EMBRACING ESG IN TRAVEL & TOURISM
(Environmental, Social, Governance)
Opportunities and challenges
Acronyms and definitions
– CSR: “Corporate Social Responsibility.”
– ESG: “Environmental, Social, and Governance.”
- At first glance, these two terms may seem interchangeable, but they are different. While CSR is about doing the right thing (i.e. operating ethically and responsibly), ESG is about measuring the impact of those actions (with clear KPIs and goals). Organisations need to distinguish between these terms and create sustainability-minded cultures and quantifiable and measurable strategies.
– Sustainability: “Meeting our present needs without compromising resources for future generations and maintaining an ecological balance.”
– Sustainable business: “Responsible business practices and strategies ensuring that the business can continue to operate and grow in the long term.”
- The two go hand-in-hand and have become a major pressing issue for all industries. Organizations must integrate environmental, social, and economic considerations into their core strategy to create long-term value and continuous growth.
– Fragmented industry: With a wide variety of ownership structures each with its own beliefs, priorities, and reporting systems, the hospitality industry does not have a strong and unified voice nor consistency.
– Lack of a global standard: Companies are outdoing each other in producing ESG data and reports, making them difficult to properly understand and measure. A global standard for each industry would be of great help to all involved.
– The key pillars (‘The key Ps’) of ESG: People, planet, prosperity, peace, partnership.
– ESG as the creator of long-term value: It has been proven that companies that courageously pursue strong growth and profitability while improving ESG performance will deliver superior returns in brand recognition and value, with a happier labour force, repeat business, lower costs, and higher profitability/ROI.
ESG IN HOSPITALITY: The most pressing challenge of our time
The evolution of ESG, from useful to a necessity, is a transformation that has engulfed all industries, including travel and tourism.
The hospitality sector, though previously lagging in ESG, is now witnessing a rapid transformation. The increasing demand for clarity on organisations’ ESG strategies from customers, investors, insurers, and capital providers clearly indicates the need for transparency.
The growing popularity of responsible investment and sustainable finance, coupled with a rise in conscious consumerism, has put significant pressure on corporations to prioritise transparency in measuring both CSR and ESG.
Studies show that roughly 70% of institutional investors will likely avoid companies with poor ESG and sustainability performance. Similarly, estimates suggest that nearly half of business travellers, especially those attending Meetings, Incentives, Conferences, and Exhibitions (MICE), prioritise working with ESG-committed organisations.
Consumers are increasingly aligning their choices with their values, and companies that fail to comply risk losing out on a significant market segment.
Undoubtedly, travel and tourism, particularly air travel, land/sea transport, hotels, and food and beverage services, contribute significantly to greenhouse gas emissions. However, while many organisations recognise the importance of ESG, its priority lags behind short-term profitability.
The industry could do with less “lip talk” and more concrete actions regarding sustainability and sustainable business.
The increasing pressure to address environmental, social, and governance issues is not just a matter of reputation; it has a tangible impact on a company’s performance and legal compliance. Ultimately, an effective ESG strategy can be a major differentiator, providing a clear competitive edge.
Environmental impact
The impact of climate change on people and nature is increasingly apparent. Habitats are undergoing rapid shifts in response to changing temperatures and precipitation patterns.
The overexploitation of natural resources to pursue economic growth and development has negatively impacted the environment and caused resources to become scarcer and costlier.
While complete reversal of the damage may not be possible, significant changes can slow the decline and pave the way for a sustainable future. The travel and tourism industry, a significant consumer of resources and often plagued by high waste, has a critical role to play – especially when it comes to reducing carbon footprint and greenhouse gas (GHG) emissions.
Remember, change always starts at the top. Addressing sustainability isn’t just a moral obligation for travel industry leaders and investors – it’s a sound economic decision. By driving innovative solutions from the top down, organisations can embrace a “reduce, reuse, recycle, upcycle” philosophy across all operations.
With the vast majority of the world’s population breathing unsafe air, the industry must reduce emissions, limit waste, conserve utilities, use renewable energy, implement smart technology, increase operational efficiency, and champion better sustainable practices.
Training, retraining, and educating all people within an organisation – and supporting them – is not just an obligation but a key strategy for every owner and leader. Sustainable management practices are an investment – ensuring a healthy planet and a thriving tourism industry for generations to come.
Sustainable business in hospitality
This is the time for travel and tourism owners, leaders, and operators to review their strategies and rethink their entire process – from product to administration to finance to sustainability – and adjust accordingly to match shifting consumer preferences, digital transformation, and accelerated global trends.
There has never been a fiercer wake-up call for the industry, and we can’t go back to how business was conducted in the past.
In today’s rapidly changing and uncertain business environment, adaptability, agility, smart technology, and sustainability will all remain crucial keys to success.
Building a better future (at least not worse) is everyone’s responsibility. True business sustainability requires organisations to have clear and comprehensive strategies for driving continuous, profitable growth while being mindful of their social, environmental, and financial impact.
When it comes to strategising for sustainable business, however, there is no one-size-fits-all formula, as each organisation is different and has its own organisational principles.
Creating value for all stakeholders (not only for shareholders) is usually the key objective. The aim is to create a better future for all involved without compromising the ability and prospects of future generations. To do so, we must ensure that short-term profits don’t turn into long-term liabilities.
Naturally, organisations prioritise business results and profitability, but overall image and positioning are just as important for the medium-long term. When it comes to ‘People-Planet- Profit-Process,’ one cannot be achieved without the other.
It is a fast-changing industry, and company owners and leaders must evolve to embrace the many new business dynamics, including a new generation of attitudes and expectations from both the labour force and consumers. No business will automatically grow year after year. A sustainable vision, strategy, roadmap, and commitment are all necessary.
Additionally, integrity, honesty, accountability, respect, and equal opportunity should be core values guiding ownership, leadership, and employee behaviour.
Creating value with ESG
Any organisation must fully understand the multiple ways that environmental, social, and governmental factors can create value. It is also important to regularly acknowledge how ESG is measured. Creating value should be the core message of every leader.
Among the many benefits, ESG can create value in five critical areas:
- Top-line growth: A strong culture in ESG helps companies tap new markets and expand existing ones. It drives consumer preferences.
- Employee productivity: It helps companies attract and retain quality employees, enhance motivation, instil a sense of purpose, and increase productivity.
- Cost reduction: Executing ESG effectively can help combat rising operating expenses, such as supplies and raw materials and the true cost of energy, water, wastage, and carbon emissions.
- Reduce regulatory and legal intervention: This enables companies to achieve greater strategic freedom, ease regulatory pressure, and gain government support.
- Investment and asset optimisation: This helps attract financial support, partners, and investors, and enhances investment returns by better-allocating capital for the long term and achieving higher valuation.
Owners and leaders must work hard to analyse what matters most for their respective organisations, and where the greatest potential exists to impact them.
ESG performance is commonly measured using both quantitative and qualitative indicators. KPIs can include:
– Carbon footprint, greenhouse emissions
– Employee attraction, retention, and satisfaction
– Customer loyalty and satisfaction
– Utilities consumption (energy, water, gas/fuel)
– Renewable energy
– Quality/efficient air filtration system (MERV, HEPA and similar filters)
– Waste reduction and management
– Building management system (BMS)
– Responsible suppliers and sustainable procurement
– Social/community engagement and activities
– Ethical business practices
– Environmental policies
– Economic principles
Where possible, ESG processes and actions should be certified by a qualified body. This will enhance credibility with customers and investors.
Financial impact on the bottom line
Evidence is emerging that a better ESG score translates into higher profitability for companies in terms of increased customer loyalty and revenue (+10%?), lower operating and labour costs (-15%?), and lower cost of capital (-10%?) as the risks that affect business are reduced. Of course, all this will reflect on the long-term image, position, and value of the brand/company.
Basics of ESG reporting
Organisations are required to disclose information covering operations and risks in the following key areas:
– Environmental stewardship
– Social responsibility
– Corporate governance
– Targets in reduction of emissions, overconsumption, and others (Note that transparency in all reporting is essential)
The road to 100% sustainability is long, and numerous approaches will need to be tested before a company or organisation can have the most positive impact. The objective is to create a better future for all involved.
Evaluation and benchmarking template
For impactful ESG/Sustainability efforts, a company’s KPIs need to go beyond just measurements. They should include clear objectives (what you want to achieve), specific actions (how you’ll get there), and targeted results (how success will be measured). Focusing on measurable environmental targets, with well-defined assessment, rating, and reward systems, further drives efficient practices and successful implementation.
Simply put, companies can’t save what they aren’t measuring, and if they can’t measure it, they can’t improve it.
| Assessment: 1-10 | Action | |
|---|---|---|
| Energy; | ||
| – Energy audit & consumption tracking, in place/done? | ||
| – Led lighting, % of installation | ||
| – Energy sub-metering, % of installation | ||
| – Geothermal/free-cooling cooling towers | ||
| – Heat Pump system | ||
| – Cogeneration/combined heat and power (CHP)/Trigeneration | ||
| – Quality of building insulation (thermal, fire, acoustic) | ||
| – Renewable energy generated by; (present & future) | ||
| 1. Solar PV and/or thermal panels | ||
| 2. Photovoltaic glass/panels (conversion of light into electricity) | ||
| 3. Wind power, hydrogen, geothermal system, or other | ||
| Water; | ||
| – Water audit & consumption tracking, in place/done? | ||
| – Sub-metering, % of installation | ||
| – Facets flow/pressure controller, mist showerheads, dual-flush toilets | ||
| – Water filtration/hydration station system throughout the hotel | ||
| – In-house potable water bottling with reusable glass bottles | ||
| – Rainwater harvesting (capture) and recycling | ||
| – Wastewater/sewage treatment | ||
| – Graywater recycling and reuse | ||
| – Handling of laundry water; recycling-dispose-or? | ||
| Gas and Fuel (if any); | ||
| – Consumption tracking, in place/done? & proper combustion mixture | ||
| Comprehensive Best Practices; | ||
| – In-house sustainability team and champion; efficiency & results | ||
| – Elimination of single-use plastics & plastic/styrofoam pollution | ||
| – Reduction of paper usage (paper-free?) and reduction of office supply | ||
| – In-room Towel & Linen reuse program (opt-out) | ||
| – Soap and Shampoo dispensers (organic products) | ||
| – Electric and/or hybrid vehicles | ||
| – Digital thermostats in-rooms, restaurants, banquet areas | ||
| – Occupancy sensors for guest rooms and function rooms (for lights & exhaust fans) | ||
| – Energy-efficient equipment, machinery & vehicles | ||
| – Benchmarking energy, water consumption, and best practices with peers | ||
| – Involve guests to support green initiatives | ||
| – Green roof & vegetable garden (if possible) | ||
| – Friendly cleaning products, sanitizers, adhesives, paint & other | ||
| – Environmental sustainable packaging and amenity containers | ||
| – Handling of flammable/combustible and dangerous products/goods | ||
| – Environmental friendly fire suppression system | ||
| – Manuals-standards-procedures & other in electronic format | ||
| – Gift trees to employees and/or clients on special occasions | ||
| Recycling; | ||
| – Collection-sorting-recycling process in place? | ||
| – Pictorial/Labeled/colored bins (trash receptacles) available in all areas, front & back | ||
| – Old electrical and electronic items (battery, hazardous waste & other) | ||
| – Old furniture and equipment | ||
| – Linen, towels and beddings program | ||
| – Handling of bottles and cans (crasher and compactor?) | ||
| Waste & Disposal; | ||
| – Food waste tracking and prevention program, in place/done? | ||
| – Food waste composting (use/sale as soil fertilizer?) | ||
| – Waste compactor (space maximation, cost savings & hygiene) | ||
| – Food surplus donation program | ||
| – Handling of kitchen grease and of cooking oil recycling | ||
| – Classification and sorting of waste & trash at garbage area | ||
| – Dry and wet garbage; handling-collection-safety-hygiene | ||
| Preventive Maintenance; | ||
| – Is the preventive maintenance program in place? | ||
| – Risk-based priority maintenance process | ||
| – Replacement program for old/inefficient machines & equipment | ||
| – Variable frequency drives for varying/part load operation | ||
| – High-efficiency HVAC system (inverter) | ||
| – Energy saving mode & efficiency of lift & escalator installations | ||
| – Track/analyzing costs for savings opportunities | ||
| Restaurants; | ||
| – Portion control/portion size to avoid wastage | ||
| – Promotion of plant-based foods (reduction of animal farming and overfishing) | ||
| – Promotion of vegetarian/vegan and healthy food options | ||
| – Environmental friendly menu and promotional material (contactless) | ||
| – Elimination of disposable/polluting plates & utensils (use biodegradable) | ||
| – Upgrade equipment (kitchen in particular) and eco-friendly | ||
| Procurement; | ||
| – Preference for locally produced goods and services | ||
| – Supplier evaluation, licensed and reliability | ||
| – Sustainable food/seafood procurement policy | ||
| – Inspection of supplier’s places | ||
| – Delivery methods and sustainable packaging (biodegradable packing) | ||
| Environmental policy, Training, and Culture; | ||
| – Written & updated environmental policies including related budget | ||
| – Measurements and KPI’s formulas and implementation | ||
| – Training and retraining consistency. Display work instruction and criteria | ||
| – Recognition and rewards for exemplary performance & results | ||
| – Green and best practices shared on the website and social media | ||
| – Formula to measure the company carbon footprint/emission | ||
| – 3rd party certification by a recognized organization: LEED-ISO or other | ||
| – Stricter environmental, social and corporate governance approach | ||
| – Human rights program (child labor, modern slavery & similars) | ||
| Carbon-Offsetting; company initiatives & activities; | ||
| – Full understanding of the company’s carbon footprint & GHG emission | ||
| – Sustainable reforestation, planting of trees, and conservation | ||
| – Support to land/soil restoration and prevent soil erosion | ||
| – Local community projects; cleaning of shoreline, parks, mountains, rivers etc. | ||
| – Get staff and guests involved in sustainability efforts | ||
| – Tell your sustainability story & demonstrate your company values |
Utilities Metrics
In principle, all targets and KPIs must be measurable, relevant, specific, and time-bound. Targets should be aggressive but achievable, and all stakeholders must accept and embrace them in full.
| A – Electricity Consumption (kW-h) |
Current Period Targets, YTD |
Current Period Actual, YTD |
Previous Year Actual, YTD |
Previous 2 Years YTD |
| Total consumption | ||||
| Per m2 of indoor floor space |
|
|||
| Per Available (or occupied) Room | ||||
| Variance, Total Consumption | ||||
| B – Costs ($) | ||||
| Total Costs | ||||
| Per m2 of indoor floor space | ||||
| Per Available (or occupied) Room | ||||
| % of GOR | ||||
| Variance, Total Cost |
| A – Water Consumption (cu) |
Current Period Targets, YTD |
Current Period Actual, YTD |
Previous Year Actual, YTD |
Previous 2 Years YTD |
| Total consumption | ||||
| Per m2 of indoor floor space |
|
|||
| Per Available (or occupied) Room | ||||
| Variance, Total Consumption | ||||
| B – Costs ($) | ||||
| Total Costs | ||||
| Per m2 of indoor floor space |
|
|||
| Per Available (or occupied) Room | ||||
| % of GOR | ||||
| Variance, Total Cost |
Can develop similar benchmarking for fuel and gas (if any).
| Total Utilities |
This Year, YTD |
Last Year, YTD |
Improvements |
Notes: |
| Expenses ($) |
| Renewable Power |
Present |
2025 Target |
2028 Target |
2030 Target |
| Target |
% of supply: …… |
% of supply: …… |
% of supply: …… |
% of supply: …… |
P/S: Sustainability is not just a passing trend – it is here to stay and must address root problems.
Sustainability – Business Activities
