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ESG's increasingly important role in hospitality

Tuesday, January 25, 2022, 16:28 Hrs  [IST]
HBI Staff | Hyderabad

By Rajneesh Malhotra, COO, Chalet Hotels

As Benjamin Franklin once said, "When the well is dry, we know the worth of water." No business ecosystem is more crucial than the elements of nature itself. Sustainability is widely regarded as the key to a successful business in the 21st century, along with and social responsibility, this is fast becoming a prime concern for governments, businesses and public at large. Since the tourism industry is a people-centric industry and has a substantial impact on the environment, it is imperative that the industry infuses ESG in its DNA. Besides the impact on environment, hotels influence choices people make in their lifestyles; often people adopt trends they see in hotels. Many of my friends have installed aerators in water taps in their homes after seeing these in hotel rooms thereby saving water! 

The tourism sector is a broader ecosystem that encompasses businesses such as hotels, airlines, restaurants, transportation, entertainment, and several other industries engaged in supporting travel, lodging & food service. As per UNWTO, tourist transportation accounts for an estimated 75% of total tourism emissions, accounting for 5% of all manufactured emissions and more than 20% of all transport-related emissions. The COVID-19 pandemic has compelled the tourism industry to refocus on resiliency, sustainability, and interconnectivity among varied stakeholders. As a result, worldwide trends such as clean energy, green architecture, waste management, water management and reducing carbon footprint reflect today's environmentally conscious travelers' ask. 

Leading players in the hospitality industry have been mostly cognizant and respectful of the environment and have acted responsibly for several years, however, more needs to be done. Larger brands/hotel companies have been investing in green infrastructure and sustainable operations and this trend is likely to become even stronger, with spends increasing & even smaller players are now forced to adopt ESG because of rising awareness amongst customers, investors and even employees. The ongoing pandemic has accentuated the need to 'do more.' The hospitality industry realizes the importance of accelerating the adoption of innovative solutions to reduce carbon footprint and create a cleaner, safer & sustainable environment for guests, employees, and the community at large. Green buildings designed with a focus on overall health hygiene and safety provide a safe working environment for employees and instill confidence amongst the guests.

Today's guests are eco-conscious as they care about the impact of tourism-related consumption on the environment, making carefully evaluate their choice of hotels. As a result, they prefer brands that take initiatives to protect and preserve the environment. This awareness is mainstream, and therefore, new projects have been designed keeping the consumer trends in mind. All the stakeholders, including the architects/designers of today, realize the value of creating a lasting change and implement processes encompassing environmentally friendly elements. Hotel developers must track consumer sentiment and be up-to-speed with the new generation of consumers/hotel guests; they must incorporate consumer expectations regarding the environment & sustainability in the hotel design.  

Sourcing power from non-fossil fuel based renewable sources, responsible consumption of energy & water, water & waste management and lowering carbon footprint have been identified as critical areas of focus. As an outcome of these efforts, hotels will aim to achieve consistent year-on-year reduction in unit consumption per room of power and water. Hotels must recycle 100% water and wet waste and target zero discharge. Sourcing electricity from non-fossil fuel based sources and local sourcing of raw materials will help lowering the carbon footprint substantially. Newer ways to a greener future include investments in developing charging infrastructure at hotels to nudge public at large to transition to Electric Vehicles (EV’s). Hotels can lead the way by converting their transport fleet to EV’s 

Tourism sector has the potential to create most number of jobs across industries. According to IBEF, Indian tourism and hospitality created about 39 million jobs in 2020-21 and is expected to create about 53 million jobs by 2029.   Like its impact on the environment, the tourism sector has the potential to have huge social impact. Besides creating millions of jobs, the sector can, and has provided employment to women and other marginalized communities like people with disabilities and the LGBTQ+ community. During the ongoing pandemic hotels served as quarantine centers and extended logistical support to authorities fighting COVID. 

The world is changing, and the new generation of investors and other stakeholders are reevaluating their investment approach. Investors now believe that environmental, social, and governance criteria have a practical purpose beyond ethical concerns. By adopting ESG criteria, they may be able to avoid companies whose ‘way of working’ could signal a risk factor. Companies with ESG best practices may get access to larger pools of capital and are better placed to create long-term value for all its stakeholders. 

Being a sustainable company simply makes great business sense as it’s a win-win situation. It reduces annual variable expenses while more and more customers are willing to reward businesses seen as sustainable by buying products and services from them.  There is no doubt that the foundation of hospitality is built on customer experience, but the need of the hour is that this be grounded within sustainable thinking.  

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