Corporate purpose

IHG Hotels & Resorts unveils responsible business plan

IHG Hotels & Resorts delayed unveiling its responsible business plan to manage the pandemic, but the end result is richer

It is inevitable that any business unveiling a ten-year action plan in February 2021 would incorporate the lessons and insights gleaned through the Covid-19 crisis. And for Yasmin Diamond, executive vice president of global corporate affairs at IHG Hotels & Resorts, that means that its responsible business plan Journey to Tomorrow is ‘all the richer’.

The group, which operates almost 6,000 hotels across 100 countries, found that while the environmental aspect of its ESG agenda had previously dominated, during the pandemic it was the social and societal aspects – the S – that really spiked.

‘It was all about how you behave, how you treat your people, how you work within the communities in which you operate, how you work with your suppliers, all those things’ explains Diamond. ‘The E has not gone away. It remains really strong, and we’ve got COP26 this year, but it’s just that S was really elevated.’

Covid-19 shone a spotlight both on how businesses were behaving and how transparent they were in their dealings. ‘Having a strong corporate affairs voice at the top table really was becoming so much more important because you are looking at all your stakeholder groups and saying What can we do for our investors? Our owners? Our communities? Our colleagues? Our guests?’ says Diamond. ‘I ended up having quite a holistic viewpoint and started with really clear principles around transparency and openness and trying to do the right thing.’

The hospitality industry was among the hardest hit by the pandemic. IHG’s hotels were closed in many markets. They re-opened and, in some cases, were forced to close again. With just a few exceptions, IHG does not own the hotels it operates. They are owned by small to medium sized businesses, with whom IHG works hand-in-hand.

‘We applied what I called the ‘rear-view mirror test’. Every decision that we made at the height of the crisis, we had to apply a rear-view mirror test so that when we look back, we are comfortable with the decisions we have made and the way that we’ve made them,’ she explains. ‘And we absolutely had to make some tough decisions to ensure the business was sustainable and properly financed. But the feedback we got from colleagues was that they understood.’

Diamond believes that in having a clearly defined corporate purpose prior to the pandemic – which is providing True Hospitality for Good, every day – shaped IHG’s response. It launched a global partnership stretching across 70 countries, supporting food banks and charities providing food to those impacted by Covid-19.

It offered free hotel accommodation to first responders across America, while also working with local governments to provide free accommodation to frontline staff and the vulnerable. Its IHG Rewards members were also able to cash in their loyalty points to donate to community partners, such as the Red Cross. And its hotels also hosted community initiatives, such as a spaghetti and meatball drive-thru in Pennsylvania.

Every decision that we made at the height of the crisis, we had to apply a rear-view mirror test so that when we look back, we are comfortable with the decisions we have made and the way that we’ve made them

‘We did a lot of things that are absolutely core to IHG, which is basically looking after people. Our purpose absolutely shapes our strategy. It shapes how we’re going to deliver the business and how we are going to grow it,’ explains Diamond. ‘It doesn’t sit in isolation. It’s not like a purpose that you throw onto the wall. You’ve got to step back and ask Does it stand up to scrutiny? Do all the things we are doing stand up to it?’

She adds: ‘Our purpose genuinely shapes our culture. You are there to provide hospitality. You’re a service organisation. You welcome millions of people into your hotels every night. They also interact with you throughout their guest journey, whether through your apps or your website. It is a rounded relationship. And then when people are finished, they interact through social channels to say how much they loved their stay or to post their pictures.’

Having seen how its response naturally fell into the areas of communities, its people and – to a lesser extent – the environment, IHG recognised that the responsible business strategy it had been developing in 2019 needed to evolve to reflect this. ‘Our plan was to launch it [in 2020] but when Covid hit, we just thought it wasn’t the right time,’ says Diamond. ‘And it is actually richer for that.’

The Journey to Tomorrow is a ten-year action plan, which sets out five clear ambitions to make a positive difference for IHG’s people, the communities to which they belong and the planet. These include achieving a gender balance, a doubling of under-represented groups across IHG’s leadership and an ambition to improve the lives of 30 million people in its communities through skills training and innovation, support in the event of natural disasters and helping those facing food poverty. The ambitions are also aligned to the UN’s 17 Sustainable Development Goals.

Our purpose absolutely shapes our strategy. It shapes how we’re going to deliver the business and how we are going to grow it

‘It’s really important that whatever you do in this space, it doesn’t feel alien to your people. We’re a people business. We’re based in communities all around the world and the environment… these areas are core to what we do,’ explains Diamond.

‘As your company evolves, so your targets have to evolve and to remain ambitious. It’s not about being ambitious for the sake of it; it’s because we’ve already done some of these things. We’ve already done a lot of work around gender, and the development of female general managers. Today, around 37 per cent of our senior leaders are female, which wasn’t the case five years ago. So, you move on from gender equality. What’s the ambition for the next ten years? Obviously, last year [the big issue] wasn’t just Covid. We had a lot of things around race, particularly in America, which is our biggest market. So, we’ve made more significant commitments around ethnicity and diversity within the organisation.’

IHG is also building on its IHG Academy programme which offers young people a chance to experience the hospitality industry either for a short stint or longer-term, with the aim of finding a role within one of its hotels. ‘Getting young people back into jobs is really important,’ she adds. ‘And, coming out of Covid, there will be a need for good quality, sustainable jobs. The onus is on us.’

But IHG is also ramping up its environmental work, setting itself science-based targets for 2030 that deliver a 15 per cent reduction in energy use from its direct operations, reduced emissions in its franchise operations and a commitment that new build hotels will operate at zero or ultra-low carbon emissions. It is also pioneering the transformation to a minimal waste hospitality industry, with the elimination of single use items, reducing food waste through a ‘prevent, donate, divert’ plan – which also supports its community objectives – and collaborating on innovative circular solutions.

‘We were the first hotel company to move from miniature bathroom amenities into bulk amenities, but we want to do more. Covid was interesting because we removed a lot of things from our guest rooms, although we did have to introduce some items, like plastic water bottles for health and safety reasons, and we should take advantage of some of the things we learned,’ adds Diamond. ‘We did things like mobile check in, using digital screens in hotel rooms, which is great for our waste agenda as it reduces paper.’

But while IHG is working on issues, such as the use of renewables, centrally, it is also aware that the majority of its hotels are just getting back on their feet and may not have the necessary investment funds. ‘You can never impose, nor should you, because we work in partnership with our owners. But we’re not starting this from scratch, we’ve been on this journey with our owners for many years now,’ she explains. ‘The important thing is trying to find the sweet spot of doing good and it being good for business.’

The group has been calculating the return-on-investments to prove the business case for, say, renewables. There are examples that are already proven. Moving from miniature to bulk amenities involved an initial financial layout, but the savings have far outweighed this. ‘We are rolling out an enhanced version of our Green Engage system. Hotels input their data and find out what their carbon footprint is,’ adds Diamond. ‘It also tracks waste and water usage.’

The hoteliers receive hotel-specific reports, and regional benchmarks to track their performance, as well as advice on specific actions that can be taken to reduce their impacts.

Covid was interesting because we removed a lot of things from our guest rooms, and we should take advantage of some of the things we learned

But Diamond also points out that customers are demanding change. IHG conducted a survey of 9,000 adults, of whom 82 per cent said it was important to choose a hotel that operates responsibly and that they would be prepared to pay 31 per cent more for places that met that criteria.

‘We’re doing a lot of work centrally that we’re pulling together for owners on ROI, but we’re also showing them what governments in different markets expect and the incentives that are out there, and how to access them,’ she adds. ‘We’re getting better data around carbon, water and waste to be able to help the hotels, saying These are probably some of the interventions you need to make to improve X, Y or Z. It’s always that; it’s not imposition.’

Each ambition in its responsible business plan also naturally loops into another. For example, there is a focus on water consumption, particularly in hotels operating in the areas of high risk. ‘It ties into the whole area around communities because our hotel owners are very active in their local communities. They may have multiple hotels. They employ people. We’d like to have a positive impact on 30 million people around the world, and some of that will be what our own colleagues do,’ says Diamond.

The ten-year targets have ‘very clear roadmaps’, she says, adding: ‘They are stretching, as they should be. We will report against them every year. And we’ve also signed up to TCFD, the taskforce for climate related financial disclosures: you put out there, very publicly, what your risks and opportunities are in terms of climate and the environment. We’ll be scrutinised, which is absolutely fine. I can tell you now that we wouldn’t put out targets without thinking through how we were going to meet them.’

The important thing is trying to find the sweet spot of doing good and it being good for business

Being science-based targets, they might adjust or get updated, particularly as technological developments come online. A five-year review is also planned. But the objective is always to make the targets more challenging rather than easily achievable. ‘Externally, we’ll be providing a lot of data. And we’re participating in all the ESG indices,’ she adds. Each index is measured differently, which adds to the burden of disclosure. ‘But, just in terms of the shareholder base, we have so many questions around this agenda.’

Diamond believes IHG has a track record for delivering what it says. The new responsible business strategy builds on an earlier version that was coming to its natural end. But this version is different not only because it takes a science-based approach, with externally validated results, but because it has really factored in climate risk. ‘We’re taking waste to the next level. We are doing more and more, but on a market-by-market basis because recycling and waste are so dependent on local infrastructure,’ she explains.

IHG is piloting new circular economy systems, including Winnow, which gives chefs digital tools to easily measure waste, combined with analytics to pinpoint opportunities to reduce waste. It is estimated that the Winnow system can cut food waste in half over 12 months.

A sustainability committee has been established, with the IHG Owners Association. ‘It’s great because it is working with them to say what would work, and them coming to us with ideas as well. But it is also cognisant of the fact that this is a ten-year plan. Everything doesn’t have to be done in year one,’ she points out. ‘Anything we do in this space creates such a buzz with our colleagues. They’re the most commented articles, the most commented blogs, the most commented videos. The enthusiasm. The commitment is there in abundance.’