Case study: sustainability in the hospitality sector

When Pegasus added Six Senses to its private equity portfolio, it required that the group engage an executive level head of sustainability. A vice president of sustainability was hired and tasked with development and implementation of a sustainability management system to guide core business activities, including the supply chain.

Six Senses’ supply chain relationships range from large-scale international to small-and-independent local businesses. As such, Six Senses recognises the importance of managing risks and opportunities of these varied supply chains to maximise brand value and to protect local communities and environments. While there are sustainable sourcing requirements for specific items (e.g. fish and seafood, prioritisation of local and organic food, and sustainable certification for wood and fabrics), each property has a unique supply chain and therefore differing material issues. Therefore, Six Senses also requires each property has its own sustainable procurement program, which includes an initial and annual review of procurement items and suppliers, improvement targets (with responsibilities and timelines), engaging suppliers on improvements needed, and reporting.

Subsequent improvements include the termination of a non-certified palm oil supplier contract replaced with an alternative meeting Six Senses requirements; as well as the development of a sustainable fishing education programme for local fishermen supplying a Maldives resort property. As an incentive, the property committed to procure whatever was caught from that day’s catch as long as it wasn’t on the “do not serve” list, resulting in a win-win situation for the fishermen and resort.

Monitoring and reporting

Reporting consists of an annual on-site audit (lasting about half a week) by either the Director of Sustainability or VP of Sustainability. Outcomes are built into both a Sustainability Action Plan (with required action, responsibility and timeline) and a report. Both are shared with the property General Manager, the group CEO, the group President and the group Executive Committee. Identified risks are flagged for executive review and support. Six Senses has a monthly corporate Sustainability Strategy meeting in which executives meet to discuss high-priority items. As the majority shareholder in Six Senses, Pegasus stays in regular contact with Six Senses management on material issues, including supply chain matters, as deemed appropriate. Six Senses also submits an annual Sustainability Report to Pegasus.

Continued improvement

In 2017, Pegasus intends to reach out to each of its portfolio companies, including Six Senses, to develop a Supplier Code of Conduct with basic requirements for supplier commitments to ESG best practices. Environmental, health, safety, human rights, and certain governance issues are expected to be included in the code of conduct. Portfolio companies, including Six Senses, are expected to monitor suppliers’ compliance with the code of conduct and work with suppliers to enhance ESG best practices, as practical and feasible. More comprehensive requirements for reporting to Pegasus on material ESG supply chain risks, opportunities, and performance are also being developed across the portfolio.