ESG adoption and hospitality: The path forward


The most successful and progressive leaders of today are embracing ESG (Environmental, Social, Governance) throughout their businesses in various forms. ESG is a vast and ever-changing topic that is no longer background noise and should be considered the backbone of any business. The hospitality industry is no different and especially customers are now wanting to see that a facility practices social responsibility, has ethical governance plans, and prioritises eco-friendliness.

But how can ESG help a company in the hospitality sector address some of its challenges around staffing and costs? Also, what are some specific examples of good ESG practice that can help a hospitality business move forward?

Key challenges in hospitality in 2024

The hospitality industry is set to face a number of challenges through 2024. While many businesses don't see it as a priority in the current climate, ESG adoption may actually help solve some of the challenges the hospitality industry is grappling with.

Staffing issues

An almost perfect storm of issues has already hit the hospitality sector hard. Brexit had an impact on the free movement of labour in the UK and throughout the EU. That was quickly followed by the Covid-19 pandemic which further impacted staffing levels. Add a workforce that now demands more from their employer and has ever-changing expectations, it is making it harder for any business to operate as it should.

Spiralling costs

Like any other industry, the hospitality sector faces rising energy, labour, and raw material costs. This increase puts pressure on margins and makes it hard to focus on matters like ESG.

The economy

Globally, the economy faces many challenges, including the wars in Ukraine and the Middle East, and inflation. Economic uncertainty tends to make consumers more cautious, and they tend to spend less on hospitality.

Climate change

A changing climate is a major factor for some businesses in the hospitality sector. They may face rising sea levels, a lack of water, or other extreme weather. Again, these challenges make a business more expensive to operate.

New technologies

People are increasingly prone to book travel and accommodation online using emerging technologies. In turn, this adds an element of disruption to companies in the hospitality sector.

Despite these challenges, the hospitality sector is resilient and has a long history of overcoming adversity. Businesses that can adapt to the changing landscape and meet the needs of their customers will be well-positioned to succeed in the future. ESG can be a key component to futureproofing those businesses.

Why ESG adoption is good for the industry

When companies in the hospitality sector embrace ESG, numerous benefits may follow.

Attract new customers

study by Nielsen found that 66% of customers may be willing to pay more for services or products when the company is committed to ESG principles. So, they may be more inclined to stay in hotels or eat at restaurants that understand ESG.

Retain employees

Likewise, employees are more likely to work for companies committed to ESG. An increasing number of Gen Zs and Millennials could reject a job based on whether that company aligns with their personal ethics.

Reduce cost

Energy efficiency is a principal component of any ESG initiative, and a pursuit of efficiency will eventually yield cost savings. For example, a hotel could reduce its energy bills by retrofitting older lighting fixtures.

Boost reputation

When companies strongly commit to ESG, stakeholders will take notice. This move can help improve brand reputation, broaden exposure, and further boost customer loyalty.

Impress investors

Many investors want others to see that they are doing the right thing. These investors may want to help companies with a strong ESG track record, which often reflects good management ethics and high performance.

Specific examples of ESG practice that can help your business

How could your business embrace ESG in concrete terms?

Fix your supply chain

Start by looking at your supply chain. Do your suppliers adopt ESG principles? Do they clearly show that they resource their materials sustainably as well? It’s a good idea to insist that each part of your supply chain is inherently sustainable.

Adopt environmental practices

Reduce your company’s impact on the environment by adopting good practices. Ensure that you conserve water at every stage by fitting “smart” taps and retrofitting staff and consumer bathrooms where necessary. Invest in renewable energy, such as solar, thermal, or wind, where possible. Ideally, you’ll transition to exclusive use of renewables, saving energy-related money each month.

Engage with the community

Reach out to the local community and this can help to foster sustainable development, preserve the local culture, and improve social inclusion. Source your materials and supplies locally wherever possible and support local businesses in the buying chain. You can involve communities in decision-making processes if you plan a major change, which could enhance your social impact. Above all, you can align your ESG ideals with specific local values to gain community support, which can only help your bottom line.

Recruit locally

Aim to hire local employees. The community will see that you are creating jobs efficiently and looking for local people as an ideal. You’re boosting the local economy down the line.

Train and develop

Address your staff shortages by investing in training or development programmes to help you attract and retain new staff. These programs will help you run a more efficient business and show prospects that you always seek to improve. Further, you can create a positive work environment.

Improve your customer service

Finally, companies that operate in the hospitality sector should focus on top-notch customer service. Most businesses operate in a very competitive environment where the “little things” could make all the difference. So, be responsive to customer needs and go the extra mile by doing something for a client which may be unexpected. As you create memorable experiences, your clients will spread the word for you.

Let HLB help you navigate the future of ESG

ESG will become a crucial challenge for all businesses in the hospitality sector. Many companies are already setting ambitious ESG goals and taking concrete steps to achieve them, which can give them a competitive edge if other businesses lag behind. Still, it’s not always easy to go it alone, especially as you have many other challenges. So, for advice and help, turn to HLB Global.

We are a network of independent advisory and accounting firms spread across 156 countries and with experience in the hospitality sector. We combine local expertise and global capabilities to service your needs, and one of our experts is waiting for your call today.