Corporate Social Responsibility in the Tourism Industry - Examining the Difference Between Mainstream Tour Operators in the UK and Canada

The Role of Tourism

The United Nations World Tourism Organization (UNWTO) in its Tourism 2020 report estimates international travellers will reach 1.2 billion by the end of the next decade. It also emphasizes the importance of tourism businesses to develop and implement a sustainability strategy to reduce harm while increasing the long-term benefits to local communities. According to the World Travel and Tourism Council, the total contribution of travel and tourism to employment, including jobs indirectly supported by the industry, is forecast to rise by 2.3% per annum from 258,592,000 jobs (8.8% of total employment) in 2011 and tourism also contributes a substantial amount of GDP for many developed and developing countries. International tour operators are a crucial component of the travel mix. They act as intermediaries between travellers in source markets and a complex global transportation and hospitality supply chain in destinations. Visits abroad by UK residents reached 58.6 million visits (Office for National Statistics, 2010) and it is estimated that mass tour operators carry approximately 24% of the total leisure holiday market. Canada’s outbound travel reached 27 million people including 18.9 million overnight cross-border travellers to the USA and 8.1 million to the rest of the world. (Statistics Canada, 2008). Mainstream tour operators represent approximately 43% of all non-USA departures. Tour operators therefore, have significant impact on office operations including energy consumption, water and waste management, as well as on the supply chain including aviation, land transport and accommodation. The tour operators’ scale plays a critical role in influencing a large number of consumers to adopt more responsible practices and to help hotels and local suppliers raise health, safety, environmental and social standards.

Progress of Corporate Social Responsibility within Tourism

Within tourism, there are some instances of progress in corporate social responsibility (CSR). The Tour Operator Initiative for Sustainable Development (TOI) is a network of over 20 international tour operators of all sizes and specialties who have committed to incorporate sustainability principles into their business operations. The initiative was developed with the support of the United Nations Environment Program (UNEP). In conjunction with TOI, these groups created the report, Integrating Sustainability into Business – A Management Guide for Responsible Tour Operations. The report recognizes that tour operators have the ability to influence a wide range of stakeholders and provides an overview of the economic, environmental and social impacts of tourism. It broadly outlines key indicators for each perspective, but is not prescriptive as to how they should be integrated into a sustainability strategy. The key areas addressed are internal operations, product development of destinations and sustainable vacation packages, sustainability standards for supply chain sourcing, customer relations communications and education. In another study of the Canadian marketplace it was found that mass tour operators are not yet adhering to the principles of CSR in any structured and systematic form, however, a societal approach may be the driving factor to further CSR initiatives. To date, awareness of CSR is evident among Canadian tour operators but there is little participation and no measurement or disclosure of initiatives directed at protecting the areas in which these travel companies operate (see Canadian tour operator study by Dodds & Kuehnel, 2010). Further, most major tour operators in Europe, particularly the UK, seem to have embraced CSR and sustainable development policies more widely. Why is there a divide between the two destinations? This article discusses findings from a 2009/2010 study undertaken to understand CSR awareness and practices in the outbound tourism market in the UK and Canada and to determine drivers for CSR adoption.

Key Issues Affecting Tour Operators

The commoditization of packaged holidays puts constant pressure on tour operator’s bottom line and the core concern of the business is to be profitable. Along with this challenge, tour operators are faced with a number of challenges including climate change, specifically in relation to managing new legislation requirements, increased costs, environmental instability and changes in consumer behaviour. Additional challenges are the effects of the economic downturn and the ensuing financial crisis, rising fuel costs, security fears at home and in destinations, political instability in the areas they operate, and global pandemics. As consumers now have the ability to assemble their own vacation packages via web-based technology, operators who had low direct distribution also cited disaggregation as a threat to the traditional tour operator model.

By far the most popular UK short-haul mass destinations are in the Mediterranean. Although European states are stable, Spain and Turkey have experienced up-swells in acts of terror directed at tourist attractions (e.g. 2005 Madrid bombings, 2006 Turkish bombings). Severe droughts and water shortages in some Mediterranean countries affect the local population and hinder tourism. Long-haul destinations in Asia and small islands in the Caribbean are also challenged to provide adequate waste disposal for tourism areas, as well as clean water and recreational amenities. These amenities often come at the expense of local communities.

Canadians flock to resorts in Mexico, which although not yet directly affected by the drug war troubling this country, they are nonetheless exposed to potential security risks. Cuba is the most popular Canadian destination with over one million visitors in 2008 (Statistics Canada, 2009), and although the “Castro's” regime has been relatively stable for over fifty years, a change in their ageing leadership may lead to potential political upheaval.

Adoption of CSR

In both the UK and Canada, tour operators have a good understanding of sustainability and CSR issues and a number of operators are reporting and undertaking CSR practices in both the UK and Canada. However, CSR is not currently embedded or integrated into business practices. A number of factors affect CSR.

Ownership Structure

The ownership structure of mass tour operators varies widely between the UK and Canada and this may play a significant role in the adoption of CSR in each market. In the the UK, tour operators are publicly traded on the FTSE (Financial Times Stock Exchange) or London Stock Exchange), while only one of Canada’s large operators is publicly traded. Large tour operators that are publicly traded adopt a wider range of CSR initiatives as potential environmental and social issues may be seen as material risks by shareholders. In Canada, the first mass tour operator to publicly endorse integration of CSR policies in their core business is traded in the Toronto Stock Exchange (TSX). Although in other business sectors, large privately owned companies have been leaders in sustainability (e.g., InterfaceFLOR), this has not been the case in tourism. In the absence of pressure from institutional shareholders, large privately owned tour operators who are not compelled to disclose publicly their financial results and non-financial activities do not feel the urgency to adopt tourism sustainability practices. Ownership structure may therefore play a role in the speed with which mass tour operators consider the strategic development of CSR in their organizations and may be one of the reasons why Canadian outbound mass operators lag behind their UK peers.

Destinations as CSR Drivers to Preserve the Tourism Product?

In Canada, eighty to ninety percent of all the capacity is in Mexico and the Caribbean, whereas for the UK, seventy to seventy five of their capacity is in the Mediterranean. The Canadian mass tour operator’s business follows a north-south “colonial” line where tourism is a critical part of these countries’ economy. Some of these destinations, however, have volatile political systems, crime, social unrest as well as environmental concerns around energy, water, waste disposal and land and marine conservation. In addition, areas in the Caribbean and Mexico are exposed to more frequent and intense natural disasters such as tropical storms and hurricanes. It is clear that if up to ninety percent of the Canadian sun and sand product is in these areas, the mass tour operators’ business is highly vulnerable. Yet, most of these enterprises are not actively pursuing sustainability strategies. Canadian mass tour operators have not fully linked the relationship between vulnerable destinations and business risk; this may be preventing them from seeing the value of developing strategic CSR plans in destinations which would somewhat mitigate their overall business exposure.

UK operators, on the other hand, seek to implement a wide range of CSR practices through partnerships with NGO’s and government agencies (e.g., Travel Foundation and Travelife). UK enterprises recognize that to preserve their long-term business viability they need to help their supply chain to urgently address scare resources like energy and water, manage the waste generated by tourists, protect the natural and cultural heritage and encourage the local production of goods and services to increase the economic benefit to the destination.

Mega issues & legislation:

Mega issues of climate change, environmental pollution and erosion, energy, water and food security, unstable global economy, poverty, terrorism and security are recognized among businesses, however, to what extent these issues are seen as a threat to their businesses and have translated into sustainability initiatives varies considerably between the UK and Canada.

The UK has made substantial progress in the past years and it is only recently that some Canadian operators have begun to take up this challenge. Climate change, the most visible and debated global issue, is still primarily viewed as a financial risk not as an environmental concern. Nor has it been linked to possible social problems such as water and food scarcity, many of which may affect the mass tourism industry in the future. The discrepancy may be because UK operators are already experiencing some of the impacts of climate change on their business (Air Passenger Tax, Cap and Trade legislation as well as impacts in destinations), while Canadian operators do not yet feel climate change will immediately affect their operations. The issue is seen as important but not urgent.

Perhaps, the lack of legislation may inhibit progress. While operators welcome the notion of corporate social responsibility, they are also seeking direction from to the government to define and enforce environmental legislation. Whilst the UK mass tour operating sector has been actively engaged with their government through lobbying through the Federation of Tour Operators (FTO) and the Association of British Travel Agents (ABTA), similar associations in Canada have been largely absent in the sustainability discussion. The different approaches may also be attributed to the UK and Canadian governments’ policies around climate change and corporate responsibility. These issues have driven the UK political agenda for many years, whereas in Canada there has been little to no debate (see article by Dodds & Graci, 2009 discussing climate change and tourism in Canada). As mass tour operators lease their aircraft, they will be forced to address concerns such as potential carbon emissions legislation, trading schemes and other taxation. The office operations’ environmental impact is relatively small in the context of airplanes and any initiatives in the respect may remain voluntary. Likewise, any environmental or social impact assessments will continue to be voluntary as most destinations lack stringent environmental and social governance that have the potential to affect operations. Therefore, tour operators that have not yet committed to CSR will be faced with mandatory carbon trading schemes or taxation legislation in the near future. Canadian operators who are not currently engaged in CSR run the risk that bureaucrats in Ottawa may one day embrace sustainability and impose unilateral policies that may prove detrimental to the whole sector.

Conclusion

Mainstream tour operator’s general concerns are to maintain profitability in a fragile global economy and in a very competitive and disaggregated travel market. This includes reducing costs, increasing market share, create differentiation in tourism product and services and reduce business risk exposure. In the future where CSR and general climate change issues become more prevalent, these tour operators may wish to look at a number of issues which will also affect their operations in the mid to long term. First, they should examine ways in which climate change mitigation may reduce energy costs and increase the efficiency of their assets at home and in destination as well as their air, land and sea operations. Second, mainstream tour operators may seek to leverage sustainability initiatives in resorts to develop niche travel products that help local communities preserve their cultural and environmental heritage, thus potentially increasing market share and profit margins through a differentiation strategy. Third, mass tour operators may seek to engage all their employees in CSR to increase retention and loyalty. Finally, they should be an active participant in the greening of their supply chain to reduce energy and water consumption and waste issues, thus securing the future viability of the product from which they profit.

Bibliography

• Dodds, R. & Graci, S. (2009) Canada’s tourism industry – mitigating the effects of climate change: A lot of concern but little action. Journal of Tourism and Hospitality Planning and Development. Vol. 6 (1) pp. 39-53
• Dodds, R. & Kuehnel, J. (2010) CSR Among Canadian Mass Tour Operators: Good Awareness but Little Action. International Journal of Contemporary Hospitality Management Vol 22 (2) pp 221-224
• Office for National Statistics (2010). International Travel
• Visits abroad fell at record rate in 2009 retrieved July 13, 2010 from http://www.statistics.gov.uk/cci/nugget.asp?id=178
• Statistics Canada (2008). International Travel.
• UNWTO (2010) Tourism Highlights, Edition 2010. UNWTO.
• WTTC (2011). Travel and Tourism Economic Impact