Not without work, argues the WTTC’s Christopher Imbsen and Oliver Wyman’s Dan Darcy
Travel and tourism entered 2023 like a marathon runner hitting the last six miles of a race. It fought its way through two years of the Covid-19 pandemic only to be overwhelmed by an unprecedented surge in travel demand.
With many in the industry still struggling to recruit to handle this tsunami of travel, companies big and small now face their next challenge – the accelerating transition from voluntary to mandatory sustainability reporting. Are they ready for it?
The first wave of tougher mandatory regulation on sustainability disclosure takes effect in 2024 as new EU sustainability rules start to compel the largest companies operating in the bloc to begin gathering data on greenhouse gas emissions.
These new rules – including the Corporate Sustainability Reporting Directive – also require companies to submit annual transition plans for reducing emissions. Plans must be compliant with limiting the rise in Earth’s temperature to 1.5C – a target set by the 2015 Paris climate agreement – with progress on meeting these goals made available annually to corporate stakeholders and the public.
But not only is the EU imposing new mandatory regulations, so is the UK, Australia, Canada, India and Singapore. In the US, the Securities and Exchange Commission is expected to move in the next few months to adopt similar climate disclosure requirements that would make formerly voluntary emissions disclosures mandatory.
And most recently, the International Sustainability Standards Board (ISSB) – affiliated with the International Accounting Standards Board – released what will eventually become the international norm for sustainability accounting.
All the new standards require disclosure of Scope 1, 2 and 3 emissions under the Greenhouse Gas Protocol for corporate accounting.
Considerable work to be done
Given the deluge of new standards, it’s time to assess how prepared the travel and tourism industry is.
After surveying industry members for a report due to be released in the fourth quarter of this year, the WTTC and consultancy group Oliver Wyman have concluded there is considerable work to be done. The industry is currently responsible for 8.1% of global greenhouse gas emissions. While many of the industry’s biggest companies have set 2050 emissions-reduction targets, just as many have started to consider how to address climate change in their business.
Navigating the compliance landscape will be no easy task for an industry with operations spanning multiple countries, and enterprises that run from a few employees to thousands.
The complexities of managing multiple subsidiaries, suppliers and partnerships will be daunting even within a single jurisdiction.
These hurdles become even higher when 80% of industry members are small and mid-sized companies with limited resources to invest in new personnel and technology.
Recognising this, the WTTC and Oliver Wyman will be including a tool to help the industry navigate the requirements in their upcoming report.
Widespread company concerns
One concern raised by most participants in our survey was the industry’s lack of resources, capabilities and expertise to tackle the demands of the new regulations.
In the past, sustainability personnel at many travel and tourism companies were more likely to deal with branding and marketing or operational issues than with accounting or data collection.
But compliance with rigorous sustainability disclosures rises above a mere accounting exercise to become more of an organisation-wide shift in culture, and sustainability teams will not be able to tackle the upcoming challenge alone. More education and internal expertise on sustainability will be needed.
Another challenge facing the industry is data collection. The broad and fragmented value chains of many companies in the sector make it difficult not only to ensure that data is assembled in a timely manner, but also that the information on emissions — especially Scope 3 emissions produced by upstream suppliers and downstream users — is accurate.
With the absence of sector-specific guidance, some form of industry collaboration may be needed for the first few years. Companies are struggling to reconcile the investment needed in new data collection capabilities with investment already being made in initiatives to reduce emissions and meet other ESG goals. At the same time, extra spending on personnel and operations has been required across most organisations to meet rising demand.
But ready or not, the regulations have arrived and, especially for the biggest companies and networks, now is the time to act.
● Christopher Imbsen is director of sustainability at the World Travel & Tourism Council (WTTC)
● Dan Darcy is a principal in management consultancy Oliver Wyman’s Transportation and Services Practice, based in Los Angeles