Tourism Sector
Bolstering Tourism MSMEs to Meet Responsible Procurement Requirements from Hospitality MNCs
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ESG awareness varies across different countries and industry sectors
Not familiar
Moderately familiar
Very familiar
Survey question: How familiar is the management of your company with the concept of sustainability/ESG for business?
Note: Figures have been rounded to the nearest whole number.
ESG practice adoption rate across countries and sectors – average number of practices and percentage of MSMEs implementing at least one
Average number of ESG practices per MSME
Percentage of MSMEs having implemented at least one practice
Survey question: Has your company taken any actions or adopted practices in the following areas to 1) reduce its environmental impact, 2) increase its social impact, and 3) ensure its good governance? Please select all that apply
Note: A p-value of less than 0.05 indicates statistical significance, in which the null hypothesis is rejected. Figures have been rounded to the nearest whole number.
Year of initial ESG adoption by companies
Indonesia
Malaysia
Singapore
Vietnam
Weighted sample: n = 700 | Survey question: How familiar is the management of your company with the concept of sustainability/ESG for business?
Due to the consumer-facing nature of MSMEs in the tourism sector, many have been exposed to higher levels of demand for sustainable services and programmes. We have identified two key stakeholders among the MSMEs in our survey: consumer-facing MSMEs including boutique hotels, artisans, and tour agencies, and business-facing MSMEs that supply to large hotel chains. 66% of tourism MSMEs surveyed indicated being moderately and very familiar with sustainability and ESG issues.
MSMEs in the tourism sector have adopted and implemented the highest number of ESG practices, with each adopting an average of 8.1 practices. 91% of MSMEs are also likely to have implemented at least one ESG practice, which is the highest alongside E&E across our study’s four sectors. These are likely to have been driven by consumer demand for the greater adoption of ESG practices among the businesses they interacted with.
Key reasons for adopting sustainability/ESG practices in each country
As with MSMEs across the other sectors, the main motivations for the adoption of ESG practices are cost-savings through increasing long-run efficiency in business operations, meeting increasing customer demands for sustainable products and services, and measures to mitigate reputational risks.
Key challenges to adopting sustainability/ESG practices in each country
For tourism MSMEs, different key challenges emerge across markets. In Indonesia, low levels of ESG awareness is the top barrier to ESG adoption and implementation. Malaysian MSMEs see both low ESG awareness and high implementation costs as their main challenge. For MSMEs in Singapore, high implementation costs comes out on top, while limited in-house skills are the primary barrier in Vietnam. Levels of ESG awareness among tourism MSMEs in Indonesia may be affected by the geographic diversity of the country, with different MSMEs facing different ESG concerns in their local contexts.
The same may hold for Malaysia, though low ESG awareness has been a key challenge for MSMEs in the market as a whole. Similarly in Singapore, high cost of implementation emerged as the key challenge. Opportunities for training, capacity building, and helping with implementation costs remain the most important for MSMEs in tourism.
Corporate client incentives for increasing ESG practices
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Weighted sample: n = 290 | Survey question: Which types of incentives from a corporate client would most impact your company’s decisions to consider further increasing its sustainability/ESG practices? Please select up to 3 options that apply. | Note: The top two incentives for each country are highlighted.
In the tourism sector, we see our recommendations divided in terms of the needs of consumer-facing and business-facing MSMEs, with different stakeholders taking the lead in each case.
Consumer-facing tourism MSMEs
Industry associations and government agencies can play a key role in supporting consumer-facing MSMEs through their sustainability transitions. The World Travel & Tourism Council (WTTC) is a global organisation dedicated to promoting sustainable growth and development within the travel and tourism sector. EU sustainability regulations are shaping global tourism by creating indirect pressures on MSMEs through large companies and international supply chains. In Southeast Asia, WTTC emphasises the need for early-stage adoption of sustainable practices in developing destinations integrating resilience into tourism planning. Examples include Sarawak’s ecotourism focus and Thailand’s sustainability scorecards for the travel industry.
Business-facing tourism MSMEs
Business-facing tourism MSMEs have very different motivations. MNCs and large customers can play a key role in driving behavioural change among business-facing MSMEs through supplier codes of conduct and capacity building. These include large international players as well as regional hotel chains. In examining demand-side incentives from corporate clients, long-term contracts guaranteeing steady business emerge as the most impactful incentive for driving ESG adoption. Such tourism MSMEs demonstrate a stronger preference for financial support and pricing-related incentives.
Grants, subsidies, or awards are preferred, followed by bonuses or incentives for meeting sustainability targets and higher prices for sustainable products or services. This highlights the sector’s reliance on external funding and financial mechanisms to support their sustainability initiatives. Such preferences reflect the resource-intensive nature of tourism operations and the need for pricing structures that adequately reward sustainable practices.Tailored financial solutions and financial incentives from corporates therefore play a critical role in accelerating ESG adoption within the tourism sector.
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