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June 10, 2014

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Hospitality industry can take steps to be ‘greener’

MANY enterprises in the hospitality and travel industry (hotels, restaurants, airlines, cruise ships) have taken steps to create programs focused on environmental sustainability. Initiatives within these programs have focused on consumer-facing efforts like towel reuse programs, as well as operational initiatives such as reducing energy use or water usage.

As organizations consider their next steps for sustainable initiatives it is natural to focus on the company’s supply chain. In other industrial segments like manufacturing or retail, the largest opportunity for improving sustainability performances such as reducing carbon emissions, water use, toxic chemicals and addressing social and human rights concerns is in its global supply chain. For example, up to 60 percent of a manufacturing company’s carbon footprint is in its supply chain. For retailers, the figure is closer to 80 percent along with exposure to human rights and social issues.

The hospitality industry embodies unique characteristics requiring examination of supply chain management under a different lens.

The global nature of competition and desire to identify additional cost savings motivated a change in traditional “purchasing” to a focus on “supply chain management.” In the 1980s, manufacturers and retailers realized they could benefit from collaborative relationships versus adversarial “purchasing” relationships with their suppliers. Companies began to realize they could no longer effectively compete in isolation of their suppliers and other entities in the supply. Additionally, work on supply chain management has been inspired by many tangential issues including quality management, advances in technology, notions of materials management and integrated logistics, and a focus on industrial markets and networks.

The potential benefits of improved supply chain performance are as compelling as those achieved through a direct focus on sustainability through a company’s own operations. The business case for focusing on substainable supply chain management (SSCM) is based on similar categories for focusing on sustainability. Organizations utilizing SSCM can enjoy economic, environmental and social benefits including: cost savings, reputation management, improved access to capital, tax breaks and credits, new innovation, employee engagement and environmental benefits.

Ultimately, companies can better protect their reputations from human rights and environmental violations, increase productivity and save on costs related to energy, water use and reductions in waste and toxic chemical use through initiatives focused on SSCM.

While the hospitality industry can learn from efforts of manufacturers or retailers like Amazon, Hewlett-Packard, and Wal-Mart, the reality is that planning for SSCM for a product is different from a service. In hospitality, the “product” is not as easily standardized; restaurants prepare multiple menu items with some flexibility and the menu (or product) frequently changes. In hospitality our product is perishable; if an airline seat goes unsold, the “product” cannot be stocked for future use. In hospitality, the product is consumed where it is purchased (in situ); a hotel customer must be present to receive the “product.” In hospitality the product is a package of tangible products and intangible services; in many cases, the complete product cannot normally be examined prior to their purchase. Finally, some hospitality products, like tours, represent a coordination-intensive bundle where different companies combine their products/services (transportation, sightseeing, dining, shopping, accommodation, etc.) to form a final product.

These issues mean the hospitality industry cannot simply cut and paste SSCM solutions from retailers or manufacturing to their own operations.

The next wave

Across the hospitality industry, companies are making great strides in re-thinking the supply chain and its management. Tomorrow’s Value Rating 2009 survey favorably called out Accor, InterContinental Hotels Group, and Marriott as companies where sustainability management is seen as important for protecting and creating commercial value.

Cruise ships from large lines like Royal Caribbean International or Princess Cruises to smaller companies like Yachts of Seabourn have addressed resupplying cruise ships in a more sustainable fashion, a very complex and arduous task. Orient-Express’ Palacio Nazarenas, in Cuzco, Peru, attempted to source nearly everything in Peru, from its linens to its ceramics and artwork. Hilton Worldwide utilizes a mattress recycling program that recycles spent mattress materials into household products. In partnership with DH Hospitality, materials like steel springs will become tools, cars and construction materials, wood will become particle board shelving and tempered flooring, cotton fibers will become oil filters and stuffing while quilt scrap will become carpet padding. Through the program, Hilton will recycle 85 percent of the mattresses used in their hotels. In 2012, Peninsula Hotels stopped serving shark fin dishes in its nine hotels, including those in China, where it is considered a delicacy, to help preserve the marine ecosystem. Ceasars Entertainment introduced its CodeGreen Scorecard in 2010 and updated it in 2012.

These efforts and others within the industry are admirable and valuable. Every change in the supply chain can create positive reverberations. All hospitality companies should be encouraged to view its procurement considering: Whether a purchase is necessary at all, what products are made of, under what conditions they have been made, how far they have traveled, their packaging components, how they will be used, and how they will be disposed of.

However, a seismic shift will only occur when the industry begins to design the hospitality product differently. Many resource needs are pre-determined based on the design of the product, like the type of shower heads in the room. Many of these design issues are literally “built into” the product in the form of the built environment — building, the room size, fixtures. While some aspects of the “built” environment can be renovated and rebuilt, it is critical to design hospitality products considering life cycle assessment and life cycle costing. Life-cycle assessment, also known as life-cycle analysis, is a technique to assess environmental impacts associated with all the stages of a product’s life from raw material extraction through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling. It looks at a product from a cradle-to-grave perspective. Life-cycle costing is a technique that establishes the total costs of purchasing a product or service from cradle to grave by asking questions relating to costs at each stage of its life cycle.

The physical design of new hotels and new restaurants is critical, as is the design of processes and activities that occur within that establishment. Consideration of landscaping, lighting, internal operations like housekeeping and food preparation is also critical. For example, EcoLab has worked closely with Marriott to come up with a low temperature water laundry system, the Aquanomic laundry system, which reduces water and energy consumption by up to 40 percent. This demonstrates how innovation and working collaboratively with suppliers can result in better design and better resource utilization. Both gained when they partnered on this new laundry system.

Strategic decisions involve long-term issues such as demand planning, strategic alliances, outsourcing, supplier, selection, and new product development. By combining strategy and design into the SSCM process, the hospitality industry has the opportunity to leapfrog other sectors in their supply chain practices. That is the next “big” step for sustainable supply chain management in this industry.

Susan Tinnish is dean of School of Hospitality Management, Kendall College. The article is abridged due to space limitation.




 

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