Oona Farchy Cambridge graduate and graduate intern in environmental research

Missing ESG reports: The Travel and Tourism Sector

By April 9, 2021No Comments

The rising attention given to Environmental, Social Impact and Governance (ESG) criteria within the corporate world is proving to investors that sustainable trends may in fact be profitable. Due in large part to a more ethically-driven generation coming of age, millennial investors want to put their money where their values are and companies are having to (finally) prove their worth through ESG reports. That seems all well and good, but why have we not heard from Travel and Tourism, an industry that made up 10.3% of global GDP and worth $9 trillion in 2019?

There are several reasons the Travel and Tourism industries have been able to escape public scrutiny. The first is the pandemic. It is estimated that the coronavirus cost the global tourism sector around $1.3 trillion according to the UN. Travel and Tourism essentially suffered a worldwide unintended boycott, which has significantly deterred investors. Next, there is the fragmented nature of the tourism sector: within the hospitality, transport or retail industries, there exists businesses ranging from major airline corporations or hotel chains to your local restaurant owner. This eclectic mix squeezed under the same bracket make it difficult to define adequate disclosure topics and highlight the lack of standard definitions or valuation models within the ESG framework. Moreover, the majority of tourism businesses are in fact small or medium enterprises (SMEs) with less than 500 employees and do not fall under the same stringency or breadth of disclosure.

Nonetheless, the world can no longer turn a blind eye to an industry that represented 8% of total greenhouse gas emissions in 2019. The pandemic should be treated as an opportunity to transform travel and tourism and drive a force for change. The World Travel and Tourism Council (WTTC) members pledged in 2009 to halve emissions by 2035 and attempt to align themselves themselves with the UN’s goal to become carbon neutral by 2050. Some

initiatives have been taken: the international Aviation Organization (ICAO) has developed the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), an industry-wide carbon emissions calculation tool for air travel. A central registry of participating airlines is available on their website in the aim to promote data transparency and it is likely that CORSIA will become mandatory by 2027. Moreover, certain companies such as Air Canada and Virgin Australia have published their sustainability reports and materiality assessments on their websites to support the ESG reporting trend.

Despite small achievements in data transparency and reporting (most of which are conducted internally and lack third-party verification), travel and tourism are still lagging in their sustainability efforts. The UK’s hospitality industry alone creates a whopping two million tonnes of waste a year and most restaurants have failed to adopt greener practices. However, a noticeable pioneer in their environmental strategies, the Hilton reduced 32% of their carbon emissions in 2019 and diverted 3.4 million pounds of soap and plastic bottles from landfill through their soap recycling programme.

Although Greta Thunberg’s voice is ringing in our ears urging us to reverse climate change, it is important not to forget the social impact reports of ESG. At first glance, the tourism and travel industry rank well in gender equality, with women making up 54% of the workforce, and have proven to be an important source of employment for young people and migrant workers. However, hospitality work is commonly recognised for its low hourly rates of pay, endless shifts and little to no adequate breaks during peak season.

” Why have we not heard from Travel and Tourism, an industry that made up 10.3% of global GDP and worth $9 trillion in 2019?”

Another problem specific to the tourism sector is the impact on local communities in travel destinations. Developing and operating sites for hotels or resorts has been known to disturb local inhabitants with light pollution or traffic congestion and the influx of tourists can become a threat to local culture and heritage sites. On the other hand, tourism income largely supports the conservation and celebration of local culture and many island nations are wholly dependent on the tourism industry, such as Aruba, where tourism accounts for 84 % of their total share of employment.

The main problem seems to be – where’s the data? How can an industry so powerful continuously escape the urgency for social and environmental change? When will the WWTC members lead the way and impose ESG reporting within major tourism and travel companies that can potentially lead the way to change for SMEs? As the growing hope of getting our lives back become a reality with the distribution of vaccinations, we cannot allow the travel and tourism industries to return to their old ways.