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Green practices can increase profits for RET businesses

By Robert E. Pfister, PhD, and Patrick T. Tierney, PhD


An RET entrepreneur must take a critical look at all expenses in order to maximize profits and repay debt. Even if you personally have an interest in going green and being more earth friendly, you still have a fiduciary responsibility to maintaining profitability. When managers consider green eco-friendly practices, their first thought might be that being environmentally conscious will significantly increase company expenses, make their products uncompetitive, and ultimately reduce profitability. When viewed narrowly and in the short term, this may appear true. For example, free-trade, shade-grown organic coffee beans can cost 5 to 15 percent more than other similar types of coffee. However, offering this coffee to your clients at an event may have other immediate and more long-term positive financial impacts. And a company certainly needs to minimize labor-cost increases associated with moving toward green practices. But many innovative companies that have implemented green practices and technology have not seen severe cost increases or a drop in competitiveness. In contrast to this view, they are some of the most successful and profitable firms. This green tip illustrates ways instituting green business practices can save money or make an RET business more profit.

Immediate Financial Returns

  • Recycling or reusing "waste" can significantly save on garbage collection costs.
  • Reusing and minimizing use of raw materials can reduce materials costs.
  • Energy conservation practices reduce the cost of electricity and other forms of energy.
  • Reducing use of toxic substances minimizes the risk of employee injury.
  • Reducing travel through more teleconferencing and electronic communications saves transportation and labor costs.
  • Use of innovative green technology and practices is now more often required by resource agencies and event sponsors to win a competitive contract.
  • More consumers are demanding green practices and products, and they will select those firms that offer them.

Longer-Term Financial Returns

  • Construction of renewable energy sources, such as solar, can recoup initial investment in a two- to five-year period and subsequently provide very low-cost energy.
  • Building a reputation for environmental concern develops customer loyalty and gains your company favor among resource and regulatory agencies.
  • Installation of carbon-reducing technology may prevent more-expensive retrofits and legal costs down the road, when carbon emissions will likely be regulated, as has been seen with other air pollutants.
  • Many employees are willing to assist in making your company more eco-friendly, and this can lead to greater productivity and loyalty toward management and the company.
  • Workers’ compensation costs can be reduced by eliminating workplace toxic materials and working in healthier buildings.
  • An entrepreneur could start up a new division or an entire company based on green services or products.

These are just some examples of how expenditures in green technology and practices will produce short- and long-term financial gains. But you should also consider that the marginal cost of implementing green practices is often a small percentage of the total production costs. Using the coffee example again, an additional 10 percent boost in the cost of beans translates to just a 1 to 2 percent increase in the final retail price. If your staff feels better about working there because of the extra lengths you went to, and the final little push to win a $100,000 contract was the shade-grown coffee, then the return on investment is considerable. It is important for an entrepreneur to view money spent on green technology as an investment and evaluate its return versus seeing it as just another regulatory burden. With this perspective, more-creative solutions can be developed. Since the probable cost of installing similar equipment will be considerably greater in the future, then eco-friendly green technology and practices contribute to profitability and are much more justified right now.

This is an excerpt from Recreation, Event, and Tourism Businesses: Start-Up and Sustainable Operations.



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