Being green brings in the green

The business case for social responsibility in the hospitality and tourism industry


Doing good results in doing well, and being green brings in the green. In the hospitality and tourism industry, being a good corporate citizen is strategic, because it results in superior financial performance, says Manisha Singal, an assistant professor of hospitality and tourism management.

Singal conducted a series of recent studies on various aspects of corporate social responsibility in the hospitality industry. Her research, she says, shows that hospitality firms deliberately and strategically invest more in socially responsible activities than firms in other industries, and they benefit financially for doing so.

Social responsibility can pay dividends

Companies in any industry have to decide whether and to what degree to invest in corporate social responsibility — voluntary activities relating to environmental, social, and governance areas that are integrated into the firm’s business activities. Examples might be getting LEED certification, providing family benefits, and seeking out women and minorities for leadership positions.

Decisions to invest, Singal says, are easier to make when being more socially responsible also results in superior firm financial performance.

In one study looking at the link between a firm’s financial performance and investment in sustainability initiatives, Singal says she found that hospitality firms on average invest more in environmental programs than do businesses in other industries.

A virtuous cycle

This study of hospitality firms over a 20–year period, she says, shows that investments in such initiatives as recycling, waste reduction, water and energy conservation, and pollution control result in superior future financial performance, which in turn enables the firms to invest even more in going green, creating a virtuous cycle.

Hospitality firms — which have a significant environmental impact through water and electricity use and food waste, for example — also have significantly fewer environmental concerns or censures, Singal says.

The value of diversity

Comparing investment in diversity initiatives by hospitality firms with firms in other industries, she finds that hospitality firms have more policies and practices encouraging diversity than other firms.

Diversity management is imperative in the labor–intensive and globally dispersed hospitality industry, says Singal. Not surprisingly, she says, Diversity Inc.’s list of top 50 firms for 2013 has a disproportionately high number of hospitality firms, including Marriott, Wyndham, Disney, and Sodexo.

Her research found a strong link between diversity and financial performance in hospitality firms, suggesting that investment in diversity leads to superior financial performance in the hospitality industry. For the control sample of firms in the non–hospitality sector, Singal says, this link is weaker, thus suggesting that it may not be as financially rewarding for non–hospitality firms to invest aggressively in diversity initiatives. The study was published in 2014 in the International Journal of Hospitality Management.

The importance of perception

As to why hospitality firms invest and should invest more in corporate social responsibility than firms in other industries, Singal says that while a positive corporate image is important to all firms in influencing consumer decisions, it is especially important to firms in service industries and those in services that are personally experienced, such as hospitality and tourism. The service quality of a hotel experience, for example, she says, likely depends more on consumer perceptions than of an oil change or dry cleaning.

In service industries, customer perceptions of quality and value depend substantially on intangible factors — such as the customer’s own expectations, the richness of the interaction with service-providing employees, and the firm’s reputation, she says.

By engaging in visible socially responsible actions, firms are able to manage their reputation to provide them a competitive advantage. And by highlighting the high-quality, eco-friendly nature of their services, produced in a diverse and employee-friendly workplace, hospitality and tourism firms are able to persuade customers to pay more for their products.

Corporate social responsibility

Her studies show that customers of hotels and restaurants, for example, care about environmental and social issues, and that their concern affects not only their buying intentions but also their evaluations and perceptions of service quality.

Corporate policies are strategically and carefully designed to maximize profitability and stockholder returns, Singal says. Among those policies, corporate social responsibility is effective, particularly for hospitality firms, in achieving organizational goals at relatively low cost by positively influencing firm reputation, managing consumer attitudes toward the service provider, and motivating employees to enhance product quality and customer satisfaction.

Virginia Tech Pamplin College of Business Virginia Tech Pamplin College of Business Magazine Fall 2014

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