Environmental, social and governance (ESG) risks have been a hot topic in boardrooms, and many businesses are now developing tangible ESG strategies and objectives for business functions. One less-considered way to advance ESG goals is through corporate travel programs. Indeed, companies are considering several new topics that tie directly to business travel, such as reducing their carbon footprint, using renewable energy, reviewing third-party suppliers’ ESG-related practices, and prioritizing employee safety and well-being. Risk managers can play a key role in this process by helping their organization translate high-level ESG objectives into effective mitigation strategies, including new policies, procedures, tracking mechanisms and communications.
Most considerations that impact business travel concern the social and environmental components of ESG. Social factors relate to the way that businesses treat and value people. The connection between business travel programs and overall employee satisfaction has long been established, making traveler satisfaction an important consideration for companies, but the recent focus on employee well-being and safety has dominated the social risk conversation within travel departments. Social factors also consider the relationships between a company and people or institutions outside of it, prompting a deeper look at the third-party suppliers employees use when traveling. The final, and perhaps most obvious, tie is the impact that business travel has on the environment.
Below, we explore each of these in more detail, focusing on how travel managers are starting to address these areas, and how their risk colleagues can best support them:
Safety and Well-Being
While enterprises have long been concerned about traveler safety and well-being, COVID-19 has made this a more urgent focus for all companies. Enterprises have traditionally managed this risk through policies such as pre-trip approvals and encouraging the use of a corporate travel management company to ensure there are records of trip details. Now, it has also become common to adopt supplementary specialty technology and services that can: 1) provide key information to travelers ahead of the trip to help keep them safe, 2) track and communicate with travelers throughout their journey, and 3) provide expert assistance when necessary.
In adopting these services, travel managers bring the domain expertise, but risk managers play an integral part in evaluating how these new technologies or services can best mitigate risks to individuals and the organization. Monitoring is key for any effective mitigation strategy and with traveler safety and well-being, the ability to easily identify and assist a traveler in need is critical.
Business travelers often make the final decision around how they are going to travel, where they are going to stay and which suppliers ultimately receive company funds. However, business travel departments try to influence traveler behavior by selecting and encouraging preferred suppliers that they believe will best meet the objectives of both the business and traveler. Traditionally, these suppliers were determined through an RFP process that focused on “best value.” Typically, that was defined as meeting the minimum service-level requirements at the best (lowest) price.
This is changing. Now, it is becoming more important for companies to take a deeper look at the individual suppliers they support. Who is responsible for governing that supplier? What do they stand for? How are they handling ESG considerations? These questions are making their way into the supplier selection process, forcing enterprises to consider how these new priorities stack up against traditional perceptions around “best value.” For example, are companies willing to pay more for a supplier that exhibits a greater commitment to workplace satisfaction or the environment? The organization should base the answer on its top-level objectives.
Risk managers can again provide a key link between these organizational goals or commitments and the tactics that companies use to support them. If there is a clear understanding of the company’s objectives, it is easier to evaluate which areas might be deal-breakers in the selection process and which are “nice-to-haves.”
Once preferred suppliers are selected, the focus shifts toward measuring traveler compliance with those suppliers. Since businesses will never have complete control over the suppliers used, finding creative ways to communicate and promote these suppliers is key to improving compliance.
Companies can use two strategies to decrease the impact their business travel has on the environment: 1) travel less, and 2) make better decisions about how to travel. While many companies hope to accomplish both, it is important to establish a baseline before doing either. Your travel management company can help by providing data on travel frequency and volumes, and there is a wide variety of resources to provide an estimated carbon footprint.
An organization’s future travel volume depends on multiple factors, most of which are controlled by executive management and heavily influenced by business needs. That being said, organizations often trust their employees to make smart decisions about travel details, which shifts the focus of those establishing relevant policies toward making whatever travel does occur more environmentally friendly.
Companies have different options when encouraging more eco-friendly travel. Several large organizations are choosing to actively fund the advances of sustainable aviation fuel (SAF), which reduces emissions by almost 80% compared to conventional jet fuel. Companies that have joined the United Airlines Eco-Skies Alliance, which purchases SAF for use in their employees’ business travel, include Boston Consulting Group, Deloitte, DHL Global Forwarding, HP and Nike. Once organizations can better show the impact that these purchases have on their specific programs (e.g., the suppliers they use and the routes they fly), this trend will likely become far more common.
Another emerging tactic is promoting suppliers that offer more eco-friendly options. Examples of this include properties that have undergone third-party certifications such as LEED or Green Key Global, and flight itineraries that use newer and more eco-friendly aircraft. The key to this strategy is to incorporate it into the preferred supplier selection process, as mentioned above, and to present this information to travelers when they are booking the trip to best impact their decisions.
Perhaps the most attainable tactic is “carbon offsetting” by supporting initiatives that reduce emissions or remove carbon dioxide from the atmosphere. Both supporters and critics of this practice generally agree that offsetting is not enough on its own, and more action must be taken to change traveler behavior to stop or reduce emissions before they occur. However, offsetting does bring increased visibility to environmental causes and represents an opportunity do something tangible. Further, it can help engage employees who want to be part of the solution.
When it comes to environmental goals, the risk management team’s priority should be helping to ensure that the organization is positioned to deliver on its commitments. This means helping to establish and validate the connection between the tactics employed by the business travel department and the top-level environmental goals.
Risk managers can partner with their travel management colleagues to establish effective strategies that support their organization’s ESG goals. However, the success of each strategy often depends on traveler behavior and the organization’s ability to impact employees’ decisions. It is essential that organizations establish effective ways to communicate, educate and influence their travelers to support the ESG goals that are not only becoming more important to companies, but to those same employees as well.