Welcome to ‘The ESG Crunch’ with Tom Allport, a Q&A focused on Sustainability & ESG in the Built Environment.
This Q&A series is an opportunity for our Lead ESG & Sustainability Consultant, Tom Allport to discuss all things Environmental, Social, and Governance (ESG) with some of the leading players and decision-makers in the space. Each week we will ask burning questions centered around the critical role of ESG in shaping business strategies, fostering sustainable innovation, and driving societal impact. This series will provide a platform to share insight into how these leaders are integrating ESG principles into their organisations, navigating challenges, and advice for aspiring entrepreneurs looking to join the ESG & Sustainability industry.
Hersha is a US-based lodging REIT with a long-running focus on sustainable hospitality. Hersha’s proprietary sustainability platform, EarthView®, was created in 2010. It exemplifies our commitment to delivering financial value while supporting the well-being of our guests, associates, communities, and planet. The EarthView program takes a multidimensional approach to sustainability. We consider the impact of our business on all stakeholders and the environment to achieve long-term success.
How did you find yourself working in the ESG & Sustainability space?
I have a deep-rooted passion for positive impact and am motivated by a desire to contribute to a cause larger than myself. This determination has guided my career path, leading me through a few different avenues before I arrived in the ESG space.
I started my impact career in politics, where I played a role in the 2020 general election and the Georgia senate runoff campaigns. These experiences exposed me to the power of policy in shaping our society and environment.
Following the campaigns, I worked at the intersection of finance, policy, and climate. I gained valuable insights into how policy decisions impact corporate action and how they don’t. I saw how some companies led the way with sustainable development while others word-smithed their way out of taking action. I dug in on Justice40, combed through ESG reports, and learned how comprehensive sustainability programming is critical to true corporate social responsibility and thus, to a thriving world. With this new perspective, I decided to become an ESG specialist.
I aim to contribute to the growth, normalization, and quality of corporate social responsibility and sustainability. There are so many intelligent, values-driven contributors in the ESG space, and the innovation and determination of my peers consistently inspires me. I’m excited to participate in a movement that seeks to create a better and more sustainable future for businesses, but more importantly, society and the world we share.
What does your role at Hersha entail?
As the Head of ESG at Hersha, I lead our EarthView(R) program and sustainability strategy, including science-based targets across energy, water, waste, and emissions, reporting, compliance, sustainability-related Capex, operational programming, employee training, and philanthropy. While I lead EarthView, implementation is the responsibility of our entire team. As such, I take an integrated approach, engaging every department at Hersha, our partner management companies, and property-level leadership to ensure coordinated sustainability implementation.
Could you share some insights into the ESG & Sustainability priorities at Hersha?
We strive to operate responsibly by aligning our sustainability goals with our business impact. As a REIT, our first sustainability priority is resource efficiency. According to the EPA, 30% of the energy used by commercial real estate is wasted, resulting in significant unnecessary emissions. We prioritize building improvements that decrease our energy, water, and emissions intensity to help us reduce our environmental impact while saving money.
While we work to divert our waste from landfills via recycling, composting, and other methods, we know that the most impactful waste strategy is source reduction. Beyond energy, water, and waste efficiency, we are working to increase the responsibility of our sourcing by partnering with our procurement management vendor to determine opportunities to decarbonize and increase the circularity of our supply chain. You can read more about our sustainability priorities, including low-emissions transportation, social programming, and our net-zero target, in our latest sustainability report (https://hershaearthview2022.com/).
With ESG being so broad across the industry and so nuanced within Real Estate, what specific focus do you and your team have?
We focus on providing our business and leisure guests with high-quality, low-impact hospitality. This means ensuring that our buildings only use the energy and water necessary to provide guest and employee comfort (efficiency), our teams are trained on sustainability best practices (from housekeeping to maintenance to F&B and beyond), our sourcing is responsible and results in minimal single-use waste, and our amenities are low-impact. A recent Sustainable Travel Study by Expedia found that over 90% of consumers look for sustainable options while traveling. Still, many don’t know how to align their impact-oriented values with their actions. At Hersha, we thrive on the opportunity to help our guests close this gap.
What unique challenges and opportunities do you see with ESG in the US compared to other global regions?
Globally, policies and regulations (or the lack thereof) result in different ESG challenges and opportunities between countries, states, and cities. In some ways, the difference in sustainability policies between US states can be as stark as the difference in sustainability policies between countries in the EU. US national policies and regulations enable state and local regulators to make drastically different decisions about sustainability requirements for businesses, individuals, and governments. As a result, across the US, there is significant diversity in sustainability opportunities and implementation, with some states (e.g., California, New York) driving sustainability-forward policies that require and incentivize business action. In contrast, others (e.g., Mississippi, Louisiana) lack these incentives and requirements, enabling businesses to neglect environmental externalities. While some pockets of the US strive for sustainability leadership, the absence of comprehensive federal climate regulations governing corporate sustainability disincentivizes corporate social responsibility. The US may not be the most sustainable, but it is a country with a significant focus on innovation and capital available for startups. According to the World Economic Forum and research by the UN Conference on Trade and Development, the US was ranked the most prepared country for the green tech transition. There are many opportunities for companies across sectors to implement climate-forward initiatives and technology in the US. The American sustainability challenge lies not in the availability of solutions but in the need for widespread requirements for their adoption and incentives for sustainability leadership.
Globally, there is a skills talent gap in the ESG and sustainability Real Estate sector. What skills are particularly important when developing and implementing the Hersha ESG Strategy?
ESG leaders are strong researchers, creative problem-solvers, systems thinkers, and collaborative managers. Sustainability leaders in the built environment should have the training necessary to understand key priorities, set and track essential KPIs, and research and explore best practices and innovative methods for sustainable development. They do not need to be experts on everything, but they should be eager to form relationships with a network of experts across relevant fields to ensure well-researched and vetted approaches that utilize the existing ESG knowledge bank.
Sustainability is a unique field that runs counter to traditional corporate capabilities by necessity. There is always more to learn, and we are routinely letting go of old ways of working to adopt more efficient, socially and environmentally conscious practices. When leading ESG at a company where ESG is one of many priorities, it’s important to model sustainable decision-making, invite collaboration, communicate priorities clearly, and stay patient through the implementation process.
Many experienced ESG leaders are willing to share best practices with those who are more junior or professionals looking to pivot into the sustainability space. These relationships will help us progress toward our shared climate action goals and corporate responsibility.
In my opinion, any talented systems thinker with a deep commitment to sustainability can become an ESG leader. For companies struggling to find the right fit for ESG roles, especially those just beginning to build their ESG program, I urge recruiters to consider interviewing candidates with fewer years of experience and flexibility in the title/level they are looking to hire. It is better to hire a self-starter with half of the desired years of experience with a mid-level title and significant growth potential than to fail to find “qualified” candidates with eight+ years of experience and leave an ESG role open. Corporate ESG action is long overdue, and hyper-fixation on finding the “perfect” candidate will only delay progress. As a company develops its ESG program and the field matures, it will attract more experienced ESG professionals.
How have your client’s / investors ESG & Sustainability needs and priorities changed in the last 12-18 months?
We’ve seen an increased focus on our mid-to-long-term strategy in the past year. I’ve had the opportunity to develop an internal roadmap toward our energy, water, waste, and emissions targets, which has clarified our short-term priorities. ESG road mapping is an essential practice that allows space for creativity, generating new ideas and long-term strategies that wouldn’t result from a singular focus on near-term objectives. This process has allowed us to identify potential partners for longer-running projects that may not kick off immediately but have a longer-term impact than anything we can complete in a six, or even 12-month period.
What challenges and opportunities does Hersha have with ESG & Sustainability?
At Hersha, there is no one-size-fits-all approach. Every one of our hotels is unique, with a diverse set of brands, markets, and hotel classes, so our strategies and initiatives have to take these differences into account. We grow by purchasing existing hotels and do not do new construction. This business strategy aligns with our sustainability commitments – When we purchase an asset, we increase its efficiency and decrease its environmental impact, providing a net-positive impact from our operations. While working with a diverse set of assets can be challenging, there is no shortage of sustainability improvements and innovation opportunities.
How have you found the market in 2023?
The market is interested in ESG, especially with increased funding through the IRA, but actual execution seems delayed. Occupancy at many of our hotels has surpassed pre-COVID numbers, especially given our positioning in key business and leisure travel markets. Many of these travelers value sustainability and are eager to integrate this value into their travel but don’t necessarily know how. That’s where we come in. On the business travel side, 100% of the RFPs received by our sales teams contain questions about sustainability. The appetite for more sustainable travel is strong, and I expect it to grow as the sector continues to recover from the impacts of the pandemic. The growth opportunity is exponential.
Finally, what advice would you give to aspiring ESG and sustainability talent in today’s market?
Stay curious and be willing to explore new interests within the sustainability space. Connect with as many ESG professionals as you can. If you want to learn something, go learn it. The information is out there. Don’t be discouraged when you face rejections, and be willing to branch out into new sub-sectors. If you haven’t yet, read Paul Hawken’s Regeneration – works like this will remind you of how many opportunities there are for changemakers like you. Keep learning, growing, and connecting; the right fit will come along at the right time. Don’t give up on your commitment to creating a better future.
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