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Calculating the Triple Bottom Line Financial Benefits of Green Tourism Investments

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Within the tourism industry as well as many others, the phrase "green is good for business" has been a ubiquitous one, especially in the last decade. But, other than anecdotal information, there has not been the hard data behind the message to prove that investment in sustainable operations actually yields substantial costs savings and/or increased revenue.

In other words, taking into account the triple bottom line -- namely a business' social, economic, and environmental goals and achievements -- is wonderful, but how does a business owner know beforehand that such investments will grow a business?

For the last year, I've been discussing the notion of return on investment (ROI) with sustainable tourism certification bodies, tourism experts, and tourism business owners as well as researching academic publications to seek out some hard data. The main question has been "exactly how has green been good for your tourism business?"

One such set of conversations took place last month with Steve Macfarlane, the owner of Glenuig Inn, a Green Tourism Business Scheme eco-certified property located on the western coast of Scotland. As our small group dined on locally sourced seafood, I asked Steve several questions about the catalyst and results for running Glenuig Inn in a sustainable manner and whether customers even noticed.

Steve started by giving a refreshing answer, "Being green is good for business, but in my determination to make green mainstream, it is not being green that drives the business, but the business drives being green!" In other words, if care is taken up front by tourism business owners to research every cost driver and determine cost-saving alternatives, green or sustainable operations investments would potentially rank higher for businesses. "...If I could re-set the overhead base of the business, I would be able to compete and be profitable, and provide a service appropriate to future markets."

For Glenuig Inn, resetting the overhead included substantial investments in energy efficiency. For example, building renovations included insulating the entire main building with breathable wood fiber that allowed for the existing old stone walls to level the supply and demand for heat in the building.

Additional investments included a solar thermal system, LED lighting system, water conservation schemes in the kitchen and bathrooms, heat recycling systems from refrigerators and freezers, and the replacement of the kitchen fryer with induction cooking surfaces that turned off as soon as the pot or pan was lifted. Doing away with the kitchen fryer alone resulted in a savings of 40% on insurance premiums for Glenuig Inn.

"And a fun one . . . the shower in the staff (apartment) is heated from both the solar panels and the wood burner in the dining room. If there is ever a complaint that the shower is cold, it can only be because (the staff) forgot to put an extra log on the fire yesterday . . . it builds a direct sense of connection to the environment and your actions when your everyday functions are connected with noticing whether the sun is shining and if not, lighting a fire and keeping it going! Too many people's lives are disassociated from the consequences of their actions; here, it is direct, personal, close and green!"

Once those investments were made, then Glenuig Inn began to round out a holistic set of activity and dining options targeted at its customer's preferences including offering sea kayaking excursions to see dolphins and other wildlife, installing yacht moorings, and changing up the dining menu to offer real ale (additive-free beers) and natural soft drinks as well as vegetarian, non-dairy, vegan, gluten-free and/or nut-free dishes.

So what were the results? Glenuig Inn is thriving with an increased and satisfied customer base. One such recent customer was His Serene Highness Prince Albert II of Monaco and his wife, Princess Charlene who specifically visited Glenuig Inn in April in order to discuss with Steve the circumstances and results of the Inn's sustainability efforts.

For our part, our investigative study has culminated in the development of an ROI Model for Sustainability specifically for the tourism industry.

The ROI Model for Sustainability takes into account applicable costs, savings, and incremental revenue changes so tourism business owners can more reliably anticipate the operations, community, employee, and customer bottom line financial results that come from implementing sustainable processes.

The goal is to create a readily available tool that for the first time would provide real-time benchmarking data and aggregated green investment information for tourism businesses worldwide.

Steve did not have our ROI Model for Sustainability when he acquired Glenuig Inn of course, but said, "If you want to look at ROI, then the only way is to compare with what would have happened if I had not implemented the measures. (For example) I have a (neighboring) business whose energy costs in 2005/6 were about 10% more than this business. They have 20 bed spaces, and there were 18 bed spaces here. (Three) years ago, his energy costs were over £20,000 for the year. Add 15% per annum (the average energy cost rise in the UK for the last 3 years) and this runs to £23,000, £27,000 and this year over £31,000. In comparison, this year we expect to spend £10,000 and we now have 35 bed spaces. Thus, we have (doubled) the capacity (but are only paying) a third of the energy costs."

What have your experiences been with green investments and how have you calculated ROI?

Read my entire interview with Steve Macfarlane.