Green, Responsible And Competitive Hotels: Environmental Managment In Green Globe Certified Hotels In The Caribbean And Mexico Albert Schram, Maasstricht University Paper prepared for the 10th Annual ICHRIE International Council on Hotel, Restaurant and Institutional Education, Summer Conference & Marketplace 28-31 July 2010. Caribe Hilton, San Juan, Puerto Rico USA Abstract (max. 100 words) A theoretical framework for environmental management is offered that takes into account energy and resource efficiency, human resources management, and stakeholder relations in the context of CSR. A survey was held among a 55 Green Globe certified hotels in Mexico and the Caribbean. The program is evaluated positively, and perceived by all respondents as having a good return to investment. As a recommendation, the program could try to publicize the best practices among its members, since we see that not all hotels manage to take advantage of all the full set of opportunities an EMS can offer.

1. Introduction In the past environmental management in the hospitality industry was considered of secondary importance, since most of the primary operations cause relatively minor environmental impact. Usually only the golf course, the food and beverage division and the laundry operations, in so far they are present on the site, produce a significant environmental impact. Lately, the expectations of guests have increased in this respect, and are demanding that hotels go beyond “laundry on the floor” and “switch out the light” type of measures. Now many hotels now are pondering how far to go with all that “greenery”? How to integrate environmental management systems into a broader framework corporate social responsibility policy while enhancing the competitive position of the hotel? In this paper we wish to offer a theoretical framework, and an approach to the development of an integrated CSR strategy that takes into account energy and resource efficiency, human resource management and stakeholder relations. In the second part of the paper, the results of a survey held in Spanish and English among a 55 Green Globe1 certified hotels in Mexico and the Caribbean are 1 See http://www.greenglobe.org Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 1/9

examined. Finally, some conclusions and recommendations are presented.

2. Theoretical Framework In order to reap the full benefits of an environmental management systems (EMS), a company should integrate it in its business strategy, and place it in the wider framework of the company's social responsibility. CSR is a confusing and inherently controversial term, and this integration is far from a straightforward exercise. For this reason, today some prefer to speak of Environmental, Social and Governance Activities. In addition, CSR is a moving target, since the definition of the scope and content of CSR differ in different societies and is constantly evolving.1 The delimitation of the responsibility of business vis-a-vis the state, and citizens is a central part the political debate in any democracy. Different societies have found different solutions. Global companies therefore need to localize their CSR policies and continuously update them. In general, CSR can be seen as voluntary, beyond compliance activities intended to deal with an organizations social and environmental impacts, according to the definition of the European Commission.2 Interestingly, with the recent publication of the ISO26000 guideline the old term “social responsibility” without the corporate part is being used again, since in the ISO logic norms and guidelines can be applied to any organization. Although there is no agreement over the content or scope of CSR, three dimensions can be distinguished: the motivating principles and drivers, the business processes and activities, and the impacts. Business processes related to CSR can be divided up into strategic assessment and alignment, stakeholder management and issue management. The recently published ISO 26000 norm outlines seven main core subjects, each divided into several issues: organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, community involvement and development. Of those core subjects, for a company its impact on the environment is probably the easiest to measure, and therefore to manage. Concerning the impact of CSR there are numerous studies on the possible relationship between CSR activities and financial performance, none of them conclusive.3 Some have suggested that CSR activities have no significant role to play when there are no large distributional issues, and not strong externalities, or difference between private and social costs, which are normally associated 1 Albert Schram, “Policy Review of Corporate Social Responsibility Research in the 6th Framework Programme. European Commission DG Research” (European Commission, DG Research, 2009). 2 European Commission, Implementing the Partnership of Growth and Jobs: making Europe a pole of excellence on Corporate Social Responsibility. COM(2006) 136 final (22/03/2006) (Brussels: Commission of the European Communities, 2006). 3 S.A. Waddock and S.B. Graves, “The Corporate Social Performance-Financial Performance Link,” Strategic Management Journal 18, no. 4 (1997): 303-319. Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 2/9

with pollution.1 Despite the relatively low environmental impact of hotel operations, we contend that CSR activities have a role to play. First of all, during the construction phase environmental impacts are highly significant. Secondly, gains in operational energy and resource efficiency can be considerable, and in that sense environmental management is just a part of good management. In water scarce areas, for instance, a water savings and recirculation systems for the hotel and the golf course nowadays seems to be good practice. Thirdly, when hotels operate in societies with a high poverty rates the distributional issues associated with this can be addressed in a community relations program in order to prevent conflicts. Summing up the literature, financial benefits from CSR activities, including environmental management can emerge from direct resource efficiency gains, better risk management, enhanced reputation and better competitive position. There are also gains on the human resources management and stakeholders relations side: it can become easier to recruit and retain better performing personnel, reduction of conflicts and coordination problems with providers and other stakeholders, better relations with authorities, and unexpected side effects from better community relations. As a secondary effect, financial markets may recognize these positive impacts, and better access to capital can be obtained. These benefits can only be obtained when environmental and stakeholder management are integrated into the business strategy, and the understanding of managers of CSR issues is adequately aligned with the expectations of stakeholders.

1 Geoffrey Heal, “Corporate Social Responsibility: an economic and financial framework,” The Geneva Papers 30 (2005): 387-409. Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 3/9

Illustration 1: Benefits from strategic CSR

Environmental management as part of a company's management systems became popular in the 1990s with the ISO14001 norm. Currently, over 150.000 companies world wide have and EMS based on this norm, which is far more than any similar norm or guideline in this field. Compliance is verified by third-party auditors, who can certify the company for a number of years. Although in principle ISO14001 can be applied to any organization, large hotel chains have preferred to use proprietary EMS, which in general are not certified by a third party. Others have adopted EMS schemes that are developed especially for the hotel industry and focus more on customer experience, of which Green Globe is one of the principal ones. Environmental management is particularly relevant for hotels in the the Caribbean and Mexico, since here hotels are sometimes located near extremely sensitive eco-systems of global importance, such as coral reefs, and dry tropical forests. As a consequence, a hotel can seriously damage its reputation if it is perceived as damaging or not caring about those eco-systems. In the 1980s in Costa Rica , for example, one hotel chain famously had to change its building plans, and improve its water treatment systems after environmental activities denounced its building activities and plans.1 There is a long strand of literature focusing on the behavior of multi-national corporations to relocate in tax havens and avoid having to comply with legal systems which are perceived as too constraining. Although Royal Caribbean Cruises is mentioned, fortunately hotel chains are generally 1 “Barceló hotels & resorts afecta las condiciones de vida campesina en Costa Rica,” http://www.turismoresponsable.org/denuncia/0701_barcelo_costarica.html. Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 4/9

not included in this category.2 The literature on CSR and EMS in the hotel industry is not very extensive, but has grown in the last few years. A somewhat dated study comparing the hotel, banking and food and beverage industry's disclosure of social responsibility activities in Singapore observed that all three industries increased their disclosure efforts considerably over the 10 year period (1986-1995). In addition, it showed the hotel industry was most active in disclosing its social responsibility activities.2 There are some studies focusing on CSR activities of one hotel chain.3 A recent study of CSR reporting in the hotel industry find that the quality of the reports is uneven, and the Hilton Corporation provided the most detailed report.4 In a study for the USA limited to the Marriot, Starwood and Hilton hotels the link between CSR activities with customer satisfaction has been found to be weak.5 The authors provide an elegant and simple framework to test their hypotheses, and include numerous references to recent literature. Regression analysis with a sample size of 32 observations, however, is bound to generate low statistical significance, which in the end is a test of for sufficiently large samples. As the authors state in their conclusions, more research and more data are needed. Conversely, another comprehensive study focusing on the environmental practices of 301 Spanish hotels, found a strong correlation with environmental performance.6 Somewhat advance econometric results are used and the data sets are sufficiently large and of sufficient quality to give confidence in the results. To sum up this review of recent literature, the judge is still out on the relationship between EMS and different environmental and financial performance measures. What seems to be needed are more and better data, as well as studies reviewing the experiences of the hotel management itself with environmental management.

3. Findings So far 6 representatives of the 55 hotels reacted, but responses are still coming in. For now, the sample is too small and not representative of the population of all Green Globe certified hotels in 2 Gerald F. Davis, Marina v.N. Whitman, and Mayer N. Zald, “The Responsibility Paradox: Multinational Firms and Global Corporate Social Responsibility” (Ross School of Business Working Paper Series Working Paper No. 1031 April 2006, 2006), 16-17. 2 Eric W. K. Tsang, “A longitudinal study of corporate social reporting in Singapore. The case of the banking, food andbeverages and hotel industries,” Accounting Auditing & Accountability Journal 11, no. 5 (1998): 624-635. 3 Paulina Bohdanowicz and Piotr Zientara, “Corporate Social Responsibility in Hospitality: Issues and implications. A Case Study of Scandic,” Scandinavian Journal of Hospitality and Tourism 8, no. 4 (2008): 271-293. 4 Judy L. Holcomb, Randall S. Upchurch, and Fevzi Okumus, “Corporate social responsibility: what are top hotel companies reporting?,” International Journal of Contemporary Hospitality Management 19, no. 6 (2007): 465. 5 Seoki Lee and Cindy Yoonjoung H, “Corporate social responsibility and customer satisfaction among US publicly traded hotels and restaurants,” International Journal of Hospitality Management 28 (2009): 635-637. 6 Jose F. Molina-Azorın et al., “Environmental practices and firm performance: an empirical analysis in the Spanish hotel industry,” Journal of Cleaner Production 17 (2009): 516-524. Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 5/9

the Caribbean and Mexico. Fortunately, all respondents left extensive comments on their side, and some phone calls were made to ask for further explanations. Of the hotels which responded 4 were certified silver, and 2 gold. The hotels had an average number of room of 1.173 , a average high season rate of $183 and an average occupancy rate 74% in 2008. The respondents had quality management (4), or general management roles (2). It is interesting to see that most believe environmental management is very important for the hotel management, but less important for the guests. However, none have included questions about environmental activities in their customer satisfaction surveys, so this must be based on conversations with guests or other information. It would be recommendable to include questions on the perception of the environmental management of the hotel in the customer satisfaction forms, in order to acquire more reliable information from the customers. We can deduce from this that the drive to create an environmental management system has been largely internal, or driven by other stakeholders. Regarding the impact on the service level of the hotel of the EMS, most respondents see their efforts as in educating the guests and convincing the guest to collaborate with the energy saving program. One respondent describes how their hotel has given a more positive twist to this. In this hotel, some guests join in with annual coastal clean ups, monthly beach clean ups, and recycling contests. Although not all hotels may have a sufficient number o guests to develop similar activities, if they don't try it they will never know. Another opportunity for a hotel with a EMS is to use it as a competitive advantage in the labor market, attracting and retaining better qualified personnel. Only one hotel answers that they communicate to job candidates that they are a “more structured organization with a commitment to improve”. All respondents mention that indeed the program helps to retain better performing personnel since they offer more training than others. One also mentions all personnel performs better since they are more conscious of spending and costs. Regarding training, all respondents mention they have more structured and better documented training now. One respondent also states that training activities are now developed in cooperating with the surrounding communities. Regarding direct savings of resources, all respondents except one are explicit in that the continuous efforts to save energy and resources produce costs savings. Two respondent mention they decided to use a lighting and air conditioning system with movement sensors to save electricity. Waste management in the F&B division has also improved, according to all respondents. Half the respondents mention that it has led to changes in the operations of the reception division of the hotel. Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 6/9

Regarding the strategy and the competitive advantage, four respondents mention that the certification communicates. It also entails a promise to keep performing at the highest level in this field. Only one hotel reports that the certification has led to new forms of cooperation with other operators in the tourism industry. Given the limited number of certified firm, with whom cooperation would come more natural, this is hardly surprising. Finally, all respondents are very satisfied about the green globe program giving it an overall grade of 82%. As good business men they would like to see lower costs of the program, but they find it has an excellent cost benefit ratio. Most find it is too early to assess the long-term benefits. Ov erall ev aluation of the G reen G lobe Prog ram Categ ory A. D irect cos ts of certification B. Indirect cos ts of certification C. D irect benefits of certification D . Indirect benefits of certification E. Cost s av ing F. Attracting better personnel G . Retaining g ood pers onnel H. S tim ulating continuous im prov em ent I. S tim ulating innov ativ e practices J. Im prov em ent in env ironm ental perform ance Av erag e score

S core 3 .1 7 3 .5 4 .5 4 .5 4 .5 4 .1 7 3 .6 7 4 .1 7 4 .5 4 .5 4 .1 2

% S core 63% 70% 90% 90% 90% 83% 73% 83% 90% 90% 82%

D escription Av erag e G ood G ood G ood G ood G ood G ood G ood G ood G ood

Table 1: Evaluation of Green Globe program

It seems in particular in the integration of EMS into HRM policies can be leveraged to achieve higher benefits.

Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 7/9

4. Discussion Following our theoretical framework, the questions were divided into four groups: customers, personnel, operations, strategy, and evaluation of the Green Globe program. It seems this approach of focusing on the customer satisfaction, human resources management, and the direct savings in operations with the continuous improvement or innovation elements of the environmental management system is appropriate for the hotel industry. None of the respondents seemed to have problems understanding the questions and meaningful results were produced. The emails with the invitation to participate in the research were sent in November. Follow up calls were made in December and January. Some hotels sent the survey to headquarters, but so far none has replied. The may be a strong selection bias of hotels which are satisfied with the Green Globe program. For now, the sample size much too limited to draw any firm conclusions. The detailed answers give a detailed impression of the internal changes the Green Globe program brought about. Nevertheless, thanks to the extensive comments provided by the respondents, it is possible to obtain a general impression and produce some recommendations.

5. Conclusions and Recommendations The Green Globe program is perceived by all respondents as having a good return to investment, and many benefits in the area of improved environmental performance cost saving, and attracting better personnel. The respondents are also positive as to the programs effect on stimulating continuous improvement and innovative practices. As a recommendation, the program could try to publicize the best practices among its members, since we see that not all hotels manage to take advantage of all the full set of opportunities an EMS can offer, in the area of personnel, customer participation and community involvement, better energy management, and reduction of the environmental impact in the food and beverage division and laundry operations.

Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 8/9

Nu m b e r of G re e n G lob e A c h ie v e m e n t C e rtifie d h ote ls C ou n try B e n c h m a rk e d C e rtifie d C e rtifie d B ron z e G old Pla tin u m A n tig u a a n d B a rb u d a A ru b a 1 5 Baham as 1 B a rb a d os 2 B e liz e D om in ic a 1 D om in ic a n R e p u b lic 6 G re n a d a 3 Ja m a ic a 2 13 1 Me x ic o 2 2 S a in t L u c ia 3 T u rk s a n d C a ic os Is la n d s G ra n d T ota l 16 25 1

C e rtifie d G ra n d S ilv e r T ota l 1 1 1 7 1 2 2 4 1 1 1 6 3 8 24 14 18 3 1 1 29 71

Table 2: Green Globe Certified Hotel in Mexico and the Carribean

Albert Schram, Maasstricht University et al., Green, Responsible and Competitive Hotels: Environmental Managment in Green Globe Certified Hotels in the Caribbean and Mexico(HOTELS_ENVIRONMENT/Schram_Albert_Hotel_Environment.odt) pg. 9/9