Can you still afford to be green

“Now, more than ever, helping to preserve the planet makes good business sense and is vital to the future of our company. We continue to take steps to save energy, reduce waste and involve our employees and customers in new ways that they can help improve the environment.”

President and Chief Operating Officer Arne Sorenson, co-chair Marriott’s Executive Green Council comments.

At a time of global recession, every aspect of every company’s operations come under scrutiny and it would be naïve to assume that investment in environmental initiatives will, or should, escape examination.

In many companies, the findings of such investigations support a continuation or even expansion of environmental activity.

These organisations may have had evidence of the economic value of initiatives already in place. They will be looking at the competitive edge that continued investment will give them as the economy emerges from recession. For others, the broad commitment may still be there but the budget may simply not.

Small businesses pull back

A study by the UK’s Environment Agency has revealed that, due to economic necessity, 55% of UK businesses plan to cut investment in sustainability.

Not surprisingly, it is smaller- and medium-sized businesses that are easing back investment in environmentally beneficial projects. A recent survey by NetRegs, a partnership of UK environmental regulators offering guidance to small- and medium-sized enterprises, showed that only one in four small- or medium-sized companies in the UK plan to invest in improving their environmental performance next year.

Perhaps even more significant was abandonment of existing environmental management systems (EMSs)–the survey found a 75 % drop in SMEs with EMSs.

The case of the energy companies

However, it is not only smaller businesses that are reducing their green investment. BP–once an award-winner for its commitment to alternative energy sources–has been criticised for apparent downgrading of its alternative energy programme.

This follows the slashing of its budget and the abandonment of a groundbreaking carbon capture and storage project in Scotland and a solar project in Spain. Nevertheless, the company, which is the US’s third-largest wind power generator, plans to spend $5bn over the next five years on renewables. Shell, meanwhile, has pulled out of wind, solar and hydro-power because it believes they are not economic. Exxon, like both Shell and BP, is now backing controversial bio-fuels.

With energy prices and profits high, producers seem relatively satisfied. However, environmentalists and many businesses maintain that, in a recession, energy consumers should be according higher not lower priority to environmental initiatives. Continued investment in equipment and systems that result in energy savings are, if anything, a greater priority during a recession.

“Many green policies are entirely consistent with the imperative of cost reduction that businesses experience in a downturn, with environmental benefits frequently stemming from corrections to what amounts to inefficiency,” says Simon Aumonier, a partner at Environmental Resources Management (ERM), a leading global provider of environmental consulting services.

“Frequently, we identify hotspots in product and service carbon footprints associated with energy and materials usage that can readily be reduced, saving money as well as delivering climate change benefits,” he says. “The same is true of water footprinting, where initiatives will reduce water consumption, as well as saving energy, and so bring down costs.”

According to a new paper co-authored by Ram Nidumolu, CK Prahalad and MR Rangaswami, Why sustainability is now the key driver of innovation, published in the September 2009 issue of the Harvard Business Review, sustainability is certainly not the burden on the bottom line that many executives believe it to be. “In fact, becoming environmentally-friendly can lower our costs and increase your revenues,” it says. “In the future only companies that make sustainability a goal will achieve competitive advantage. That means rethinking business models as well as products, technologies and processes.”

Retail industry's green future

One of ERM’s clients is Tesco, which within three years will overtake Carrefour to become the world’s second-largest retailer behind Wal-Mart. Despite the recession, it continues to invest heavily in wide-ranging green initiatives covering product lines, stores and distribution.

“Going green makes commercial sense,” says Tesco CEO Sir Terry Leahy. “Saving energy means lower costs. For consumers, the downturn does not mean that their wish to protect the environment has disappeared: they merely need more help in fulfilling it.” He adds that Tesco needs to make sure that eco-friendly products are affordable by those on tight budgets and it has to show that, by going green, consumers could save money.

And customers do care

At the heart of Tesco’s policy is the premise that customers do care about the environment and environmental issues and this will influence their buying habits even in a recession. Previous experience of customer attitudes to green issues in a recession would appear to contradict this assumption.

According to MORI research, concern in the UK fell from 35% of the public thinking the environment was one of the major issues facing the country in 1989 to 5% in recessionary 1991.

Nevertheless, greater awareness of environmental issues, both economic and social, together with global warming, appear to have resulted in more support for green issues during the current recession. Research shows a fall in the past year of just 10% in the number of people thinking environment is a major concern.

A new survey from Penn, Schoen & Berland Associates and advertising agency JWT indicates greater resilience. Consumers in the US, UK and Japan appear to place more emphasis on buying products with an environmental pedigree now than they did before the recession.

Another study by Green Seal and EnviroMedia Social Marketing found that, in the US, 50% are buying as many green products now as before the economic downturn, while 19% are buying more. Just 14% say they are buying fewer green products.

The price of energy, too, has been a factor Last year, it rose to a high of $126. This year, it began at $33 but had more than doubled by summer. In this recession, unlike in the early 1990s, the value of conserving energy has been evident to businesses and consumers alike.

Governments’ green priorities

Governments, too, continue to give environmental issues high priority. “With climate change and the global recession driving the current international political agenda, both politicians and businesses are being drawn towards the idea of a global green economy,” says the UN World Tourism Organisation. However, it fears that while the tourism sector is at the frontline of these issues, it is unlikely to receive the attention it deserves in the high level discussions on the replacement of the Kyoto protocol, to be finalised in Copenhagen in December.

WTO staged a symposium in Gothenburg in September to address how the development of sustainable consumption and production relates to tourism. “Climate change is a driver of sustainable development, and national tourist offices need to pay attention to global and European-level policies and programmes that will help them maintain and improve their market share,” said, Rob Franklin, executive director of the European Travel Commission, a partner in the symposium.

The view from hoteliers

Meanwhile, many hoteliers—from smaller boutique properties to major groups—also remain in no doubt of the benefits of sound environmental policy.

The 37-room Scarlet hotel in Cornwall, UK, for instance, which opened in September, has remained true to the environmental principles established at its pre-recession conception. Sustainable initiatives include a carbon-neutral, woodchip-fired biomass boiler, grey-water recycling, rainwater harvesting, natural air-conditioning, mineral wool insulation and solar water heating.

At the other end of the scale, Orient-Express Hotels (as one example among the many members of the International Tourism Partnership) remains fully committed to its existing environmental initiatives. "For Orient-Express, responsible tourism is one of our core platforms,” says the group’s president and CEO, Paul White. “It is therefore as important as ever, irrespective of the recession.”

White says that Orient-Express has always been very active in community support, taking the view that the location of its hotels is as fundamental to its guests as the property itself, and that that will not stop just because the trading conditions are tough. “We have a more recent focus on environmental management and sustainable operations and, of course, there is no question that this area does return cost savings, so it's doubly relevant to pursue these policies in the current climate," White says.

At the InterContinental Hotels Group (IHG), a new online system Green Engage, which aims to help general managers make cost savings, is already reaping considerable rewards. Although the group recently reported a 38% reduction in profits, it offset some of the disappointment in its figures by forecasting a $10 million improvement in cost savings to $80 million—half of which are described as “sustainable savings”.
“It’s all too easy to scorn changes such as lagging water pipes and turning down the swimming pool temperature, but these savings not only reduce the group’s environmental impact but also save a considerable amount of money,” says, IHG chief executive, Andy Cosslett.

Tom Corcoran, chairman of the IAHI, the international association of IHG owners and operators, of which a number of hotels are taking part in the Green Engage scheme, stresses that the scheme is not only good for the environment but good for business. “In the current economic climate and with rising energy bills, this tool will help us to identify significant cost savings,” he says. “At the same time it delivers what our guests want—a greater sense of well-being and less impact on our planet when travelling."

Early trials have shown potential energy savings of up to 25%. If fully adopted by all hotels across the 4,000-strong IHG portfolio, it is estimated that the savings could be as much as $200m.

Marriott International, too, has no doubt of the value of the range of initiatives it has in place or their continuance through the recession. Chairman and CEO of Marriott International, Bill Marriott, says the company takes its commitment to protecting and preserving the environment very seriously, stressing that the company is continuing to reduce its energy consumption, create a green supply chain and ensure its golf courses become certified by Audubon International. Read more about Audubon International in our Know How section.

“There are multiple business benefits to going green, which is more important than ever in this economic climate,” he says. “For instance, a green hotel can enjoy a return on its investment within one to two years, primarily through energy and water conservation and other incentives. Also, the hotel can enjoy a competitive advantage with consumers, who will choose a green hotel over another one, all things being equal.”

We cannot afford NOT to be green

This summer, Hilton Hotels moved its global headquarters to Virginia and into a new energy-efficient site built to the highest environmental standards. The building features a reflective roof, low-flow plumbing that reduces water use by 40%, energy efficient windows, the use of sustainable wood in doors and the lobby, and a 10,000-gallon cistern for rainwater and air conditioner condensate capture. A total of 97% of the waste produced building the facility did not go to landfill.

Hilton Hotels Europe, meanwhile, is driving an ambitious energy efficiency and water conservation programme that has saved the company more than $9m in two years, proving, said President Wolfgang Neumann, “that being green is smart for business”.

The clear commercial benefits of sound environmental practice are echoed by International Tourism Partnership director Stephen Farrant. “Environmental and social responsibility make business sense--it’s that simple,” he says. “Never before has the global focus on the triple bottom line of economic, social and environmental impacts been so important.

We cannot not afford to be green.” We would like to know what you think of the views expressed in this article. Please let us know

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