Visioning 2023: Sourcing Green: Sustainable Procurement in Hospitality

If you haven’t noticed, sustainability has become a global conversation or, perhaps more aptly, a pertinent global priority. Now, more than ever before, corporations and individuals alike seem to be connected by a desire to combat climate change and collectively mitigate the negative environmental impacts we have long since set in motion. To this effect, sustainability has emerged as a significant trend and topic of interest across industries over the last few years, with 2023 expected to represent a major tipping point.

While sharing its 2023 predictions, Forrester noted that sustainability is a business opportunity, a matter of survival, and a customer obsession enabler and an integral part of business risk. Seeded with immense government investment, Forrester predicts that environmental sustainability is ushering in a complete “green market revolution.” In many ways, a company’s demonstrated ability and willingness to adopt sustainable practices will be a primary indicator of success in 2023 and beyond, and ideation that lacks implementation (or instances of greenwashing) will undoubtedly cost brands.

As you might have guessed, the hospitality industry finds itself at the center of this campaign for greener practices. Hotels and airlines, after all, represent a significant carbon footprint, and travelers around the world are now making conscious efforts to travel more sustainably and responsibly. However, when we look at the hospitality ecosystem and, more specifically, the procurement supply chain, which directly informs the experience hotels offer to their guests, we recognize a significant opportunity to create positive change.

Procurement is the Base of the Iceberg

Frequent travelers to New York City are undoubtedly familiar with the Metronome, which includes an eye-catching, 15-digit electronic clock that faces Union Square in Manhattan. In September of 2020, the clock received a striking makeover courtesy of two artists, Gan Golan and Andrew Boyd, who turned it into The Climate Clock: a clock that counts down the critical time window to reach zero emissions (our “Deadline”), while tracking our progress on key solution pathways (“Lifelines”). In simple terms, the clock depicts a critical window for action to prevent the effects of climate change.

The project made waves quickly, as images of its “The Earth has a deadline” messaging began to appear on the display and was soon shared across social media in a viral fashion. And while the sentiment it shares faced some criticism. The most common critique of the clock is that it induces an existential dread in individuals whose actions don't affect the time of the clock as significantly as major corporations, who, as we know, have a much more significant impact on carbon emissions than individuals. And while climate change is undeniably a collective effort that requires commitments all the way from micro-level participants (individuals) and macro-level participants (big corporations and government), it is important to recognize the larger piece of the (environmental impact) pie that industries like hospitality are responsible for.

The World Economic Forum has now ranked climate action failure as the top global risk, and the hotel sector accounts for around 1% of global carbon emissions. To this effect, research from Sustainable Hospitality Alliance has found that the hotel industry needs to reduce its carbon emissions by 66 percent per room by 2030 and by 90 percent per room by 2050 to ensure that the growth forecast for the industry does not lead to a corresponding increase in carbon emissions and this is set to increase.

According to McKinsey, for most products, 80 to 90 percent of greenhouse-gas emissions are “Scope 3”: indirect emissions that occur across the company’s value chain, such as embedded emissions in purchased goods and services, employee travel and commuting, and the use and end-of-life treatment of sold products. Of these emissions, two-thirds are usually from the upstream supply chain. With this in mind, shifting procurement policies and best practices to prioritize sustainability is not the tip of the iceberg; instead, it’s the biggest and arguably most impactful piece.

Sustainable Procurement

Sustainable procurement is a matter of responsible decision-making, as hotels look to meet stakeholder requirements while also meeting the burgeoning requirements of society. Now, more than ever before, hospitality brands must consider social and environmental factors alongside financial and economic ones. Environmental, social, and governance (ESG) credentials will become critical for assessing which suppliers hotels should work with along the procurement supply chain. Suppliers are the backbone of the BirchStreet’s e-procurement platform, with a network of 450,000+ suppliers, many of which are committed to sustainability best practices.

Fortunately, McKinsey's research shows that procurement leaders who take bold action can make a decisive difference in sustainability. According to the firm, strong ESG credentials drive down costs by 5 to 10 percent, as these companies focus on operational efficiency and waste reduction. Moreover, top ESG performers enjoy faster growth and higher valuations than other players in their sectors, by a margin of 10 to 20 percent in each case. Finally, ESG excellence reduces transition risk by helping companies stay ahead of changes in regulation and stakeholder sentiment. Hospitality brands that adopt sustainable procurement policies will also protect their reputation amongst ego-conscious travelers and employees and gain access to tax breaks and credits.

While sustainable procurement is an ongoing and ever-evolving effort, hotels can begin the transformation by choosing brands during procurement that have a track record of sustainable responsibility (ESG credentials) and getting stakeholder and employee buy-in. Hotels could also eliminate single-use plastics, opt for high-quality goods (furniture, uniforms, appliances that offer a longer lifespan and therefore don’t need to be frequently replaced), source renewable energy products from suppliers, avoid products containing toxic substances, and prioritize upcycled products, or products made from recycled or reclaimed materials.

Hotels may have an indirect negative impact via the goods and services they use. For example, procuring water-intensive products from a water-scarce region, or products with human rights issues in the supply chain, reads the sustainable procurement fact sheet from the Sustainable Hospitality Alliance. Hospitality procurement managers can also have an influence on suppliers’ and consumers’ behavior, helping to drive further progress, whether buying food for their restaurants, furniture for guest rooms, amenities for the spa or outsourcing laundry services.

When we consider that two-thirds of the average company’s environmental, social, and governance footprint lies with suppliers, hospitality’s greener path forward reveals itself in a rather obvious fashion. To truly move the needle in the direction of sustainable hospitality, it’s time for our industry to view sustainability not as a trend but as a business necessity and commit to more sustainable procurement practices.

About BirchStreet Systems

Founded in 2002, BirchStreet is the leading global provider of enterprise procure-to-pay solutions for the hospitality sector. BirchStreet's software platform provides leading global hospitality brands with a full suite of procurement applications, including eProcurement software, accounts payable automation, invoice management, inventory management, recipe management, supplier payments, and reporting and analytics. BirchStreet's customers leverage the company's solutions to access a broad network of suppliers and manage billions of dollars of spend annually across a wide variety of categories, including food and beverage, operating supplies, maintenance services and capital projects. For more information, please visit www.birchstreetsystems.com.

Gareth Fraser
Vice President of Sales & Marketing Enablement
BirchStreet Systems