Can a Brand Be "Too Sustainable to Fail"?

The notion of "downsizing" has long been associated with the adverse affects of the economy on businesses. Many business experts, in particular investors, believe that larger businesses are better suited to survival in challenging economic times. But according to two new pieces of research, smaller organizations that focus their efforts on sustainability may win out in the long run.

In banking, the term "too big to fail" is bandied about, suggesting that the larger the bank, the more stable and profitable it must be.

A new study by the Global Alliance for Banking on Values, however, suggests that from 2007 to 2010, "sustainable banks" had significantly higher levels of growth in loans and deposits and better Returns on Assets with comparable Returns on Equity than the world's 29 "GSIFIs" (Global Systemically Important Financial Institutions as classified by the Financial Stability Board).

For example, sustainable banks fund a much larger portion of their total balance sheet with customer deposits than GSIFIs, a sign of financial stability.

In 2010, sustainable banks averaged over 70 percent total deposits to total assets vs, about 41 percent on average for GSIFIs. In 2010, sustainable banks averaged close to 9 percent equity to assets vs. under 6 percent on average for GSIFIs. Growth rates in loans, deposits and assets from 2007 through 2010 are truly impressive: sustainable banks on average had net income growth of 64.62 percent in contrast to average net income growth for GSIFIs of minus 6.72 percent.

The Global Alliance for Banking on Values report finds that sustainable banks follow these principles:

1. Triple bottom line approach at the heart of the business model;

2. Grounded in communities, serving the real economy and enabling new business models to meet the needs of both;

3. Long-term relationships with clients and a direct understanding of their economic activities and the risks involved;

4. Long-term, self-sustaining, and resilient to outside disruptions;

5. Transparent and inclusive governance;

6. All of these principles embedded in the culture of the bank. 

The report authors suggest that the success of sustainable banks proves they are a model for the future. According to the Global Alliance, "These banks demonstrate decades of responsible banking and a consistent commitment to productive economic activity.They have increased their activity during the present recession, expanding their lending to small and growing businesses in particular. ... The evidence of their success suggests a renewed emphasis in public policy, and by investors, on sustainable banks, could provide the long-term path for responsible banking necessary to support a more just, environmentally sound, and sustainable economy."

It turns out the smaller may also be better for another industry — the hotel and hospitality sector — when it comes to sustainability of the green kind.

A new report on hotel energy and carbon efficiency by Brighter Planet, a sustainability technology company, analyzed details on more than 46,000 hotel properties in the U.S. — 80 percent of all hotels in the country with 15 or more rooms. The study found that "Budget hotels are generally more efficient... The average upscale hotel uses 25% more energy per room-night than the average budget hotel." However, says Brighter Planet, "the majority of upscale hotels are cleaner than the dirtiest budget establishments."

The top 5 hotel chains, in terms of energy and carbon efficiency, include two mid-range and three budget chains. Ranked in order, they are Vagabond Inns and Red Lion Hotels and Inns (both mid-range) and Red Carpet Inns, Travelodge, and Scottish Inns (all three are budget). Of 75 ranked hotels, four of the last five were upscale chains. Westin Hotels & Resorts, Embassy Suites Hotels, Renaissance Hotels & Resorts, AmercInn International, and JW Marriott Hotels & Resorts were at the bottom of the efficiency list.

Brighter Planet concludes in its report that "Hotels are growing less and less efficient. Modern hotels use significantly more energy per room-night than their older-vintage counterparts, and the energy they use is dirtier."