Making the S in ESG count for hospitality investors

On the island of Giudecca in Venice, a team from the spa at the Hilton Molino Stucky Venice regularly crosses the narrow bridge over the Rio di San Biagio to visit the women’s prison. They spend time training inmates in techniques such as massage therapy, hair styling and treatment programmes, with a view to broadening their horizons once their term is over. The hotel’s kitchens, meanwhile, engage with a local church, providing food before it goes to waste to assist in its parochial duties of feeding the less fortunate. This is the Chiesa del Santissimo Redentore, and when the church’s feast day comes in July, the whole community joins together with small boats on the canal and fireworks to remember the end of the terrible plague of 1576.

While social engagement can feel like a box ticking exercise on a long list of tasks for environmental, social and governance (ESG) compliance, actual community engagement raises the stakes, according to the hotel’s general manager, Massimiliano Perversi. The Hilton Molino Stucky is also a major local employer, featuring Venice’s largest meetings, events and conference facilities, with 18 rooms including a ballroom for 1,000 people and some 20,000 m2 of exhibition space. “ESG matters are of particular importance to international and global businesses, so it’s also something we address with our conference facilities,” he adds. As well as using the Meeting Impact Calculator, which forms part of Hilton’s global ‘LightStay’ campaign within its ‘Hilton Travel with Purpose 2030’ programme, the hotel collaborates with environmental agency South Pole to regulate the environmental and social impact of its activities. Through South Pole, it has helped repair and maintain wells in Rwanda, build a geothermic plant in Turkey and develop and maintain wind turbine plants in India and the United States.

While the ‘S’ in ESG has typically been one of the more elusive facets of ESG alignment, that is now changing thanks to improved measurement tools, a plethora of new service providers, and a patient approach to helping the planet’s communities. 

Measuring the impact 

Professional services firm PwC advises both real estate companies and hospitality businesses on quantifying the impacts of their social investments using its proprietary Total Impact Measurement and Management (TIMM) framework. PwC carried out a study to examine the total impact of 60,000 holidaymakers visiting eight TUI Group hotels in Cyprus using its TMM approach. The report concluded that while governments typically count tourism in terms of per capital movements or total revenues to quantify its impact, a more useful approach assesses ‘the quality of the holidaymaker experience with the environmental impact they generate, and the needs of the destination community.’ The PwC study suggests that holidaymakers judge a trip a success if they can achieve meaningful engagement with locals or are able to purchase gifts and keepsakes made by the community. Local businesses, meanwhile, often take pride in sharing the best their culture has to offer while learning what visitors want, all while ideally offering rewarding and sustainable careers to the local community. The study concludes that it is often the nuances that owners, operators and indeed government departments need to appreciate for social wins.

From increasing employee engagement to improving diversity, equity and inclusion (DEI), enhancing indigenous relations or focusing on responsible sourcing and supply chain practices, a good “S” strategy is often deeply granular in approach and has an asset-by-asset dimension. But this can often make it easier to measure, notes Braiden Goodchild, ESG real estate deals leader at PwC. “Measuring societal value creation is the critical first step in understanding the impact made by an investment, the associated uptick in enterprise value and the indirect financial benefits resulting from ESG strategies focused on the social pillar,” he says. “In order to claim that an action is creating value, the impact must be rigorously quantified and attributed to the activity or investment.” That means not only monitoring the spend on social practices – for example, a €250,000 investment in DEI training – but also the outcomes, such as a “25 percentage point increase in hiring processes deemed fair and transparent”, he adds.

Solving broader problems

While programmes designed to improve the “S” factor are often quicker and easier to implement than the routes to improving environmental impact, this strategic area still has to contend with secular headwinds. In the case of the widespread staff shortages besetting the hospitality industry, however, social impact programmes have an opportunity to be part of the solution. In the UK last month, the Department for Education launched a £165 million (€192 million) fund to develop skills and training, and for UKHospitality Skills Director Sandra Kelly, this represents a clear opportunity for the industry to narrow the gap. “Hospitality has excellent examples of how close relationships between education providers and local employers can help plug skills gaps and this significant investment can help expand that even further to allow more people to pursue a career in hospitality,” Kelly notes.

“Through UKHospitality’s work with local authorities, the majority of Local Skills Improvement Plans include hospitality and puts the sector in a great position to benefit from this announcement,” she adds.

Paris-based start-up Brigad, meanwhile, is hoping to address the hospitality staffing crisis through its flexible freelancer marketplace serving the UK and France. The start-up raised €33 million earlier this year, in a new funding round led by Balderton Capital, joined by Wendel Group, Serena Capital and Square Capital. Bringing Brigad’s total fundraising to €50 million, the latest funds will help the firm expand across Europe.

According to Brigad, the platform provides skilled and experienced chefs, waiters, bartenders and front-of-house staff with more control over their working lives, enabling them to access a flexible freelance economy, while solving staff shortages. Says co-founder and CEO Florent Malbranche: “The labour market has experienced profound changes in the last two to three years and the hospitality industry is living with the fallout. We can’t afford to lose a generation of skilled hospitality industry staff and Brigad’s platform means we don’t have to.”

Big moves

While the S in ESG is often about sweating the small stuff, that doesn’t mean that global enterprises can’t make big moves in the space. On June 1, Accor revealed new partnerships with Green Key and Green Globe to help improve its accountability across its entire portfolio in ESG matters.

These certification programmes also assess businesses on cultural impacts and socio-economic impacts, as well as sustainable management and environmental aspects. Says Brune Poirson, chief sustainability officer at Accor: “Accor’s capacity for action is global. But this requires a method of implementation to maximise social and environmental impact. Independent certification is a must-have for all hotels as it helps them to provide proof of our sustainability commitments, meet the growing expectations of our guests, and contribute to scientific objectives.”