Navigating the CSRD: how will this directive transform the Hospitality Sector?
The Corporate Sustainability Reporting Directive (CSRD) stands as a new EU legislation with the primary goal of advancing the uniformity and comparability of sustainability reporting across companies. The CSRD will have a direct impact on the hospitality sector, as they will be required to report on the sustainability of their business, both in terms of the impact on the external environment and society, as well as external impacts on the business. Reporting under the CSRD will become mandatory in 2025, initially applying to entities already subject to the Non-Financial Reporting Directive (NFRD), and will require comprehensive and granular disclosures covering the entire spectrum of sustainability topics. Since its mandatory character in 2025, companies should acknowledge the impact of the directive and start gathering information for 2024 during the course of next year.
The CSRD also embraces "double materiality," which requires that companies report information necessary to understand how sustainability matters affect their business development and performance and the impact they have on a range of sustainability matters. Hotels will need to identify the most relevant sustainability topics, assess their impacts on the company and the environment, and consider the risks and opportunities presented. Reporting in line with CSRD recommendations can be advantageous, as it is likely that provision of capital by banks and investors may increasingly become linked to compliance with CSRD reporting. In addition, even if a hotel business is not directly in scope, its supply chain is likely to be impacted.
In this context, the CSRD holds significant implications for hotels. By placing a strong emphasis on the necessity for consistent and comparable sustainability reporting, the directive plays a pivotal role in shaping the way hotels assess, report and communicate their environmental, social, and governance (ESG) performance. Compliance with the CSRD aligns with the broader industry trend towards greater transparency and accountability, responding to the growing demand from stakeholders for clearer insights into a company's sustainability practices.
Implications for Hotels
The implications for hotels stemming from the EU legislation are substantial. The directive underscores the crucial need for hotels to engage in consistent and comparable sustainability reporting. This not only aligns with regulatory requirements but also presents a unique opportunity for hotels to distinguish themselves positively in the market.
Top Sustainability Focus Areas For the Travel Accommodation Industry
source: Statista.com (https://www.statista.com/chart/28196/travel-accommodation-sustainability-focus-areas/)
Compliance with the CSRD is more than a regulatory obligation; it is a chance for hotels to showcase their commitment to responsible business practices, and operate according to the EU Taxonomy which is aimed at reducing greenwashing. By transparently communicating their environmental, social, and governance (ESG) performance, hotels can attract environmentally conscious consumers, build a positive brand image, and contribute to long-term profitability:
Regulatory Compliance: As the CSRD becomes more prominent, hotels must ensure they are prepared for compliance with the new regulations and adapt their reporting practices accordingly.
Resilience and Long-term Success: The CSRD highlights the need for strategic adaptation and innovation in the hospitality industry to ensure long-term success and resilience in the face of future challenges, such as pandemics or climate-related disruptions.
Supply Chain: The CSRD will impact the hospitality supply chain, as hotels will need to ensure that their suppliers also comply with sustainability reporting requirements.
Cost Savings: Implementing sustainable practices in hotels can lead to cost savings, as energy-efficient technologies, waste reduction initiatives, and other sustainable strategies can lower operating costs and reduce the environmental impact of the hotel's operations.
Competitive Advantage: Hotels that prioritize sustainability and communicate their efforts effectively will enhance their value proposition and competitive advantage in the market.
Attracting Customers: Tourists and business travelers are increasingly focused on finding sustainable options when choosing a hotel. Hotels that commit to and implement sustainable strategies will be more attractive to travelers who prioritize environmentally, socially, and culturally sound practices.
Community: Hotels can play a role in promoting sustainability in their local communities by engaging in sustainable practices and communicating their efforts to the community.
Creating a Sustainability Plan for Hotels
To create a sustainability plan for hotels, the first step is to establish the hotel's current sustainability status. This step requires analyzing the hotel's energy, food, beverages, water, and waste, as well as calculating the hotel's carbon footprint and documenting any Corporate Social Responsibility (CSR) practices currently in place[1]. Once the hotel's current sustainability status is established, the hotel can develop a sustainability plan that includes specific goals and strategies for reducing the hotel's environmental impact, promoting social responsibility, and enhancing the hotel's value proposition and competitive advantage[1].
Communicating with employees, customers, and the community will help hotels position themselves as sustainable and responsible organizations. This will enhance the hotel's value proposition, as respect for the environment and social responsibility have become crucial among employees and consumers. The sustainability team and hotel employees committed to sustainability will be the best ambassadors for the brand and the hotel's sustainability strategy.
In terms of timing, the EU has confirmed that the implementation of the CSRD will take place in three stages:
1 January 2024 for companies already subject to the non-financial reporting directive (reporting in 2025 for the financial year 2024)
1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (reporting in 2026 for the financial year 2025)
1 January 2026 for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings (reporting in 2027 for the financial year 2026) [6]
Conclusion
The Corporate Sustainability Reporting Directive (CSRD) has significant implications for hotels, as it emphasizes the need for consistent and comparable sustainability reporting and promotes strategic adaptation and innovation in the industry. By focusing on sustainability, hotels can attract more customers, enhance their resilience and long-term success, achieve cost savings, and gain a competitive advantage in the market. As the CSRD becomes more prominent, hotels must prepare for compliance and adapt their reporting practices to ensure they are well-positioned to succeed in the evolving hospitality landscape. Creating a sustainability plan for hotels that includes specific goals and strategies for reducing the hotel's environmental impact, promoting social responsibility, and enhancing the hotel's value proposition and competitive advantage will be crucial for success in the industry.
Sources:
[2] https://www.sciencedirect.com/science/article/abs/pii/S144767702030259X
[4] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8647208/
[5] https://www.ey.com/en_us/assurance/csrd--the-rush-to-get-ready
