Let's look at some practical implications for the Hospitality Industry.
Stakeholders increasingly expect and demand attention from hospitality companies to the environmental and social challenges affecting land and local communities where hospitality companies operate.
Rigorous sustainability assessments of organizations are critical competence to understanding their social and environmental impacts. Thus, sustainability due diligence is becoming a crucial competence for hospitality leaders and businesses.
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MAIN MATERIALITY AREAS FOR HOSPITALITY BUSINESSES
Environmental Social and Governance (ESG) criteria are increasingly viewed as resilience in the face of crises and businesses’ ability to create shared value over the long term. Hospitality businesses should expect further environmental and social regulations, and investors and banks will require more information about the company ESG data.
Environmental Criteria
GHG Emissions
Water & Marine Resources
Natural capital depletion and degradation
Biodiversity conservation and ecosystems
Indoor and outdoor air quality
Land
Climate Change Mitigation
Climate Change Adaptation
Climate change Preparation & Prevention
Pollution
Food Waste
Waste Model
Ecosystem Services & Resources
Social Criteria
Human Capital Management
Harassment
Labour conditions
Compensation and Workload
Health & Safety
Diversity & Inclusion
LGBTQAI+ Community
Value Chain
Affected communities
End users / consumers
Procurement
Wider society
Disability
Prosperity
Governance
Business Ethics & Human Rights
Anti bribery
Anticorruption
Modern Slavery
Human trafficking
Child Labor
Management of the Quality of Relationships
Communications
Strategy
Why are they key?
Environmental, social, and governance (ESG) justifications are used for any company investment.
The enhanced reputation and innovation arising from being a force for good enable a company to capture new opportunities and mitigate new boomeranging risks.
Risk management
Preparing for ESG disclosure will not only assess financial risks to the hotel itself but also assess whether the social and environmental impacts of the organization are consistent with its stated goals, mission, and policies.
It is fundamental to ensure transparency, by having third-party audited sustainability reports based on double materiality.
It must have an integral approach, bringing together qualitative, quantitative, and time-bound fragments data, and assessing these in the context of each other, seeking to apply a wide and inclusive perspective.
To achieve meaningful advancements and thriving communities, a holistic approach to sustainable development and regenerative practices is required.
Performance
What is being measured?
What measures are chosen?
To what extent are aspects of sustainability covered in an organisation’s performance measurement system?
Are measures of sustainability included?
To what extent do the chosen performance indicators enable management to measure performance from a sustainability perspective?
Are the measures chosen the most appropriate ones for the organisation to be using?
Do the chosen measures provide a balanced picture of the organisation’s performance (rather than, for example, just focusing on areas which the organisation is doing well)? How is performance measured (eg inputs; activities; outputs), and can the data be reliably captured?
Are there benchmarks or comparators against which performance can be assessed?
Source: https://www.accaglobal.com/gb/en/about-us.html
Sustainability performance is much more than a set of indicators. We cannot understand or express sustainability performance without knowing many things about the organization’s context, structure a background in the widest sense. - Olaf
Key challenges
ESG scores and the TripAdvisor effect
ESG Scorecards do not reflect the real performance of businesses.
Lack of standardization - Looking forward CSRD regulation (EU) and ISSB (US)
Sustainability professionals are looking forward to having policymakers' papers, as it will help implement the sustainability strategy more practically, set objectives, and report on progress. Standardized ESG data will improve the collection and evaluation of ESG data among investors and asset managers. Voluntary action does not appear to have resulted in large-scale improvement. Thus, this regulation will support the sustainability transition and the transparency of hospitality stakeholders
Board commitment
Have a real intention from board members and c-suite to have an integral ESG strategy through the company value chain.
Having a champion leader helps embed strategies in every department.
Does the leadership have the freedom and incentives to do their work with purpose?
What is the business doing to foster the internal culture? What educational programs are the companies providing for employees?
Have the interests of business stakeholders been taken into account? How are training and development programs helping to promote sustainability values and culture?
What is being measured? What measures are chosen and why?
To what extent are aspects of environmental and social sustainability covered in an organization’s performance measurement system?
Employee engagement and education
Once the leadership teams have the strategy clear, employees play a fundamental role in successfully implementing the sustainability plan and regenerative practices in operations. Not to do tasks but making them feel part of the process, ask their inputs and corners actively, and address them.
Accurate data for investors
More hedge funds and investment entities are required disclosure of data, especially industry-specific issues, so they can make informed decisions in capital allocation and reduce risks.
ESG due diligence before investment decision-making is key. Investors could achieve steady and robust dividends from REITs that invest in sustainable practices.
Sustainability strategy and practices, when done right, can improve portfolio risk management. Hotel chains' shareholders focused on sustainability yield high returns and can mitigate risks (higher cash flows and decreased expenses such as interests).
Hospitality businesses implementing a sustainability strategy, starting their Environmental, Social, and Governance (ESG) non-financial reports should consider the advances of the European Financial Reporting Advisory Group EFRAG and European regulation.
Choosing the right technology to gather data, track progress and report transparency.
Many software companies are offering an ESG report, benchmark, or rating. One should be careful about what we chose and why.
Software solutions can estimate ESG performance. There are many solutions to know a portfolio footprint, but not all platforms include all sustainability, social, and good governance metrics. Turnkey, Clarity AI, Normative.io, IFC’s software EDGE.
The software also has to comply with the EU taxonomy.
The challenges of operating properties through the pandemic in an uncertain environment continue to be felt by hospitality companies. Furthermore, other rising issues such as the talent market, labour conditions, supply chain disruption, climate instability, and regulatory frameworks make these times difficult to navigate.
As I mentioned in my article on the Sustainable Business Guide, The six key areas of focus are:
Have strategic plans and an internal director responsible for the sustainability and purpose journey.
Provide educational programs for the entry-level and management teams.
Evaluate sustainability-related risks and opportunities.
Internal and external stakeholder engagement. Instead of being limited to a sustainability matrix or a handful of stakeholders, having a wider group of affected groups, identifying what concerns them and the business materiality around it.
Prioritize culture and mental health.
Implement technology for efficiency, transparency, and engagement.
If you have any questions please email me! maribelep@purposedriven-net.com
Or if you want to learn more about Sustainability in Hospitality and Hotels, you can book my online course here!
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