If you thought COVID was a life-altering worldwide emer-gency, think again. It pales in comparison to the global climate catastrophe that many say is looming over our futures. While each human being has a part to play in creating the current crisis, the impact that businesses have, especially in the hospitality sector, is under particular scrutiny.

Enter ESG. These letters refer to environmental, social and corporate governance, three key factors measuring the sustainability and ethical impact of a business or company, concepts that can be expanded to include its supply chains, providers and vendors.

According to McKinsey, delivering “meaningful impact over the long term” is going to be an important part of busi-ness practice for everybody in 2023 and beyond. Businesses need to make sure that their ESG processes are front and center, and not just because of stakeholders’ demands. Consumers are a big driver of ESG policy. “Conscious consumption” of travel related services – from food (is it fair trade? does it support local farmers?) to banning plastics and using recycled goods to sustainable tourist excursions and their ecological impact – is on the priority list of business travelers.

“From governmental reg-ulators to customers to Wall Street and NGOs, stakeholders of all kinds are demanding increasing amounts of ESG information,” states Denise Naguib, global VP of sustainability and supplier diversity at Marriott International. This trend is set to rise in 2023.

The Point of No Return 
According to Forbes, one of the five biggest business trends in travel in 2023 is sustainability. Within the realm of environmental sustainability, flying is the most problematic issue, and as such, airlines are in the limelight more than ever before.

Most airlines have stated their intentions to halve their emissions by 2030 and reach net zero by 2050. “The most important topic in the coming years is CO2 reduction,” states Caroline Drischel, head of corporate responsibility at Lufthansa Group. ”For effective climate protection our focus is on accelerated fleet modernization, the use of sustainable aviation fuel, the continuous optimization of flight operations, and innovative offers for its customers to make a flight or the transport of cargo carbon-neutral. In the long term, the use of SAF is considered the key to CO-neutral flying. Already today, the Lufthansa Group is one of the world's largest cus-tomers of SAF from biogenic residues, and it is engaged in numerous projects to ensure that SAF becomes increasing-ly available.”

United Airlines is also on pace and “is set to triple its sustainable jet fuel pur-chase commitments through United’s Eco-Skies Alliance program, launched in April 2021,” according to Rohini Sengupta, director of environmental sustainability at United. “As the creator of the first-of-its-kind aviation venture fund – United Air-lines Ventures, the airline is expediting and fostering new technologies focused on sus-tainability and decarbonizing air travel, as well as improving the customer and employee experience.”

However, reliance on SAF is just one pathway to decar-bonization. Another pathway is simply flying less often. This has prompted travel managers to create strategies that decrease “frequent flyer” business travel. It starts with a question: “Is this travel really necessary?” According to Deloitte, to keep costs under control, nearly three in four companies will limit the number of trips taken, while three in 10 companies expect their own commitments to sustainability to produce an 11 to 25 percent reduction in travel budgets by 2025.

If flying is not essential to business, there are still options. Face to face meet-ings can be replaced by video conferencing; virtual technology and drones can be used for site inspections; bundling meetings together is preferred over attending sin-gular events; and alternative forms of travel such as public transport or trains (in Europe, in particular) are increasingly encouraged.

“Air to rail shifts on domes-tic routes should be in full swing on travel policies and programs. Not only does this support carbon reduction goals; the train becomes an extension of the virtual office and employees start to get used to the increased productivity and won’t return to flying,” explains Sally Higgs, sustainability manager at travel consultancy Festive Road. She advises travel man-agers to “be transparent with airlines that you’re actively pushing rail over air, be bold and remove domestic dis-counts from your airline deals and ensure that your contract targets are for medium and long-haul routes.”

If employees must travel by air, then educating them about the carbon offset of that trip is empowering. For example, at some companies like KMPG, charging a carbon fee proportional to the emissions of each airline ticket booked is helping travelers decide whether they really want to fly or not. The fee is designed to then fund green investments that decarbonize KPMG’s operations.

Hotels on the Hook 
While the focus is primarily on airlines, hotels also play a part in the ESG universe. According to the Sustainable Hospitality Alliance (SHA), the global hotel industry needs to reduce carbon emissions per room per year by 66 percent by 2030 and 90 percent by 2050. Just as business travelers may now think twice about flying, they are also making different choices about where they’re staying.

“We have several sustain-ability focus areas for 2023 and beyond,” says Naguib. “Our 2025 sustainability goals commit us to reducing water intensity by 15 percent, carbon intensity by 30 percent until our science-based tar-gets are approved, waste by 45 percent and food waste by 50 percent, while responsibly sourcing 95 percent of our top 10 priority categories and working to get 100 percent of the portfolio sustainably certified – all of which help our customers meet their sus-tainability goals as well.”

Environmental issues often lead in ESG policies, but the social component under-scores a variety of hot topics such as diversity, equity and inclusion, wellness, and cultural intelligence. Again, hotels are well positioned to lead in this arena. “Infusing DE&I into our DNA is integral to our success,” notes Maruiel Perkins-Chavis, vice-president, global diversity equity and inclusion at Marriott International. “In 2023 we will continue to focus on driving towards our company’s DE&I objectives, including increasing the presence of women and people of color at the vice president level and above, increasing the number of diverse- and women-owned hotels, and providing diverse-owned suppliers with access and equity in our supply chain,” she says.

“We are continuing to deliver aid and support to communities, especially in times of need such as wars or natural disasters – for exam-ple, humanitarian assistance for Ukraine and hurricane relief,” adds Apoorva Gandhi, senior VP of multicultural affairs, social impact and business councils at Marriott. “We also continue to bring opportunities in hospitality to underserved communities. For example, Marriott International, in collaboration with the US Business Summit on Refugees, plans to hire 1,500 refugees over the next three years.”

TMCs to the Rescue 
Understanding the ins and outs of ESG can be complex. Maybe it’s the environmental angle and clean, green lifestyle that a hotel offers that draws your clientele. Perhaps it’s the social impact of wellness initiatives – i.e., what tools do travelers have at hand to mitigate mental stress? What company pro-grams and policies support them? These are the legacy questions that COVID-19 has left us with.

Or maybe it’s the governance component, such as the transparency of a company’s climate strategy. For example, what is a company’s carbon emission impact? Will it have to pay carbon taxes? How does its budget further its sustainability goals? “Travel managers should think of carbon budgets in the same way they do financial budgets,” advises Festive Road’s Higgs.

“While traditional financial reporting tells people only about the numbers, reporting on ESG says much more about a company’s values. To measure success, you should treat ESG reporting with the same rigor you do financial reporting,” explains April Bridgeman, senior VP, BCD Travel and managing director of Advito.

“When it comes to your business travel program, ESG requires a mindset shift,” she says. “Many travel programs already consider their emissions impact, but focusing on ESG means thinking about the social impact of your program and its governance structure. One of the best ways to approach this is to collect data that allows you to measure that impact across the board. For example, your travel data will help you forecast demand, see which trips have a useful business impact, keep track of emissions, look after employ-ee wellness, assess your DE&I impact, and much more.”

To understand the ESG universe a little better, many companies are creating win-win partnerships with TMCs. According to Deloitte, one in three will seek guidance from travel management firms on how to reduce their carbon footprint, while 25 percent plan to prioritize travel sup-pliers that invest in sustain-ability.

Think Purposeful 
Recent research suggests that “companies with transparent ESG strategies could win the loyalty of travelers that may be undecided on which company to use for a specific aspect of their trip.” Companies seeking a competitive advantage are keenly aware of this trend, and all sorts of “green” loyalty rewards pro-grams are showing consumers that their faithfulness can be used for the greater good.

“We are entering the era of Purposeful Travel; we are helping our clients move to more purpose-based Stra-tegic Travel Management Programs,” says Caroline Strachan, managing partner at Festive Road. “Gone are the days of travel being seen as the easy budget line item to cut. Our clients are being more thoughtful about the people-and-planet impact plus financial investment of being there in person.”

Chris Weedon, VP of global sales and service at GlobalStar Travel Management agrees. “I think it’s fair to say that ESG and DE&I initiatives are here to stay and are becoming more important than ever. This is for a number of reasons – companies have a legal requirement; they want to be seen to be doing the right thing and as a ‘good place to work;’ and shareholders also have their expectations,” Weedon says. “We used to see one or two questions about sustainability and diversity in RFP’s, but it was very much a ‘tick box’ exercise. Now there are whole sections on ESG and DE&I and it has become part of the overall scoring and selection process often with a significant weighting.”

ESG is no longer about just staying at an eco-certified lodge for a single trip – it has morphed into something wid-er that embodies a new way of living. “From beach clean-ups, to supporting A21’s Walk For Freedom, raising awareness about human trafficking, our people are committed to sustainability and helping others. So we’ll be continuing down that path,” explains Sharon Dirks, senior direc-tor of sustainability at BCD Travel. For the business travel industry, which is positioned to make incredible changes in the name of the global com-munity, this can only be good news.

Image: Photo by Egor Vikhrev on Unsplash