A more sustainable future for the travel industry

Stakeholders are putting increasing pressure on the travel industry to become more transparent about the impact it has on climate and nature, also to take action to prevent further damage to the environment. The future viability of the industry is at stake given the importance of nature to the visitor experience, to hotel infrastructure and to supply chain sustainability. Addressing both climate and nature-related risks is critical for the travel industry to remain resilient and competitive.

This is the first in a series of articles that will outline three priorities for the sector to achieve greater resilience. They are:

• linking sustainability to finance
• integrating protection of nature across the business alongside climate
• transitioning to net zero

Linking sustainability to finance

Investors increasingly demand the same rigour in measuring and reporting sustainability metrics as they do for financial information. Chief Financial Officers (CFOs) not only ‘hold the purse strings’, they also control the systems and processes required for their organisations to report on their environment, social and governance (ESG) performance. As a result, the finance function has become critical in the pursuit of net zero and that has led to the emergence of ‘green’ CFOs.

The role of the green CFO is to integrate all sustainability data across their organisation, by including non-financial data in existing reporting processes to track and measure progress against ESG targets, quantify transition plans and facilitate more informed decision-making. Green CFOs not only ensure that their organisations meet their ESG targets profitably, they are also becoming the leaders and partners in their organisation’s pursuit of value creation and are contributing to a more sustainable future.

Integrating protection of nature across the business alongside climate

Biodiversity loss ranks in the top three most severe business risks, and as a result nature is rising to the top of the corporate agenda alongside climate. ¹ With more than 80 per cent of its goods and services dependent on nature, the travel industry is particularly exposed to the issue of biodiversity loss. Recognising the need to tackle the climate and the nature crises together, the world’s governments gathered at COP15 in December 2022 (the most recent UN Convention on Biological Diversity) and committed to an ambitious global plan to halt and reverse nature loss by 2030.

The Taskforce on Nature-related Financial Disclosures (TNFD) will publish a new framework in September 2023, to help firms assess, disclose and manage their nature-related risks alongside climate risks. The framework will also include ways to build resilience through nature-positive strategies and investments. Regulations on the protection of nature are expected to follow soon after. The travel industry needs to act now to adapt and thrive in this changing environmental, economic and regulatory landscape. Prioritising net zero and nature must become a cornerstone of the travel sector’s strategic direction.

Transitioning to net zero

Financial markets are interested in understanding businesses’ climate-related risks and opportunities. Disclosure requirements are set out by the Task Force on Climate-related Financial Disclosures (TCFD), which suggests using scenario analysis to stress test current strategies against various future outcomes to best position companies to respond to climate disruptions. The Transition Plan Taskforce is now building on TCFD by continuing to increase mandatory practices and by putting more emphasis on the actions companies are taking to transition to net zero. This includes measuring Scope 3 emissions.

Scope 3 emissions incorporate the emissions arising from the value chain of a business, both up and downstream, including emissions with nature-related impacts (i.e. deforestation and land conversion). Understanding which activities across the value chain yield the highest emissions allows companies to target those that offer the best opportunity for reducing emissions. Given the travel industry’s global reach, it has the unique potential to deliver sustainable values throughout the world.

What is needed?

Climate change and nature loss are already affecting the travel sector, whether directly through shifts in natural and human ecosystems or indirectly through a more demanding regulatory environment. The sector can no longer avoid taking a more collaborative and balanced approach. Measuring, understanding and integrating climate and nature risks are critical steps for the travel industry to become more sustainable.

A more sustainable future for the travel industry is possible, and it will be those businesses committed to decisive action that will not only survive but thrive in the long term.

For more information, see Deloitte’s Climate Action Guidebook developed in partnership with ABTA.

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[1] The Global Risks Report 2023, World Economic Forum, 2023.