Sustainability in emerging economies

Growing evidence suggests that the emerging markets of Brazil, China, India and Russia are rebalancing their domestic consumption to achieve long-term growth. Sustainability and innovation will be key to their success, and the hospitality industry must play a major part in driving the change, says Oliver Balch

All eyes are on the BRICs. Home to approximately one-third of the world’s population, Brazil, Russia, India and China are seen as economic powerhouses of the future. Their impact on the environment promises to be huge, too. Until recently, the prospects for the planet looked unfavourable. Brazil’s agro-fuelled boom saw deforestation spiral, while China and India’s energy needs resulted in a leap in coal-based power.

In 2009, BRIC economies accounted for over one-third (37%) of global carbon emissions, according to the latest data from the International Energy Agency. That is double the figure of 1990. If the trajectory continues, emission levels will reach perilous levels, regardless of mitigation efforts by the rest of the world.

Despite the reticence of BRIC governments to sign an international climate deal, strong signals to curb climate change through low-carbon growth are occurring at a domestic level. China’s latest Five-Year Plan (running until 2015) makes an explicit and aggressive commitment to sustainable development. Among the targets of the Plan are a 16% and 17% reduction in energy use and carbon emissions respectively.

India has also announced a series of eco “missions” in recent years. Among the most successful is the $108m Jawaharlal Nehru National Solar Mission, which aims to generate at least 1,100mWh of solar power by 2013.

WHILST SUSTAINABILITY IS STILL A RELATIVELY NEW CONCEPT, THE BRIC COUNTRIES ARE FAST MAKING IT THEIR OWN

Increased awareness

BRIC countries are certainly wising up to the negative environmental effects of rapid industrialisation, observes Amrita Bhalla, executive vice-president, human resources, for Indian hospitality group Oberoi Hotels and Resorts.
The growing awareness of air pollution provides a case in point.

Authorities in Beijing are taking a lead in trying to address the situation. Switching the city’s primary energy usage from coal to natural gas, relocating highly polluting industries outside Beijing and adopting stricter auto emissions standards are just some of the initiatives currently underway in the Chinese capital. “The conundrum is that in a time of such rapid growth, are all the necessary environmental measures being taken?” asks Bhalla.

Matthias Strausberg is positive about the steps being taken. As head of public affairs for Global Compact, a United Nations initiative to encourage businesses to implement socially responsible and sustainable policies, he notes an upsurge in interest from BRIC countries. Around one in seven (Brazil, 439; China, 273; India, 268; Russia, 58) of the Compact’s 7,000 signatories now come from these four leading emerging markets. “It dispels the fear that this is something that is imposed on Southern countries by Northern industrialised nations,” he remarks, debunking a lingering perception in many quarters.

A steep learning curve

While sustainability is still a relatively new concept, the BRICs are fast making it their own. Look at climate change. The UK-based Carbon Disclosure Project now counts offices in Sao Paulo, New Delhi and Beijing. As for sustainability reporting, certified Global Reporting Initiative (GRI) reports rose 9% in China and a staggering 68% in Brazil in 2010.

Businesses in these markets have also been quick to latch on to the cost savings and market opportunities that green technologies represent. Talk to an Indian businessman about the benefits of sustainable construction or energy efficiency, for example, and they “get it” immediately, says Joe Phelan, India director, International Business Leaders Forum. The same is true for their peers in other BRIC countries.

It certainly helps when the government shows its commitment to sustainable development. In China, where the state continues to occupy a pivotal role in the economy (far more than in the other BRIC countries), billions of dollars are earmarked for its “clean revolution” over the next five years.

“They [China] are very serious about it,” notes Ari Makkonen, executive vice-president, Finnish Environmental Cluster Project for China, an initiative promoting the export of environmental technology to China. “And they have the resources and the decision-making systems to get quick results.”

Private sector takes the lead

The private sector is seen as increasingly key to the sustainability agenda in the BRICs, too. “Given the growth and wealth of the private sector, the government sees the need for it to contribute to sustainable development,” argues Janet Geddes, associate director at KPMG’s development sector practice in Mumbai.

That’s certainly Nokia’s experience. The mobile phone operator has championed recycling across India over recent years. In response, the government will be introducing specific e-waste guidelines in May 2012. While Nokia has no formal partnership with the Indian government, policy makers “certainly appreciate it” when companies present examples of eco-innovation, says Pranshu Singhal, head of sustainability, Nokia.

SWITCH-Asia provides another example of sectors working co-operatively to promote sustainability. One of the projects currently being supported by this €152m, five-year European Union initiative, is in Sri Lanka. The €1.8m Greening Sri Lanka Hotels project aims to drive energy and water efficiency among 350 small- and medium-sized hotels across the country. The scheme, which also involves 200 firms supplying the hospitality industry, has seen the creation of a green hotel accreditation system.

Christian Tetzel, programme manager, SWITCH-Asia, sees potential in a similar partnership approach being adopted elsewhere, including in BRIC countries. Why? Because it plays an invaluable role in “the development and exchange of knowledge”, he insists.

For Oberoi’s Amrita Bhalla, it makes sense that BRIC countries should be turning to business for a lead on responsible practices. In the hospitality sector, international brands such as Marriot International, Four Seasons Hotels and Resorts and Hilton Worldwide, have established sustainability practices and policies. As well as providing an opportunity to learn, there’s an implicit challenge for domestic firms to catch up. As she notes: “International companies are a little bit ahead of the curve, so they’re going to raise the bar for us.”

To meet that demand, Hunter Amenities is now using post-consumer resin in its amenity bottles. It’s also putting bio-additives into its bottles to ensure they decompose speedily in the event of not being recycled. It is money well spent. “Almost every RFP [request for proposal] now comes back with a request for the company’s sustainability record and what sort of initiatives we can offer,” Hunter reiterates.

Increasing awareness, promoting innovation

Many international hoteliers investing in BRIC countries see increasing sustainability awareness as an intrinsic part of their business responsibilities. InterContinental Hotels Group, for instance, cites the transfer of knowledge as a guiding corporate principle. Employee training acts as a key mechanism for such transfers.

One international hotel group operating in several BRIC countries provides web-based training on sustainability in 10 different languages.

At the same time, international companies operating in BRIC countries are pursuing more sustainable business models, often with an inventiveness that comes from operating in a challenging business environment.

Take waste collection in Russia. Without a formal recycling process in place, Radisson Blu Hotels has had to develop an “ecosystem” of its own more or less from scratch. This has required the “complicated” task of negotiating multiple contracts with individual refuse collection firms, explains Radisson spokesperson Yulia Anisimova. The hotel group now recycles oil, paper, plastic and other recyclable waste through a network of specialist firms.

Malini Mehra, founder of the India-based Centre for Social Markets (CSM), believes foreign companies can bring the “ecosystem of innovation” that a shift to sustainability requires. “Newcomers provide the churn and competition for sustainable products and services to emerge,” she states.

Not that international companies have a monopoly on innovation. Far from it. Mehra maintains that domestic “eco-entrepreneurs” are acting as major catalysts of sustainable development. Take Selco Solar, one of the businesses profiled in CSM’s documentary In Good Company. The company sells, services and finances solar systems designed specifically for low-income customers in rural India.

India’s reputation for creating green tech start-ups is renowned. So renowned, in fact, that senior managers from foreign multinationals are travelling to India to learn from them first hand. Mumbai-based Journeys for Change arranges regular “tours” around some of India’s most innovative social enterprises.

The list includes the likes of d.Light, which works to replace kerosene lanterns with cleaner light solutions, and Goonj, a waste recycling organisation and former winner of the World Bank’s Development Market Place Award.

THE PRIVATE SECTOR IS SEEN AS INCREASINGLY KEY TO THE SUSTAINABILITY AGENDA IN THE BRIC COUNTRIES TOO
JANET GEDDES, ASSOCIATE DIRECTOR, KPMG

Domestic hoteliers rise to the challenge

While international hoteliers, with their greater expertise in sustainability matters, have a major contribution to make to the sustainable development of the BRICs, there is plenty of evidence that domestic businesses are helping to raise the sustainability bar, too. Many are taking advantage of the clean energy boom in BRIC nations, driven primarily by huge demand for power, climate change concerns, limited oil and gas reserve, and high energy prices.

Chinese Himin Group’s Solar Valley Micro-E Hotel in Dezhou, Shandong province, provides a radical example of this trend. Touted as the country’s first luxury eco-hotel, it boasts thousands of solar heat pipe collectors and integrated photovoltaics to harvest and store energy. Following close behind is ITC Windsor’s five-star hotel in Bengaluru, the first Indian hotel to achieve the US Green Building Council’s LEED (Leadership in Energy and Environmental Design) platinum ranking.

Water conservation is another area where the local hospitality sector is demonstrating its green credentials. Oberoi, for example, has introduced a package of measures, including flow restrictors in showers, rainwater harvesting facilities and water sewage treatment plants at its hotels in India.

There is also a shift towards local sourcing of products and services. Local hotels seeking “green” building certification under BREEAM (Building Research Establishment Environmental Assessment Method) or LEED, for example, will have to meet specific local procurement criteria. Some early-stage vendor databases exist to help in that process.

In China, for instance, engineering polymer-maker Bayer Material Science catalogues reputable producers of environmental equipment as part of its EcoCommercial Building Programme.

The necessary support mechanisms to promote sustainability certainly exist in BRIC countries. In addition, international investors¬—including hoteliers—are arriving in increasing numbers with the know-how in sustainable policies and practices, together with the business motivation to share their knowledge and help change attitudes, actions and policies. BRIC governments are providing regulatory and financial incentives to go green.

And domestic firms are offering innovative solutions that can be copied and potentially brought to scale. Seize all three and BRIC companies could well emerge as sustainability leaders. The world is watching, and hoping they will.

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