Sustainable Business Model: What Every Business Leader Should Ask Themselves
Although more and more companies seem to be acting on sustainability, the results are scant. How can business leaders pave the way to sustainable business models?
Corporate Social Responsibility (CSR) and sustainability have become increasingly important issues for a wide range of corporations. There is a growing awareness of the impact of business practices on the world environment, especially from the consumer side. Yet, companies are still resisting making social, economic and environmental sustainability a top priority.
Many hospitality companies are quite simply reluctant to embrace sustainable management. Most lack even reporting on their CSR activities, despite the existence of official reporting systems such as GRI. Companies nowadays mention the United Nations Sustainable Development Goals (SDGs) in their annual reports, yet there's little concrete or convincing information available regarding the outcomes. Companies seem to be acting on the idea of sustainability but the end results are scant.
As part of the elective course on Corporate Social Responsibility and Sustainable Innovation taught by Dr Carlos Martin-Rios and Dr Peter Varga to final year Bachelor students at EHL, a panel discussion with industry and academic experts took place on October 2019 aimed at addressing the challenges and opportunities in CSR and sustainability from both the academic and professional perspective.
The panel tackled the most pressing topics of the two distinctive, yet interrelated fields: CSR and sustainable business models. Here we summarize the main takeaways extracted from the panel and the previous conversations with the panelists.
Panelists:
- Mrs. Lilian Roten, VP Brand Management at Swissôtel and Pullman,
- Dr. Guido Palazzo, Professor of Business Ethics and Vice Dean at UNIL,
- Dr. Stefan Gössling, Professor of Tourism at Linnaeus University (Sweden) and Professor in Human Ecology at Lund University (Sweden).
What are the Sustainable Development Goals?
According to the United Nations: "The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by all UN Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. The 17 SDGs are integrated—that is, they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability."
SDG Integration from United Nations on Vimeo.
What are the main challenges to truly get firms committed to CSR?
The large majority of companies has a longstanding tradition of adopting CSR policies. In many cases each company comes with a dedicated department to deal with ethical and social responsibility matters, yet CSR efforts have seemingly failed to solve the structural problems in society. We posed the question to our panelists.
Walking the CSR talk
Most companies are comfortable with some level of engagement with CSR, yet they struggle with walking the talk. According to Dr. Guido Palazzo - who believes CSR is obsolete and is actually skeptical of its role -
The primary focus should not be on adding a bit of CSR to the usual way of conducting business, but rather on transforming radically companies' operations and purposes.
In fact, Dr. Palazzo has been highly critical with the otherwise popular "Creating shared value" (CSV), a business concept coined by Michael E. Porter and Mark Kramer in their 2011 Harvard Business Review.
Thomas Dyllick, Professor of Sustainability Management at the University of St Gallen, wrote in Financial Times about Palazzo's research "Contesting the Value of 'Creating Shared Value' (CSV)." "It is a brilliant dissection of the limitations and shallowness of CSV made it very clear to me that CSV was not the answer to this fundamental debate."
What factors hinder the implementation of a CSR strategy?
According to our panelists, it's the big scale companies, owners and suppliers who are the more challenging actors to get on board concerning CSR principles.
One way to increase allegiance to CSR is to spread commitment across all levels in the organization. According to Lilian Roten, in global corporations, company-wide projects seem to have the highest social impact when supported by the individual efforts of each local establishment.
Similarly, Dr. Palazzo suggests that each CSR measure in place should be tackled with a global mindset, fostering accountability at different levels of the organization—from individual employees to top-level managers to external industry players - including suppliers, vendors, partners, customers, etc...
What becomes clear is that CSR is often too narrow in its focus on social, ethical and philanthropic actions, insufficient to address the global sustainability challenges we face.
How to pave the way to Sustainable Business Models?
Sustainability often relates to long-term goals. It addresses the greatest global challenges related to inequality, poverty, environmental degradation and climate change. Organizations increasingly recognize that these challenges are already impacting their operations, the industries and markets they operate and the individuals and societies they serve. Sustainable business models and sustainability practices describe effective strategic and operational responses by business organizations to these challenges.
As one of the world's largest and fastest growing business activities, the tourism and hospitality industry has a responsibility to foster sustainable business models and to incorporate sustainable SOPs. The shift requires profound changes in the way we do 'business as usual'. Sustainable businesses infuse their strategic mindset with a better balance between short and long-term objectives. They involve all stakeholders along the value chain in the decision-making and problem-solving processes. Also, each business decision related to value creation is managed through the prism of sustainable value: financial, social and environmental.
Committing to sustainable ambitions
The transition toward sustainable business is not without obstacles. Our industry faces major barriers to adopt a sustainable mindset, including the decreasing cost of traveling and accommodation, rising travel frequency and shorter length-of-stay.
According to Stefan Gössling:
The major challenges for sustainable tourism are
a) the climate imperative,
b) the transformation of the global food system, specifically in tourism and hospitality, and
c) the reconsideration of the economic models on which tourism is based.
This will mean significant changes in cost structures as a result of carbon taxation and changes towards more regional economic approaches to tourism.
When asked about his view on the level of commitment of tourism companies toward sustainable innovation and the main challenges to turn these companies into truly sustainable innovative firms, Gössling adds:
Tourism companies have not shown much ambition to become more sustainable. There are some independent companies and larger brands that have gone through major efforts to green their operations, but none of the large players has ever seriously considered sustainability, specifically not with regard to climate change.
Coordinating sustainability at all levels
Another challenge for a successful transition is the complexity of coordinating at multiple levels in the organization.
According to Ms. Roten, the focus at Swissôtel is on local or regional sustainability projects. "When it is closer to home, efforts are often long-term, and hence projects also seem to be more successful." Hotels should have the freedom to act locally, so their employees could assess the impact of such efforts, since measuring the effects is key in the process.
Getting management on board is often not the most difficult side of my job. Owners and suppliers are more challenging. Each hotel wants to support local charities, participate in local and regional sustainability projects. This means that for company-wide projects, (which is usually better for companies like Accor), we have to bundle our efforts and then collect a certain amount of money from each hotel. Global organizations are then the beneficiaries.
"We then have to make sure that communication also targets our owners. This means that our General Managers must be supported in their budgeting processes so that everyone understands the benefits - especially for the individual hotel. Often office management at the brand level do want to push for sustainable management practices but we also need to get our suppliers and our guests on board. A good discussion point is the usage of mini bathroom care products, where we struggle to get support from our suppliers as we push to move towards dispensers."
The role of investors and consumers
Finally, when considering the other potential actors of sustainability, Guido Palazzo believes that "two stakeholders have so far not yet jumped on the bandwagon of sustainability: investors and consumers."
The use of certifications or reporting of SDGs is broadly misused by companies and is thereby confusing for consumers. Still, isn't it in the hands of the consumer to really make a change? Despite all the information available to them, behaviors aren't really changing and customers should be involved in companies' sustainability initiatives.
According to Dr. Palazzo: "Companies need to include the education of consumers into their sustainability activities (in their very own interest). Currently, consumers don't care, but Greta Thunberg's initiative is about to change this."
Sustainability and hospitality are hot topics, and as in every actual topic there are usually a lot of misunderstandings and misperceptions. Our panelists acknowledged that tourism contributes to peace in the world, but certain business mindsets and customer ways of traveling are not ok. All panelists agreed that awareness is key to rethinking this topic in a trans-disciplinary way.
Information by itself doesn't drive change, you must inspire people in order to drive change.
Need more resources on the travel, tourism and hospitality industry?
Hospitality Industry - All Your Questions Answered
Research:
- Crane, A., Palazzo, G., Spence, L.J., & Matten, D. (2014). Contesting the value of "creating shared value". California management review, 56(2), 130-153. https://doi.org/10.1525/cmr.2014.56.2.130
- Raub, S., & Martin-Rios, C. (2019). "Think sustainable, act local"-a stakeholder-filter-model for translating SDGs into sustainability initiatives with local impact. International journal of contemporary hospitality management 31, 2428-2447. https://doi.org/10.1108/IJCHM-06-2018-0453
- Porter, M.E., & Kramer, M.R. (2019). Creating shared value. In Managing sustainable business (pp. 323-346). Springer, Dordrecht.
- Scott, D., Hall, M., & Gössling, S. (2012). Tourism and climate change: Impacts, adaptation and mitigation. Routledge, 2012.
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