“The pandemic and its impact on tourism, jobs, and revenues offer an unprecedented reminder of the need to rebalance our relationship with people, planet, and prosperity. The green transformation of the sector is needed, not just for the planet, but also for tourism itself, boosting competitiveness and increasing resilience.” – UNWTO Secretary-General Zurab Pololikashvili
While the world is seeking to adapt to the “new normal” set by an ongoing pandemic, the future of the tourism industry remains highly uncertain. According to the UNWTO World Tourism Barometer released in January 2022, global tourism registered an increase of 4% in 2021, with 15 million more international tourist arrivals compared to 2020. Still, these levels remain 72% below the pre-pandemic year 2019. Meanwhile, the latest UNWTO Panel of Experts survey reveals that most experts (64%) agree that international tourism will not reach the 2019 levels until 2024 or later.
Beyond the economic and social disruption, the pandemic crisis has disclosed existing structural weaknesses in the tourism sector, along with breaches in governmental and industry preparedness or response capabilities. Fragmented sectors and differences in the nature of tourism; seasonality; consumption of natural resources; impacts on climate change; and relative importance of tourism in the economy are only some of the shortcomings, as shown by the OECD Tourism Paper in 2021.
Moreover, recent studies indicate that the demand for tourism is undergoing significant behavioral changes towards more sustainable travel patterns that were amplified by the pandemic. For instance, a 2021 Eurobarometer survey showed that 82% of European citizens are inclined to include more sustainable practices in their travel habits, such as consuming locally sourced products, reducing waste and water consumption, traveling off-season or to less-visited destinations, and choosing transport alternatives based on their ecological impact. These results are supported by another survey conducted by Booking.com across 30 countries worldwide that gathered insights from 29,000 travelers. Seventy-three percent of the participants in the survey would be more likely to choose an accommodation if it has implemented sustainability practices.
Such studies prove that there is an increasing need for developing more sustainable and resilient models of tourism, supported by policymakers and service providers. In other words, a change of paradigm is needed, and green transformation policies and strategies seem to be the approach that will bring resilience and balance between “the needs of people, planet, and prosperity” in the tourism ecosystem.
The role of green transformation in sustainable industry recovery
Green transformation is not a new concept for the world economy, and it emerged as a trend in the tourism industry even before the pandemic. In a broad sense, the concept refers to “combining economic growth with caring about the environment to guarantee a high quality of life for present and future generations, at the level which is attainable due to civilizational development, as well as to an effective and rational use of the available resources” (Cheba et al., 2022, p.1).
In particular, green transformation involves an integrated approach that relies on combining legal regulations, innovative technologies, strategies, and clear initiatives to create sustainable and environmentally friendly markets. As the pandemic hastened the call for a green transformation in tourism, worldwide organizations and policymakers are planning strategies, key actions, and targets to achieve long-term competitiveness and sector recovery.
There is a general consensus that the industry must continue to build digital skills, implement digital solutions, create sustainable infrastructure, and address sustainable travel patterns. In early 2022, the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs released the Transition Pathway for Tourism, a report that introduces a set of strategy recommendations for the tourism ecosystem, based on the objectives of the European Green Deal. Within this report, the European Commission refers to the “tourism ecosystem” as businesses that work in sectors such as food and beverage services, on-line information and services providers (tourist offices, digital platforms, travel technology providers), travel agents and tour operators, accommodation suppliers, destination management, attractions and passenger transport (pg. 2).
Some of the key strategies and their related targets are as follows:
Passenger transport companies (aviation, water, and land transport) should reduce Greenhouse Gasses (GHG) to become climate neutral by 2050.
European cities and regions should develop sustainable mobility for climate-neutral cities, by implementing mobility plans and by doubling the high-speed rail traffic by 2030.
Buildings have to become more energy and resource-efficient, and energy support must move towards sustainable renewables.
Hospitality and all tourism services should implement circular models and diminish their environmental footprint. This includes reducing by half the amount of non-recycled waste by 2030 and lower food waste, single-use plastics, air pollutants, and water pollution while increasing water efficiency.
Each destination or tourism service provider should build their communication strategy on transparency towards sustainability and environmental footprint, thus guiding and empowering consumers’ choices.
Furthermore, the World Tourism Organization considers that “transforming tourism operations for climate action continues to be of utmost importance for the sector to remain in line with the international goals.” To support that, three main goals and actionable ways for their achievement were introduced in the Recommendations for the transition to a green travel and tourism economy:monitor and report CO2 emissions from tourism operations; accelerate the decarbonization of tourism operations; and engage the tourism sector in carbon removal.
Green transformation strategies in practice
Around the world, different practices of strategy planning and ongoing actions stand as evidence for the shift to a green travel and tourism economy as a roadmap for sustainable and resilient growth.
In the recovery from COVID-19, Kyoto (Japan), “a city where history and culture give rise to hope,” reconfigured its urban development and tourism strategy in 2021. The recovery strategy aims to develop the city as a higher-quality destination for both residents and tourists while supporting the Sustainable Development Goals (SDGs) recommended by the United Nations.
Harmony between the life of residents and tourism, allowing the local populace to feel enriched
All actors are involved in refining the “light of Kyoto” and improving tourism quality.
Tourism industry leaders become more active, and entrepreneurship of new businesses in the fields of tourism and culture flourish, contributing to improve the vitality of the city and cultural inheritance
Ensuring flexible, strong, safe, secure and environmentally sustainable tourism that can cope with various crises, such as infectious diseases and disasters
Establishing the city’s credentials as an attractive MICE city, welcoming people from all over the world, recognizing diversity, and contributing to world peace
Measuring the progress towards achieving their vision is ensured by key performance indicators set for each of the five goals, which are meant to be evaluated on a regular basis. Several examples of KPIs included in the strategy plan are as follows:
% Full-time employment in the tourism sector
% Satisfaction level of tourism workers
% Tourism businesses whose products and unit prices have increased
% Tourism businesses contributing to the local community
% Tourism businesses that take into consideration the environment
# International conferences held
One distinctive feature of the Kyoto strategy is the Code of Conduct for Sustainable Tourism in Kyoto (Kyoto Tourism Morals), which aims to provide “guidelines for the tourism industry and its workers, tourists, and residents to work together in united efforts to maintain harmony in Kyoto, and to preserve Kyoto for future generations.”
“Rebuilding tourism is also an opportunity for transformation with a focus on leveraging its impact on destinations visited and building more resilient communities and businesses through innovation, digitalization, sustainability, and partnerships.” – 2020 Tourism Policy Brief, United Nations
This article originally appeared in the 23rd PERFORMANCE Magazine – Printed Edition. Download your free copy from TKI Marketplace or get one in print via Amazon.
Compared to previous decades, the world has more innovative and safer cities that take better care of their citizens. A smart city represents an area that uses information and communication technology (ICT) to enhance administrative performance, disseminate information to the public, and boost the standard of services and the welfare of residents. A 2022 study reports that between 2000 and 2016, there was a global decline in the number of deaths from lower respiratory infections among children under the age of five, which fell by 54%, and roughly 13% overall.
Making a city smarter has been identified as the most effective method for enhancing residents’ quality of life and tackling urban challenges. According to a 2022 top from Ranking Royals, the smartest cities in the world have developed in the Nordic countries (namely Norway, Finland, and Denmark), Singapore, Switzerland, Taiwan, New Zealand, Spain, Austria, USA, and South Korea.
Boosting Sustainability and Citizens’ Wellness
While getting smarter, urban regions have implemented sustainable systems and tools that contribute to the Green Deal agreement. The EU Green Deal’s primary goal is to achieve climate neutrality as the first continent by 2050. That will lead to a cleaner environment, cheaper energy, smarter transportation, new jobs, and a better lifestyle. The strategies of smart cities aim to improve life quality for inhabitants by using innovative technologies and saving resources.
For example, in Graz, a smart city in Austria, energy efficiency is considered essential for future developments. In 2010, the “Smart City Graz” project, whose purpose was to transform the territory into a sustainable and energy-autonomous urban district, was launched.
Denmark demonstrates its strength and sustainability level by covering the needs for energy production without using foreign energy resources. It secures its place as the greenest country in the world by continuously practicing a sustainable economy. For instance, a 2020 case study presents one of the wealthiest areas in the world, a Danish island called Bornholm. Bornholm’s wealth comes from developing new energy market mechanisms to control energy networks with a high proportion of renewable energy resources.
To support sustainable initiatives and contribute to citizens’ welfare, Vitoria-Gasteiz city (Spain), the European Green Capital of 2012, launched a secure bicycle parking network called VGBiziz. It is a low-cost initiative comprising 9 parking sites for around 400 bikes (including electric and cargo bikes). In 2009, Valencia, Spain’s largest city, joined the Covenant of Mayors, and in 2010, it announced its first Sustainable Energy Action Plan (SEAP). The agreement should reduce GHG emissions by 40% by 2030 in accordance with the goals set forth by the Mayors’ Covenant on Climate and Energy Program. By using the VLCi Platform, a global platform for smart city management, Valencia moves forward with its Smart City Strategy.
In the 2022 Environmental Performance Index (EPI) rank, Denmark received the highest EPI score (77.90), with 14.90 points increase compared to last decade. The Environmental Performance Index is a tool for measuring the environmental performance of a state’s policies. The United Kingdom earned the second position with a very close score, 77.70. Finland occupied the third place with 76.50 points, followed by Malta (75.20), Sweden (72.70), and Luxembourg (72.30).
How to Monitor and Improve Citizens’ Wellness
Sustainability concerns not only the welfare of the planet, but also the well-being of its inhabitants. The environment can positively or negatively impact human health. People need good resources to evolve and stay healthy: fresh air, good food, and drinking water. But how can people know if they have all of these? To evaluate life quality, municipalities usually use publicly available and updated key performance indicators (KPIs), such as:
# Outdoor air pollution
# Air quality complaints
# Risk Management Index
# Environmental Sustainability Index (ESI)
% Households with a reliable supply of water
% Drinking water compliance rate
% Households with access to safe water
% Satisfaction with food quality
Since respiratory infections are influenced by air quality, specific KPIs for measuring the air level of pollution should be included in weather updates. Individuals that suffer from chronic respiratory conditions such as asthma and chronic obstructive pulmonary disease (COPD) are susceptible to the negative effects of air pollution. Asthma and COPD are aggravated and triggered by air pollution, raising respiratory morbidity and mortality. Also, cholera, diarrhea, dysentery, hepatitis A, typhoid, and polio are just a few of the illnesses that can spread due to contaminated water and poor sanitation. People are exposed to health risks when water and sanitation services are absent, unsatisfactory, or improperly managed.
Leaders can use key performance indicators to improve quality of life and make decisions based on the results. Some KPIs, which they can consider are:
# Initiatives to promote greater environmental responsibility
# Water recycled and reused
% Current projects that are environmentally friendly
% Waste reused, recovered, or recycled
By monitoring the energy-related KPIs, community leaders can see if they can satisfy the needs of citizens, using only renewable energy resources. Additionally, KPIs such as # Initiatives promoting greater environmental responsibility and % Current environmentally friendly projects help raise environmental protection awareness.
To advance your knowledge and skills among professionals in identifying most effective KPIs for your organization and its use in measuring performance, be a Certified KPI Professional and Practitioner. The certification in KPI Measurement courses of The KPI Institute are designed to help practitioners understand the KPI measurement challenges and ways to address them. Invite your colleagues and enroll now! For further information, visit kpiinstitute.org.
Sell the mobility, not the vehicle! Sell the light, not the lamp! Sell the cooling, not the AC!
In a continuously changing market with intense competitiveness and constant shifts in the customer’s behavior, traditional manufacturers have to keep adapting and innovating to maintain their positions.
An innovative business strategy that shifts the traditional way of doing business is servitization, a process through which the producers go from a product based model to a Product-Service System (PSS). Companies are no longer producing and selling products alone. They are selling services, integrated solutions, and an overall greater experience for the end consumer.
According to Miying Yang and Steve Evans’ study on “product-service system business model archetypes and sustainability,” a generally agreed-upon way to classify the PSS is to include it in one of the following models:
Product-Oriented – when the provider sells the product that ends in the buyer’s ownership. Other services such as consultancy or maintenance can be sold.
Use-Oriented – when a business provides customers with the utility of a product while keeping its ownership. Examples are renting or leasing.
Result-Oriented – when the company sells the results of a product or the value being delivered to the customer. The customer only buying the consumed light instead of lighting products is a relevant example of this typology.
To remain relevant in an always-evolving environment, companies should seize every opportunity to enhance their performance and obtain competitive advantages. Servitization is a win-win model benefiting all the involved parties that’s why an increasing number of businesses are approaching it.
Competing through advanced services is, first of all, an opportunity for growth and profitability as the revenue streams are more diverse. By offering complimentary ongoing services, the income gates certain stability due to recurring and incremental revenue streams.
The relations with the clients are strengthened as their satisfaction is increasing and their loyalty is drive-up. Greater alignment with the customer needs facilitates a long-term relationship and a better relationship with the customers means higher barriers to competition.
Using a servitization model can become an important source of insights for further innovation because providers are still connected to their service which eases the detection of improvements and can spark ideas for new services. Additionally, services are more labor-dependent and less visible which makes them more challenging to replicate and become a sustainable source of competitive advantage.
With all the above benefits also come challenges that companies face in their process to adopt servitization. The biggest problem results from the aversion to change. Old habits die hard while shifting towards servitization requires fundamental changes in the way companies are doing business, affecting every aspect from the strategic approach to everyday operations.
It is a time-consuming transition that needs to be done gradually to avoid putting pressure on the enterprise’s resources. Also, it requires adjustments in the existing capabilities, new technologies need to be deployed to support the services offered, and the employees need to develop related competencies. Customers’ perception is another challenge that companies face, as clients may be reluctant to adopt an unfamiliar servitized solution.
Selling Performance: Pay-per-lux and Power by the Hour
Philips Lighting, currently activating as Signify launched the ‘Pay-per-lux’ model, a ‘lighting-as-a-service’ offer for its customers. Signify handles the entire lighting service – design, installation, maintenance, and upgrades while the customers pay a monthly service fee for light. The program considers circular principles and uses advanced technologies like AI and the Internet of Things.In this model, Signify keeps the ownership of the lighting systems and offers a five-year performance contract, which is based on a series of key performance indicators such as light level, uptime, and energy savings.
The solution was first deployed for the National Union of Students from the United Kingdom. Signify is responsible for the lighting system for 15 years, while NUS pays a quarterly fee. As a result, the energy costs have been minimized while the technologies used are continuously updated, and annual checks are done to assess the system’s health and prevent maintenance.
Rolls-Royce manufactures engines for the aviation industry and implements a servitization model named Power by the hour through which customers have access to a service package by a dollar-per-flying-hour payment mechanism. CareServices solution offers a variety of services to customers such as engine monitoring to predict potential maintenance problems and ensure the aircraft is ready to fly on time, efficiency services to balance the low fuel consumption with optimized flight operations, asset and safety management solutions, in addition to world-class customer support.
The most recent service agreement has been signed with South Korean airline T’way Air. It will benefit from a service concept based on predictability and reliability that will secure the cost of operating, maintaining, and enhancing aircraft availability.
To sum up, there are many other companies from different industries that are moving their focus towards servitization. Even though it is not shielded from risk, the model can create significant benefits in relation to resource efficiency, growth, customer relationship, resilience, and impact on competitiveness. For a traditional manufacturer, a gradual transition from product commercialization to a servitize offering can become a decisive factor in its long-term sustainability.
To ensure a smoother transition from the traditional way of doing business to servitization, join the Certified Strategy and Business Planning Professional course offered by The KPI Institute. Develop the right plan and strategy for your business in achieving servitization. For further details, visit kpiinstitute.org.
In an interview with The KPI Institute (TKI) Publishing Team, Ihab Ibrahim Mohamed Alsakkti, a Strategy and Performance Manager at Alkifah Contracting Company, shares his insights and expertise in organizational performance management for the next issue of Performance Magazine – Print Edition.
On the one hand, investing in sustainability is no longer a nice-to-have strategy. But it is absolutely a need-to-have strategy to ensure compliance with governmental and regulatory requirements.
Here is an excerpt of the interview, where Ihab highlights the effect of sustainability in strategy planning and performance management.
A hundred billion tons of materials enter the global economy every year. Only 8.6% of the total amount of the materials are cycled back into the economy. This is the result of the linear economic model. In a case study written by Thibaut Wautelet, he refers to the linear economic model as a production and consumption model based on the “take-make-waste” scheme. He explained that raw materials are collected, then transformed into goods that are used and finally discarded in landfills or incinerated as waste. This approach turned out to be broken, enabling overconsumption to the detriment of planetary health.
Governments and businesses are looking to adopt the circular economy model and start repairing the damage created by unsustainable production and consumption. According to a published research in “Cleaner Environmental Systems Journal”, authors define circular economy as a catalyst for sustainable business. Moreover, the circular model promotes “…the use of resources within closed-loop systems, reducing pollution or avoiding resource leakage while sustaining economic growth.”
The pressure to adopt sustainability compels companies to implement the “reduce, reuse, and recycle” practices from the design stage to post-sales activities. Based on the same research, “Circular economy as a driver to sustainable businesses”, the influence of the circular economy can be seen in many business areas:
Cost management – The circular model leads to the transformation of products at the end-of-life cycles into resources for new products. Integrating material recycling into new components production can close the loop, reducing waste and the usage of more expensive raw materials.
Supply chain – The circular management of the supply chain is based on the coordination across the different members in closing, slowing, or narrowing energy and material flows. Additionally, the packaging system is an important aspect of the distribution process circularity.
Process management – The business processes are rebuilt to make them more circular, facilitating the reusing and recycling out of the desire to extend product life and reduce environmental impact.
Service management – The Product-Service system is considered an enabler of the circular economy by offering services instead of products aiming at pro-environmental outcomes.
Research and development – The achievement of circular goals relies heavily on design, which determines the circular potential. The life-cycle-based research and development allows the selection of the type and quantity of materials and determining how they are combined – a process that affects the product life and the possibility of repairing and recycling it.
Figure 1. Product Lifecycle in Circular Economy Model | News European Parliament
Companies Leading the Change
Companies embrace the concept of circularity in response to the growing interest of customers in green practices and concerns about the global waste problem. Philips is one of the companies that are successfully paving the way toward the circular economy in their industry.
Philipswas one of the largest electronics companies in the world. But it has changed its focus on health technology, looking to improve people’s health and well-being. Its products include large-scale and small medical equipment and home care products. The company developed new business models to adapt to the circular principles organized on seven strategic pillars:
Close the loop with current products through take-back, refurbishment, and recycling
Further circular practices across Philips sites, including zero waste to landfill policy
The circular design of products and business models
Technical competence building
Driving change with external coalitions and supply chain
Embedding in the Philips Business System
In 2016, the company set goals to generate 15% of revenues from circular products and services and send zero waste to landfills in internal operations. At the end of 2020, Philips achieved their circular goals. Therefore, they set three greater targets for 2025: to generate 25% of revenue from circular solutions, send no waste to landfills, and close the loop by offering a trade-in on all professional medical equipment.
The Benefits of Adopting the Circular Model
The Circular Model and its principles are still new to the business ecosystem, and the market penetration of circular business models remains limited. But the potential to scale up the model is considerable in many industries.
Besides the environmental impact that the circular model creates through the reduction of greenhouse gas emissions or the use of fewer nonrenewable resources, or achieving zero waste, shifting toward circularity can help companies secure a competitive advantage and create long-term value.
The circular model enables new revenue streams by accessing new markets or cutting off costs from waste generation. It reduces the dependency on raw material suppliers and increases the resilience in the face of supply chain disruption.
Additionally, by implementing a circular model, businesses can attract new clients and improve the retention of old ones, as sustainable practices are becoming an influencing factor in customers’ buying decisions. Also, customer loyalty is favored due to servitization, product-as-a-service offerings or take-back programs.
Based on the survey conducted by Deloitte, more consumers this year are pursuing a better sustainable lifestyle. Results show that 40% of the consumers choose brands that promote sustainable values and practices, which increased by six points compared to 2021. The number of consumers who stopped purchasing from a specific brand due to their ethical or sustainable issues and concerns towards the company has also increased by six points in 2022, which is 34%.
Going in circles is the way forward. It is time for companies to rethink how they do business, considering the industrialization’s impact on the environment, relevant international initiatives, such as the UN Sustainable Development Goals and the EU Circular Economy Action Plan, and the increasing importance of sustainability to everyday customers. The change may be difficult for organizations used to operating in the linear economy but not impossible as seen in the above examples. In order to thrive in the market, companies must establish circular business models and adapt their strategies to the circular economy.
In an interview with The KPI Institute (TKI) Publishing Team
