Hoteliers around the globe are, finally, waking up to the importance of sustainability in their operations.
While global organisations such as UNWTO are talking of improving sustainability, hotel owners, operators and brands are also starting the process of greening their operations.
The last week saw two important new organisations launched, each with a stake in persuading those in the hotel business to shape up and reduce their carbon footprints. And this time, it’s about far more than ditching plastic shampoo bottles, or only leaving dirty towels in the bath.
First off is the relaunch of a previous hotel industry initiative, under the new name of the Sustainable Hospitality Alliance. Chaired by industry veteran and hotelier Wolfgang Neumann, the group is a reformation of what was once the International Hotels Environment Initiative.
The SHA has members accounting for 25% of the global hotel industry by rooms, with Marriott, Hilton, IHG, Hyatt and Radisson on board. Linked to the United Nations, its brief includes work to improve human rights, youth employment, climate change and water stewardship.
Adding to the environmental impetus, a group of hospitality stalwarts in the UK has launched the Energy & Environmental Alliance, aiming to reduce the embarrassingly large carbon footprint of the hotel sector.
Neumann told Hotel Analyst: “We have been in existence for 28 years – we felt the time was right to launch on our own. Our vision is responsible hospitality for a better world. The great thing about the alliance was, the decision to go independent was made last year – and the membership was committed despite the Covid shock.”
“We have the opportunity to work on a global scale, and most importantly to me, it’s about collaboration. By pulling together and having a collaborative focus, we can make a difference.”
The SHA has four key areas of focus around the globe: climate action, embracing science targets and reducing CO2; water stewardship, addressing the scarcity of fresh water in parts of the globe; human rights; and youth employment.
Neumann also noted that the sector should be pushing its ability to help regenerate countries where coronavirus lockdowns have ravaged economies: “Our industry lends itself to offering opportunities for the young.”
The organisation has made a range of tools available, including a new report entitled the Business Case for Sustainable Hotels. Created with IFC, a sister organisation of the World Bank, the report delivers checklists for investors, asset managers, operators and developers. “We want to be very practical,” said Neumann. “How can we make a hotel, both in construction and retrofitting, more sustainable?”
Elsewhere, the UK-based EEA has been launched with chairman Peter Till, managing director of Choice Hotels UK & Western Europe, and having Ufi Ibrahim, former CEO of the British Hospitality Association as CEO.
The membership organisation has focused on three objectives: linking the industry with scientific experts; enabling members to source sustainable energy; and achieve world-class operating standards.
The EEA launched alongside publication of a report from Ignite Economics that declared the hotel industry of being one sector of just three – alongside construction and agriculture & forestry – not to have reduced its carbon intensity since the beginning of the century. Ignite reckons a 15-20% reduction in energy usage by the hotel sector could translate into a GBP270m saving per year, translating into a 660,000 tonnes of CO2 reduction.
“There is no question that the long-term trends in energy usage in the UK are all in the right direction: total energy use is down; energy intensity is down; the proportion of fossil fuels is down and the usage of renewables is growing exponentially,” said Ed Birkin, CEO of Ignite Economics. “However, some sectors of the economy are doing much better than others and in the accommodation sector, there is clearly scope for considerable savings.”
Chairman Peter Till told Hotel Analyst: “There’s plenty of goodwill – I think we’ve got a good running chance to get things done.” He said some of the lack of progress in the accommodation sector is down to simply a lack of guidance, something he hopes the association will attend to; while having a rigorous methodology for measuring performance is also key. Choice will be supporting all its UK hotels in joining up to the EEA, and Till is pressuring other brands to do the same, building a decent volume of those in the hotel business who can share best practice, and learn from one another.
HA Perspective [by Chris Bown]: The sustainability agenda has lots to go at. Globally, we’d love nothing more than to be reporting on the hotel sector leading game-changing behaviour, and hitting publicly announced targets. Let’s get to it.
Funnelling down to energy use and intensity, we’re a bit worried about simply applying for a “green energy tariff” label. As a recent media investigation has shown, it’s all too easy to acquire a certificate of green energy sourcing for next to nothing – with precious little actual factual support.
Far better if hotels actually focused on reducing what they use – or better yet, generated their own, off their roofs. Most of us old enough to have backpacked round the Med in earlier years will have showered beneath solar-warmed water in our digs. Two or more decades later, technology has advanced such that sensibly installed solar panels and thermal storage is a viable retrofit for northern European hotels – so long as landlord, manager and brand can be bothered to bang their heads together. The efficiency payback can be less than five years. Let’s get to it – before consumers start demanding it.
As ever, inertia is the enemy, driven in some part by the fact that if you install fast developing technology, your purchase – just like your smartphone – will always be out of date before very long. It is to be hoped the EEA will help share best practice, and encourage more to take the plunge, with a reduced level of worry about choosing Betamax over VHS.
Additional comment [by Andrew Sangster]: There is no doubt that the Environmental, Social and Governance agenda is top of mind for many capital providers. If there is a desire to access the cheapest cost of capital, being able to tick the ESG boxes is becoming increasingly important.
But is “ticking boxes” all it is about? Is there a reason why pursuing ESG is a worthy aim for businesses in itself?
The issue has recently come into focus because last month was the 50th anniversary of Milton Friedman’s famous essay where he argued that companies should simply focus on profitability and leave worrying about the good to other actors. As he put it: “The social responsibility of business is to increase its profits”.
A more contemporary perspective on this same theme is from Aswath Damodaran, a professor of finance at the NYU Stern School of Business. In a blog (https://aswathdamodaran.blogspot.com/) published on 21st September he said: “The hype regarding ESG has vastly outrun the reality of what it is and what it can deliver.” He criticised investment managers, bankers and consultants for being cheerleaders of a movement that makes them money but is based on “research that is ambiguous and inconclusive, if not downright inconsistent”. I have a lot of sympathy with this position (and it echoes much of what Friedman said 50 years ago).
To put this another way, such evidence as exists tends to show correlation rather than causality. Good companies are good at keeping records and are able to deliver good ESG results. It does not necessarily follow that good ESG results deliver good companies.
On top of the professor’s argument that there is dubious evidence to support the higher investment return claims from ESG policies (note, he does not deny that there are cases where it works for the benefit of returns but he points out there are also cases where it damages returns, with the net balance being nuanced), I have political problems with the movement. I prefer to vote for politicians to implement such standards, not have them imposed on me by unelected and unaccountable corporates.
Such views make me a dinosaur in much of modern business where “purpose” is held up as important as profit. And I’ll readily admit that no corporate can today afford not to have an active ESG programme. Nor fail to engage with the concept of purpose. The cost of being a laggard in many areas of ESG can be significant.
I do, however, struggle to see the advantages of being a pioneer when it comes to ESG. Firstly, there is the tall poppy syndrome in which a company becomes the target of activists wanting to prove the evils of capitalism. Secondly, ESG can be remarkably expensive and impact on shareholder returns.
Thus the sweet spot with ESG is being firmly mid-table, not low enough to be relegated to the target zone for activists but also not trying to spend huge amounts in a push to be the ESG league champion.
Despite my scepticism about ESG as it is often presented, I believe that the latest crop of organisations do have an important role. They provide guidance and leadership to companies attempting to navigate the complexities of ESG and the relationship between corporates and governments.
Regulation is a necessary undertaking of governments and it is best driven by consensus. Business is part of wider society and should behave in a way that responsibly reflects this.
I will not be donning an Extinction Rebellion badge but I do want to live in a society that takes issues like climate change and diversity seriously. Business has a role to play but it must be as part of a societal consensus. It is right and proper that corporates engage with these issues. Judging what is the right way to do this is yet another burden for leadership. New industry bodies that understand the challenges facing leaders doing this balancing act and can offer supportive advice are welcome.
As an aside, Milton Friedman is often held-up as some sort of anti-government free marketeer. He was nothing of the sort. He believed firmly in social market capitalism (this is quite different to socialism or social democracy by the way).
Friedman recognised there was market failure and governments were needed to ensure free markets. He did, however, want governments that were considerably smaller than is currently fashionable. Nuanced positions like his are not really the thing right now, sadly.