Best corporate citizens: Hotels
France's Accor Group tops new Tomorrow's Value Rating, but hospitality industry as a whole lags on responsibility
NEW YORK (Fortune) -- On the surface, the largest hotel firms should be standard bearers for corporate citizenship. After all, they make their money introducing guests to new cultures and pristine landscapes, so they have an interest in preserving the environment and supporting the local community. They spend billions each day on heating and water, and as the ubiquitous notes in hotel bathrooms urging us to save our towels can attest, they are acutely aware of the need to conserve these resources and reduce that cost. Like all consumer brands, they know the reputational risks of entanglement in labor or human rights abuse.
And yet, despite these synergies, hotels are among the least responsible businesses around. That's the harsh conclusion of a report for London-based sustainability consultancy Two Tomorrows in their ranking of hospitality giants, the first in a series of industry-specific studies called Tomorrow's Value Rating.
Just how dismal were the results? The best hotelier in the world according to the rankings was France's Accor Group, which scored just 55 on a scale of 100. The worst, Best Western, scored a 6. And no firm scored over 70 on any section of the survey. (Sections included "Strategy," "Engagement," and "Innovation and Leadership.")
Unlike indices from Dow Jones or Innovest, which measure a company's performance against general social or environmental goals, Two Tomorrows senior consultant Thomas Krick says, "We wanted to focus on sustainability management -- to what degree [the hotels] seek to improve sustainability in order to maximize business opportunities." So the focus is on process rather than outcome.
Two Tomorrows surveyed the 10 largest hotel chains (by the number of guests they can hold) about the strategic overlap between sustainability efforts and core business, the role of top executives in developing and implementing sustainability policies, and the impact of stakeholder engagement in core business decisions.
Companies got scoring boosts by using sustainability initiatives to drive innovation, by tracking sustainability issues from the boardroom to the individual hotels, by partnering with local organizations to achieve their goals, and by benchmarking their achievements alongside financial performance in annual reports. Meanwhile, generous giveaways from corporate foundations to social and environmental causes earned no points at all. Not only because, as Krick says, "philanthropy has been mainstreamed in the world's largest companies," but also because it doesn't depend on strategic C-suite decisions.
Despite hospitality's overall poor performance, there are a few standout programs. "If you think of the positive impacts that a hotel can have," says Krick, "the main one is that they can contribute to the local economy and environment."
No. 1 Accor Group operates 4,000 hotels in 90 countries, ranging from the luxury brand Sofitel to the bargain chain Motel 6. In Accor hotels, guest recreational activities include educational segments on local biodiversity and public health issues. Accor also partners with local firms on supplies. That's in sharp contrast to most hotel chains, says Krick, "who fill a gift shop in the Middle East with toy camels made in China." Meanwhile, Marriott, which placed No. 3 on the Tomorrow's Value Rating, plans to have its golf courses double as wildlife reserves.
If Accor and Marriott lead the pack on strategy, InterContinental Hotels Group excels in governance, earning it the No. 2 spot in the rating. "With IHG, you can follow responsibility from each site right up to the CEO," Krick says. Alone among companies in the report, the British company monitors practices at both its franchised hotels and wholly owned ones through an online network called GreenEngage. Not only does that allow executives to check up on hotel managers across all properties -- and managers to share best sustainability practices -- it also makes it possible for activists and local stakeholders to hold the firm accountable.
Public disclosure is crucial, says Krick, because "hotels are not that prominent as investment vehicles, and therefore haven't faced the kind of scrutiny in the sustainability space that other industries, like oil and gas firms, have endured." Transparency on the subject is rare in hospitality: Only three of the companies surveyed publish a social responsibility report.
That may be because no one has required it. Krick notes that eight of the 10 largest hotel firms are American, and that all eight lag behind European Accor and IHG on the Tomorrow's Value Rating. "These things -- labor, environment -- are more regulated in Europe," Krick says, "and the firms will be subject to scrutiny by European nonprofits and consumers than U.S. companies don't have."
That creates an opportunity for Two Tomorrows, which hopes to sell their reports along with advice about strategic sustainability management to companies looking to get ahead. To that end, says Krick, by this time next year, he'll have U.S.-centric surveys on five industries: hotels, utilities, energy, food and beverages, and telecommunications.
The top 10 hospitality companies, as ranked by Tomorrow's Value Rating, are: Accor, InterContinental Hotels Group, Marriot, Global Hyatt, Choice, Carlson, Hilton, Wyndham, Starwood, and Best Western. For more on the rankings and Two Tomorrows, please visit www.twotomorrows.com.