Lessons from Establishing an ESG Committee
Introduction
As environmental, social, and governance (ESG) considerations become increasingly critical to stakeholders, from investors to consumers, the establishment of a robust and effective ESG Committee is essential.
A well-structured ESG Committee serves as the backbone of a company’s sustainability strategy, guiding decision-making processes and ensuring that ESG principles are not just integrated into the corporate culture but are also actionable and measurable. The ability to navigate the complexities of global operations, align diverse teams, and set realistic yet ambitious goals lie at the heart of what makes an ESG Committee functional and effective.
In this interview we look at the process of setting up an effective ESG Committee through Hadrian Beltrametti Walker 's first-hand experience.
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Why Hadrian?
Hadrian Beltrametti has worked for the hospitality industry for 17 years, 11 of them in Kempinski, a 125-year-old hotel group with presence in 35 countries and more than 19,000 employees. Holding positions as Vice President of Legal Services, Executive Vice President & General Counsel and Company Secretary, during his last 3 years, he was also the founder and Head of the ESG Committee.
If you prefer to watch rather than read, you can check out the value pills of the interview here:
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Sustainability on the hospitality sector
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Alberto: Hadrian, I would like to start with a brief background around sustainability in the hospitality sector. What are the unique sustainability challenges and opportunities that hotels face?
Hadrian: Sustainability in the hospitality sector is really key. I would say that the hospitality, travel and tourism sector is one of the sectors that has the largest impact on the environment and employs so many people around the world that it also has a huge social impact.
Now talking about hospitality and hotels specifically rather than the whole travel and tourism sector,
we must remember that hotels are large buildings operating 24/7, which leads to significant energy and water consumption.
Looking at large corporate groups with thousands of hotels in their portfolio, you can imagine how making small changes in the ways that the hotels are guided from the corporate level to reducing their energy consumption and water consumption, as an example, can have a huge impact as that amplifies across the entire portfolio.
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Another area that's very important is procurement and food consumption. Large hotels often will have a breakfast buffet and a lot of food in these breakfast buffets usually gets wasted and thrown away. But with new modern systems, this can be reduced significantly.
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Then of course on the social side, there are tens of thousands of employees in these large corporate groups, each hotel employing hundreds of people. And these people come from all over the world.
Diversity and inclusion are important aspects for the hospitality industry, where we are working with people from all over the world, from all ways of life and from every ethnic background. That social impact is very important and runs through the entire process from recruitment to employment to people then moving on, changing countries, moving to different hotels around the world.
And from a governance perspective, this all has to be seen from what I think is a top -down approach, ensuring that the corporate governance throughout the organization is consistent at the highest level.
Alberto: What about local communities?
Hadrian: ?The impact on local communities is very important. I've seen a trend in the past 17 years that I've been working in hospitality. And that is to increasingly try to employ local talent and to provide sufficient education and training programs to ensure that the local talent has the training required for operating a hotel. And this is something that I think has a huge positive impact on local communities around the world.
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Setting an ESG Committee
Alberto: now that we covered a bit of the background and we understand the challenges, we can jump into the main point of the conversation. Let’s talk about your experience as founder and Head of the ESG committee on Kempinski.
Could you picture for us what was the situation of sustainability at the beginning? What was the starting point?
Hadrian: Sustainability has always been at the core of Kempinski’s values, but it became more structured over time. Although there was already a strong foundation with several ESG objectives in place, the system needed to be restructured and reorganized.
There was some reporting prior to the ESG committee, but it was more of a snapshot of various ESG targets and objectives.
The shift point was when the company restructured. I took over managing sustainability that I picked up from my predecessors. They had already been working towards what was going to be a more formal reporting standard.
So that was being put in place, but it was all paused because of the pandemic.
When I took over, the company had already signed up to the United Nations Global Compact, committing to abide by the 10 principles of sustainability of the UNGC. All of this groundwork had been set, but at the time the company had not really been able to formally launch that report and to really have a timeline dedicated to publishing its first ESG report.
Alberto: So we could say that at that point the company was already trying to integrate sustainability as something else than just an addition to their public information. They looked for an strategic approach and then decided that this needed to have some sort of higher level of management to have a broader perspective and a long -term approach to it.
Hadrian: Yes, yes, that and also to have it on a more corporate structured basis and to further integrate sustainability into the corporate culture of the company
Alberto: What was your process to start the foundation procedure and to decide the most appropriate structure to the new committee?
Hadrian: As I mentioned earlier, the company was still recovering from the COVID pandemic. Resources were relatively limited, and we couldn't really make any new hires in any area, also in sustainability.
Recognising such a broad scope in ESG, I wanted to make sure that we had sufficient resources in place to manage all these different areas and that the people who would be on this committee would be senior and subject matter specialists, so that they could also mobilise their teams and so that sustainability could permeate throughout the entire organisation.
And so, in deciding to set up a sustainability committee, what I did was to identify people on the C-suite, department heads and subject matter specialists covering the various areas of environmental, social and corporate governance, and asked them to join this committee, which I then chaired.
Then we subdivided the committee into subgroups, an environmental, social, and a corporate governance subgroup. I chaired the corporate governance subgroup as well as the committee itself.
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On the environmental side, for example, one of the key topics in hotels is engineering, so I had our group Vice President of Engineering on the committee. He's really a subject matter specialist and all the engineers of all our individual hotels around the world report to him. So therefore, he was really an important leader to have for the engineering aspect. And there that's where you look at things like electricity and water consumption.
For the social side, I had our Chief Human Resources officer on the committee, as well as the leader of the group's corporate social responsibility program. On procurement, I include the CEO of the procurement arm. And I also invite other subject matter specialists like our spa experts.
Alberto: How do you set a committee like this one?
Hadrian: Well, for me, one of the most important steps was to have conversations with the key stakeholders within the organisation to make sure that they had buy-in to create this new structure for sustainability. Being such an important part of any company these days, and especially within the hospitality sector, I needed to make sure that the board of directors and that the management board had the buy-in.
I had conversations with them on what my plans were and convinced them that I was the right person to lead this for the company in years to come. And of course, then I had to have individual conversations with all the potential members of the committee who I wanted to invite to join, to see if they would accept to have a formal position on this committee that I would be chairing.
So those were really the first steps. And then, when the committee was formed, what we had to do was really take a look on everything that group had been doing for the past 10, 15 years or so on sustainability, understand what we had achieved, what we wanted to achieve, tie in the loose ends and come together as a group to understand what our new objectives would be, how we were going to achieve these and put in place a timeline for us to publish our first ESG report.
Alberto: How far did you develop the structure? Like, were you basically stopping at the main people on the ESG committee, or were you also trying to help them to define what kind of team was there to execute the implementation of their site of the ESG strategy?
Hadrian: No, I mostly left it to the members of the committee to manage their own teams. They already managed teams globally, so I didn't see it as a role of the sustainability committee, which was basically the highest-level committee on sustainability within the group.
What the committee did was it met regularly to discuss what the ESG goals were to set targets, to set objectives and timelines.
It was up to every individual committee member and for the subgroups to then implement those (targets) within their parts of the organisation.
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Alberto: And how often were you meeting with the different subgroups that you mentioned before? What was the structure of this meetings?
Hadrian: we had monthly meetings with the subcommittees and quarterly meetings with the entire committee. This was in line with our corporate reporting because the group reported on a monthly basis informally and then formally on a quarterly basis. With those meetings, we were able to coordinate all those different objectives.
For each meeting we set an agenda to discuss any challenges that we had, what objectives we needed to meet and to take stock of where we were in the process. Those were the formal meetings that we had.
And then of course, on a day-to-day basis, if any need arose, then there was always the opportunity to have informal discussions with individual members of the committee to discuss whatever needs they had.
Alberto: how did you formally introduce all these new responsibilities on their agenda?
Hadrian: Well, when we launched the sustainability committee, this was communicated to the group globally. So that was put on a formal setting and myself as chair of the sustainability committee, reported to the CEO, and at the time to the chairman of the board of directors.
We had that formal setting and the backing of senior management and other directors. That strong backing enabled us to really ensure that this became something that was really key to the corporate objectives of the group. It really was integrated in the group's objectives.
In later years we started to incentivise certain members of management with ESG objectives. That included certain C-suite individuals and hotel general managers and some other members of the executive teams of hotels.
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How to successfully manage an ESG Committee
Alberto: Coming back to the process, I see that the first part of it was to prepare this tailored structure through individual interviews and conversations, and then start working on the strategy together.
How would you say this strategy work on long term? Because this is usually the main difficulty, right?
We all do these strategies that look really amazing, but then we have to face the challenges of reality.
We find problems with budget availability, and we have to collaborate with other people on the organisation that has all other things to do. And this sometimes can bring some friction.
Also, of course, the strategy can change a lot since the beginning through the changes on the context.
What was your experience on this?
Hadrian: Yeah, absolutely. You hit the nail on the head with that.
The scope of work, I think, was quite a bit larger than we had anticipated. There were so many different topics and so many different objectives that the company already had. And to get to grips with all those different topics really was a significant amount of work. And as you pointed out, people on the committee had other jobs, their main jobs within the company that kept them very busy.
It was tricky to coordinate meetings. We had people in several different timelines, time zones, and coordinate calls for the entire committee with 11 or 12 people on it was always a bit of a challenge.
?What we did was working with external providers to put together a timeline for the ESG report. I think there was a lot of touch and go and quite a learning curve for us in doing that.
One of the biggest challenges really is coordinating a sustainability program on a global scale with so many hotels and so many different stakeholders in the group.
And even with sustainability being something that was in the core of the values of the company, it was also still difficult to ensure that the entire portfolio really bought in to the global corporate sustainability program.
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So that took some time and some convincing.
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But we got there in the end, and after the first ESG report was published, we learned from our mistakes and were able to improve that for the second year.
Alberto: I think it's very interesting to speak about the mistakes and lessons learnt, for those reading or listening to us. What would you say to the ‘you of three years ago’ to help him with the process?
Hadrian: I think we were very ambitious in our objectives. We had less than a year to pull together the full sustainability report and integrating the pre-existing program into the new program. And one thing that I think we really would have benefited from was some more time. And I think we also would have benefited from more training and education throughout the group generally.
This is something that would really help because the more people understand what we're trying to achieve, how we're trying to achieve it and why, the better their reporting will be, the more precise the figures will be and the stronger their buy-in to the program will be.
Alberto: I would also like to ask you for the best practices that you identify through this process, the practices that you mature through these three years of management.
Hadrian: So definitely, as I mentioned earlier, recognise that sustainability is a journey. You don't have to get it right from the beginning. You won't have the best results right from the start. But recognize that the pathway to net zero, the pathway to a more sustainable future is progressive, and that by achieving goals year on year, you can get there further and better.
I think it's also very important to have subject matter specialists managing the various areas of ESG. It is such a broad area that it's really important to have people with real expertise in their different areas.
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I also think that
it's key in any corporate group to ensure that sustainability is integrated into a broader?corporate structure and that people are incentivised to achieve goals in ESG.
That's a key element for any group. And then to really learn from mistakes and do your best to avoid greenwashing.
Alberto: And then, as a closing question: What is your advice to business that are trying to effectively manage their corporate sustainability and generate results?
Hadrian:
One thing that is key is integrating the sustainability program into your broader corporate strategy and incentivising people to achieve sustainability objectives.
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It's also crucial to invest in training and education, for people to understand what the various topics of ESG are and how to achieve those.
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Also, don't forget that we're managing a business. And in a business, you have to be able to achieve those objectives in a way that still enables the company to grow, but to grow in a more sustainable way.
And don't be afraid to make mistakes. In fact, everyone will make mistakes. So you need to have the ability to acknowledge those, to address them, and to learn from them as you move forward.
Alberto: Thank you very much. I think it's a very good insight to finish the conversation.
Hadrian: Thank you, Alberto.
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Key Takeaways
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Additional Resources: