ESG Hotel Luminaries

Environmental, Social and Governance (ESG) issues remain top of mind for many organizations. The following hotel industry luminaries are undertaking projects and leading organizations in the areas of diversity, environmental stewardship, community support and guest satisfaction.

As the world’s largest commercial real estate firm, CBRE takes seriously its obligations to advance ESG in its own operations and in its work for owners and occupiers of real estate. This is reflected in the high value we place on diversity, equity and inclusion (DE&I) and our pledging to reach net zero carbon emissions by 2040.

To set the stage for our hotel luminaries, we spoke with several CBRE ESG leaders to gain their perspectives on net zero, diversity, equity and inclusion, and sustainability and highlight best practices in the commercial real estate industry.

As the ESG expectations of stakeholders have grown, hospitality companies can create differentiation by telling their stories in a compelling way.

Where to begin?

Acting on climate change presents an outsized opportunity, and many hospitality companies are setting net zero targets and moving to decarbonize their operations. They often focus first on their larger assets where they can make the biggest impact before moving on to smaller properties or spaces that can be a little more challenging. Placing a financial value on carbon emissions helps to inform decision-making and raising awareness of their efforts internally inspires employee action.

Supplier diversity is another ESG opportunity within the hospitality industry. Expanding relationships with women- and minority-owned businesses broadens the goods, services and bright ideas available to hospitality companies while driving positive economic impact in communities where they operate. As hospitality companies engage with more diverse partners, they ultimately enhance their value proposition and are better positioned to meet their customers' needs.

Hospitality companies are also working to increase workforce diversity, equity and inclusion, which can provide a competitive edge, particularly when labor markets are tight. It’s important to embed inclusion into the hiring process, and robust mentorship and development programs aimed at high-potential diverse employees will help to build the pipeline of future leaders. Consider placing a financial value on carbon emissions to inform decision-making and raising awareness of all sustainability efforts internally to inspire employee action.

In the report that follows, you’ll hear more from experts on the advantages of and best practices for embedding ESG in every aspect of hospitality company operations.

Tim Dismond

Sustainability is a Team Sport

Sarah Spencer-Workman is CBRE’s Global Director of Decarbonization. She works with CBRE’s enterprise clients across sectors to deploy decarbonization solutions and services that meet clients in their decarbonization journey and get them to their carbon reduction goal, which is typically net zero.

Q: How are clients thinking about generating a return on their sustainability investments?

Over the past 15 years, investment payback windows have been in a three- to five-year period. This investment horizon has dynamically shifted as companies focus on longer-term decarbonization and net zero goals and have a longer payback window. For example, solar energy investments may take 15 to 20 years to break even.

Q: What recent measures are driving stakeholder change?

Regulatory measures are putting pressure on companies globally.

For example, the Green Deal in Europe obliges companies to make changes quickly around carbon reduction goals. Singapore implemented a carbon tax which may result in stakeholder pressure to reach a net zero mark. While the proposed SEC Climate Risk Ruling could put into place regulatory measures in the U.S., for the most part in the Americas, external stakeholders are the catalyst for advancing carbon reduction programs, particularly in the financial, insurance and professional services sectors.

These sectors are pivoting to focus on net zero investments. Recently, the U.S. government’s Federal Supplier Climate Risks and Resilience Rule requires federal contractors to disclose greenhouse gas emissions and climate risks and set science-based emission reduction targets. This ruling could have a trickle-down effect on other industries, including hotels, and companies working with the same suppliers.

Q: What are some of the early wins and best practices that the hotel industry can adopt?

There have been hotel industry leaders who have made climate pledges, fast followers, and those waiting to determine whether they will make a public commitment to carbon reduction. The industry could transition toward a net zero future by building reliable and operable accounting systems for the data that will inform their decisions to get to net zero or carbon reduction goals. Companies can solve near-term energy challenges with longer-term solutions such as transitioning to green energy. As we advance, companies should invest to adapt, which involves mapping out investments in adaptation to reach longer-term goals. Digital technology will play a role in helping to account for all the factors that build into a company’s carbon footprint, and investments in technology now will help with future transitions.

Q: How are companies working with suppliers to reduce carbon footprints?

Companies can trace carbon through their supply chain. Organizations can approach suppliers as carbon reduction partners. They can educate suppliers by holding workshops for suppliers on how to account for carbon and emissions.

Smaller suppliers will have a more challenging time than larger suppliers that have more support and resources. Larger companies will need to lend support and resources to smaller but essential suppliers. Some suppliers will not meet carbon reduction goals. Quickly identifying suppliers who might be stranded allows companies more time to solve these issues. Taking the time now to identify assets and suppliers who might need support in meeting climate targets will put companies in a better position in the long term.

Q: What is the plan for stranded assets?

When planning for stranded assets, companies should analyze physical and transitional¹ risk to determine which assets will make carbon reduction goals, which will not, and why. Companies are working to understand the impacts of assets not reaching a decarbonization goal to determine if they should make further investments to help the property achieve set climate goals. With early assessment, management can decide where to invest in helping important assets reach carbon reduction goals.

¹ Transition risk is business-related risk that follows societal and economic shifts toward a low-carbon and more climate-friendly future. Examples include policy, regulation, technology, or reputation. Physical risks are risks resulting from climatic events, such as wildfires, storms and floods.

Q: What is your advice for smaller companies looking to start their decarbonization journeys?

For most companies, mitigating climate risk is not their core business. By partnering with experts in the field, management teams can focus on their core competencies and on driving results and returns.

Improvements Today, Impacts Tomorrow

Stephen Schrope leads CBRE Hospitality Project & Program Management for the Americas. He oversees an industry-dedicated team involved in the planning, construction and renovation of hotels with more than 10,000 hotel rooms in total, representing in excess of half a billion dollars in managed capital.

Q: What sustainability and clean energy trends do you see in hotels?

Our clients tend to focus on three categories of sustainability improvement:

1. Green guest-facing efforts like electric vehicle charging stations and on-site gardens as food sources for F&B outlets. While these amenities may not drive significant ROI to the bottom line, they can help build the hotel’s green credibility with guests and communities.
2. Green efforts that drive ROI and improvements in efficiencies. In energy efficiency, projects such as LED lighting and guest room energy management systems can save energy when used correctly. To help with water usage, grey water recycling laundry facilities tend to offer a relatively fast return on investment.
3. Solar power generation using extensive open roofs in full-service hotels with meeting spaces is an exciting new development. Economic viability will depend on local market variables like local utility rates and incentives. Owners can consider different variables in deciding to undertake a solar power deal. For example, an owner can buy solar equipment and install it or lease roof space to a solar company.

Q: How can hotel owners prepare for the impact of a natural disaster?

To better prepare for a potential natural disaster, owners should:

• Make sure they have good documentation of the building and its contents, and store copies off-site
• Talk to remediation and restoration contractors in advance to understand the rate structure and pricing of restoration work
• Review their property and business interruption policy, including limits, coverage and exclusions
• Understand how to make and escalate a claim
• Address increasing climate risk by including facility resiliency upgrades in future projects