MANAGEMENT

SKILLS
MANAGEMENT FOUNDATIONS OF IN HOSPITALITY INDUSTRY
FOUNDATIONS
OF

MANAGEMENT
Chapter 5: Managing for Sustainability

Sustainability
Sustainability
The ability of a company or organization to meet the needs of the present without exhausting natural resources or damaging the environment.

Sustainable Business
Any organization that participates in environmentally-friendly activities while maintaining a profit.

Green Businesses
Green Business Practices
Generic term for environmentally-friendly business practices, such as conservation of water and energy. Play a large role in sustainability initiatives. Companies that employ them are often said to be going green, being green, or greening their business

Renewable Resources
Renewable Resources
Natural resources that are replaced by natural processes at a rate comparable to or faster than their rate of consumption. Wood, paper, and leather may all be renewable if harvesting is performed in a sustainable manner.

Perpetual Resources
Inexhaustible resources such as solar radiation, tides, winds and hydroelectricity.

Business and the Environment: Conflicting Views

The Win-Win Mentality
Being green" is a catalyst for innovation, new market opportunities, and wealth creation. Actions can be taken that benefit both business and the environment.

The Dissenting View

Spending money on environmental problems does not provide full payback to the firm. The belief that everyone will come out a winner is nave.

Complying with Environmental Regulations

The financial costs of complying with environmental regulations are steep.
GM spent $1.3 billion to comply with California emissions requirements. At Bayer, 20% of manufacturing costs were for the environment about the same amount as for labor. The Clean Air Act was expected to cost U.S. petroleum refiners $37 billion, more than the book value of the entire industry. California's laws have caused manufacturers to move to Arkansas or Nevada. Environmental regulations were once considered a threat to the survival of the chemicals and petroleum industries.

A More Balanced View

Businesses must weigh the environmental benefits of an action against value destruction.
Don't obstruct progress, but pick environmental initiatives carefully. Shareholder value, rather than compliance, emissions, or costs should be the focus of objective cost-benefit analyses. Such an approach is environmentally sound and sustainable over the long term.

Businesses have the resources and the competence to bring about constructive change.
This creates opportunity if well managed for both business and the environment.

Why Manage with the Environment in Mind?

Legal Compliance
U.S. environmental laws govern water, air, hazardous materials, and public disclosure. Government regulations and liability for damages provide strong economic incentives to comply with environmental guidelines.

Why Manage with the Environment in Mind?

ISO 14000 Standards
A family of voluntary standards developed by the International Organization for Standardization (ISO). Provide a framework for a strategic approach to an organization s environmental policies, plans and actions.

Why Manage with the Environment in Mind?

Cost Effectiveness
Short-run: Companies are realizing cost savings from repackaging, recycling, and other approaches. Long-run: Companies may avoid paying damages or upgrading technologies and practices when laws change down the road.

Cost Effectiveness
Other Cost Savings
Fines, cleanups and Litigation lower raw materials costs reduced energy use less expensive waste handling and disposal lower insurance rates

Why Manage with the Environment in Mind?

Competitive Advantage
Corporations can channel their environmental concerns into new opportunities and producing higher-quality products that meet consumer demand. Companies that fail to innovate in this area will be missing a competitive disadvantage. Environmental protection is a major export industry.

Why Manage with the Environment in Mind?

Public Opinion
The majority of the U.S. population believes businesses must clean up, but few people think businesses are doing it well. More than 80 percent of U.S. consumers consider environmentalism in making purchases. Companies recover public opinion very slowly following an environmental disaster. Adverse public opinion may affect sales and the firm's ability to attract and retain talented employees.

Why Manage with the Environment in Mind?

Long-Term Thinking
Economic arguments
It is the responsibility of management to maximize returns for shareholders, implying the preeminence of the short-term profit goal. Attention to environmental issues enhances the organization's long-term viability because the goal is the long-term creation of wealth for serious investors in the company.

Why Manage with the Environment in Mind?

Long-Term Thinking
The Tragedy of the Commons
Environmental destruction that results as individuals and businesses consume finite resources (the commons ) to serve their short-term interests without regard for the long-term consequences.

Carrying capacity
The limited ability of a finite resource to sustain a population without being destroyed. Examples of finite resources include clean water, air, and land.

Why Manage with the Environment in Mind?

Long-Term Thinking
The Tragedy of the Commons
The solution is to make choices according to longversus short-term consequences.

In many ways, we are witnessing this tragedy of the commons.

Carrying capacities are shrinking as precious resources become scarcer. Inevitably, conflict arises and solutions are urgently needed.

Why Manage with the Environment in Mind?

International Perspectives
Environmental problems are seen differently in various countries and regions of the world.
Holland, Germany and Denmark are among the most environmentally conscious industrialized nations. Poland, Hungary, the Czech Republic, and former East Germany are the most polluted industrialized nations.

Companies selling products in certain parts of the world must take growing consumer consciousness about environmental protection into account. There is a large growth market in Western Europe for environmentally "friendly" products.

What Managers Can Do

Systems thinking
Environmental considerations relate to the organization's inputs, processes, and outputs. Inputs
Include raw materials and energy. Environmental pressures are causing prices of some raw materials to rise, increasing production costs. Higher energy costs are causing firms to switch to more fuel-efficient sources.

What Managers Can Do

Systems thinking
Processes
Firms are considering new processes or methods of production that will reduce air and water pollution, noise and waste. Firms are incorporating technologies that control these by-products of business processes. Many companies keep minimal stocks of hazardous materials, making serious accidents less likely.

What Managers Can Do

Systems thinking
Outputs
Include the products themselves and the waste or byproducts of processes. Both have environmental impact.

Strategies for reducing environmental impact.

Recycling or reusing waste from manufacturing processes. Refurbishing and reselling products.

What Managers Can Do

Strategic Integration
Environmental issues should be addressed in a comprehensive, integrative fashion. First step: create the proper mindset.
The firm must come to see environmental concerns as a potential source of competitive advantage and an important part of a strategy for long-term survival and effectiveness. This sets the stage for Strategic Actions

What Managers Can Do

Strategic Actions
1. Develop a mission statement and strong values supporting environmental advocacy. 2. Gain support of top management. 3. Involve employees at all levels. 4. Establish a framework for managing environmental initiatives. 5. Engage in "green" process and product design. 6. Establish environmentally focused stakeholder relationships. 7. Provide internal and external education.

What Managers Can Do

Implementation
Preparations
Begin with a commitment by top management Commission an environmental audit Communicate the policy and make it highly visible throughout the organization. Have environmental professionals within the company report directly to the president or CEO. Allocate sufficient resources to support the environmental effort. Build bridges between the organization and other companies, governments, environmentalists, and local communities. Make employees accountable for any of their actions that have environmental impact.

Implementation
Implementation Strategies
1. 2. 3. 4. 5. 6. Cut back on environmentally unsafe businesses Carry out R&D on environmentally safe activities. Develop and expand environmental cleanup services. Compensate for environmentally risky projects. Make your company accountable to others. Make every new product environmentally better than the last. 7. Invest in green businesses.

Implementation
Public Affairs
1. Attempt to gain environmental legitimacy and credibility. 2. Try to avoid losses caused by insensitivity to environmental issues. 3. Collaborate with environmentalists.

Implementation
Legal Issues
1. Try to avoid confrontation with state or federal pollution control agencies. 2. Comply early. 3. Take advantage of innovative compliance programs. 4. Don't deal with fly-by-night subcontractors for waste disposal.

Implementation
Operations
1. Promote new manufacturing technologies. 2. Practice reverse logistics. 3. Encourage technological advances that reduce pollution from products and manufacturing processes. 4. Develop new product formulations. 5. Eliminate manufacturing wastes. 6. Find alternative uses for wastes. 7. Insist that your suppliers have strong environmental performance. 8. Assemble products with the environment in mind.

Implementation
Marketing
1. Cast products in an environment-friendly light. 2. Avoid attacks by environmentalists for unsubstantiated or inappropriate claims. 3. Differentiate your product via environmental services. 4. Take advantage of the Net.

Implementation
Accounting
1. Collect useful data. 2. Make polluters pay. 3. Demonstrate that antipollution programs pay off! 4. Use an advanced waste accounting system. 5. Adopt full-cost accounting. 6. Show the overall impact of the pollution reduction program.

Implementation
Finance:
1. Gain the respect of the socially responsible investment community. 2. Recognize true liability. 3. Fund and then assist green companies. 4. Recognize financial opportunities.

Opportunities for Making Your Business Sustainable

Air Quality
Indoor and outdoor air quality is affected by the type of energy we use to power our businesses and the equipment and products we rely on in the workplace.

Building Construction and Renovations

Building renovations are an opportunity to improve environmental performance while potentially realizing cost savings.

Opportunities for Making Your Business Sustainable

Energy
Energy use is one of the largest contributors to the environmental impacts of any facility. Reducing energy consumption will reduce your company s environmental impacts and energy costs.

Paper
By reducing paper use and purchasing paper products made with recycled fiber you will help to reduce the use and pollution of freshwater, reduce greenhouse gas emissions, and improve your company s bottom line.

Opportunities for Making Your Business Sustainable

Purchasing
The purchasing decisions your company makes have an impact on the environment. Consider the effects of the products you purchase and give preference to ecologically preferable options. Encourage the widespread adoption of environmentally responsible purchasing practices.

Opportunities for Making Your Business Sustainable

Transportation + Accommodation
Transportation is a source of pollution, smog, carbon monoxide, and harmful particles that can cause health problems. By reducing the need for automobile transportation and promoting environmentally preferable forms of transportation and accommodation your organization can reduce its contributions to these harmful effects.

Opportunities for Making Your Business Sustainable

Waste Management
By recycling, your company can keep products out of landfills and reduce the harmful environmental impacts associated with the extraction of natural resources. Choosing products manufactured from recycled content also helps reduce pollution from virgin resource extraction and processing.

Opportunities for Making Your Business Sustainable

Water Quality and Use
Your company can reduce detrimental impacts on water quality by limiting the use of toxic chemicals, pesticides and fertilizers, and by using more grass and gravel on your property to absorb and filter pollution. Water conservation strategies can help ensure that future generations have access to the water they need, while saving your company money.