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It's Not Easy Being Green: The Sustainable Economic Impact of the Olympic Games

Posted: 21/06/2012 16:28

Sustainability is one of the core values promoted by this summer's Olympic Games in London, touted as "The First Green Games." In fact, the Olympic Delivery Authority has ingrained sustainability into every element of the event's 34 official sites, with facilities that use 40 percent less water than similar facilities of the past, significantly reduced carbon emissions from transport and a 'zero-waste to landfill" policy.

In 2011, I set foot on a then under-construction Olympic Village as part of a group of London Business School students hosted by developer Bovis Lend Lease. We visited the job site, saw the residential structures being erected out of recycled materials and learned of the work underway to create 250 acres of new park land that would soon constitute the largest new urban park in the UK. Visiting the Olympic Park this past April on a similar tour, I believe the principles of sustainability did manifest in the finished product.

But while much of the discussion around this year's Olympics has focused on environmental sustainability, economic sustainability should be given equal importance. Fittingly, this and other key issues in the business of sport were the focus of this year's London Business School Global Leadership Summit (GLS), held on May 21. This annual Summit is the School's flagship event for its entire global community, inviting the brightest global minds in business, sport, government, finance and academia to discuss and debate the challenges facing the business leaders of today and tomorrow.

Andrew Scott, Professor of Economics at London Business School, moderated a keynote panel at GLS that discussed the global economic impact of major sporting events, and featured top executives from the 2012 Games. Professor Scott's opening remarks for this panel cut at the very heart of the business sustainability question regarding the Olympics.

"London must evaluate the economic impact of the Games both from a short and long-term perspective," said Scott, "the short term benefits of the Games are obvious, but how can the country capture and sustain value as hosts of the Olympics?"

So what will likely determine the success - from an economic standpoint - of this year's events? Traditionally, the greatest long-term value from any Olympic Games is reaped through sponsorship. One of the longest standing official sponsors of the games is Visa and Peter Ayliffe, President and CEO of Visa Europe. Ayliffe recently spoke of how the largest credit card issuer in the world has effectively used the Olympic Games as a platform to showcase innovation and new payment technologies, engage customers and ingrain the Olympic ethos directly into the Company's culture for the past 26 years.

To illustrate, Ayliffe described how Visa has already invested heavily to set up 1,000 new contactless payment points, including points at all 34 Olympic sites, to service the 21 million contactless cards already in circulation in the United Kingdom, as well as the millions expected to arrive in the wallets of visitors to London in the coming months. To promote this new, more expedient payment technology, Visa has signed 100 meter world record holder Usain Bolt to be the ambassador for the campaign.

In addition, Ayliffe shared research based on Visa's historical sponsorship of the Olympics showing that 94 percent of adults recognized the Olympic rings, two-thirds of people prefer to work with and buy from companies affiliated with the Olympics, and how Visa's 200 past regional Olympic campaigns in Europe have elicited a 71 percent increase in usage when run. Taken all together, Visa is expecting at least a seven percent increase in card usage because of Visa's association with the Olympics, and forecasts 750 million plus dollars of additional expenditure, plus knock-on effects of $5.1bn across all other countries.

Similar to Visa, General Electric (GE) also uses its sponsorship of the Games to drive brand awareness and incubate new technologies. CMO Beth Comstock reported that the company experienced a 53 percent increase in awareness in China as a result of its sponsorship of the 2008 Beijing Games. GE looks to the Olympics as a vehicle for imprinting its brand in new markets outside of the United States, which now account for 60 percent of GE's revenues. GE also uses the Olympic site as an incubator for new ideas; GE supports the Olympic infrastructure behind the scenes and showcases new technologies through the venues, which can then be perfected and used to redevelop local communities all around the world. Comstock estimates $1 billion dollars worth of new projects have resulted from GE's relationship with the Olympics.

The Visas and GEs of the world will always find a way to capitalize on their investment in the Olympic Games, building long-term value for their businesses. But the economic legacy of these Olympics will be measured by the enduring impact that they will make on the City of London and the UK itself. A Thames Gateway research report estimated that London 2012 will contribute 5 billion pounds to the London economy, and is expected to grow the London economy by more than 50 billion quid by the times the Games kick off in late July.

In fact, Andrew Scott described multiple studies showing how hosting the Olympics do make a country happier and increase its foreign trade; another panelist, Heather Hancock - Deloitte UK's Lead Partner for London 2012 - corroborated Scott's claim when she described her consulting firm's research showing an 8 percent increase for Great Britain as a place to visit and invest in by people in India and China as a result of winning the London Games.

John Armitt, Chair of the Olympic Delivery Authority, believes that 75 percent of the seven billion pounds spent on infrastructure will have long-term benefit for the blighted region in East London where the main Olympic site has been constructed, including training and employment for thousands of Olympic staff, and 3,000 to 10,000 homes that will be built in the Olympic Park over the next decade. In addition, Armitt spoke of the legacy of infrastructure safety from the Olympic Park developments that construction companies can take forward; the Olympic Village will serve as a benchmark for developments of the future, and over 300 research and best practice papers on the Olympic Legacy website covering development, management, and technological improvement in delivery will also be available to the public.

Despite the benefits to business institutions and development outlined above, Andrew Scott notes that the positive impact on GDP is thus far inconclusive, so it remains less than certain that the UK's 10 billion pound investment in London 2012 generate true economic value. Only time will tell if the legacy of these Olympics will actually be realized.

 
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