ESG Framework for tourism businesses | Resources
Tourism businesses are facing mounting pressure to address ESG concerns due to increasing regulations and industry-wide goals. Furthermore, investors and consumers are exerting significant influence on businesses. In particular, investors are now seeking socially responsible investments and demanding transparency in non-financial information beyond traditional financial statements. Consumers, on the other hand, are becoming more environmentally conscious and tend to show higher satisfaction and loyalty towards companies that embrace sustainable practices. As a result, tourism companies have a direct and tangible interest in reporting ESG information.
By adopting ESG reporting practices, tourism businesses can demonstrate their commitment to sustainability, meet regulatory requirements, attract socially responsible investors, and build stronger relationships with environmentally conscious consumers. It is an opportunity to showcase their efforts in addressing environmental and social challenges while ensuring long-term success and positive impact in the sector. Some of the tourism areas where the importance of ESG for companies can be clearly seen are:
- Customer acquisition
- Customer retention
- Managing risks and regulations
- Gaining access to sustainable financing
- Managing investor relations
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Environmental |
Social |
Governance |
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Environmental matters that consider a company’s impact on the natural world and its position to deal with climate change. |
Social matters that consider a company’s social impact, both in and outside its organizational chart. |
Governance matters that consider leadership’s commitment to positive change. |
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Most of the existing Environmental, Social and Governance (ESG) frameworks lack uniformity and are not tailored to reflect the specific needs of the tourism sector. ESG reporting remains largely voluntary, with tourism companies either adapting existing frameworks or developing their own reporting standards. Like businesses in other sectors, tourism companies also report being overwhelmed by the ESG “alphabet soup” and have recurrently complained of “reporting fatigue”. All this reinforces the need to harmonise existing efforts and develop an overarching and global ESG framework that is tailored and fit for purpose for the tourism industry.
- Sustainability: in tourism, this term refers to the optimal use of environmental resources, maintaining ecological processes and helping to conserve natural heritage and biodiversity. On the other hand, to be sustainable, tourism activities are expected to respect the socio-cultural authenticity of host communities and ensure viable, long-term economic operations.
- Frameworks: provide the ‘frame’ to contextualize information and guide reporting. A framework can be thought of as a set of principle-based guidelines on how information is structured and prepared, and what broad topics are covered.
- Standards: provide agreed, detailed, and replicable requirements that reporting companies should meet. A standard can be thought of as containing specific and detailed criteria or metrics of ‘what’ needs to be reported and how. Standards make frameworks actionable, ensuring comparable, consistent, and reliable disclosure. Frameworks and standards are complementary and are designed to be used together. Both standards and frameworks derive authority because they are either made mandatory by law, or they are endorsed by a majority of (relevant) stakeholders (e.g. United Nations institutions). A global framework with clear set of ESG metrics and standards would simplify reporting for companies and make it easier for external stakeholders to understand their actions on ESG, enabling comparison across companies and time.
- Ratings & rankings: capture a ‘score’ of the maturity or ‘ESG savviness’ of organizations. Companies’ ESG ratings are usually comprised of a quantitative score and a risk category and are compiled by dedicated ranking and rating agencies. To date, however, what these actual ratings are comprised of often remains a black box.
- Credibility: In a world where investors increasingly seek sustainable investments and customers become more conscious of the sustainable impact of tourism, a global ESG Framework would help reporting companies demonstrate their commitments to sustainability and improve their reputation.
- Efficiency: A global ESG framework would help to tackle the reporting fatigue for tourism businesses, rechannelling their efforts towards advancing ESG initiatives.
