Tuesday, May 28, 2024

The importance of ESG principles in tourism and hospitality

Tourism and hospitality sector can no longer shy away from accelerating ESG principles. ESG has a pivotal role to play in driving the sustainability agenda forward, says Dr Maryam Ali Ficociello, Chief Governance Officer at TRSDC, in an Op-Ed article.

If not kept in check, greenhouse gas emissions could reach a record high by 2023. At the same time, it’s predicted that climate change could wipe as much as $23 trillion from the annual global economic output by 2050. 

Environmental, Social and Governance (ESG) considerations are no longer niche topics constrained to the boardroom. It is something that impacts us all.

That is why the need to address these issues is increasingly permeating into consumer values, and the tourism sector is no exception here. More and more tourists are adopting new attitudes towards responsible travel and expressing strong preferences for destinations that demonstrate a sustainable ethos. Attention is also being given to how developers benefit local communities, thus acknowledging their social responsibilities.

These trends stand as a stark reminder that the tourism and hospitality sector can no longer shy away from accelerating ESG principles. Be it across governments, corporations, or investors, ESG has a pivotal role to play in driving the sustainability agenda forward. This requires setting the right targets and measuring what matters, while creating the right incentives to promote sustainable investment – an approach that we see rising to the mainstream in Saudi Arabia.

A top-down transformation 
Saudi Arabia’s announcement that it will achieve net zero by 2060 ushered in a call for action that has rippled throughout the public and private sector ecosystem. Sustainability is at the center of Vision 2030 and its ambitions are geared towards energy transition, achieving the Sustainable Development Goals (SDGs), and forging the way forward for a new wave of investment. Other national initiatives such as the Saudi Green Initiative are also inspiring a national outlook towards ESG. Likewise, the Kingdom’s Public Investment Fund (PIF), which is aiming to allocate $1 trillion in investments by 2025, has put ESG principles firmly in the center of its considerations.

The role of investors
The investment community has a strong role to play in holding organizations accountable. They are key players in driving effective ESG adoption and reporting across industries. Investors from both the public and private sector are in a prime position to demand fact-based reporting from companies to map how their funding will support positive change. 

As Peter Drucker, an Austrian American management consultant, educator, and author, stated, “what gets measured gets managed.” This may be a daunting challenge to undertake, but as the Chief Governance Officer at The Red Sea Development Company (TRSDC), I have seen firsthand how a structured, well-integrated, and compliance driven ESG approach can mobilize large-scale organizational change.

ESG in practice
At TRSDC, we are going above and beyond on project governance to ensure that it’s more than business-as-usual. Every step of the way, we are supporting a sustainable approach in accordance with our core principles. We are not just complying with local legal and regulatory framework requirements, but setting our sights higher by adopting global leading governance practices. Our robust reporting demonstrates how we systematically address ESG factors in our core operations, in line with the Global Reporting Initiative (GRI) and the Global Real Estate Sustainability Benchmark (GRESB). In fact, the latest Benchmark ranked us amongst the top 20 percent of outstanding organizations and recognized us as the Regional Sector Leader. 

Ultimately with such endeavors, we are aiming to present the industry with a successful blueprint to raise the bar for ESG standards like never before. We hope to prove that by prioritizing ESG as a core component of business strategies, we can all collectively gain from investing in higher standards of sustainability, accountability, and transparency.

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