Benefits and difficulties of CSR management in travel and leisure companies

The Covid-19 crisis has reinforced the strategic importance of Corporate Social Responsibility (CSR) for all organizations. In particular, the pandemic has fostered awareness that firms must introduce responsible policies and processes that focus management attention on long-term sustainability over short-term profits.

Managing CSR issues is a necessary way to build consumer confidence & embrace business recovery

Awareness is even greater across firms in the Travel and Leisure (T&L) industries whose business has been impacted dramatically by the crisis, as customers halted their buying decisions and business trips. Yet, academic scholars and business leaders see the pandemic as a breaking point to transform tourism value chains by integrating social and environmental issues. Travel and leisure companies are expected to rebound and emerge stronger through product, service and systems innovations that promote more sustainable forms of leisure and business travel.

Additionally, growing concerns about climate change and conservation of natural resources, as well as greater expectations around safety, diversity and other social issues have brought CSR into the mainstream also for consumers. CSR activities impact positively customer satisfaction, loyalty and buying decisions, and this effect is stronger in consumer-facing businesses like many T&L firms.

T&L customers have showed an unprecedented increased desire for transparency, cleanliness, community living and social consciousness after the pandemic. They often weigh up safety issues, avoid “touch-based” products, and prefer purchasing non-plastic products and local goods. At the same time, they do not want firms to abandon environmental goals and practices in these turbulent but crucial times. In sum, CSR activities represent now a necessary way to build consumer confidence and develop business for travel and leisure companies.

CSR management in Travel & Leisure

A prerequisite to meet customer needs and rebound effectively after the crisis is to integrate environmental and social issues within the organization’s strategy and internal processes. To understand how T&L firms are equipped and take this opportunity, we took the 260 largest listed travel and leisure companies and looked at the diffusion between 2009 and 2018 of certain management practices that focus on key social and environmental issues, and are important or “material” to the company performance. We looked at a total of 23 practices that include a mix of explicit targets and management systems, and capture both the firm’s CSR strategic orientation and the actual incorporation of key CSR issues in its organizational processes.

As displayed in Table 1., five practices reflect how CSR issues are integrated at the governance level, 10 focus on the environmental dimension (such as GHG emissions, air quality, energy management, and waste management); and the remaining eight focus on the social dimension (such as product quality and safety, customer welfare, labor practices and employee health and safety).

Interestingly, travel and leisure companies show some important differences when compared to the largest firms in other industries. On the one hand, more T&L firms employed targets for reducing CO2 and equivalent emissions, use of natural resources and energy consumption. More travel and leisure companies made donations, engaged in volunteering and offered general training programs to employees. Also, a higher proportion of T&L firms gained CSR awards and adopted formal monitoring systems on the impact of their products and services. Importantly, more T&L firms released CSR reports, established CSR committees or teams responsible for managing the CSR issues, and tied the compensation contract of their executive managers to specific CSR goals.

On the other hand, travel and leisure companies adopted policies for environmental innovation at a lower rate and made less use of certified organizational systems like environmental management systems (EMS) and quality management systems (QMS). Also, less T&L firms provided training programs for employees on green management and offered training to suppliers on sustainability and health & safety issues. Finally, a lower proportion of T&L firms purchased external audit on the content of their CSR report and set up explicit targets for reducing employee discrimination.

Performance implications

We also looked at the performance implications associated with the use of these CSR practices. Surprisingly, results of linear regression analyses unveil that CSR management across travel and leisure companies had similar value relevance but higher strategic importance than across firms in other industries.

Table 2. displays very clearly these findings. Travel and leisure companies with greater CSR management intensity showed higher firm value (measured using Tobin’s Q and market capitalization), yet the extent of this effect was similar to that observed across firms in other industries. In contrast, greater CSR management intensity related to improved CSR performance and reduced CSR controversies (measured using CSR score and CSR controversies score from Refinitiv ESG) and the extent of the effect on CSR performance was similar, while the reduction in CSR controversies looked stronger across T&L firms than across other firms.

A first conclusion is that CSR management is able to create value and confirms to have a key strategic role in T&L businesses. Thus, managers at T&L firms should care about introducing effective CSR practices to foster CSR improvements.

However, a detailed analysis reveals the existence of important delays and difficulties in implementing CSR management, especially across travel and leisure companies, showing both longer time-to-adoption and higher number of discontinuations in using CSR practices (see Table 3.). That is, T&L firms find more difficult to integrate environmental and social issues in their strategies and organizational processes.

Understanding the difficulties

Across T&L firms, there are, indeed, certain business and organizational factors that make the implementation of CSR strategies complex and often affect the achievement of results. Ownership and management structure of hospitality companies, tourism seasonality, the inherent environmental impact of travel and tourism businesses, and the conflicting pressures from growing global trends and local stakeholders’ needs could lead to delayed decisions regarding CSR matters and therefore deferred environmental and social improvements.

In sum, CSR management is proven to be a strategic priority for the future survival and growth of T&L businesses. Managers at travel and leisure companies are encouraged to integrate key environmental and social issues in their company’s strategy and processes; yet they must play particular attention on how to design and use the material CSR practices to foster effectiveness and value creation.

Our research highlights specific properties and benefits, but also reveals delays and difficulties of CSR management in T&L businesses. More research and ideas are needed to identify ways to address these issues and help managers implement CSR management effectively.

Join us in an interactive event with Dr Alessandro Inversini and Dr Giovanni-Battista Derchi to discuss these issues and suggest ways of fixing problems.