What is ESG and Should I Care?

Whether your company is publicly traded or is a member- or privately-owned resort, your management and board are going to feel the emphasis on and impact of ESG investing, accountability, and regulatory protocols. Respond proactively and embrace the shifting perspective. You’ll find that timeshares, vacation ownership resorts, hotels and mixed-use properties are well-positioned to benefit from this developing direction and the increasing scope of regulatory requirements that inherently will be part of it.

ESG stands for environmental, social and governance. You’ll hear the acronym used most often in discussions of ESG investing, which is the decision to invest money selectively in funds comprised of companies that demonstrate responsible practices environmentally and socially and in their corporate decision making. Run a quick Google search of ESG, and you’ll discover millions of entries, largely related to investing or ESG accountability and disclosures.

ESG: How Did We Get Here and Where are We Going?

During the Vietnam War era, antiwar activists drew attention to the concept of war profiteering, the idea that investors were, without realizing it, backing the corporate growth of chemical and weapons manufacturing. Understandably, the thought of building your retirement savings by indirectly investing in the production of Agent Orange, for example, made people highly uncomfortable.

In the early seventies, two Protestant ministers launched the Pax World Balance Fund to provide investors in search of socially responsible investment opportunities a fund they could support in good moral conscience. In that moment, the groundwork was laid.

Now, fast forward through the decades since the Pax Fund began. With years of evolving environmental concerns and human rights and ethics awareness, from preserving the planet to gender and racial equality, global business has finally arrived where we stand today. Companies have little choice but to be accountable to their shareholders, investors, clients, patrons, industry and the world at large for their actions.

Currently, the Securities and Exchange Commission is working to establish uniform disclosure guidelines for corporate ESG accountability in the United States. European regulators already have the process well underway. One of the few points slowing down the SEC is the committee members’ awareness that one size definitely does not fit all.

SEC Chair, Jay Clayton, has spoken candidly about the difficulty of establishing standards given that industries and types of businesses fall into a vast range of sizes, business styles and categories. How does the SEC establish guidelines fairly and then enforce those guidelines? How does it hold smaller companies with smaller budgets and less workforce accountable for applying, monitoring and reporting on their own compliance without penalizing them because they lack the resources to implement and manage new regulations? Regardless of how difficult the challenges facing regulators are, mandates are headed our way.

Here’s Why ESG Matters, Even for Small Timeshares or Family-Owned Resorts

Even without defined regulations in place, ESG standards are quickly becoming the benchmark by which corporate America (and much of the rest of the world) is measured. At publicly held companies, stockholders demand transparency of process, accountability for how assets are allocated and managed and access to the process for making decisions.

While privately held companies do not issue reports to shareholders, they do compete with publicly held companies for employees, vendor relationships, lender financing, community support, real estate, regulatory agency approvals and market share. Irrespective of their corporate structure, timeshare companies need to be able to demonstrate that they are politically correct, environmentally responsible and socially sensitive.

Choose Your Shade of Green Carefully: The “E” in ESG

In many ways, hospitality providers have been ahead of the curve regarding environmental stewardship. On the day the first hotel posted signage reminding guests that reusing bath towels was an option or to “please turn the lights off” as they left their unit, environmental accountability found its foothold in the resort business.

But as hospitality providers, you already know that in this service business, guests and timeshare owners are either your best brand ambassadors or your biggest public relations nightmare. Efforts by timeshare developers to represent a resort as environmentally responsible can backfire.
Critics will quickly jump on the “green sheen” bandwagon, branding an environmental endeavor as “greenwashing” if it appears to be a marketing strategy rather than a sincere effort to improve or protect the environment. If your resort is going to, “leave the light on” for its guests, you’d better be sure that light is eco-friendly and low wattage.

Today, many properties are monitoring energy consumption, consumption per square foot, emissions (including greenhouse gas emission), water consumption, waste diverted from landfills, use of energy or water efficient technologies and countless other efforts and initiatives that they can implement, measure and report on to their boards, stockholders, investors, guests and member-owners.

The “S” and the “G” in ESG

Issues of social responsibility have always been complex. Between a global pandemic and a vast social rights uprising, 2020 has made correct social and governance protocols more difficult while at the same time, more on demand.

Just as environmentally responsible efforts can be misconstrued, charitable initiatives that appear to involve little more than writing a check will be labeled as disingenuous or a ploy for publicity. Businesses should focus on diversity and inclusion, equal opportunity, zero tolerance of discrimination and harassment, employee enrichment through training and education and benefits workers genuinely value, such as onsite childcare, education and opportunities for volunteerism.

Often intricately linked to social responsibility are issues of corporate governance. Is there diversity among senior executives? Are women and minorities well represented on the board of directors? Does the executive decision-making process prioritize the safety and physical and emotional wellbeing of its employees? Organizations of all sizes must take great care to ensure that policies and practices are well vetted, transparent and focused on social rights.

ESG is the New Normal for Business

Like many other timeshare and vacation ownership companies, Wyndham Destinations has a demonstrated history of environmentally sensitive and social-minded accomplishments. Yet last year, upon publishing its 2018-2019 Social Responsibility Report, Wyndham Destinations President and CEO Michael D. Brown described the 80-plus page document as a “first for our company”.

In so many ways, Brown hit the nail squarely on the head. In an ESG-focused, post global pandemic work world, whatever your organization has been doing in the past is no longer sufficient. Although your resort makes significant contributions to the economy, your community and the industry, timeshares, like every other vertical, are being viewed through a new, high-resolution lens.

You can push back against the scrutiny, or you can embrace it. Blaze new trails with ESG initiatives that are firsts for your organization, perhaps even firsts in the industry. In doing so, you’ll create value, reduce risk, and even make the world a better place, which is not a bad day’s work for any of us.

Key Takeaways:

• Examine every aspect of both internal and forward-facing culture, looking with fresh eyes at how existing practices, policies and even your supply chain impact others or may be interpreted by others.
• Prepare for unprecedented scrutiny of how your organization acknowledges cultural practices and religious traditions.
• Ensure that your ESG initiatives are integrated throughout management, operations, finance, and human resources as well as marketing and public relations.
• Develop effective and repeatable ways to document your efforts. Some activities may be hard to quantify, so make certain you are reporting data accurately.
• Be transparent in your actions, results and reporting.