PROFITABILITY IN ECO-FRIENDLY INITIATIVES: A STUDY IN A HOTEL SECTOR ORGANISATION

Pradeep Randiwela1 p_randiwela@yahoo.co.uk University of Colombo-Sri Lanka Imaduwa M.R. Priyadarsshna Imaduwa.m.r.p@gmail.com

Abstract Along with the new market developments, more and more businesses are being either pushed or on its own accord; taking initiatives to reduce their carbon foot print in its business activities. In a commercially charged business sphere, profitability in terms of a monetary value of these Green Initiatives, holds the top most vitality to all its stakeholders. Therefore, the primary aspire of this study is to device a method which will be compatible with the current practices of accounting standards where it could be interpret into comparable ratios while comparing monetary values retrieved from the concerned organizational records and interpret them in terms of its profitability. The formula to work out the profit is based on the hypothesis that is difference between the running costs before and after the green initiative, to be considered as an opportunity cost which could be either plus or minus while there is a probability to make no difference either way. Then apply the outcome to the Return calculation formula as the Operating Income or if more appropriately termed it as Generated Income of the initiative. Further, to see whether the initial capital that has been invested could be recovered via these returns over a five year period by applying amortization laws. Primary data that has been examined as per the methodology of this study been obtained from a well established organization that has dedicated itself to implement green initiatives and had been recording on costs and quantities throughout. More than 90% of the tested initiatives are marginally profitable in terms of ROIC where it hits as highly profitable in terms of recoverability. If added, the other benefits such as, health benefits, environmental benefits, gaining a competitive advantage or even gaining a cost or price leadership which has not been tested or quantified in this paper certain to add more value to these respective initiatives. Key words: Eco-friendly initiatives, sustainability, profitability, measurability

Professor of Marketing, Former Dean Faculty of Management and Finance, University of Colombo, Sri Lanka.