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Saturday 15 October 2016

CSR and Tourism


Tourism is often seen as a driver of any country’s economic growth, but current unsustainable tourism practices can have a deteriorating impact on environment as well as on the well-being of society in general. That is why more and more the term ‘sustainable tourism’ begins to buzz around, leading us to the viewpoint that tourism and CSR are quite compatible. The report prepared for the Investment Climate Department of the World Bank provides the following explanation: “Sustainable tourism development is about making all tourism more compatible with the needs and resources of a destination area. It is more than just environmental conservation of a natural area, it must also address the quality of life of those visiting it and those being visited” (Dodds & Joppe, 2005).

The problem is that demand for sustainable tourism comes in the majority of cases not from the customers, but as a result of increased pressure by governments, NGOs, politicians and other parties. Based on this kind of demand a number of initiatives were taken. For example, the Tour Operators' Initiative, in cooperation with the GRI, developed a Sector Supplement to the GRI 2002 Sustainability Reporting Guidelines providing Tour Operators' performance indicators (Dodds & Joppe, 2005). Forty-seven indicators were developed to measure tour operators' performance in addressing the environmental, economic and social impacts of their business operations. Among these indicators were, for example, reporting on employee compensation, donations and other community investments, proportion of spending on locally-based suppliers, procedures for local hiring, percentage of materials used that are recycled, energy consumption, water usage, impact on biodiversity, training programs etc.

Some businesses develop their own programs which help to spread sustainable practices throughout their supply chain. For example, Hilton has adopted a new Standard for Business Partners and Suppliers which includes standards on child or forced labour, employee representation, health, safety and environmental management, discrimination, disciplinary practices and employee compensation and working hours (Dodds & Joppe, 2005).
However, the progress on implementation of CSR principles seems to be slow. I believe the main reason for that is the lack of sense of urgency as consumers in their majority simply do not demand that or are reluctant to pay more for a sustainable tourism option. From interviews with large operators it was found out that no specific consumer requests for environmental or social criteria were enquired about when booking the holidays (Dodds & Joppe, 2005). Thus, unfortunately, environmental and social criteria do not influence the purchase decision, as the primary focus is on the price and the second is on quality. Of course, when asked, consumers may indicate that they expect that their holiday would not damage the environment and benefit local people through, for example, jobs and business opportunities, but that’s the responsibly of an operator to make sure that these criteria are met. Even when given the direct opportunity to contribute to sustainability, very low percentage of people is interested to be involved. A good example of that is a program offered by TUI in UK for ski-holidays tourists to purchase a tree to reduce carbon emissions (a tree + a map of its location costed just £10) (Dodds & Joppe, 2005). As a result only 1 in 20 bookings subscribed for the program, proving a very low participation rate. Thus, it is clear that there is no connection between consumer motivation and actual purchasing.

 Let’s take a look what is the current situation with sustainability in China, especially when it comes to hospitality business and hotels.  It is obvious that hospitality industry in China is rapidly maturing. Increasing numbers of foreign visitors lead to environmental challenges the country needs to face in order to create conditions for sustainable development of tourism. It goes without saying that some strategies are required in order to control energy consumption, cope with water scarcity, manage indoor air quality, and train staff in terms of sustainable hotel management.

 So, what does the current situation in China look like? According to a new report issued by Cornell University’s Center for Hospitality Research in 2016, China’s hospitality sector urgently needs to address its sustainability. The country’s hotel development continues at a pace that would see at least three new 150+ room hotels open every day for the next 25 years. It is estimated that China currently has 2.7 million hotel rooms, but that number is expected to grow to 9.1 million by 2039 (Noordzy, Ricaurte, James, & Wu, 2016).
Usually global hotel groups like Accor, Hilton, Marriott which operate in China and cover 22% of hotel supply, commit to reduce their carbon footprint and collaborate to reduce the environmental impact of the sector. They see it as a key driver of their strategic development and a long-term perspective. But this is not the case with the Chinese smaller hospitality chains or independent operators who do have a strong sustainability commitment. On the contrary, they like lavish designs in public hotel areas and lobbies that require high amounts of energy and water (O'Neill, 2016). Moreover, energy and water conservation is not a common practice in China, so it is not seen as first priority by local hotel owners. For example, if we compare water and energy consumption per square metre and per occupied room in China and in the other countries, disparities would be quite surprising (see Figure 1).  As can be seen, hotel rooms in Germany consume on average 459 litres per occupied room, compared to 1,555 litres per occupied room in China.
 
Figure 1. Average energy and water use per occupied room in selected countries (source: Cornell University’s Center for Hospitality Research report, 2016)
 
Further comparison of carbon footprints would reveal that “because of China’s reliance on coal, the countrywide average output of CO2 emissions per kWh of electricity generated in the grid is over 50-percent greater than that of the United States, Thailand, and the U.K., and over ten times greater than in France or Brazil. As a result, the energy comparison of output per square metre or occupied room demonstrates a greater footprint of CO2” (Noordzy, Ricaurte, James, & Wu, 2016). If the hotels that are forecasted to be constructed in China till 2025 increase their efficiency, this will save the equivalent of 84 million tons of CO2 emission (O'Neill, 2016). Such sustainable considerations are usually anticipated at the phase of conceptual planning of the hotel life cycle. However, in China this practice is usually neglected. Why? There may be several reasons: lack of understanding, misperception of the cost of sustainability, silo mentality, personal biases. Though the Chinese government is committed to sustainability, local hotel operators do not see it as a long-term strategy, so this is something that has to be changed.

In my opinion it is quite critical for any organization to work according to CSR principles and disclose the information about its business practices, environmental footprint, activities and environmental initiatives. CSR has become a part of strategic competency and this development is not likely to fade away.  By following the CSR principles a company would not only benefit the society as a whole, but will also get a lot of advantages for itself (Epstein-Reeves, 2012) (Hensley, 2016):
  • Costs savings. Initial investments required for implementation of sustainable processes will repay manifold in the long-run. It can be as simple as using energy saving lamps or as complex as running of a closed water circulation system. Anyway, the costs will be cut and the savings will add up quickly.
  • Increase in innovation and creativity efforts. Implementation of CSR principles across the whole supply chain drives the necessity to come up with innovative decisions and creative approaches. This way a company is encouraged to constantly support the research and development efforts and keep leading positions in its sector.
  • Improved public image. If company regularly goes public with its CSR information, it gets the image of transparent and honest entity, building trustful relationships with consumers. People would feel good when dealing with the company and this in its turn would increase the customer engagement.
  • Investors’ attraction. Nowadays potential investors assess not only sound business plans and budgets, but also a sense of corporate social responsibility. So, if a company demonstrates commitment not only to profit-making, but also to its environmental footprint, it is more likely to get attention and continuous support of investors.
  • Employee engagement. When a company demonstrates an aspiration towards environmental-friendly behavior, the employees become inspired and united by the common goal. They feel engaged and productive when working in a positive working environment and feel proud of a company.
 It goes without saying, that control aspects in the context of CSR guidelines are also essential. The control can be divided into external and internal. The external control may be carried out by the government, organizations the company has committed to be member of, and customers. At the governmental level a company has to comply with, for example, certain employment practices or safety requirements (WTTC, 2016). As for internal control, it is carried out by the company itself throughout the whole supply chain. The purpose of such control is to check the compliance with the internal rules, regulations and procedures set by the company and react to inconsistency, if any detected. Of course, quite often multiple stakeholders are involved in operating of a supply chain, so it may lead to difficulties in controlling of all elements of CSR. Nevertheless, reporting as a tool of control should not be underestimated. Such reports can serve multiple purposes: inform employees about the company’s sustainability policy and encourage participation; improve reputation and combat any negative perception of the brand; communicate business practices to other stakeholders all over the world and demonstrate proactive position; retain investors and attract the new one. Summing up, it is important to say that all parties involved should coordinate their efforts in order to harmonize monitoring and reporting tools and reach consistency in their performance.



References:
Dodds, R., & Joppe, M. (2005). CSR in the Tourism Industry? The Status of and Potential for Certification, Codes of Conduct and Guidelines. Investment Climate Department of the World Bank.
Epstein-Reeves, J. (2012, February 21). Six Reasons Companies Should Embrace CSR. Retrieved from http://www.forbes.com: http://www.forbes.com/sites/csr/2012/02/21/six-reasons-companies-should-embrace-csr/#572867324c03
Hensley, L. (2016). Why Corporate Social Responsibility is Important. Retrieved from https://doublethedonation.com: https://doublethedonation.com/why-corporate-social-responsibility-is-important/#corporations
Noordzy, G., Ricaurte, E., James, G., & Wu, M. (2016). Environmental implications of hotel growth in China: integrating sustainability with hotel development. Cornell: Cornell University School of Hotel Administration.
O'Neill, S. (2016, June 9). Hotels in China must be more sustainable, says report. Retrieved from greenhotelier.org: http://www.greenhotelier.org/our-themes/energy/hotels-in-china-must-be-more-sustainable-says-report/
WTTC. (2016). Environmental, Social and Governance Reporting in Travel and Tourism: Trends, outlook and Guidance. London.