Risks affecting the hospitality industry are not only related to inflation, war, and geopolitics. Science has proven that climate-related risks and biodiversity loss are a threat to the fabric of society. The convergence of global systemic risks has a name: 'global polycrisis'. In addition, localized events such as wild fires or potential torrential rain put destinations at risk, leading to the assertion that "tourism destinations in every corner of the globe face the virtual certainty of experiencing a disaster of one form or another at some point in their history". The hospitality industry operates in a volatile, uncertain, complex, and ambiguous environment. Thus, it is challenging for hotel owners, operators, and leadership teams to adapt to the constantly changing circumstances.
Rising energy and food supply costs (and insecurity) and chronic staff shortage require attention now but those are not disconnected from longer term sustainability endeavors. Crisis management, including disaster management and risk management, has become a hot topic for organizations in the hospitality industry. Hospitality companies leading the sustainability conversation are those that understand risks and opportunities assessments with a clear focus on tangible impacts.
Coming out of COP27, we want to find out:
- How are hotels navigating the current 'perfect storm' of geopolitical uncertainties, energy transition and operational challenges (e.g. having enough staff to support operations or even develop and eventually open new hotels)?
- Do you recommend hotel businesses to conduct a materiality assessment (assessing the risks exposed and impact on business performance)? Yes/No & Why
- How do you recommend overcoming cherry-picking and bias when assessing risks that build a materiality matrix?
- Could you provide three to five resources to help hospitality companies to tackle strategic and operational risks?
 Lawrence, M., Janzwood, S., & Homer-Dixon, T. (2022). What Is a Global Polycrisis?
And how is it different from a systemic risk? Cascade Insitute. https://cascadeinstitute.org/wp-content/uploads/2022/04/What-is-a-global-polycrisis-v2.pdf
 Faulkner, B. (2001). Towards a framework for tourism disaster management. Tourism Management 22(2), 135-147. https://doi.org/10.1016/S0261-5177(00)00048-0
Hotels face numerous risks which make it harder than ever to operate under “business as usual”. Following the pandemic, we are seeing new threats to the industry in the form of soaring energy costs, increase in forced labour, staffing shortages, conflict, guest behavioural changes, and impact of climate change. These span across both people and planet, and many are mutually reinforcing and interconnected.
It is therefore important that hotels conduct materiality assessments to understand the risks and how these might impact their performance. But they also need to understand the impacts they are having on the world around them, and how this might contribute to risks for others. This will help to prioritise the most critical actions as relevant to each business and their employees and, importantly, their local area and community.
There are free resources which can support hotels: our new TCFD guidance, Water Risk Assessment, ethical recruitment guidance and Pathway to Net Positive Hospitality.
These kinds of challenges will not disappear overnight and don't always have an easy solution. As an industry, we need to focus on developing long-term strategic plans and responses which tackle environmental and societal issues and support communities around the world.
The hospitality industry has a tough call to answer: How to grow sustainably amidst global challenges? Glocalizing and centralizing sustainability efforts is the flexible and agile quick response for ALL. This can be sustainable in the long term, only if applied locally – an example mixed-use, ESG-focused lifestyle operator, Kerten Hospitality, has set. How does UBBU (United. Building a Better Universe) help instil values throughout teams and properties? The answer on how operators adapt to the local contexts of each property can be found in the opinion piece by Marloes Knippenberg, CEO of Kerten Hospitality.
Yes, materiality assessments can help any tourism business prioritize ESG aspects to address in their business model, but they must factor in climate change impacts. Assessing climate impacts on ESG materiality needs to be understood from a systemic risk perspective, which considers cascading impacts within the tourism sector and across the systems (infrastructure, transportation, waste, water, electricity, etc.) which tourism relies upon.
In addition to the risks associated with transition to a lower-carbon economy, physical climate risks are already impacting tourism, including major heatwaves, drought and wildfires, more frequent and severe weather events, and landscape and ecosystem changes.
The evolving realities of unavoidable and accelerating impacts of climate change will shape the future of tourism. Everything we do as a sector going forward is going to increasingly need to pass a climate stress test, including ESG materiality assessments. The following resources are recommended to help tourism businesses, especially hotels, to understand how to start including climate risk in their ESG materiality assessments:
- Framework for climate risk disclosures for hotels by the Tourism Panel on Climate Change (TPCC): https://tpcc.info/downloads/
- Task Force on Climate-related Financial Disclosures (TCFD) recommendations: www.fsb-tcfd.org
- Hotel Resilient - Responsible Hotel audit: https://app.hotelresilient.org/
In times of uncertainty, many businesses focus on their internal operations to survive. However, the 'perfect storm' cannot be tackled in isolation, ignoring neighbours, other stakeholders, and the environment we are part of.
The Long Run, which is part of the Sustainable Travel Programme of Preferred by Nature, works with approximately 100 tourism business and travel partners. By working closely with them through the pandemic and many other crises — local political conflict, extreme weather events, global economic crisis — we've proven that embedding a sustainable framework into operations is critical for survival. This is not a nice to have, but helps businesses to survive and thrive, whatever is thrown their way. We are proud to say that not one Long Run member went out of business during the global pandemic, nor did their community outreach and conservation projects suffer. That's because they are all built upon the holistic balance of the 4Cs — Conservation, Community, Culture and Commerce — which has enabled them to weather crises with a loyal workforce, passionate former guests that will donate or fundraise to plug gaps when needed, committed suppliers that will work alongside our members to find shared solutions, and build financial resilience and diversity.
Perhaps the hospitality sector is one of the first to be hit really hard by the poly crisis, but it definitely won't be the last. What is critical now may help to become more resilient in the future. This would give the hospitality sector a pioneering role. All this is of little help if one's existence is threatened now, but it should still be considered.In concrete terms and in relation to the top issue of biodiversity: 1. companies should understand where they depend on biodiversity and ecosystem services and how they affect them. 2. companies should be committed to the protection and preservation of biodiversity, even if they do not see the direct connection of their core business to the topic at the moment.3. wherever ambiguity exists, the precautionary principle should apply.4. concrete measurement methods for the impact and dependence on biodiversity do not (yet) exist. Sometimes common sense helps, sometimes buying expert knowledge helps
One of EarthCheck's favourite sayings is you can't manage what you don't measure. Investing in a system that enables understanding of pressure points and consequently overspend, drives performance and value. Data-driven decision-making turns tactical implementations into savings that are good for business and good for the planet.
When it comes to materiality assessment, it's not just hotels, but destinations and all tourism businesses that must understand risks and prioritise actions to minimise and mitigate. Only when we understand our vulnerabilities can we give permission to do something about them. To reduce a narrow focus, it is essential to bring diverse voices to the table. In large organisations, bring representatives from each department and levels of business. That way, risks, challenges and solutions can be identified. If smaller, bring a broad representation of team or external stakeholders to provide insights you may overlook.
In resources, knowledge is king – the micro-credential training Sustainability Management provides the foundational knowledge (https://www.typsy.com/partners/earthcheck/courses/sustainability-management). Don't Risk It (https://www.austrade.gov.au/news/publications/dont-risk-it-a-guide-to-assist-regional-tourism-organisations-to-prepare-respond-and-recover-from-a-crisis_ (Spanish https://earthcheck.blob.core.windows.net/media/51343/no-arriesgues-tu-negocio-dont-risk-it-earthcheck.pdf ) aligns to the Sendai Framework designed specifically to support tourism and hospitality operators prepare , prevent, respond to and recover from disaster situations. And, of course, your EarthCheck Certification (https://earthcheck.org/) supports identification and prioritisation of risks.
We are in the middle of various interrelated crises that affect tourism, but most people tend to forget that tourism has been intregal in causing these very crises. Tourism is ten percent of greenhouse gas emissions. Oil and gas have been sourced from the worst places, cheap beating responsible. Oligarchs and celebrities, the super emitters arriving with private aircraft and yachts, brought riches to destinations - and no questions asked. Air travel has been the vector that contributed to the rapid spread of COVID (and it will happen again). The platform economy (Booking, AirBnB) has been sucking money out of businesses, destinations and national economies. Business models have been extremely vulnerable and low-profit, with aviation surviving on subsidies. Food has been sourced from the cheapest global markets (think Deutsche Bahn offering chicken from Brazil), and hotels continue to offer supersized portions of meat. There is no end to this list, all the while the sector remains a champion in greenwashing.
We need to get out of this mess. The good news is that hotels and gastronomy can lead the way. My estimate is that hotels can reduce 90% of their emissions to 2030, starting with a switch to renewable power. Green electricity is an option now offered by utilities in many countries. Changing the power provider might even lead to lower power bills. Then consider your building envelope, heating system, and options to produce your own power (solar). Reconsider your menu, your supply chain, your marketing. It is not complicated, it is meaningful, it helps the economic bottomline. If we all move, tourism will become a force for good.
The more crises we experience the more important it is to be resilient as a business or destination. And the best way to be resilient is to be sustainable ecologically, socially and economically. Ecological sustainability means energy independence and maintenance of the very assets that tourism relies on. Social sustainability means that in times of crisis the local community and staff will be more likely to support the business. And as we could experience during the covid crisis, economic sustainability is the very basis of it all.
But sustaining is not enough, we really need to focus on regenerative development now, because it will not get easier in the future. Innovation is key.
Sustainability Leaders United just published a viewpoint on innovation for tourism sustainability, bringing together innovation ideas from around the world, available on Sustainability-Leaders.com.
We live in VUCA – Volatile, Uncertain, Complex and Ambiguous – times. Our challenges are many and varied, and often intersect and amplify each other. One of the central issues – the climate crisis - exacerbates a range of economic, environmental and social justice issues.
Hoteliers and tourism businesses must increase our capacity to manage risk and prepare to be resilient in the face of new challenges. It may not be clear what the next crisis will be – but developing a solid foundation from which the business or destination can build back is critical.
These challenging times are not a reason to “hunker down” and abandon the progress we've made in sustainability to focus on merely surviving VUCA.
On the contrary, risk management and resilience are core principles of sustainability and incorporating sustainability practices into the business reduces risk to many of the challenges facing organizations. Indeed, it is telling that ESG (Environment, Social, and Governance reporting) is being driven by financial organizations, such as the United States SEC, demanding business show they are addressing issues that may represent future risk to the corporation. Things won't be getting easier anytime soon, get ready.
Risks and Materiality
Yes, hotels are urged to conduct a materiality assessment. Extreme weather events have already and will continue to damage assets and infrastructure, displace communities, and disrupt supply chains and hotel business operations. These are physical risks with financial, ecological, operational and market implications. If we hope to limit further climate change and thus reduce the physical risks, we will require significant changes in the way we develop, design and operate hotels. The risks that accompany an uncertain path to a decarbonized economy are called transition risks.
Depending on which climate pathway we end up on post-COP27, 1.5°c, 2, 3 or 4°c, we will face varying transition and physical risks. Those climate pathways will dictate how ferocious our climate changes and how badly the effects will be felt (with all consequences). The pathways also dictate how decarbonisation demands will fall onto various sectors of society, including hotels. Mapping risk and material issues is expected by various stakeholders as a method to understand where your hotel may be exposed and therefore where resilience plans can be developed.
Hotel Resilient https://hotelresilient.org/ offers risk mapping, performance metrics and priority-setting on mitigation and adaptation strategies.
From discussions with hotel owners and operators, they seem to rationally focus on bringing in the business they can whilst it's still there and monitoring what's under their direct control, eg their energy consumption.
The problem is that this global polycrisis forces hospitality businesses to deal with immediate emergencies with business practices inherited from another era. Consequently, the immediate struggles might prevent them from seeing the next wave, not to mention anticipating it with a materiality assessment.
And yet the next wave is expected to hit us even harder, and some of the quick fixes found today can weaken us. In this context, hospitality businesses need to address the issues with a new compass. Inspired by Paul Hawken, I'd suggest that any decision be made after answering yes to the simple and direct question : “Is this decision supporting Life?” If the answer isn't a clear-cut yes, just don't do it.
For those who can afford it, preparing an action plan thanks to a materiality assessment is advisable. Moreover, sharing it in detail with other players would be a model of transparency and collaboration and an example of the changes that need to happen for the sustainability of our industry.
We are seeing climate change adaptation become more of a focus of attention, especially as some investors start to pay attention to future asset risks and protection. A climate change risk assessment is relevant in most cases, but especially for developments in remote locations or areas prone to natural disasters. A scientific approach is recommended, with the review of climate literature, interviews with local stakeholders and identification of current and upcoming hazards that cover both material and systemic impacts. They are then classified in terms of impact level, confidence of occurrence and timeframe, for prioritisation. Finally, individual mitigation measures are proposed and incorporated early on into the design and planning of developments. Adaptation helps protect the investment, but also the communities and systems around it.