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Profiting from sustainability: Economics, Efficiency, and Investor Perspectives

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by Brendle Group on 11 July 2014

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Transcript of Profiting from sustainability: Economics, Efficiency, and Investor Perspectives

NSAA HAS A LONG HISTORY
OF ECONOMIC ANALYSIS
AND
SUSTAINABILITY

SUSTAINABILITY
IMPROVES SKI AREA FINANCIAL PERFORMANCE

SUSTAINABILITY SPURS
ECONOMIC GROWTH IN MOST SECTORS

outperformed
traditional companies
Significant Benefits
Cost of external financing
Return on invested capital
Sales growth
Fade-rate of a firm's competitive advantage
Green Winners
, AT Kearney, 2009
Stock prices of 99 sustainability oriented companies...
Outperformed the industry averages by 15%
over the 6 month period.
AMONG RESORTS, WHO IS
DOING WHAT?

The Sustainability Advantage
, by Bob Willard
"
Typical companies that implement best-practice sustainability approaches could improve profits by 51-81% over 3-5 years and avoid 16-36% erosion of profits."

Judy Dorsey
, Brendle Group
Dave Belin
, RRC Associates

HOW ARE THEY
PERFORMING?

36%
HOW DID THEY DO IT?
3-4%
How are they
performing?
How did they do it?
Who is doing what?
Summary of Income Statements and Operating Profit
(Units: x$1,000)
Performance Index
Percent Profit Increase
ALTA 2013
Effort to document costs and benefits of sustainability projects
SUSTAINABILITY

ECONOMIC ANALYSIS
93%+
see sustainability as
crucial to success
91% would employ technology and practices to meet sustainability goals over the next 5 years
Invest
Conclusions
Top Down:
Comparison with Willard's factors
Bottom Up:
Ski industry sustainability data
Case Study:
Alta Ski Area
Q.

Among resorts, who is doing what in sustainability?
How are they performing financially?
How did they do it?
2008
2009
2010
(the most extensive corporate survey ever conducted on the topic of sustainability...)
MIT SLOAN REVIEW:
"Delivering on the Promise of Green Logistics"
1) Correlate wide range and varied sustainability projects/practices to RRC survey/analysis format
2) Create applicable questions to include in the RRC economic analysis survey - to determine the implementation of sustainability projects
3) In total 115 ski areas responded to the questions pertaining to sustainability impacts
75%
actively engaged in sustainability efforts
Q.
Why did "blue squares" outperform "black diamonds"?
Only 1 year of financial data
Possible that highest performers tackle more ambitious projects with longer-term benefits
Leading-edge sustainability performers tend to look past short-term financial returns when picking high-profile legacy projects
Black diamond group comprised of larger ski areas with $38.6 million in revenue and $8.4 million in operating profit, on average
Baseline revenue $23m
Implementation $800k
Investment 3.5%
Baseline operating expenses $17.6m
Avoided costs $242k
Cost savings 1.4%
Increased revenue $229k
Baseline operating profit $5.3m
Profit increase 8.8%
Effort to document costs and benefits of sustainability projects
LEED Silver skier services and lift maintenance building
Energy efficiency, renewable energy, and operational improvements
Organizational development
Costs and savings from Alta were propogated to the typical balance sheet for similarly ski areas in Rocky Mountain region
Results at Alta would translate into:
0.9% increase in profit margin
0.5% improvement in profit before tax on equity
$0.56 reduction in expenses per skier visit
$0.48 increase in profit per skier visit
increase in profit margin
improvement in profit before tax on equity
reduction in expenses per skier visit
increase in profit per skier visit
by
Sustainability's Next Frontier
MITSloan Management Review, December 2013
Major Ski Area Sustainability Program Type % Implementing
Food and Beverage 51%
Utility Energy Management 38%
Existing Buildings 32%
Snowmaking Efficiency 30%
HR 29%
Marketing and Sustainable Brand 27%
New Construction 19%
Lift Modernization 17%
Fleets and Grooming 17%
Accounting 13%
Lift Operations 9%
Other 4%
Renewable Energy Generation 4%
Extrapolated to larger Rocky Mountain Region
Avoided costs $242k
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