Towards a Future Fit Business
In 2015 the UN launched a shared vision for humanity: 17 Sustainable Development Goals (SDGs) which serve as a call to action to end poverty, protect the planet, and ensure prosperity for all. At their heart, the SDGs are about fixing how our economy operates. Nevertheless, how can businesses make credible positive contributions to the SDGs, while simultaneously working to ensure that they aren’t inadvertently undermining progress elsewhere?
Did you know?
Our global economy is failing society in three critical ways – and we must consider them together if we are to get things back on track.
- Environment – We are disrupting and degrading Earth’s natural processes and depleting the resources which humanity and all other life depends upon.
- Social – The basic needs of billions of people around the world are not being met, while the gap between the haves and have-nots grows.
- Business – has the power to address these challenges, but today’s markets are doing little to encourage, recognize and reward bold action.
A company must reach this goal to ensure that it is doing nothing to undermine society’s progress toward an environmentally restorative, socially just, and economically inclusive future.
To support these companies, a guidance note is prepared by ESG Matters to give the hotel professionals and practitioners an overview on the concepts of ESG and sustainability, and the key essential elements toward a future fit business. Advice on key material issues, sustainability innovation, actionable guidance and benchmarking tools will be discussed. With the guidance notes, the
- business managers shall have a better idea to set the right environmental and social ambitions, take better day-to-day decisions in pursuit of those ambitions, and explain their progress more effectively;
- investors shall have a better idea to assess systemic risks in their portfolios, and identify which assets are doing the most to build resilient businesses and capitalize on new opportunities; and
- practitioners shall have a better idea to offer high-value services and solutions to help companies and investors embed the pursuit of future-fitness into the core of their business.
What is ESG?
Starting with the basics, the letters in ESG stand for Environment, Social, and Governance, respectively. Specifically, they refer to the risks and opportunities that fall within these areas. Together, they make up the extra-financial conditions that companies must consider to understand its footprint on the system.
- Environmental factors refer to climate-related effects, risks, and opportunities. This can fall under waste management, energy consumption, water usage, and more. Hotels’ consumption in energy and water, as well as the problem of food waste are all issues that the industry is facing.
- Social factors address criteria that consider how well a company manages the relationship with the employees, suppliers, clients, and communities. This includes items such as human rights and labour standards in supply chains, child labour compliance, occupational safety and health, and even the relationship and reputation of the company’s business. Hotels’ employees are mostly from local communities with the possibility to bring the issues of forced or child labour, or even human-trafficking.
- Governance factors involve the rights, responsibilities, expectations, and transparency concerning different stakeholders in a corporation. Some criteria that fall into the governance area include company leadership, executive pay, audits, internal controls, and shareholder rights. Hotel groups may source overseas decorations or wares for their properties, lacking practices of local purchase.
While huge disruption has been caused by the coronavirus pandemic on tourism and travels, ESG has become an increasingly important and discussed topic. The hospitality sector is no exception.
The transition to a Future-Fit Society will be long and arduous, but as with any journey we need only two things: a destination to aim for, and the means to track our progress along the way.
This guidance note offers one thing companies have been lacking: a clear, science-based destination to aim for, and the means to guide and monitor progress toward it.
At the core are 23 Break-Even Goals, which together mark the line in the sand that all companies must strive to reach to ensure that they are in no way slowing down society’s transition to future‑fitness. A set of complementary indicators equips any company to measure, manage and explain its progress toward each Break‑Even Goal.
Many companies aspire to do more than cause no harm, by seeking to be a force for good in the world. The guidance note supports such efforts, identifying 24 Positive Pursuits which characterize all of the ways a business may act to speed up society’s transition to future-fitness.
- “Where we are today: a systems view” describes where society finds itself today and how we got here, and applies systems thinking to explore what has to change going forward.
- “Where we need to go: a Future-Fit Society” offers a shared destination to aim for, by identifying what a Future-Fit Society would actually look like.
- “Actionable guidance for business” explains how these systems concepts can be translated into a practical business tool, to help individual companies play their part in our collective journey to future-fitness.
- The last two sections introduce the Break‑Even Goals and Positive Pursuits.
The Systemic Approach
Instead of just considering the financial aspect, there are other implications of ESG. Taking a step back, we are seeing exponential growth in some of our use of resources and in our impact on the planet. This is across a range of dimensions and the challenge here is that we live on a finite planet where exponential growth cannot continue indefinitely. We’re starting to see the strain we are placing on the natural systems we depend upon and the social fabric we rely upon to ensure that society functions in a healthy way. That is why the consideration of ESG is so important. Considering ESG allows for companies to identify and address risks that are systemic.
When we look at this through a systemic lens, we can see that business can only thrive if society flourishes, and society can only flourish if it’s operating within the carrying capacity of our finite planet (if we’re not undermining the natural systems we depend upon). Continued negative impacts by companies will contribute negatively to this system. Instead of just having a positive impact, companies need to adopt an ESG lens to simultaneously do everything possible to eliminate their negative footprint. This is all the environmental, social, and economic negative impact that you cause yourself or that you are dependent upon through others in the value chain, whether it’s impacts you are passing on to your customers or ones that you are depending on through your supply chains. Leadership of companies should ensure a responsible party to take charge of the implementation of ESG towards a systemic
future to best allow for success.
Set you ambition! What are the ambitions of a future-fit hotel business?
- ENERGY is from renewable sources.
- WATER use is environmentally responsible and socially equitable.
- NATURAL RESOURCES are managed to respect the welfare of ecosystems, people and animals.
- PROCUREMENT safeguards the pursuit of future-fitness
- Operational emissions do not harm people or the environment
- Operations emit no greenhouse gases
- Operational waste is eliminated
- Operations do not encroach on ecosystems or communities
- Community health is safeguarded
- Employee health is safeguarded
- Employees are paid at least a living wage
- Employees are subject to fair employment terms
- Employees are not subject to discrimination
- Employee concerns are actively solicited, impartially judged and transparently addressed
- Product communications are honest, ethical and promote responsible use
- Product concerns are actively solicited, impartially judged and transparently addressed
- Products do not harm people or the environment
- Products emit no greenhouse gases
- Products can be repurposed
- Business is conducted ethically
- The right tax is paid in the right place at the right time
- Lobbying and advocacy safeguard the pursuit of future-fitness
- Financial Assets safeguard the pursuit of future-fitness
ESG in the hospitality sector is becoming more than a trend but awareness which pushes every stakeholder to act upon it. From the adoption of some international sustainability standards and frameworks like GRI and SASB to the establishment of the industry-specific Sustainable Hospitality Alliance, ESG is in all aspects in the running of a hotel business.
By referring to this guide, you can find clear instructions on how all the aspects and topics in E, S and G can be addressed, identified and taken care of. It is also crucial to prioritise the material ESG topics that only apply to you, to effectively distribute the limited resources for sustainable actions. Stakeholders should also be engaged as they share values, profits and even risks with you. With the help of innovative technologies, more solutions are available and can be adopted to empower the hotel operators to take more sustainable measures. With the relief of the pandemic, the travel and tourism industry is reviving, and so is the hospitality industry. This is also the opportunity to demonstrate your efforts and contributions on sustainability and on moving forward to a more sustainable future.
How to identify what information to gather, actions for improvement and how to have them prioritised? Key questions to ask:
(3) Natural Resources
- If the company offers services which require physical goods to be consumed – what product inputs go into those goods?
- Does the company outsource any core functions?
- Which ancillary goods and services does the company purchase to support its operations?
(5) Operational Emissions
(6) xxx Operational GHGs
(7) xxx Operational Waste
(8) xxx Operational Encroachment
(9) xxx Community Health
(10) xxx Employee Health
(11) xxx Living Wage
(12) xxx Employee Terms
(13) xxx Employee Discrimination
(14) xxx Employee Concerns
(15) xxx Product Communications
(16) xxx Product Concerns
(17) xxx Product Harm
(18) xxx Product GHGs
(19) xxx Products Repurposed
(20) xxx Business Ethics
- Does the company have an explicit policy relating to how it pays taxes?
- Are tax opportunities a driving motivation in the company’s strategy?
- Is the company an individual firm or part of a corporate group?
- Does the company operate in multiple jurisdictions?
- Does the company take part in activities that are explicitly defined as lobbying, undertake other actions which seek to change public policy or public opinion, or contribute to third parties who do the same?
- Does the company belong to any bodies which influence on its behalf?
(23) Financial Assets
- Are financial assets part of the company’s core business?
- What are the company’s investment goals?
- How does the company manage its financial assets?
ACross the Board
- What are the opportunities for the company to make the most significant progress?
- Which steps can the company most easily implement?
- Could the company find ways to exceed the requirements of this goal?