Sustainability has become a top priority for most travelers, hoteliers and investors. There has been a growing interest in responsible environmental practices, sustainable tourism, corporate governance and social welfare. This increasing interest in eco-friendly initiatives is pushing the hotel industry worldwide to prioritize decarbonization initiatives and responsible social policies and practices.
CBRE’s latest study — Sustainability and ESG Adoption in the Hotel Industry: A Global Status Update — highlights the urgency for hospitality and leisure establishments to reduce their carbon footprint compared to other real estate asset classes. Providing a status update on ESG adoption in the hotel industry across the U.S., Asia Pacific, the U.K. and the E.U., the report gives examples of ESG-related strategies implemented by hotel owners and operators.
According to the report, while many hotel companies, owners and operators have pledged to improve ESG performance and reach net zero targets, slower economic growth in the U.K., E.U. and Asia Pacific, along with an anticipated recession in the U.S., is likely to slow down short-term progress.
Other challenges, like continuing inflation, high-interest rates and heightened geopolitical uncertainty, could prompt capital-constrained companies to delay ESG initiatives ad draw out their implementation timeline.
GLOBAL SCENARIO
Climate-related initiatives by hotel companies are usually focused on four key areas – energy efficiency, carbon emissions, water conservation and waste reduction. While creating consistency in reporting on water, waste, energy and carbon emissions, measurement metrics can be challenging. Many hospitality brands have begun to utilize Global Reporting Initiatives and other standards, like the European Financial Reporting Advisory Group and International Sustainability Standards Board, to set up an internal framework for reporting standards.
These reporting standards are helping hotel industry stakeholders understand and benchmark performance about ESG targets.
The Cornell Hotel School, Greenview and many others created the Cornell Hotel Sustainability Benchmarking Index to track performance. The index allows hotels to benchmark their progress in sustainability areas against their competitors. CBRE’s report included energy efficiency, carbon emissions and water usage in 25 countries among hotels participating in the Cornell Hotel Sustainability Index.
ESG rules vary across markets, with some countries more advanced than others, in terms of implementing laws to mitigate climate change, like making it compulsory for new construction and remodeling to meet strict regulatory requirements.
Some common ESG initiatives across all regions include:
- A rise in the number of benchmarking firms focused on measuring and tracking carbon, waste, electricity and diversity, equity and inclusion levels at the property and company level.
- Strong commitments to science-based reduction targets and timelines.
- Emphasis on ESG effectiveness as an investment criterion.
- More initiatives to increase the number of diverse leaders in C-suite and board positions.
- Employee and guest bases are more focused on working for and patronizing hotel groups they feel are good environmental stewards and committed to the well-being of their associates, communities and guests.
- More usage of green financing options to improve ROI on environmentally sound investments,
- Efforts to implement waste reduction (single-use plastics) and energy efficiency, which most hoteliers consider as low-hanging fruit.
- More collaboration within the hospitality sector to lower carbon emissions and achieve sustainability targets involving companies like the Sustainable Hospitality Alliance, the World Travel and Tourism Council, the Global Sustainable Tourism Council and the American Hotel & Lodging Association. The report anticipates a greater number of independent hotel owners partnering with these organizations to leverage energy-efficient technologies, reduce food waste and remodel assets to improve their respective environmental performance.
- More focus on social goals. Organizations like End Child Prostitution and Trafficking are working with the hotel industry worldwide to further causes like eliminating human trafficking within the hospitality sector.
- To align with green building standards, certifications and systems to implement sustainability initiatives.
FOCUS ON THE U.S.
While the SEC’s draft regulations may add new requirements on public companies, external stakeholders have been an immediate catalyst to further carbon emission reduction programs.
The government’s recent Federal Supplier Climate Risks and Resilience Rule mandates federal contractors to disclose greenhouse gas emissions and climate risks and set science-based emission reduction targets. This is likely to have a trickle-down effect on other industries, including hotels and companies working with the same suppliers.
The U.S. Department of Energy has created the Better Buildings Challenge, a voluntary leadership initiative to encourage, educate and support small hotel owners and operators to take the initiative in reducing energy consumption and water waste.
Stakeholders are prioritizing guest and employee well-being and fair labor practices, particularly hiring, to ensure diversity among staff, executives and suppliers.
Company ethics and transparent reporting on environmental and social issues have become a pillar of corporate governance. Many major hotel companies have board committees that oversee the direction and implementation of ESG goals.
An increasing number of companies are using their own proprietary systems to implement and monitor ESG initiatives. Examples include Hersha’s EarthView, Hyatt’s EcoTrack, Hilton’s LightStay, Wyndham’s Green Toolbox and IHG Green Engage.