Hotel Firms Must Prioritize Environmental, Social and Governance impact in 2023

This article by Katharine Le Quesne was first published on Costar.com on January 25th 2023.

ESG Requirements and Best Practices Are a Collaborative Endeavor

ESG requirements will remain a boardroom issue in 2023, as the world transitions to a more sustainable position. This is no mean feat for the property industry in the EU, which is responsible for an estimated 38% of energy consumption and 29% of all greenhouse gas (GHG) emissions. We have to improve how hotel assets are built and operated.

Industry stakeholders are making seismic shifts to reduce emissions and improve ESG performance. Research reveals common themes, summarised below as five mutually-reinforcing actions. Together, they generate traction to drive systemic change and embed ESG principles.

Educate

Invest in relevant education.

Knowledge is the first step to understanding the operating environment over the next decade. Bring in experts, subscribe to courses, self-educate.  I studied with the Cambridge Institute of Sustainability Leadership (where I am now an assessor) – but shop for what your organisation needs.

Whoever you are – hotel real estate owner, operator, investor, lender, franchisor or OTA – learn from other industries. Look at faster-moving industries such as consumer goods and fashion. Net Positive, a book co-written by Paul Polman (Former CEO of Unilever) and Andrew Winston (a leading author on sustainable business), provides transferable knowledge from businesses on ambitious sustainability journeys.

Measure

Measure impact, not just economic outcomes.

This next chapter of global development is about creating a more equitable relationship, between people, planet and profit. As a result, new measurement tools are emerging. These are skewed towards achieving CO2 reduction, as the world strives to avoid climate tipping points and bio-diversity breakdown; but this will change.

Current/pending tools for the sector include:

• Carbon Risk Real Estate Monitor (CRREM) – designed for financial reporting and measures carbon emissions from property assets;
• Hotel Carbon Measurement Initiative (HCMI) – calculates carbon footprint of hotel stays and meetings for a hotel; and
• Uniform System of Accounts for the Lodging Industry (USALI) – 12^th edition due end 2023/early 2024 with new waste, water and energy definitions/metrics.

Tools are still evolving, particularly for measuring impact on people and bio-diversity, but this will change as legislation increases. If none work for your organisation, collaborate with others or develop your own. Look out also for smart apps, that use gamification to motivate employee action. As management consultant and educator Peter Drucker said: what you measure, you improve.

Align

Companies deliver impact when company purpose, people and processes are aligned.

This idea is not new. Since the 1970s, companies have been structured to deliver for shareholders – a singular internal goal for one stakeholder. Today, a multi-stakeholder approach is needed, with internal and external objectives and a clearly defined purpose (i.e. vision/mission statement). This last point is important. According to the latest Edelman Trust Barometer (2022), 60% of workers choose a place to work based on their beliefs and values.

This alignment is evident in a growing number of hospitality businesses, including: Slow; Habitas; Artiem and Zoku (both B Corps); Six Senses (1% of hotel revenues allocated to local sustainability initiatives); and UK-based Lamington Group and Zeal Hotels (both creating Net Zero hotels).

When people and organisations are well-aligned, good things can happen.

Collaborate

Adopt an “open source” mentality.

Sharing successes/problems with your community fuels innovation. For example, a client’s employee identified a solution to reduce supply chain uncertainty, costs and Scope 1 & 2 emissions on ice cubes, by buying from a neighbouring competitor, who owns on-site state-of-the-art production facilities. Win-win for a space-constrained operator and a capex-heavy one.

On an industry-wide level, organisations and conferences provide platforms for unified action. In the EU, the Energy & Environment Alliance (EEA), Sustainable Hospitality Alliance, and IHIF are all harnessing industry collaboration. This is not a one-organisation or a one-team endeavour.

Communicate

Be transparent and tell your story – internally and externally.

Changing systems is hard work, so use all channels available to share evidence of progress and motivate the people who are critical to success. At The Social Hub, on-property welcome screens share specifics on environmental and social performance in a simple engaging format. Inspire guests, colleagues, suppliers and other stakeholders with the commitment behind the scenes. It also builds that most precious of assets: trust.

Prioritising ESG

Sustainable hotel operations and reporting is being accelerated by three drivers: legislation; industry (investors/operators); and hotel guests (interesting that 58% of people buy or advocate for brands, based on their beliefs and values – Edelman, 2022).

The climate crisis will remain a significant global business risk; so if ESG has not been a priority, elevate it in 2023. We have an industry and a planet to protect.

About Katharine Le Quesne