Is 2020 the Year of Sustainable Business in Hospitality?
2019 saw an increase in activities related to climate change and in 2020, hospitality as well needs to start the process to become a sustainable business.
By Samuel Wich, Student at Ecole hôtelière de Lausanne obtaining his Bachelor in International Hospitality Management
From Greta Thunberg sailing across the Atlantic Ocean to attending a conference in New York, to protesters all around the world taking to the streets in peaceful demonstrations - 2019 saw a huge uptick in activities related to climate change and environmental issues.
Green Is the New Black
A 2019 study by Harvard Business Review found that for sales in 90% of the observed Consumer Packaged Goods categories, brands that were marketed as sustainable were growing faster than traditional competitors. This rise in customers' attention to environmental issues has been picked up on by large companies in virtually any industry. As a consequence, the use of buzzwords such as "sustainable", "eco-friendly" and "green" has skyrocketed in recent years, as brands are trying to highlight the ecological advantages of their products or services.
Adidas' recent pledge to use only recyclable polyester in their sneaker and clothing production by 2024, or forty-two major consumer goods brands (e.g. Häagen-Dasz, Tide & Gilette) coming together in the Loop TerraCycle project to provide households with zero-waste containers that are refilled only when needed are merely two examples of these "green" initiatives.
Hospitality as well as food and beverage companies also often focus their public messaging around these topics, promoting achievements in saving water, electricity or reducing greenhouse gas emissions either directly or along their supply chain. Truly impactful changes to the ways in which businesses operate tend to be rewarded by the public through a rise in popularity and consequently, sales.
A study by Just Capital, an outlet that ranks American companies on issues such as fair pay, equal treatment and ecological impact, found that companies that lead their competitors in terms of environmental performance also tend to enjoy a median Return-on-Equity that is 3% higher than that of their counterparts.
Furthermore, running an ethical and sustainable business is gaining importance in the fight for scarce talent. A survey by the Governance and Accountability Institute published this year found that 40% of millennial respondents had chosen an employer because of their sustainability performance. On retention, the responses were even clearer. Here, 70% of millennials answered that they are more likely to stay with a company with a strong environmental reputation and policy.
The Dangers of Greenwashing
With growing interest from various stakeholders in the way companies structure their business, companies that decide to participate in this "Green Marketing" tend to be under constant scrutiny by consumers. In their efforts to bolster public image and revenue overall, many firms are focusing on their engagement with communities and marketing messages around ecological themes.
Sadly, these initiatives hailed publicly as sustainable often just act as a smokescreen to divert public attention from business activities that remain, at their core, harmful to the planet. With more than two thirds of costumers ready to pay a premium on products that they consider environment-friendly, this trend is as understandable from a corporate perspective as it is troubling for consumers.
The heightened public sensitivity means that more and more firms get caught in their use of fluffy marketing terms and advertisements that paint them in a greener light than their activities merit. The confusion and deception felt by consumers that are victims of greenwashing can lead to decreased brand loyalty and to a loss in brand equity. More than ever, 2020 will be the year for companies to stay true to their environmental policies and messaging.
Changes to More Than Just Your Business
"While changing to renewable energy from power factories or replacing all light bulbs in retail outlets with low-energy consumption LEDs are commendable acts, players in all industries will have to do more in coming years. Traditional linear supply chains where raw material is sourced, processed in factories, consumed and then discarded to end up on landfills or, worse yet, the oceans, have proven to be a main driver to the declining health of our planet."
A shift towards a circular economy, where products are not only made from recycled and recyclable substances but consumers are also actively educated, encouraged and assisted to re-use materials, is inevitable for any business that wants to be a true driver for positive change. These practices are a staple with many environmentally-responsible start-ups. As part of their sustainability award program, "The Circulars", the World Economic Forum (WEF) recognizes impactful innovations in sustainability.
Start-ups like the British firm Olleco, which collects food waste from outlets such as restaurants, hotels or food manufacturers and turns it into biofuel that is returned to customers are promising role models to everyone wishing for more sustainable business and consumption cycles.
Innovative actions in climate protection are not limited to start-ups. Multinationals like the beverage giant Anheuser-Busch InBev are also praised for their efforts. On their page about "The Circulars", WEF notes that "the world's largest brewer wants 100% of its products to be in packaging that's returnable or made from majority-recycled content by 2025. Already nearly half of its drinks are sold in returnable glass bottles." The company has also introduced a new protein-rich beverage made from spent grains that were previously exclusively used as animal feed. Initiatives such as this one will be necessary for leaders in all industries, including the major players in hospitality, to ensure continued success and healthy ecosystems.
Green Initiatives by Hospitality Businesses
According to a publication by the Cambridge Institute for Sustainability Leadership, the tourism industry is responsible for about 5% of current greenhouse gas emissions. With numbers of travelers and hotel rooms booming, this number is set to increase by 130% by 2035.
"The immense impact on a global scale and the great extent to which hospitality businesses are exposed to changes in the environment puts the industry in a position where a shift towards more sustainable practices becomes an ecological, economical and ethical necessity."
Due to the heavy investments needed to update existing locations and inherently low profit margins compared to other industries, hotels and restaurants have been rather slow in adopting sustainable business practices. By 2050, hotels will need to reduce emissions per key by 90% to be in line with the Paris Climate Agreement. Public and political pressure on the sector is rising to implement drastic changes in coming years. Many hotel and restaurant chains are responding, but the path to a clean hospitality industry remains a long one. The steps that can be taken by businesses and what sustainable hospitality really means will be discussed in more detail as part of a later article by this author.
Still, some companies that have already taken decisive steps towards a greener operation are worth mentioning already here. In October 2019, the latest SAM Corporate Sustainability Assessment was published, ranking the most sustainable hotel chains worldwide.
The Spain-based Meliá Hotels International was awarded the highest possible points in criteria such as Climate Strategy and Social Reporting.
In December 2019, Meliá was also the first International hotel chain to make use of environmental blockchain technology to offset its carbon footprint. In collaboration with Spanish start-up Climatetrade, it will also allow its loyalty program members to spend their credits on initiatives against climate change "which help develop, protect and conserve natural ecosystems".
1 Hotels is another great example. The boutique hotel chain with locations on both US coasts has an impressive track record. Each property pays a lot of attention to ecological aspects when designing their buildings and selecting furniture. Much of the furniture is made of reclaimed wood, the F&B operations make use of seasonal and local produce, and staff members as well as guests are encouraged to learn about and engage in environment-friendly practices.
The Time Is Now
Transforming the way all hotels and restaurants make use of Planet Earth's resources may seem like a gargantuan task to both regulators and hospitality operators. But in 2020, more than ever, both the economic and ecological benefits of a sustainable business are indisputable and the time has finally come to start the process of turning every last room on this planet into a sustainable accommodation that even Greta would be happy to call home.
Samuel WichMore from Samuel Wich
Phone: +41 21 785 1354