Corporate Social Responsibiliity In The Hospitality Industry

Corporate Social Responsibility in the Hospitality Industry 1

Running head: Corporate Social Responsibility in the Hospitality Industry

Corporate Social Responsibility in the Hospitality Industry

Cecil J. Hopper

September 16, 2010


Introduction

The popularity of corporate social responsibility, or CSR, has gained steadily since the

1990s in response to the shareholder value revolution that swept the capitalist world earlier in

20th century (Programme, 2002). Philanthropic activities are common place and business ethics

is so widely regarded as essential to commerce that most MBA programs now require numerous

courses on the subject. In the hospitality industry, green promotions are immensely popular

because of the inversely proportional relationship between production and expenses. What is not

to love about a marketing strategy that actually decreases costs while increasing revenue?

However, like most things in life, with great success comes great responsibility and recent

studies indicate that businesses are failing to fulfill the commitment that comes with

implementing corporate social responsibility, and in particular, environmentally conscious

marketing campaigns. Are we seeing a new round of unethical business practice based on the

proven marketability of social efforts? Moreover, should CSR be implemented at all, or do such

efforts require organizations to be remiss in their fiduciary duties to shareholders? There are

some organizations which have successfully integrated CSR programs and are making a genuine

impact on stakeholders and their communities, so what is the answer and why are there so many

opposing views?

CSR Gone Wrong

CSR initiatives can go wrong in a number of ways and abundant examples are readily

available throughout the hospitality industry. In any business, you cannot manage what you

cannot measure and lack of timely quantitative analysis is a major challenge in optimizing CSR

initiatives. Quite simply, there is “a significant gap between the business and sustainability goals

companies are setting for themselves and what they are actually doing to attain them”


(Riddleberger, 2009 para. 5). Reducing carbon dioxide is probably one of the most popular CSR

initiatives in the market place today, but only 19 percent of respondents in a recent survey by

IBM on sustainability issues and their place in corporate strategies were collecting emission

information often enough to make an impact. The majority surveyed did so every three months,

which is sufficient to populate quarterly reports and satisfy shareholders, but not adequate

enough to bring about sufficient organizational change and decrease environmental impact

(Riddleberger, 2009). What remains to be seen is whether this lack of thorough follow through is

an intentional practice meant to deceive consumers, ignorance, or an example of new culture in

its infancy. Countless hotels, resorts and restaurants are already marketing CSR, highlighting

initiatives to reduce environmental impact, so are they also falling victim to the same challenges?

When the absence of adequate follow through becomes an intentional effort to mine

corporate social responsibility for revenue generating opportunities in spite of the negative

effects to the community, companies are then engaged in the act of Greenwashing. In a shocking

finding, the IBM sustainability survey reports that only 30 percent of respondents are collecting

data often enough to make necessary strategic decisions to improve sustainability in 8 main

categories, but 69 percent are using CSR to help create new revenue generating tactics

(Riddleberger, 2009). In fact, companies like Royal Dutch Shell, Coca-Cola and Nestle all

actively market their CSR programs, and have all been accused of Greenwashing. This is not

surprising considering that in a 2007 study of 454 products, 26 percent were found to be unable

to substantiate the environmental claims they made (TerraChoice, 2007).

CSR Benefits

With numerous firms having difficulty executing their CSR programs and with many

more involved in Greenwashing, does CSR have a legitimate place in business? Like any good


capitalist would suggest, that is up to the consumer to decide and in a recent study, 76 percent of

consumers report a willingness to pay more for a product from a socially responsible company

and over half are willing to pay 6 percent or more (Lester, Osman, & Beil, 2009). In the

hospitality industry, sustainability issues are of key importance amongst corporate travelers. A

third of business travelers are reported to look for hotels that are environmentally conscious.

Even more important in a time when hospitality firms are struggling with profitability, 28

percent of those surveyed reported a willingness to pay up to 10 percent more for green

accommodations (Stark, 2009).

Examining CSR

Those are very encouraging numbers for any business and it is great news for any

hotelier. So why then even examine the legitimacy of sustainability practices? With countless

reports, articles and blogs promoting everything from saving electricity by installing new light

bulbs to marketing recycled amenities, is another assessment of green practices really necessary?

Each of those questions is legitimate until one considers the findings by IBM’s sustainability

survey. If there is indeed such a gap between the promises being made in marketing campaigns

and those results being cultivated by organizations, how long will it be before the purchasing

public becomes aware? Hospitality organizations need to be as committed to improving

sustainability efforts as they are to marketing them and in order to accomplish this, accurate data

must be collected regularly so that management can make essential operational modifications.

Failing to do so means falling short of ethical obligations and should be scrutinized to the same

extent as any other form of deceptive advertising.


CSR in Practice

In order to address the questions posed by IBM to the international business community,

but gain statistics specific to the hospitality industry, an informal survey was conducted online.

Respondents were solicited from the following group discussion boards on LinkedIn.com:

Hospitality Superstars, Hotel Industry Professionals Worldwide, Hotel Online Distribution &

Hotel Revenue Management Professionals group, HSMAI and Revenue Management

Professionals. The results of this assessment demonstrate little difference from the CSR practices

of hospitality industry professionals and the companies surveyed by IBM and are provided in

Appendix A. The survey came with three main findings. First, hoteliers are aware of CSR’s

powerful marketing potential, but have only recently begun integration with marketing strategies.

Second, hoteliers mean well, as the majority of respondents reported setting sustainability goals

for their organizations. Third, the majority of hoteliers are failing to effectively conduct the

necessary performance based measurements essential to attaining sustainability goals.

Amongst those surveyed, 80 percent reported that CSR is a part of their marketing or

revenue generating strategy. Although that finding was not surprising, the relative maturity of

these efforts was unexpected. The majority of respondents have only recently integrated CSR,

doing so within the last two years and 25 percent have only incorporated CSR strategies within

the past year (Hopper, 2010). This is important to note because with such little experience in a

complex arena, it is no wonder that appropriately executed approaches are in such short supply.

Studies such as this will be important for hoteliers so that they can gain sufficient information to

create and effectively implement CSR. Cautious selection of sustainability efforts and careful

analysis of those initiatives will assist hoteliers in avoiding some of the pitfalls which have

plagued other industries.


It appears as though the hotel industry is on the right track, as industry professionals have

identified the opportunities CSR integrated marketing strategies can provide for businesses.

Even more significant, 80 percent of respondents are setting sustainability goals like reducing

water usage, carbon dioxide emissions, electricity, etc (Hopper, 2010). This is important to

organizations because doing so not only increases goal-relevant behavior, but discourages work

habits that are goal-irrelevant (Kreitner & Kinicki, 2008). For instance, associates in

organizations that have set goals to reduce water usage will be just as motivated to decrease

water usage as they are to avoid practices that are known to waste water. Although this concept

seems overly simplistic, it is important to an overall strategy that is aimed at building awareness

of environmental impact. Additionally, the importance of goal setting as a motivating technique

cannot be understated, as there is evidence to support a directly proportional relationship

between intrinsically motivated employees and shareholder returns (Serchuk, 2009). Of the

survey findings, evidence of sufficient goal setting was the most encouraging. Nevertheless,

there is one essential component to the successful execution of goal achievement which is absent

and that is measurement.

The most impactful finding of this study indicates that hoteliers are doing no better than

other industries when it comes to conducting timely performance based measurements in an

effort to meet or exceed sustainability goals. Of those respondents who have integrated CSR into

their marketing strategies, 47 percent conduct no performance based measurements.

Additionally, of the 53 percent that measured results regularly, only half did so more than once a

quarter (Hopper, 2010). In order to bring about change, organizations need to measure their

progress often enough to implement the systemic modifications required to mitigate

environmental impact and that is only occurring within a fraction of the companies surveyed


(Riddleberger, 2009). The similar findings from IBM and LinkedIn.com should be encouraging

to anyone doubting the accuracy of the hospitality survey. Whereas the IBM study found that 69

percent of respondents focused on CSR as a revenue generating strategy, the hospitality study

found that 80 percent did so. The slight variance can be attributed to the manner in which the

surveys were conducted, as the hospitality study reached out to organizations online, eliciting

responses from those who already had an inertest or involvement in CSR. In either case, both the

data sets indicate that additional work is required in order for corporate social responsibility to

live up to the latter part of its name.

Consequences of Responsibility

Although current business environments dictate that organizations are mostly intrinsically

motivated to conduct or accurately report on CSR, future regulation may provide more extrinsic

motivation. In an example of the augmented responsibility companies have in the eyes of the

consumer, the legal element of social responsibility has become increasingly regulated by

Governments, which comes as a direct result of citizen demand. Not only have consumers

increased their expectation of ethical business practices, but judicial systems are also

transforming to reflect changing of civilian sentiment. In fact, Denmark was the first country to

write CSR into law. On January 1, 2009, the Danish government began requiring its largest

companies to include CSR information its annual reports. (Danish Commerce and Companies

Agency, 2009). Although hotels, resorts and other organizations stateside are in no immediate

danger of legal repercussions due to CSR missteps, events such as this should raise awareness

amongst hoteliers, restaurateurs and marketers to not only provide sufficient evidence of social

and environmental impact, but to be transparent about the actual efforts put forth to achieve those

results.


Challenges to Philanthropy

In the hospitality survey, the issue of philanthropy was also addressed, as it is another

important component in corporate social responsibility. Among those queried, 20 percent

reported that philanthropic activates were part of their CSR strategy (Hopper, 2010). Although a

small percentage of the overall respondents, it is worth mentioning that even philanthropy has its

opponents.

CSR critics believe that if a firm is unable to fuse their business plans with CSR

initiatives, they should only contribute to causes for which the company is in a better position to

bargain with than shareholders. Such an example would be a coffee company contributing to fair

trade organizations or a recruiting firm contributing to professional development programs in

emerging markets. In both instances, the firms donating would most likely have an existing

relationship due to their complimenting business models and would be better positioned to make

contributions that would optimize social impact than would an individual. Unless such an

arrangement can be crated, critics state that executives should not peruse personally preferred

causes with corporate donations, as this would be a conflict of interest. For example, if a GM

decided to contribute to a Save Our Shores, an organization dedicated to stopping the threat of

US offshore drilling, some stakeholders in favor of tapping these oil supplies would take

opposition. In such a situation, the ethical alternative would be redirect profits to shareholders so

that they could contribute to the society in a manner of their choosing (MOR, 2009).

The primary objective of any business is quite simple: to maximize shareholder wealth

(Brigham & Ehrhardt, 2008). Actions such as the aforementioned philanthropic activities which

redirect earnings to causes that neither increase shareholder wealth nor support organizational

objectives are irresponsible (Brigham & Ehrhardt, 2008). In fact, because businesses have a


fiduciary duty to shareholders to abide by this primary objective, executing any strategy which

undermines this goal, no matter how well intended, is immoral. This is obviously more pertinent

to those hospitality organizations operating within a publicly held company, however; conflicting

stakeholder opinions are just as important for those independents and privately held companies

considering philanthropic activities.

When CSR Works

When a corporate social responsibility strategy is in lockstep with a company business

model, then that strategy becomes successful, sustainable and most importantly, profitable. A

shining example is Reuters Market Light, an informational service created in 2007 that delivers

crop, weather and commodity information via mobile phones to farms in rural India (MOR,

2009). This company is contributing to society in a way that is profitable, rather than being

lucrative and then allocating a small percentage to the most popular cause of the day, or

committing 80 percent of its marketing capital to highlight environmental products that comprise

a fraction of their overall business. There is no need to increase the accuracy and submission

times of data specifically to support CSR, nor do they need to conduct a specific marketing

campaign to build awareness of social contributions. As this organizations efforts to increase

profitability improve, so will contributions to society.

The Sustainable Tourism Paradox

It is difficult to imagine such a perfect balance in the hospitality industry, as many hotels

and resorts derive their profit from increasing human passage to environments that would

otherwise benefit from reduced traffic. In the resort market, the author believes that outside of

urban areas which have already devastated natural environments, environmentally friendly, or

sustainable tourism is a contradiction in terms.


Take for instance the new Swedish luxury property, Treehotel. The idea behind the

innovative new property, which is located in the forest treetops of Swedish Lapland, is that the

hotel blends with the natural environment and minimizes physical and visual disruption to the

landscape. Combine this with the locally cultivated and sustainable materials used in

construction and what results is an environmental marketing extravaganza poised to penetrate

multiple markets ranging from upscale leisure clientele to environmental enthusiasts, all under

the guise of sustainability (MacCarthy, 2010). However, with plans to create 20 units and the

average European hotel occupancy at 61 percent, this equates to 12.2 occupied units per night or

4,453 rooms per year (Brandt & Kenna, 2010). Should each of these rooms be occupied by two

guests, the result would be an additional 8,906 persons vacationing in an ecosystem otherwise

uninhabited by human beings.

One of the primary challenges that hotel guests bring to natural environments is the

production of solid waste, which in Sweden is reported to be 5.7kg per week per household

(Finnveden, Johansson, Lind, & Moberg, 2000). An estimated solid waste output can be

determined by converting the average number of occupied room nights into weeks, a practice

that is used in the timeshare industry. With 52 weeks in the year and 12.2 occupied units per

week, the total estimated number of occupied weeks is 634.4 which would equate to 3,616.08 kg

of solid waste per year. Although this number is staggering, solid waste disposal is but one

negative externality associated with human traffic. Additional issues which also need to be

addressed include: water consumption, electricity usage, toiletry transportation and wildlife

habitat loss.

However contradictory CSR in the form of sustainable tourism is in the resort industry,

some hospitality products can achieve social responsibility in urban markets, others are efficient


in creating sustainable tourism efforts at existing locations that mitigate damage to fragile

ecosystems and even more simply reduce environmental impact through sustainable

housekeeping practices. The element by Westin is an example of a green concept that attempts to

integrate the urban hotel business model with sustainability initiatives. By requiring brand wide

LEED building certification and incorporating amenities that will assist guests with keeping their

green routines while traveling, this new product is positioned to effectively target those

consumers willing to pay more for green products while also capitalizing on the social benefits

of green facilities (Starwoodhotels.com, 2008).

Conclusion

As CSR initiatives in the hospitality industry mature, there will no doubt be improvement

in the practices designed to support them. Part of the problem with conducting performance

based measurements is the time consuming nature of data collection and aggregation. Some

organizations still struggle with the information gathering required to facilitate successful

revenue management and marketing activities, much less the additional personnel, metrics and

coordination needed to amass sufficient weekly sustainability results. As hoteliers and hospitality

professionals gain experience in this new arena, the processes used to facilitate data collection

will increase in efficiency and become more prevalent in hotels, resorts and restaurants. One way

to aid this advancement is increased industry collaboration, as the most successful companies

will seek out the assistance of industry groups, customers and third parties (Riddleberger, 2009).

Just like comparing average daily rates in a hotel’s competitive set to attain the best revenue per

available room, hotels, resorts and restaurants should compare CSR metrics with analogous

organizations to render the best results.


There are as many opinions on the CSR debate as there are business models, and therein

lies the issue. What works for one organization does not necessarily work for all. However, with

business practices becoming more transparent and social challenges presenting themselves at an

increasing pace, CSR will continue to play an escalating role in the daily lives of hoteliers and

restaurateurs. As those responsibilities increase, companies will need to improve CSR data

management, present it to shareholders and stakeholders on a more frequent basis and advance

the processes devised to take action on those results. These efforts will help distinguish the line

between inefficient execution and unethical practices, such as Greenwashing, so that corporate

social responsibility is able to thrive as a prolific hospitality business practice.


Appendix A


References

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their value. Retrieved august 16, 2010, from Bloomberg.com:

http://www.bloomberg.com/news/2010-08-16/european-hotels-lure-investors-as-

properties-hold-their-value-in-downturn.html

Brigham, E. F., & Ehrhardt, M. (2008). Financial Management. Mason: Cengage Learning.

Finnveden, G., Johansson, J., Lind, P., & Moberg, A. (2000). Life cycle assessments of energy

from solid waste. Stockholm: Stockholms University.

Hopper, C. (2010, September 19). Corporate Social Responsibility in the Hospitality Industry:

Survey. Retrieved from Survey Monkey.com:

http://www.surveymonkey.com/MySurvey_Responses.aspx?sm=m9L%2b1wpZ%2bxvx

3q3sFKguqSrXSwSoO92zK44VGMipIYY%3d

Kreitner, R., & Kinicki, A. (2008). Organizational Behavior. New York: McGraw-Hill.

Lester, B., Osman, S., & Beil, E. (2009, June). Corporate Citzenship Study. Retrieved July 12,

2009, from tripplepundit.com: http://www.burson-

marsteller.com/Innovation_and_insights/blogs_and_podcasts/BM_Blog/Documents/Corp

orate%20Citizenship%20Executive%20Summary.pdf

MacCarthy, C. (2010, July 24). A luxury hotel in Sweden's treetops. Retrieved August 18, 2010,

from Financial Times.com: http://www.ft.com/cms/s/2/75d76d40-95e8-11df-bbb4-

00144feab49a.html

MOR, R. V. (2009, April 20). The Key to Successful Corporate Social Responsibility in India.

Retrieved July 12, 2009, from Wall Street Journal :

http://online.wsj.com/article/SB124019930116534151.html


Programme, U. N. (2002). Good News & Bad The Media, Corporate Social Responsibility and

Sustainable Development. The Beacon Press.

Riddleberger, E. (2009, July 1). Corporate Social Responsibility: Much More Talk Than Action.

Retrieved July 12, 2009, from Forbes.com: http://www.forbes.com/2009/07/01/corporate-

social-responsibility-leadership-citizenship-ibm.html

Serchuk, D. (2009, August 24). Shareholders Win When Employees Are Motivated. Retrieved

September 28, 2009, from Forbes.com: http://www.forbes.com/2009/08/23/employee-

motivation-stocks-intelligent-investing-returns.html

Stark, A. (2009). Communicate your green commitment . Hotel & Motel Management , 224 (1),

8.

Starwoodhotels.com. (2008, April 21). Starwood newest hotel brand launches this summer

making it chic and easy to be eco-friendly. Retrieved September 29, 2009, from

starwoodhotels.com:

http://www.starwoodhotels.com/Media/Graphics/Microsites/Promotions/EL_LEED/ELM

9578_PressRelease_R5.pdf

TerraChoice. (2007, November 1). The "Six Sins of Greenwashing". Retrieved July 12, 2009,

from TerraChoice.com: http://www.terrachoice.com/files/6_sins.pdf

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