By Gregg Rockett, Yoon Koh
ESG: The Paradigm Shift
ESG—environmental, social, and governance—has gained significant attention over the years and has become the norm that firms strive to meet society’s expectation or exceed the standards for the three areas. Various stakeholders evaluate firms from the ESG point of view including major institutional investors, activists and customers. Stock markets such as Hong Kong Stock Exchange and international organizations such as Global Reporting Initiative and Dow Jones Sustainability Index set the expectations on firms for all three areas of stakeholder engagement, materiality assessment and ESG risk identification, and evaluate them.
Accordingly, firms such as hotel companies have responded to this shifted paradigm. A majority of public hotel companies publish separate reports on ESG, sustainability or corporate social responsibility, to effectively communicate what they are doing with their stakeholders as well as to meet stock markets’ expectations. Despite the significant firm-level efforts, its implications for a majority of the hoteliers at the property level remain vague. Hence, this article introduces a concept that a hotel property can observe the elements of ESG, particularly as it relates to the “social” aspect of community involvement— through placemaking.
What is Placemaking?
The concept of placemaking has been introduced to the hotel industry through a variety of contexts. That is because the concept has evolved from early origins as a planning and design tool for physical spaces, to a complex concept that embraces many qualities and stakeholders. Placemaking continues to be a fluid concept without a consensus on a clear definition. It even carries three different spellings, for which a researcher at Northern Arizona University, Alan Lew, has attempted to differentiate meaning for each spelling:
- placemaking (one word) as being the top-down approach to planning, design or promotion;
- place making (two words) as being the physical arrangement and definition of place by residents and visitors; and,
- place-making (hyphenated) as being the organic evolution of place from bottom up initiatives.
If this can be distilled down into a single concept, such that the three are not mutually exclusive (because they are not), we begin to identify with effective placemaking as going beyond smart design, balancing spaces and creating programs that raise awareness. It embraces multiple stakeholders and optimizes economic, social and cultural benefits that affect livability, attractiveness and overall experience (real or imagined) for residents and visitors alike. Essentially, the key to effective placemaking (per a paper produced by the International Economic Development Council) is in the enduring utility of the place as perceived by a community that identifies with that place.
How Hotels Leverage Placemaking
Apart from the old adage ‘location, location, location,’ which has become a metaphor for the foundation of a successful hotel, the hotel facility has the capacity to attract locals and transients to a 24-hour a day experiential stage. It is a constantly changing cast that can activate an area with both new and repeat users – a veritable revolving door of activity.
More importantly, a hotel is routinely chosen for a community’s landmark rites of passage and can take center stage for a neighborhoods’ social activity. The environment of a hotel is also activated by people sharing experiences and contributing to the livelihood of others. This component of ‘vitality’ is the epitome of optimized placemaking.
Taking these factors into consideration, a hotel’s focus on ESG can be impactful and meaningful. Community involvement is a core pillar of corporate-level ESG and its impact is often immediate. Therefore, an assessment of placemaking outcomes and how these are optimized should be an important measure of a hotel’s competitive positioning that leads to superior hotel operational performance, as well.