How to tell hospitality industry stakeholders a compelling ESG story

Step up investment

With leading hospitality companies already setting science-based and/or net zero targets, tracking and reducing carbon emissions — across energy use, transport, travel and operations — is increasingly critical. Other sustainability goals that can differentiate a business include natural resource protection, sustainable and local sourcing, zero waste and water conservation.

Stakeholders have high expectations across multiple dimensions of ESG. Recent data shows that over 85% of consumers have felt the impacts of climate change in their lives, and this awareness is driving a more substantial demand for sustainable products. Specifically, around 46% of consumers are purchasing more eco-friendly products to mitigate their environmental impact.

Businesses are expected to include sustainability in their business practices, with consumers willing to pay 9.7% above average price for sustainably produced or sourced goods. Additionally, the need for robust data security, climate action, and commitments to diversity, equity and inclusion remains critical, with consumers demanding increased corporate responsibility in these areas.

Evolving rules and standards are also underway, contributing to these fast-track ESG initiatives:

• In the US, the SEC’s new rules have been set to enhance and standardize companies’ climate-related disclosures. The proposed disclosures are broadly aligned with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD). 
• The SEC has also adopted new cybersecurity rules to enhance and standardize those disclosures.
• In the European Union, US-based companies with entities there will likely have to comply with the European Commission’s Corporate Sustainability Reporting Directive (CSRD).
• The International Sustainability Standards Board (ISSB) issued global sustainability disclosure standards in June 2023, which were endorsed a month later by the International Organization of Securities Commissions. That was an important step toward developing consistent global sustainability reporting standards and strengthening capital markets.

Address stakeholder priorities

Regardless of how you responded to these questions, think about how your competitors might respond. Seek opportunities to differentiate yourself by addressing your stakeholders’ priorities. At PwC, we want to help companies accelerate their transition toward investor-grade reporting.

Workforce diversity, equity and inclusion (DEI) has emerged as a critical issue for hospitality companies, who are already facing high turnover rates. Hotels are rethinking how to engage and promote employees traditionally overrepresented in low-paying, low-skill jobs. Upskilling these employees and creating new pathways for advancement are ESG priorities directly tied to business strategy and performance. 

As ESG reporting and regulatory guidance evolve, companies that progress faster will not only be better positioned to react, they will also be likely to gain a competitive advantage by being at the forefront of the issue.

Examples of ESG metrics for the hospitality industry include:

• Climate change mitigation: Scope 1 and Scope 2 greenhouse gas (GHG) emissions.
• Climate change adaptation: Number of lodging facilities located in 100-year flood zones.
• Diversity and inclusion: Percentage of gender and racial/ethnic diversity at executive levels and in middle management.
• Labor practices: Voluntary and involuntary turnover rate for lodging facility employees.
• Water management: Total water consumed in regions with high or extremely high baseline water stress.
• Governance: Description of board oversight of ESG issues.

Applying ESG standards and frameworks as well as developing metrics and controls over reporting will often involve many different areas of a company’s operations. It will likely take time to develop the appropriate systems and processes. We suggest starting with a narrow set of priorities:

1. Decide on your ESG strategy and metrics.
2. Define process and governance steps to have confidence in your reporting.
3. Design your reporting architecture and technology.
4. Tell an authentic and cohesive story.

The hospitality industry is rethinking customer engagement and incorporating social and environmental activities within its services, from community service to immersive experiences in local culture and arts. In the hospitality industry, retaining and advancing a diverse workforce, protecting the health and safety of employees and guests, and maintaining data privacy and security are some other top ESG issues.

Companies that tell a clear, credible ESG story will not only establish themselves as leaders in the market but also stand to benefit from increased access to capital and the returns associated with that access.

In the longer term, as data and reporting become more regulated and standardized, objective comparisons will become easier. By stepping into the spotlight now with a compelling ESG story, you can take strategic actions in a measured way and start to build momentum to differentiate your company.