Building a Sustainability Index for Hospitality Purchasing

4/30/2012 By JoAnna Abrams

Hotel executives are constantly reviewing cost-benefit analysis throughout their properties: Will the addition of a particular guest amenity pay for itself in an incrementally higher average room rate, or more nights sold? Will the investment in a new property management system deliver solid returns through better revenue management or inventory planning?

There are some investments hoteliers need to make, which are not as easy to quantify, but yet are among the most significant decisions made today. What sustainability initiatives should you implement in your hotels? Which ones deliver the greater return? Installing an energy efficient HVAC system? Solar panels? Furnishings made from recycled content?

A recent study of 5,000 Expedia consumers found that 75 percent define sustainability as building, furnishing and operating hotels in ways that are “better for the guest, better for the community and better for the planet.” For the vast majority of consumers, hotels focused on energy efficiency, water conservation and waste reduction may be helping the planet, but are not directly benefiting the guest.

Operational Efforts Expected

In fact, research with Fortune 1000 corporate travel executives*, responsible for more than $10 million in annual hotel contracts, revealed operational sustainability efforts are expected as “smart business.” In other words, if your hotel doesn’t have operational sustainability efforts in place, it’s a negative but don’t expect it to result in increased revenues.

However, response changes completely when factoring in sustainable furnishings and supplies. Compared to a hotel with operational sustainability efforts, 90 percent of consumers will choose a hotel with room furnishings and supplies that contribute to guest health and well-being (e.g. eliminating toxins, minimizing allergens and improving indoor air quality).

This is great news, but will they pay extra for it? Most hoteliers believe it costs more to purchase such products. Increasingly suppliers are able to provide significant sustainability benefits for both the hotelier and the guest without increased costs. When viewed through the lens of product lifecycle cost-benefit analysis, hoteliers are realizing purchasing sustainable products can deliver efficiencies, contribute toward reducing the environmental impact of their properties, and provide the basis for gaining market share by telling their story.

Lifecycle Cost-Benefit Analysis

The lifecycle assessment of a product looks at key existing performance drivers such as durability, longevity and health in addition to measures such as production, distribution, packaging, and resources required to use and maintain the product. The win-win is a product delivering on key performance drivers, and positively contributing to the guest experience while at the same time reducing the emissions, energy, water and waste associated with producing, transporting, installing, using, and maintaining it.

What is the lifecycle impact of the products, goods and materials you purchase for your hotels? And how can greater knowledge of that impact help you make smarter purchasing choices?

Owners and managers who care about their bottom line, and the environmental impact of their hotel, whether as a result of personal values, local incentives, regulatory requirements or stakeholder demands, are looking for trusted, independent validation of the sustainability impact of the products they purchase, and the manufacturers who produce them.

Too Many Certifications to Sift Through

With more than 300 eco-labels and certifications covering sustainability attributes ranging from greenhouse gas emissions to recycled content and beyond, gathering this information is overwhelming.

In response to the need to provide easy access to meaningful, independently validated information, and to help hoteliers improve their own sustainability performance, the Hospitality Sustainable Purchasing Consortium has created a sustainability scorecard for suppliers and the products they sell. The HSP Consortium includes almost 30 leaders including brands, architects, designers, purchasing firms, the USGBC, and suppliers from more than 12 different FF&E and OS&E product categories.

Known as the HSP Index, this scorecard provides purchasing decision makers with information on the efforts and accomplishments of suppliers in the areas of Corporate Social Responsibility, Environmental and Product Sustainability.

Evaluations of suppliers look at company policies and practices, and efforts to reduce greenhouse gas emissions and energy consumption, conserve water, and minimize waste throughout company operations.

Sustainability of products is measured following a lifecycle framework, which evaluates the impacts of a product from “cradle to grave.” Rather than focusing on a product as “green” because it contains recycled content, the analysis comprehensively evaluates the product raw materials, production practices, packaging, distribution methods, product disposal at the end of its life, and how the product’s performance positively impacts the user…hotels and their guests.

Four Categories of Sustainability Performance

Knowing that time is money for all, MindClick’s HSP Index is designed to provide supplier sustainability information in a way that addresses the needs of hoteliers and purchasing stakeholders. As such, four categories of sustainability performance have been developed:

Better for the Guest evaluates the impact of suppliers’ operations, products and services on guest health focusing on efforts such as those that improve indoor air quality, help reduce allergens and minimize product toxicity.

Better for the Community assesses suppliers’ economic, social, and environmental impacts as they relate to relationships in the workplace, the marketplace, the supply chain, the community, and the public policy realm.

Better for the Planet measures suppliers’ efforts to protect the environment and preserve resources through its operations, products and services as reflected in its carbon, energy, waste, and water footprints.

Better for the Hotelier measures the positive contribution of suppliers’ operations, products and services to improving a hotel’s sustainability, guest satisfaction and business performance.

How do we use the results of evaluations of sustainability efforts to provide purchasing stakeholders with this information? Let’s walk through an example using the first three components of the product lifecycle framework.

Raw Materials

The choice of raw materials in a product has a significant impact on the “Better for the Guest, Better for the Community, Better for the Planet” evaluation. The “ingredients” used may have a direct impact on the health of the user as well as on the environment and the local community.

Those made with rapidly renewable materials—which can be regenerated in less than 10 years, or which are made from recycled or recyclable materials—can provide benefits to consumer health while at the same time minimizing the negative impact to natural resources.

Locally or regionally sourced materials contribute to reducing greenhouse gas emissions associated with distribution and can help the local economy.

How is this “Better for the Hotelier?” In the MindClick Expedia Consumer Sustainability Engagement Study conducted with 5,000 Expedia consumers in January of this year, it was found that three out of five consumers will factor the indoor air quality/health impact of a room into their purchase decisions. No other sustainability effort by hotels comes anywhere near this in impacting purchase intent.

Production

Better for the Hotelier: The production stage provides suppliers the opportunity to improve efficiency through sustainability. This improved efficiency typically results in cost savings, which can then contribute to meeting customers’ needs whether through pricing or through investing in innovation to develop products that better meet hoteliers’ needs.

Better for the Planet: Not only is reducing energy consumption, minimizing/diverting waste and conserving water smart business, it also provides suppliers a competitive advantage when competing for share of market, especially when “greening the global supply chain” is stated as an important goal for the leading brands.

Better for the Community: Additional sustainability standards include production in facilities that support freedom of association, elimination of compulsory labor, child labor, and discrimination generally.

Packaging and Distribution

Better for the Community, Better for the Planet, Better for the Hotelier: Sustainability in packaging means minimizing the energy and materials used, use of pre and or post-consumer recycled materials, and materials that are sourced locally. It also covers the capability for packaging to be reused, recycled or disposed of, in an environmentally preferable manner. Given the focus on reducing waste at hotels, looking at suppliers’ approach to packaging aligns the efforts of suppliers and hoteliers for mutual benefit.

Sustainable distribution utilizes fuel-efficient options in transporting products from manufacturer to end user and looks at alternative routing to reduce greenhouse gas emissions.

Packaging optimization efforts, often done to reduce costs, can be a significant contributor to sustainability simply by reducing the amount of packaging used.

Conclusion

As shared in the examples above, the goal of the Index is to align the efforts of suppliers with the needs of hoteliers to create value for all. Sustainability is here to stay not because it is “green” but because global organizations are realizing real value in improving business performance through efficiency, cost savings, and market differentiation.

By evaluating, validating and translating the sustainability performance of suppliers and the products they sell, MindClick’s HSP Index provides the industry the knowledge needed to furnish and supply hotels in ways that are “Better for the Guest, the Community and the Planet.”

*MindClick SGM July 2010 survey of 100 Fortune 1000 corporate travel executives from a cross-section of industries—manufacturing, technology, business services, financial services, healthcare, defense, retailing and more.

More information on how to join the HSP Consortium and access to the HSP Index can be found at www.hspiconsortium.com. JoAnna Abrams is the CEO of MindClick SGM. Reach her at jabrams@mindclicksgm.com.


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