As the pandemic recedes in the rearview mirror, new focus is coming to environmental, social and governance issues
By Mark Rowh
Why all the buzz about ESG? That's a reasonable question for travel managers, who no doubt have plenty of other things to worry about. One answer might simply be that we're experiencing a perfect storm of developments affecting not just travel, but the business world as a whole. From climate change and the growing need to conserve natural resources to the Me Too movement, Black Lives Matter and other public issues, corporations are being challenged as never before to contribute to the greater good.
Although some might view Environmental, Societal and Governance issues largely through the lens of socially conscious investing, that’s only part of the story. In fact, the principles behind it are being embraced on a widespread basis by both employees and customers, as well as corporate leaders and investors.
"Companies are realizing that ESG is no longer a nice-to-have initiative, but a critical part of running a business," says Eric Friedrichsen, CEO of Emburse, a provider of automation solutions for expense management and accounts payable. Friedrichsen explains that aside from the obvious environmental benefits, ESG is becoming a bigger issue for both investors and sales prospects. "The majority of Fortune 500 companies already report the ESG impact of their business travel programs, and more and more RFPs have questions about sustainability, so I suspect it will be a core part of business within a few years," he says.
While corporate responsibility has been an area of growing interest for some time, the pandemic accelerated already existing trends, says Nora Lovell Marchant, vice president, global sustainability, American Express Global Business Travel. That includes an expanded focus on including traveler well-being, duty of care, sustainability and diversity, equity and inclusion, or DE&I – not to mention the spotlight the roll-out of digital health passes has put on data privacy and cybersecurity.
“Businesses of all types are wanting to be able to report high standards of responsibility, sustainability and diversity across their supplier base,” she says. And while the pandemic in many ways illustrated the value of travel and in-person meetings, there is now greater pressure on organizations to meet ambitious emissions reduction and net-zero targets.
In addition, businesses have become increasingly aware of the negative impacts of prolonged immobility on relationships with employees, customers and the supply chain, notes Kevin O’Malley, CEO of CTM North America. He anticipates the role of travel buyers to become much more influential and strategic in delivering on business’s recovery and growth plans. “This is an exciting opportunity for travel managers to own a significant role in maintaining business performance through effective travel program development to support all areas of business sustainability and performance,” he says.
Pathways To Compliance Exactly what constitutes ESG varies somewhat, with companies identifying different focus areas within an overall menu of possibilities. For example, American Airlines has grouped its ESG efforts area under the headings of climate change and fuel efficiency, customer satisfaction and overall performance, diversity equity and inclusion, safety management, and team member and labor relations.
Meeting expectations in areas such as these is likely to be high on any travel program’s agenda. “ESG compliance significantly impacts the way the business meets and travels,” says Scott Davies, CEO of the UK’s Institute of Travel Management. Travel managers must select travel and service providers who in turn embrace the same principles, and they must help their travelers to make the right choices.
Davies adds that it’s important to realize that addressing ESG is not about meeting generally agreed-upon responsibilities. It is also a matter of self-interest. “Generation Z is less likely to buy from or work for companies who don’t demonstrate the values that matter most to them,” he points out.
Protecting the environment has gotten a head start on some other ESG areas, and tracking progress in this area is becoming more common, especially in the reduction of carbon emissions. “Businesses know they need to travel to survive and thrive,” Marchant says. “But they also need to meet emissions reduction targets. This is one of the biggest challenges for today’s travel managers.”
Among other strategies for pursuing this goal, GBT helps clients set targets, track progress and report on greenhouse gas emissions with data analytics to inform strategy and decision-making. Customers can also purchase carbon offsets on preferred terms from partners such as Carbonfund.org Foundation, Carbon Footprint and Tasman Environmental Markets. Offset activities that can be selected involve a variety of project types, price points and locations worldwide.
For CTM, that has included the 2020 launch of its Climate+ program, which supports tracking and reporting on the carbon impact of travel programs as well as offsets of carbon emissions through a range of global sustainability initiatives. The company is also rolling out new carbon emission identification and offset features within its proprietary online booking tool, Lightning. The objective is to give travelers and travel bookers the ability to make more informed, sustainable travel choices at the point of sale.
Another development is Emburse's recent acquisition of Roadmap, which brings the ability for travelers to measure the impact of their travel in terms of carbon emissions. Such information may be critical in the future since baseline data is critical in building a meaningful sustainability program. Similarly, tools such as those from Tripkicks identify additive supplier attributes including properties that have earned third party certifications like LEED or Green Key Global, as well as flight itineraries that are the most fuel-efficient. And going beyond environmental concerns, new attributes are being added that include diversity and inclusion data for select suppliers.
At Amadeus, the focus on ESG has seen recent progress in several areas, reports Sabine Hansen Peck, senior vice president, people, culture, communication and brand. On the environmental front, Peck points to the company’s reduction of emissions by almost 70 percent in the last two years, with a target of reaching carbon neutrality by 2030. A COVID-19 corporate social responsibility (CSR) plan is now in place, and the presence of women on the board of directors has increased to 42 percent.
Ongoing Importance Unlike with many passing trends, the focus on ESG seems destined only to increase. It’s no secret that boardrooms everywhere are paying close attention to ESG, with the topic gaining traction in stock prices and being calculated into company valuations. Once the pandemic is over and the dust settles, even more attention on corporate responsibility is likely.
This in turn promises wide-ranging impact on all levels of the organization, including travel. Jeffrey Berk, chief executive officer of Tripkicks, notes that while travel managers have traditionally emphasized price and value, for many organizations it's clear that priorities are shifting, at least to some degree.
“Prioritizing ESG comes at a cost, and although many companies are willing to pay more to ensure that they’re supporting the suppliers who are investing in and supportive of similar value, the exact weighting scale is not always clear,” he says. Here, travel managers may have an opportunity to lead the conversation – and help to set the new frameworks on how to approach supplier selection.
Peck is encouraged by the progress she sees thus far. “When I look back at the past five to ten years, it is encouraging to see how ESG topics have transitioned from being perceived as ‘nice to have’ to becoming a required element of a long-term business strategy that will impact the overall future of the industry,” she says.
ESG’s high level of visibility may also bring some unforeseen benefits. "One of the bigger surprises for many travel leaders is that with ESG reporting becoming a C-level issue, this gives them a great opportunity to elevate their role within the organization," Friedrichsen says. He notes that for some high travel volume companies such as management consultancies, business travel can contribute up to 50 percent of their overall carbon footprint, so the ability to track and reduce this can have a huge impact on the organization’s overall ESG goals.
Even as business travel rebounds, changes in how people work may also be a factor. Friedrichsen notes that while the traditional concept of the road warrior isn’t dead, the concept of mobility is evolving. Employees who were previously office-based may be working from home, a coffee shop, or even moving between different locations every few weeks. "Managing these employees will be something companies will need to focus on more in the coming months and years, to determine how sustainable travel, meetings and mobility fit into the equation," he concludes.
Berk points out that in the business travel industry, the larger companies will often pave the way and establish new norms. “Given that the prioritization of ESG initiatives is also originating from these same organizations, we should be keeping an eye on the Fortune 100 and Fortune 500, and what solutions and techniques they are starting to put in place.”
For travel buyers, Davies boils ESG down to three basic elements. “The primary task for travel managers is to fully understand their company’s commitments and expectations around ESG, adjust sourcing and supplier management to support it, and identify the risk and implications of non-compliance.”
Peck notes that travelers previously based their travel purchasing decisions on information related to schedules, availability and fares of travel options. Now, sustainability is definitely a factor, as well as health-related information and information to empower travelers to make more informed and sustainable travel choices. “ESG is here to stay,” she says. “We all can make our contribution to transform our industry so it becomes sustainable in the long run.”