The number of governments and businesses introducing environmental, social and governance (ESG) frameworks and principles has grown significantly in recent years. But what are the implications of ESG specifically for the tourism industry? Richard Stolz, principal at Roland Berger Middle East’s transportation, tourism and logistics practice in Dubai, provides a pragmatic overview of the latest ESG practices in the sector.
It has become evident that ESG is a hot topic in the tourism industry, with several emerging trends evident. Furthermore, ESG and sustainability are becoming key metrics for ranking touristic destinations. For example, the latest ranking of the Travel & Tourism Development Index 2021 (TTDI) published in May 2022 by the World Economic Forum lists “Travel and Tourism Sustainability” as one of its key pillars for determining the attractiveness of tourism destinations. The report highlighted key environmental and sustainability challenges faced in the MENA region, which include water shortages and air pollution. Economies in Europe and Eurasia are world leaders in environmental sustainability, accounting for more than half of the countries in the TTDI that score above average for this pillar.
The following provides an overview of the emerging themes and trends for ESG in tourism.
There is growing consumer awareness when it comes to assessing the environmental impact of travel. As a result, companies in the tourism industry are aligning with this shift. Transport corporations, such as airlines and cruise companies, face increasing demand for sustainable and alternative fuels to reduce their carbon footprint. Many have already pledged to reduce it. Moreover, countless hotels have introduced energy efficiency and recycling programs to their operations.
New touristic destinations are focusing on investments in local communities through supply-chain localization – for example the promotion of local F&B production and educational programs that support the prosperity of specific regions. Furthermore, a renewed focus on society/social responsibility has been explicitly witnessed in relation to the workforce, gender, diversity, community, geopolitical matters, human rights and equal pay. This can be observed through financial commitments from companies, which provide, among other things, aid for youth in communities impacted by natural disasters.
The industry is witnessing overall improvements in sustainability reporting and transparency, especially for major tourism enablers, such as airlines and hotel chains. These players are leveraging international standards, certifications and guidelines on sustainable tourism (e.g. UNGA sustainable tourism resolutions). improve their governance.
It is important to accept that ESG is here to stay. Key players in the global tourism sector have already embarked on the journey to adjust strategy, business and operating models accordingly. Further, growing consumer awareness on the impact of travel on nature and communities will increasingly influence travelers’ decision making when deciding how, where and when to travel. Therefore, businesses and governments in tourism need to be aware of the chances and opportunities ESG policies offer to eventually cater to shifting consumer demands and help ensure long term success.