At the start of 2022, the hospitality sector looked like it was set for a relatively uncomplicated couple of years, breathing a sigh of relief as a hedonistic wave of post-COVID ‘revenge’ travel replenished its finances. But by the summer the picture was already looking very different, as an energy intensive sector faced the impact of energy price hikes resulting from the war in Ukraine. Then came 2023’s wildfires in tourist honeypots like Hawaii and the Mediterranean, seemingly almost designed by Mother Nature to bring concerns about climate change and the ethics of travel to the front of consumers’ minds. Coupled with the introduction of mandatory Environmental, Social and Governance reporting requirements it is clear that the sector is facing unprecedented pressure to adapt to a world in which Environmental, Social, and Governance (ESG) considerations are more important than ever before.

As business school leaders, we recognised that helping a sector responsible for 7.6% of GDP and 295 million jobs globally to transform its practices for the better was an opportunity to change lives around the world. We also saw that the industry had unique needs rooted in the fact that it needs to address a spectrum of issues, from very physical, technical issues relating to the environmental impact of its buildings, to human questions around the wellbeing of its staff and the communities it operates in. This is why we took the decision to launch the first-ever ESG executive education programme designed specifically for hospitality sector leaders, developing the programme in partnership with the Energy and Environmental Alliance (EEA).

The EEA is a global coalition of hospitality and lodging investors, developers, building operators, brand owners and asset managers that collectively represents over 26,000 hotel properties around the world, with more than a million rooms. We have worked with them to design an Executive Education programme that is tailored to help leaders in the sector embed and assess ESG measures in their businesses. The programme is built on the foundation of discussions with over 40 senior hospitality leaders from around the world. These leaders emphasised that the recent energy price increases and the new IFRS® Sustainability Disclosure Standards were both a motivation and an opportunity to make progress on environmental measures.

Why focus on ESG?

The UN’s Sustainable Development Goals Report 2023 sets the context for the hospitality sector in terms of the challenges it needs to play its part in addressing. According to the report, while sustainability reporting more generally is on the rise, there has been a decrease in reporting on sustainable consumption and in the monitoring of sustainable tourism. The report also states that the world is seriously off-track on its 2030 goal of halving per capita food waste, a target that the hospitality sector could certainly contribute to.

For the hospitality sector, sustainable consumption requires more than just behavioural change: unsustainable energy consumption can be built into the very fabric of its buildings which range from state-of-the art and carbon-neutral, to drafty old historic buildings with protected status that need to deliver luxury levels of comfort. According to the Urban Land Institute, hotels and lodging are the least energy and water-efficient buildings in commercial use.

Research conducted by the EEA during the programme’s development stages highlighted the scale and complexity of the task leaders face in developing a plan to reduce reliance on fossil fuels. During the pandemic many hotels had zero occupancy, yet found they were still maintaining 60% of their usual levels of energy consumption just to prevent issues with moisture and to ensure that their water and other systems remained hygienic. This brought home the lesson that cutting energy consumption would entail much more than washing towels less frequently.

The majority of investors in the sector agree: they believe at least half of the measures needed to improve energy performance will require some degree of capital investment. This could mean accessing new forms of green finance and with it the need for leaders to understand a new set of priorities, measures and controls in order to be able to communicate with confidence with staff and investors.

What the new programme covers

The launch of the programme coincides with a shift in international financial regulation to make ESG reporting mandatory, the scale of which has been likened to the introduction of global financial reporting standards after the Wall Street Crash in 1929. The programme will therefore give an overview of current and planned regulation and ESG reporting requirements, with a strong emphasis on climate change, green finance, and the hospitality sector’s social impact through its employment practices. A hotel’s people make or break its success and the sector has to navigate seasonal demand and the respectful treatment of staff by guests in addition to adhering to local employment laws.

The programme’s content on marketing will address a key conundrum that the industry faces; while consumers want to be more sustainable, this is rarely the sole, or even most important driver of their booking behaviour. Our programme will look at what hospitality sector businesses can do to better align consumers’ choices with their good intentions, as well as at communicating sustainability initiatives to customers and employees at all price points within the market. It will look closely at how to create experiences that people really want, emphasising local sourcing, inclusivity and community engagement.

Participants will also gain an understanding of the science driving the climate change agenda, learn how to mitigate risk, identify opportunities and future-proof investments

Why it will work for leaders

Our experience as business educators is that while certain elements like guest speakers, case studies and discussion bring a subject to life for students at any stage of their education and careers, programmes that are designed with leaders in mind need to reflect the very specific demands on them. Our conversations with hospitality sector leaders also made it clear that there was no time to waste. They wanted to finish the programme knowing exactly what they were going to do next. This is why alongside giving them knowledge of the ESG and green finance landscape, we will help them to develop a personalised action plan that will enable them to lead complex, comprehensive change across many areas of their business. The programme’s final assessment will ask students to propose initiatives to address key challenges, such as carbon emissions and food waste, developing business plans ready to present to their respective boards, translating education into action.

There will also be a focus on the different skills they might need to lead change around sustainability, energising senior colleagues and other staff to lead ESG transformation too.

In the programme design we also wanted to reflect the fact that embedding ESG is not a one-off project that you can learn how to do and then tick it off your list. It demands a new way of thinking about business and an openness to new technologies and new societal expectations. As part of the package, graduates of the programme will have the opportunity to continue learning through online refresher sessions, receiving updates on the latest changes and innovations in ESG.

We are also working with the EEA on a second programme targeted at hotel managers which will look at how to embed ESG practices within an individual hotel. Ultimately, we hope that these two programmes will go far beyond the classroom. We aim to forge a network of industry leaders with the knowledge, connections and ambition to deepen sustainable business practices across the sector. Supporting this network, we want to train a cohort of motivated individuals who know how to translate those practices into a reality that reflects the physical quirks of their own hotel and the day-to-day concerns of their own teams.

The power of partnerships

As business educators, we can foster innovation and provide new management insights. When we choose the right partners, we also have the privilege of an opportunity to create significant, tangible change and accelerate progress for all.

The benefits are clear. By collaborating with business schools, industry partners gain access to cutting-edge research and fresh perspectives. On the other hand, business school academics can gain access to organisations and individuals eager to put theory into practice, to test and improve it and understand how best to apply it to their own needs.

The sharing of ideas, insights and best practice improves both academic research and business practices. This is especially important in an area like ESG which is still in its infancy compared with conventional financial reporting and an ongoing dialogue is needed to develop universally understood definitions and terminology.

Our collaboration with the EEA showcases the power of merging academic rigour with industry expertise. Through the programme, we are translating research into actionable strategies for a better future.

While each industry’s particular ESG challenges may vary, the need for effective leadership and rapid change to address the climate challenge is universal. We hope that our programme can serve as a model for collaboration between business schools and key players in various sectors. We need leaders in every industry who are equipped with the vision, and the knowledge to steer businesses towards sustainable practices. As we have learned through our collaboration with the EEA, business schools only have half of the answer on how to achieve this. The other half must come from listening to the industry itself.