I myself walk a fine line between the practical and the ideological. I’ve got a foot in both worlds. My practical side understands that businesses exist to turn a profit. But I also have a strong idealistic side. My personal motto is “people first”; I value sustainability and the importance of ensuring a livable climate for my sons.
That’s a little backstory, as I recount my journey to understand just what ESG is.
ESG is an acronym for Environmental, Social, and Governance. It’s a framework that companies commit to following, in order to do good in the world. At first, it seemed to me to encompass a random group of three rather squishy priorities with nothing practical in common.
Lots of articles I’ve read describe ESG as being about sustainability. It is. But there’s more to it. To tie a bow on the entire ESG framework, it’s about ethical behaviors. Moreover, sustainable investments are on the rise.
The Ideological Side
The environmental leg of the ESG stool is a company’s overarching impact on the environment, and its potential risks and opportunities. Here are some examples of environmental concerns that hotels can play a role in controlling:
- Air and water pollution
- Waste management
- Water usage
- Carbon emissions
Solutions can include reducing waste, using renewable energy sources, avoiding harmful pollutants and chemicals; seeking to lower greenhouse gas emissions and CO2 footprint, and publishing a carbon or sustainability report. (If you’re working with ESG investors, they may look closely at such a report; more on that below.)
The social leg of the ESG stool means how the company treats people including employees, customers, partners, and its surrounding communities. These can include the following:
- Employee gender and diversity
- Data security
- Customer satisfaction
- Company sexual harassment policies
- Human rights, at home and abroad
Some solutions that hotels can employ include using ethical supply chains, avoiding overseas labor that may include child labor; supporting LGBTQ+ rights and encouraging all forms of diversity, instituting policies to protect against sexual misconduct, and paying fair (living) wages.
And finally, the governance leg means how well an organization complies with industry regulations, its corporate policies and best practices, and its internal controls. Here are some examples:
- accurate and transparent accounting methods
- accountability to shareholders
- Integrity and diversity of board members
Here’s how your organization can take action in this area: avoid political contributions to obtain preferential treatment; embrace diversity on your board of directors; promote corporate transparency; consider someone other than the CEO as chair of the board, and stagger board elections.
Is the bottom line important to you? Keep reading…
The Financial Side
Here’s something important that became apparent early on in my Google research: Investors care about ESG. “ESG investing” is a form of sustainable investing that considers ESG factors to analyze an investment’s financial returns and overall impact.
Investors are increasingly searching for sustainable investing opportunities and analyzing corporations’ ESG performance. In the US, there are a whopping $8.4 trillion dollars in sustainable investing assets out there right now (according to the US SIF Foundation’s 2022 Sustainable Investing Overview).
My next thought was, ok, big dollars are involved, but what’s the bottom line? How do these investments perform?
A 2019 white paper produced by the Morgan Stanley Institute for Sustainable Investing compared the performance of sustainable funds with traditional funds and found that from 2004 to 2018, the total returns of sustainable mutual and exchange-traded funds were similar to those of traditional funds. Other studies have found that ESG investments can outperform conventional ones.
ESG is a hot topic in general and in the hotel investment industry specifically. Telkonet’s vision and mission are closely tied to ESG ideology. Expect to read more insights about ESG here in future months.
How Our Organization Incorporates ESG
VDA Telkonet embraces these environmental, social, and governance ideologies. In fact, they form the basis of our vision and mission. As an IOT leader, our mission is to provide buildings with smart energy solutions to help reduce energy consumption and minimize the world’s carbon footprint.
Environmental: all of our Group’s services and products exist to make buildings sustainable. Our vision is that we enhance ‘people’ environments using sustainable strategies that improve the relationship between people and the surrounding environment.
Social: our approach is people-centric; we focus not only valued guests, but on the valuable hospitality staff who care for those guests.
Governance: recently, our organization launched an internal project called ”Let’s Bloom”, in which we implement inter-departmental projects aimed at improving operational, energy, and functional efficiencies.
By embracing these ideologies, sustainability has become VDA Telkonet’s focal point. From this perspective we are generating practical ideas to improve the lives of our employees worldwide.
Enjoy the Spring weather!