Hyatt Hotels Corp. Chief Financial Officer Gebhard Rainer took up the hotel operator’s top financial role in 2012, but also has a leading role in his company’s sustainability efforts. He spoke with CFO Journal’s Emily Chasan about how financial chiefs can play a role in standardizing sustainability reporting in their companies and integrate sustainability into corporate strategy.By Emily Chasan
Q: What is the CFO’s role in sustainability from your perspective?
A: The CFO’s role in sustainability should certainly be a lot more involved than you see today. There is a clear correlation as we go forward between financial reporting and sustainability reporting. I think there are going to be more mandates and there are increasing numbers of investors and investor groups who pay a lot of attention to sustainability.
Q: Sometimes we hear companies say they don’t want to start a sustainability reporting program because they worry it will be a waste of corporate resources or too expensive. What do you think of that argument?
A: There is a lot out there that we can do to present and create that story about what the return on investment for sustainability is. In some areas you have a very tangible result in a short amount of time, sometimes its immediate. For example, if you invest in a new cooling tower of a hotel in a hot area, and it has technology that allows you to use less water, that’s a very clear case and you can calculate the impact of that from a financial perspective. The equipment might be a little expensive, but you know essentially over how many years you are going to recoup the investment through a reduction in maintenance and operating costs.
There are other areas where it’s a bit more difficult. For example, we deal in one part of our business in resort hotels, and we as an industry, have to be a lot more careful about how and where we place resorts, such as the impact on local environments and rising water levels. Another issue is how to handle waste disposal and how much you want to use landfills, etc., specifically in developing countries where things are not very regulated. A lot of companies take the view that it’s not really their problem, because as long as I get it out of my place, somebody else has to deal with it. That’s the wrong attitude, but it’s hard to justify the cost that you have to invest in order to make this look good from a business perspective. You might have to build over a period of time, but at some point the neglect of not acting is going to come back to all of us in business via taxes or an increased cost of doing business in certain areas.
Hyatt Hotels Corp. CFO Gebhard Rainer
Q: Have you seen any benefits from sustainability reporting that translate to the bottom line?
A: We try to create sustainable thinking, in terms of the use of resources, and ecological thinking on waste management. But we also want to have foresight for the next generation of the business and where the business is going, so we invest in education. For example, we’ve been in Brazil for many years, and we’re building a hotel in Rio.
We work specifically with underprivileged communities and underprivileged youth in the favelas [slums] there. We put over $750,000 dollars last year into programs that provide educational assistance and training to underprivileged youth to bring them into the workforce. We provide training places in our hotels, and give them plenty of exposure over a six-month program where they can actually learn a trade – be that in the kitchen, in the service areas, or in the back of the hotel. They go to school at the same time and they physically learn the trade. Then they can make a decision if they like that job. We’ve seen this in our hotel in São Paolo where 10% of our workforce comes from underprivileged areas and we have the lowest attrition in that part of our workforce. Attrition can be very expensive, but these people are extremely loyal and they actually build very fast career paths. There is of course a self-interest in that, as there is a shortage of a qualified workforce there and we want to grow our industry.
Q: Often companies don’t have the same internal controls over non-financial data that they have for capturing financial data. Have you set up an infrastructure to capture data for carbon emissions and the like?
A: We have standardized the tools globally, so now we’re using one tool that everybody has access to. It’s mobile, it’s web-based and it lets us have one view of the way the data comes back. We actually started this process in 2006, and we’ve standardized the benchmark and basis of what you have to use to come up with the data. We’ve been measuring very consistently from the same benchmark since 2006.
Q: What do you think of some of the efforts now under way to standardize sustainability reporting among companies? You say you’ve been working with the Sustainability Accounting Standards Board, but there are a lot of other groups working on standardization as well, from the Global Reporting Initiative to integrated reporting to the exchanges.
A: The more differences you have, eventually the more convoluted and bureaucratic it is going to be in terms of different reporting requirements for different investor groups. All you are doing by not standardizing is creating more bureaucracy and more layers you have to fulfill and comply with as you go forward.
You have to compare among peers and among the industry segment itself to make it meaningful. We’re all releasing numbers and we’re all talking more and more about sustainability, but very often it is hard to get that tangible comparison and know what the benchmark is, or even how that relates to somebody else’s benchmark.
Q: How does sustainability get included in your company’s new products and strategy?
A: It’s a fallacy to think that a new product is always more efficient. Sustainability, it actually turns out is sometimes less efficient. In our case, for example, when you build a new hotel in a developing nation there is a very different set of pressures. Standardization is not only part of data reporting, but it also plays a big role in our building and design-standards criteria, our materials criteria, and our operating criteria. You have to bring that sustainability perspective into overall strategy so that it actually filters all the way down to the base where everything starts. To retrofit something – not only physically but also in terms of changing people’s mindsets – is more difficult and more expensive than if you start with the right mindset and right materials at the beginning.
Write to Emily Chasan at firstname.lastname@example.org.