Grant Behnke - Building A Private Hotel Investor’s First ESG Report

[00:00:00] Adam: Hello and welcome to another episode of Green Champions. 

[00:00:13] Dominique: Thanks for joining us in a conversation with real people, making real environmental change in the work that they do.

[00:00:18] Dominique: I'm here with Adam, the social enterprise extraordinaire,

[00:00:21] Adam: And I'm so glad to be here alongside Dominique, the sustainability expert. We bring you guests who saw the potential for impact in their job or community and did something about it.

[00:00:31] Dominique: From entrepreneurs to artists, scientists to activists. This podcast is a platform for green champions to share their stories and plant new ideas.

[00:00:40] Adam: So, whether you're tuning in from your daily commute, relaxing at home, or taking a nature walk. Today Dominique and I are joined by Grant Behnke, he's a director at Rockbridge, a private equity real estate firm focused on the hotel industry. We had Grant on our last episode where he really dived into his own journey into the hotel industry and sustainability.

[00:00:59] Adam: We talked a lot about the different parts of the hotel system. What it was like for him, kind of exploring that and finding his place. And one message I really took away from that was just how it gave him the ability to explore his curiosity.

[00:01:12] Dominique: Yeah, and today we're gonna go a little deeper into the amazing sustainability work that Grant does in the hotel space. I am really excited to talk about building sustainability strategy where it did not, and frankly would not exist without him, um, building the foundation for a formal sustainability role within his organization.

[00:01:32] Dominique: And seeing himself as an advocate for sustainability without it formally being in his title. So Grant, welcome back. I am very excited.

[00:01:40] Grant: I'm excited to be back. Thank you. 

[00:01:42] Dominique: Let's jump right in. So can you just recap for us briefly about the fact that now, right now, ESG is in your title, and what does that really mean day to day? What is Grant in charge of when it comes to sustainability?

[00:01:54] Grant: Sure, yeah. ESG, environmental social governance and it is sets of criteria that can be used to evaluate a company's responsible business practices. And so that can look like a lot of different things and frankly come in a lot of different flavors for different types of companies and different types of industries.

[00:02:16] Grant: But for Rockbridge in the hotel space as a private hotel owner and investor and developer. We have a big focus on not only taking care of our corporate team, but also taking care and doing right by the hotels in which we invest and really trying to have positive impact and everything we do, including in the cities in which we invest as well.

[00:02:39] Dominique: Can you explain that last part? What does it mean to like care about the cities that you're investing in?

[00:02:44] Grant: Sure. That just means that when we make investments in a project, we are going to do a lot of the simple things. Some of that is as simple as following the rules, getting the right approvals, and simply following the local protocol that are in place. But it can also mean that we're gonna go out into the community and make sure that whatever we're building is reflective of what the community wants to have there. And that can mean in making sure that we're thoughtful about the way we incorporate everything from local art, local hiring practices with a living wage, walkability, or just having the design ethos and design intent of the project reflect the city in which we're doing business.

[00:03:31] Adam: When you look at sustainability in the hotel industry from like a top level, like what does that mean? Like what kind of stuff can you do to make a hotel more sustainable?

[00:03:39] Grant: Sustainability for hotels comes, I would say, in probably one of two things you have, and this is what makes hotels a little bit unique within the real estate sector broadly. Certainly, any kind of real estate has the physical shell, and that's what I talk about when I talk about being a high performance building. That's everything from the building envelope, the roof membrane, the HVAC and mechanical systems that are in place, and just the construction materials that are used. The concept of embodied carbon and the energy efficiency of the property itself. But hotels, and I would argue, almost uniquely, or at least in my opinion, more so than other real estate sectors are really operationally intensive.

[00:04:22] Grant: So you have the physical structure and you have the operations, and that's 24 hour variable guest demands, trying to do your best to keep different things open, and operating and running in a way that's gonna deliver a pretty high level of service and quality. And so sustainability within that space can go into one of those two directions. But for hotels, that can be anything from LED, lighting, smart thermostats, EV chargers at the property. But it can get as specific as using high yield produce in your menu design, it can get as specific as using the right kind of kitchen hood that's going to be a fit for your property.

[00:05:10] Grant: It can be as specific as the soap that you're sourcing for your bathroom, and there's all sorts of ways that you can apply sustainability creatively in both the operations and the building's physical shell. 

[00:05:24] Dominique: Okay, also know that Rockbridge put out an ESG report and that was first of its kind last year.

[00:05:31] Grant: Certainly the first for us. And it's true that a lot of the public hotel companies have, I would say, led the way as far as reporting goes but certainly getting a private hotel company like Rockbridge to produce an ESG report was a challenge.

[00:05:49] Grant: Now it's probably worth me clarifying two things about the way that Rockbridge thinks about and approaches ESG. So number one, we are not an ESG investor. Nothing about our investment criteria has to do with evaluating ESG. Metrics to filter out certain investments. We are a private hotel investor that is going to do our very, very best to report on and manage our ESG performance in a way that seizes opportunities that we see and mitigates risk that we see all of that is in the name of driving strong returns and making a positive impact wherever we go, and that has been part of the ethos of Rockbridge really since our founding 25 years ago.

[00:06:43] Grant: The second thing that's important to clarify is that there is a wide variation in the understanding of the application of ESG and even the definition of ESG, and that's true within our society broadly. It's true within the hotel industry, and it's true even within the walls of Rockbridge, 

[00:07:02] Grant: But it does mean that in addition to the time, the effort, the resources it takes to produce something like an ESG report, it also takes like discussion and education and awareness and alignment with all the different stakeholders and decision makers at a place like Rockbridge that is frankly, like a, we're a pretty complex organization and we try and do a lot of things at a high level.

[00:07:29] Grant: ESG is no exception. 

[00:07:30] Adam: You've been very passionate about sustainability and furthering that within Rockbridge. So what has that journey internally looked like and what are some of the things that you've had to, do to increase the ESG objectives that you've worked on?

[00:07:45] Grant: So number one, it was catalyzed partially by investor demand. It's very helpful that this is the kind of information that investors in the hotel industry are continuing to have an appetite for and continuing to want to see.

[00:08:03] Grant: And some of it is even just half, half the battle can simply be accessing and being able to provide data transparently. Half the battle is making the effort.

[00:08:13] Grant: For us, ESG really started by just data inventory, wrangling data. And the backbone, at least quantitatively of our ESG platform at Rockbridge, is our utility data, energy, water, and waste. 

[00:08:31] Grant: So within those, we spent a lot of time working to aggregate and calendarize and be good stewards of clean and reliable utility data across our portfolio of 75 hotels across the United States. And from there, we also took inventory of the policies that we had in place. Took inventory of the procedures that we already did as a company and wanted to establish where we're starting from, and also talk about where we wanna go so that way we can have a strategy in place to execute.

[00:09:06] Adam: Cool. And I wanna highlight this concept because I think it's really important. You mentioned. Half the battle is not just making great changes and making everything wonderful, but recording the data even if you're not where you want to be. Why is that important for sustainability?

[00:09:21] Grant: That's a great question. If you don't mind me inserting a pithy aphorism. Oh God, I'm gonna forget it now. 

[00:09:27] Dominique: I was gonna say that it reminds me of the phrase like, you can't improve what you don't measure

[00:09:33] Grant: Oh, that's, exactly what I was gonna say. Like, what gets measured, gets managed. You can't manage what you're not measuring.

[00:09:38] Adam: I think that's a great point for any listener of like, "Hey, Is there something that you can do to measure your current state? So that you can make a benchmark of where you wanna go."

[00:09:46] Grant: Yeah.

[00:09:47] Dominique: Yeah. Was that a hurdle in conversation to say, "Hey, we need to like start measuring where we're at". How'd you figure out what that step one was and how'd you do it?

[00:09:57] Grant: So we talked about in the first episode, ESG is really a framework through which reporting on things like sustainability can be done. So there are a lot of really helpful ESG frameworks available. Some of them apply across industries. Some of them are specific to the hotel industry, but those are put out by third parties who have done the work and done the research to make a determination around what kinds of data are most important and typically governed by financial materiality to a certain industry.

[00:10:33] Grant: And that helps us to know what kinds of data are the kinds of data that we should be reporting on A, so that we can just be a good corporate citizen and industry participant and B, showing that we're able to collect reliably the kinds of data that other folks in our industry are also able to collect and share reliably.

[00:10:52] Grant: So to clarify, like in the world of measure and then improve or manage, do you feel like you've just completed the measure step and you're beginning the manage, improve step? Like where are you in that storyline?

[00:11:08] Grant: Great question. I like to call it ESG, phase one and ESG phase two. 

[00:11:13] Grant: the publication of our ESG report was really marked the end of ESG phase 1, which I'll call data aggregation and just having an ability to even produce a report.

[00:11:25] Grant: ESG phase 2 is what I'll call doing the work. And that means now that we know where we're at, how can we go after the improvements that we know need to be made?

[00:11:35] Grant: But we at least took the first step of establishing that baseline of ESG performance.

[00:11:43] Dominique: If someone else is at phase zero wanting to be in phase one,

[00:11:46] Grant: Mm-Hmm.

[00:11:47] Dominique: What's one thing you wish you knew? When you began phase one.

[00:11:50] Grant: I don't want to scare people away, but candidly, like it was quite challenging and to be honest with you,

[00:11:57] Dominique: If it wasn't challenging, you would not be here and we wouldn't be calling you a champion. You wouldn't get a trophy for a thing that was easy.

[00:12:04] Grant: Fair enough. I've been apprehensive to accept any sort of champion accolades. But because I know how much work is yet to be done at Rockbridge and how much opportunity yet, or continues

[00:12:16] Dominique: That's how I know you understand sustainability to be fair, is that if you thought you were close to done, I'd be like, this guy doesn't understand sustainability. So I feel like that's just the reality of the world of like fighting climate change. Like we're not close to being done,

[00:12:32] Grant: Yeah.

[00:12:33] Adam: Well, someone from my standpoint, I'm very curious, has there been any wins in that ESG two phase of like, "Hey, here's a project that you've done that's made an impact"?

[00:12:42] Grant: We have started some ESG phase two work. One of the things that we learned pretty quickly upon the completion of ESG phase one, if you will, is because it was a reasonably time intensive effort, my job is still being split across ESG and development and we discovered that we really need someone who can drive ESG on a full-time basis.

[00:13:07] Grant: So this is a little bit of a company specific comment for me, but I think what will work best at Rockbridge and be most effective to maximize ESG outcomes is going to be having someone who has full-time dedication to the ESG and sustainability work that we're interested in.

[00:13:27] Grant: Now, I wish I knew that starting because that person could have been engaged from day one, but they weren't, and that's okay because no one is probably ever gonna get ESG phase one of any company perfectly right.. 

[00:13:40] Dominique: The idea that there would be a sustainable professional in-house during phase one, I think it sounds like an unrealistic idea because the reason you have the capacity to bring somebody in and rationalize the space they can serve and take up in your organization is because you carried the baton enough to prove the value of having this person. Is that true?

[00:14:01] Grant: Yeah, I guess if ESG phase two is doing the work, I suppose ESG phase one might have been proof of concept.

[00:14:08] Dominique: Yeah. And, proof of need, which I think that that's how I think your like champion title of sustainability is so strong in the sense that like, maybe you heard people be like, "Oh yeah, we should be more sustainable as an industry." And you're like, and people were like, "Yeah, okay." And like nobody actually picked up like the work to do it outside of their job description, 

[00:14:28] Grant: This is true.

[00:14:29] Dominique: And then made the case for like, not only does this relate to us, we already have all this data. Look at this beautiful report, and now that you're all on board, we need somebody to do this because you've seen 'em how hard I have been working for the past however long, 

[00:14:46] Dominique: Is everyone in your organization on board in a positive way with the idea of sustainability and ESG? 

[00:14:54] Adam: ESG is a space where conviction and nuance have a home. And at Rockbridge for us, that nuance can be summarized as follows: better data creates better decisions, better decisions create better financial outcomes. And no one within a private equity company candidly, is gonna argue against better financial outcomes. Not our investors, not our decision makers, not our executives. Yeah, I love that. Well, and just bringing that back to, for a business that in general has to maximize profits. Being able to say, "Hey, sustainability as a goal can actually maximize your profits, and here's how."

[00:15:34] Grant: Yes. And you had asked at one point about specific projects that we've taken on as part of the phase two ESG work. So a lot of that can be, I'll say it's not simple in that it's easy, but it's simple and that is a great place to start. So we did a portfolio-wide, LED retrofit analysis. Now, people familiar with the sustainability space probably will be pretty familiar with the concept of LED retrofitting. It's a pretty easy way to save on your utility bill, and so the concept of expense savings is a pretty easy one to point to when you're talking about sustainability work as far as LED retrofits, smart thermostats, low flow fixtures, HVAC controls, and those are the kinds of projects that we're going to go after first. The projects that have co-mingled, financial and environmental benefits. 

[00:16:35] Grant: There's another realm of ESG benefits that can come in the form of revenue. So we're seeing a trend, the hotel industry, for example, has always been a long-term growth industry, and that is anchored on the fact that it's a capital intensive industry that's constantly responding to changing consumer preferences. 

[00:16:55] Grant: So what we're seeing now is meeting planners are issuing RFPs, looking for sustainability offerings and sustainability data availability. We are seeing corporate, transient hotel room. We're seeing the corporate transient segment want to stay at hotels where there are sustainable offerings or sustainability scores or certifications up on the property level. 

[00:17:22] Grant: And these are things that drive demand and create value. There's also a component to the insurability of the asset. That's the part where ESG plays a role. There's also a part, just frankly on the idiosyncrasy of the value of the asset and some people just having a preference for the design aesthetic or just simply the ethos of being able to own a high performance, really efficient building.

[00:17:49] Adam: Cool. That's fun to hear. Just kind of what that actually looks like in practice and then what some of the drivers are going forward.

[00:17:56] Grant: And one of the sneaky pieces that I really like that's buried in there actually has to do with one of the challenges that you'll hear a lot of hotel industry executives talking about today, and that's labor. 

[00:18:09] Grant: Labor availability is a real challenge, and especially when you are a brand or an operator or really an owner, any of the three you want. Great people on your property that can provide consistent, high quality service and be able to have that reliability and standardization that really any hotel, I think would seek to have. And so as again, changing consumer preferences often reflect changing societal preferences, and what we're seeing is hotels that are more forward thinking on their sustainability initiatives are often better able to attract, entertain great on property talent as well, which indirectly and sometimes very directly creates better financial outcomes.

[00:18:56] Dominique: 

[00:18:56] Dominique: Are there any like small, tangible things that somebody could see as a way to push the hotel industry in the sustainability direction as a hotel goer?

[00:19:08] Grant: Yeah, we've probably heard that every dollar that you spend is a vote for the kind of society or the kind of planet you wanna live in. And so as a guest, something really simple you can do is just to take notice and engage with hotels that you think are being genuine and authentic in their sustainability efforts. That can be really hard. There's a lot of certification schemes out there. There's a lot of greenwashing. There are a lot of hotels that say they're doing one thing and are doing another when it comes to sustainable practices. And there are a lot of hotels that are doing really amazing things that are just so understated in their approach or don't have a marketing team behind it that you might never know how amazing they are.

[00:19:52] Grant: And so it can be challenging as a guest, but when you see it, acknowledge it and when you experience little things leave a review. mention in the comments and um, that feedback will go a long way,

[00:20:06] Adam: That's fantastic. Man, I feel like we've covered a lot just diving into the hotel world and how ESG can be applied. You spoke about one, your own journey of, you know, developing the ESG measurement, kind of where you are in those stages, what those look like, and then some of the things that you're doing going forward to actually make the rockbridge properties more sustainable, which is really exciting. So thank you for sharing that.

[00:20:32] Dominique: Yeah. One, one last thing for you. If you had like a magic wand to make one last big change or one next big change just magically happen in the hotel space as it relates to sustainability? Specifically, what would that be?

[00:20:47] Grant: We talked about the triangle of owners, operators and brands having to share control of the guest experience and the end product. We haven't gotten totally into the idea that there are some companies out there who are more than one. There are owner operators, there are owner brands, there are operator brands, and there are some who are all three. And I get really excited about the concept of hotels as a platform for education. I do think sustainability will always really start and end with people. And when it comes to people and sustainability, I think awareness and curiosity and transparency kinda win the day. So if I could wave a magic wand, I would have a hotel company that was all three and was the owner, was the operator, and was the brand, and was able to exercise full control over that end product to be able to have the pull through on sustainability initiatives that I think would be really compelling and set a really powerful example for the rest of the industry to follow by simply just demonstrating for guests and for other hotel industry, professionals, what is possible. And I think the vertical integration piece is a part that I haven't seen, at least not as the owner operator brand. I haven't seen that totally done perfectly yet. It's really tough.

[00:22:25] Dominique: Do you think Rockbridge is like one of those?

[00:22:27] Grant: Rockbridge has a challenge that a lot of owners have, which is that we are only an owner and we rely on collaboration with our operators and our brands for that sustainability pull through that I talk about. Anything we want to do on our property, whether that's redesigning our menu, changing out a thermostat, or even something as simple you know, recycling our mattresses when they've reached the end of their useful life. It requires collaboration with our operator and our brand, and that can be challenging, but I think it's also what creates opportunity and makes the space really fun.

[00:23:01] Dominique: Thank you for chatting with us and for doing really, really cool stuff and for genuinely advocating for sustainability in a space where it didn't have as much space before. And I'm excited to see what happens with Rockbridge and with the new person you're gonna bring in to hopefully maybe make you guys the, first title holder of greenest Hotel Manager out there. 

[00:23:25] Grant: hope that too.

[00:23:26] Adam: For me, like just having a peek into the window of like how hotels work and what it actually means to implement sustainability within there is very fascinating. 

[00:23:35] Adam: But I think if you're listening from the audience, like one great takeaway is just like any work that you have to do, you're gonna have to bring on multiple stakeholders. But if you can show a case for, "Hey, here's how we can save money and make you know the world a better place", you can really push that forward and get that buy-in. It doesn't need to be political, it doesn't need to be out there, but practical data can really drive really good decisions. So thank you so much for sharing that.

[00:23:59] Dominique: Yeah, and I appreciate the, mantra of you can't improve what you don't measure. I think you gave good examples of how it relates to the hotel space for hopefully like the beginning of a conversation, maybe for an organization that wouldn't have had that yet. But also that applies to all organizations they're just gonna take those steps a little bit differently. Thank you.

[00:24:18] Grant: Thank you so much for the questions. 

[00:24:20] Dominique: Is there any way that you want listeners to support the work that you do? Or to connect with Rockbridge or maybe any of your properties? 

[00:24:28] Grant: I think the only thing I would ask is that people stay curious and care where they stay.

[00:24:34] Adam: Thanks.

[00:24:35] Dominique: Thanks, Grant. I had fun, Adam.

[00:24:36] Adam: Yeah, me too.

[00:24:38] Adam: As always, our guests have found a unique way to champion sustainability. We are here to put real names and stories behind the idea that no matter your background, career, or interests, you really can contribute in the fight against climate change.

[00:24:49] Dominique: If you know a green champion, that should be our next guest, email us at thegreenchampions@gmail.com You can find out more about our show notes at thegreenchampions.com and our music is by Zayn Dweik. Thanks for listening to Green Champions. We're gonna dig into another sustainability success story in our next episode. 

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