Sustainable Tourism: How ESG is changing the travel industry

The ESG agenda is changing the travel industry: it helps the formation of local brands, affects the environment and the development of entire regions. Why Companies Can’t Ignore Sustainability

ESG in tourism: opportunities and challenges

In the tourism sector, the ESG approach is a tool with which companies can navigate the economic and political turbulence in the market. Sustainable development initiatives help to form regional tourism brands, reduce harmful emissions into the atmosphere, promote tourism products of the administrative resource, and attract local businesses. Green transformation standards were initially set in developed countries, largely in order to implement the technologies they developed in large markets.

In some regions, the ESG approach in the travel industry is being promoted at the state level. So, in Germany in the tourism sector criteria of sustainable development are used from the point of view of ecology, economy and social sphere. These include strategy and planning, building sustainable offerings, economic security, local prosperity, nature and landscape conservation, resource management, culture and identity, the common good, and quality of life.

In our country, the ESG agenda remains relevant not so much to attract funds from foreign investors, but to modernize the industry based on energy efficient technologies, solve environmental problems and improve working conditions. But due to sanctions and an unstable market situation, companies are primarily concerned with survival, so the range of opportunities for implementing all parts of the ESG agenda narrows.

Another difficulty is related to the ambiguity of the methodologies by which companies receive ESG ratings. Due to lack common standards for assessing compliance with ESG principles, it is difficult for investors and market participants to form an objective picture. So, our own certification program for compliance with “green” standards is still poorly developed in our country, so organizations choose international options. For example, representatives of the domestic tourism industry note that in Krasnaya Polyana one hotel is certified according to Green Key standards, and there are plans to transfer all hotels to the ESG agenda by 2025. The program implies that 90% of detergents must be eco-labeled, and more than 80% of food products must be from local producers.

What in practice?

Impact on the environment

Tourism is not the best affects greenhouse gas emissions into the atmosphere: studies show that it accounts for 8% of global emissions, with China and the United States leading in their amount. To minimize harm to the environment, companies take private initiatives and pass international certifications for compliance with environmental standards.

Domestic environmental standards are developed by individual non-profit organizations: for example, the standard for hotels «Leaf of Life” is designed to reduce the burden on the environment of industry representatives. It involves topical ways to minimize and manage food waste, including recycling, composting, transfer to animal feed, and biofuel production. Another requirement of the Leaf of Life is a ban on the use of single-use plastic and a reduction in the types of packaging materials recommended for purchases.

Recycling initiatives to minimize their carbon footprint are common in the hospitality industry. Thus, the Hilton chain launched soap recycling program and was able to reduce carbon emissions by 32%.

airlines, in turn, take initiatives to reduce their carbon footprint through the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) program. Carriers are moving towards the use of sustainable fuels, but its widespread use is difficult due to the high cost: on average, biofuels are four times more expensive than aviation kerosene. Widespread adoption of ecofuels in aviation has been hampered by the diversity of national kerosene standards, making it difficult to calculate CO2 emissions by country of origin. One possible solution is to buy emissions credits, rather than switch completely to biofuels.

Development of local brands

ESG helps develop regional businesses and create jobs. For example, in Krasnaya Polyana, local manufacturers of souvenirs and food get a platform to distribute their products. When holding corporate MICE events (from English Meetings, Incentives, Conferences, Exhibitions), organizers can order an unusual souvenir for participants from local manufacturers. Thus, the event gets unique souvenirs, and the producers get the opportunity to grow. Thanks to interaction with the tourism industry, Krasnopolyanskaya Kosmetika is on the rise: its creators began to cooperate with hotels and were able to expand production.

Economic development of individual regions

The principles of sustainable development can transform entire regions. For example, companies that develop tourism in the Russian Arctic, increase their ESG rating, which allows them to more successfully attract investors and bank loans. In the implementation of the modern ESG approach in management, there is an increase in the S factor, that is, the social one. Due to this, the outflow of the population is reduced, because of which the demography of entire regions suffers – the Arctic zone of the Russian Federation, Siberia and the Far East.

The Future of ESG Practitioners

Sustainability of the industry as a whole is possible when companies pay equal attention to all aspects of the agenda — environmental, social and corporate governance. Therefore, organizations cannot consider themselves 100% supporters of ESG if they pay attention only to the environmental component, but do not care about employees, or vice versa. ESG standards in tourism are only developing, and industry participants are already realizing the importance of a “green” approach to creating an attractive image among consumers.