction potential. Furthermore, greening is not necessarily a good surrogate or symbol for cost-cutting because of the perceptions and misperceptions that accompany it. These include belief that performance of a green product or system is compromised or lower; higher initial costs for some green products and systems even though their longer-term, life-cycle costs are usually lower; etc.
Other valid but less cogent arguments for the sustainability business case relate to liability, corporate image and reputation, and employee morale. Because sustainability practices reduce the use of toxic and hazardous materials, there is less opportunity for problems either in waste handling and management or in use. Sustainability can also enhance a company's reputation, with the caveat that the program must be substantive and not mere dressing or "greenwash." Similarly, we have seen cases where greening efforts can improve employees' morale and dedication, since they are given a broader context and purpose for their work beyond the conventional ones.
But the core of the business case for sustainability has to relate to the market, and it involves implied or explicit marketing using the sustainability angle to capture an additional segment in the market that conventional marketing does not. Of course, this "green" market has to exist somewhere in order to be captured, and that is the essence of making the business case - showing actual market demand for green lodging, tours, etc. on the part of consumers, institutions, and others. Documentation of the business benefits of marketing to this segment is critical to the case, with evidence that an identification of the property with sustainability is important if not necessary to that market. Evidence that third-party verification of sustainability (as through a certification program) provides additional marketing benefits strengthens the case even more.
Efforts to Date to Make the Business Case
Green lodging programs that have operated in the past decade or so give a good indication of both the limits and the possibilities in making the business case for sustainability. Green Seal's own program began in 1996 with the publication of a guidance document (Greening Your Property) that made the pitch that greening can be better for business. But the document was heavily oriented to anecdotes and isolated data with regard primarily to cost savings and improved efficiencies.
After we did some field projects with major chains and then developed an environmental standard for lodging properties (GS-33), we started a series of projects primarily with State governments to promote green lodging. The governments subsidized certification in many cases, and some properties eagerly jumped aboard. But overall it was still often a hard sell, even though the prospect of more government and public business was offered. Individual properties always seem to have other, more immediate priorities and crises; the corporate level may be more amenable, provided the case can be made.
Similary, State programs in green lodging and tourism, which do not necessarily involve certification and may have only basic entry requirements, can have some avid joiners, but none has experienced a groundswell of interest or participation. The government may provide marketing help and serious publicity, but that is apparently not enough to bring in large numbers.
Interest in sustainability on the part of the major industry association, the American Hotel & Lodging Association, has been fairly steady over the years, with its Engineering and Environment Committee actively exploring the area. But again, there has been no surge of interest, especially with the recession and decline in travel in the early 2000s.
Perhaps more heartening is a survey of consumer demand for socially and environmentally responsible tourism put together by the Center on Ecotourism and Sustainable Development and The International Ecotourism Society (Working Paper No. 104, April 2005). It found demand for ecotourism to be "passive" but growing. Specifically with respect to green hotels, it found that in Costa Rica tourists were more willing to pay for them than business travelers. Given the country's reputation for national parks and ecotourism, this suggests that the consumer route may be more promising than business travelers in marketing green properties.
What Remains to Be Done to Make the Business Case
The current lack of information or even of evidence that sustainability can drive market demand does not mean that the business case cannot yet be made. In fact, as in the previously cited study, it may very well be that such demand is latent and ready to be tapped if it can be targeted and developed successfully. In this regard, we suggest that the following should be pursued in the areas of documentation and data-gathering and in actually moving the market.
We need documentation of how sustainable practices can drive revenue generation primarily, rather than cutting costs or increasing efficiencies. This includes increased or new business from green marketing. Data are needed for actual market demand for green services, such as demand for ecotourism in the survey cited. Customer surveys showing preference for green properties and, more convincingly, choices made on the basis of green options can provide good evidence.
In terms of moving the market, individual properties and chains can promote sustainability in their operations (hopefully with justification) and measure the result in revenue and market share. Large purchasers of hospitality services, such as airlines or Fortune 500 companies, can be organized to select green properties. Travel and meeting planners can be educated to request sustainable properties, activities, and products. Certain receptive consumer segments, otherwise identified with the greening movement, can be galvanized to direct their travel activities to green properties. And lists of green properties, such as begun in the State of California, can be created and publicized and coordinated with Web travel agents.
While the business case for sustainability has yet to be made, the antecedents exist to create and make the case. Given the general reticence of the lodging industry to new ideas, little progress in making the industry more sustainable is likely without the business case and the actions required to make it. Those in a position to organize for this result need to act and to gather the information to make the case. Innovators and creative business people - now is your time to come forward.
Arthur B. Weissman, Ph.D., is President and CEO of Green Seal, Inc. He has experience in environmental science, policy, and standard-setting in public and private sectors. He has led the non-profit's resurgence as a force to make the economy more sustainable. He served as an international convener in developing the ISO 14000 standards for environmental labeling, and was the first Chair of the Global Ecolabeling Network. He has developed policy for the Superfund waste-cleanup program, served in the U.S. Senate as a Science Fellow, and worked for The Nature Conservancy. Mr. Weissman can be contacted at 202-872-6400 or firstname.lastname@example.org Extended Bio...
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