ESG isn’t just a nice-to-have. Strong and consistent reporting in this area will enable hotels to plug that wrenching employee gap, improve reputation management and attract better and more enthusiastic partners and suppliers. It also helps craft the ultimate proposition for investors.
What is ESG (Environmental Social & Governance)?
Environmental, Social & Governance criteria is a clear and concise set of data and measurable indicators of how a hotel or hotel group is performing, whilst outlining its impact on the three attributes mentioned.
- Environmental criteria measures how well the brand is considering its impact on nature.
- Social criteria covers how the business manages its relationship with people that are connected to the business – from employees, to suppliers, all the way to the wider local community it inhabits.
- Governance criteria delves into leadership, pay, audits and shareholder rights.
Why would a hotel need an ESG agenda?
It’s clear that sustainability and conscious travel are top of the agenda for travellers and staycationers alike. Consumer habits are shifting and guests care, more than ever, the impact their stay is having – not only on the environment, but on economic and social outliers too.
An ESG agenda helps unravel this. It’s a public record document that can be accessed. If publicised in the right way too, it can become a valuable part of a hotel’s brand identity and DNA.
Environmental, Social & Governance audits are also a useful and popular way for investors to evaluate companies prior to investment. For many hotels, investment is key for expansion into new markets and to differentiate against the competition.
An ESG is almost like a thorough risk assessment. It’s another useful tool for an investor to create a sound judgement. It’s becoming a must-have, rather than a nice-to-have.
Why is ESG prevalent in the travel and leisure space?
Conscious travel has been an emerging trend for decades, with its prevalence accelerated by the Covid-19 pandemic. This applies to customers and investors alike. The target market that hotels are trying to attract is looking for hotels and places to stay that offer strong social, economic and sustainable reasons to visit. This is mirrored in the eye of investors. A strong ESG is a fantastic crib sheet and proof of progress in this area.
It’s common knowledge that the younger generation is a conscious generation – these are the emerging investors and those that are passionate about sustainable travel. They are concerned with the positive and potentially detrimental impacts that their decisions can have on the environment and people. These investors are therefore keen to make smart business and investment decisions that are sound and grounded in evidence, as well as their own passion, opinion and drive.
Advisers and, more recently consumers, are seeing ESG as a valuable tool to influence decision making. They are a great way for businesses to be accountable and improve transparency too. In having one, hotels and groups can pave the way for considerate growth. Not only does this boost the bottom line, but it helps to attract conscious employees that want to work for a company that champions its purpose.
ESG is ultimately an investment tool. It’s also known as Green Investing, Sustainable Investing, Responsible Investing and other variations of the phrasing, and investors use ESG criteria to look at a variety of business behaviours.
Demand for ESG is rapidly growing year-on-year, so a hotel or group seeking investors is smart to incorporate one into its strategy.
Perhaps more important than attracting investment, ESG is a way to ensure the business has a more meaningful approach to sustainability and longevity in a world where we see increased demand for this purpose.
Examples of criteria are abundant and can include sustainability goals such as reducing greenhouse emissions or publishing sustainability reports. The social spectrum can cover fair pay and a strong diversity agenda. Finally, governance aims to ensure thorough transparency and fairness, from Board level through to other channels of the employment pyramid and supply chain.
Interested in learning more about how we work with hotels to champion its ESG criteria and leverage its visibility in the media? Get in touch – we’d love to hear from you.