MINERVA BC NEWMAN
CEBU CITY – The Center for Aviation (CAPA), world’s most trusted source of market intelligence for the aviation and travel industry with carbon reduction strategists, Envest Global released in October the “Airline Sustainability Benchmarking Report 2021” that explore the impact on airlines of the transition to net zero and airlines are now under pressure to accelerate pace of emission reductions.
The Airline Sustainability Benchmarking Report includes a comprehensive investigation of 52 airlines and a selection of corporations with large business travel requirements, to identify market trends linked to sustainability.
Coinciding with the UN’s COP26 Climate Summit, the report indicates steep cost increases for airlines as emission reduction measures are introduced, strengthened, or expedited, including higher carbon pricing and mandated blending of sustainable aviation fuels.
CAPA Chairman Emeritus Peter Harbison said that climate change is a critical challenge, and climate inaction is a critical mistake.
“We have partnered with Envest Global to assess the impact on airlines of increased pressure to reduce aircraft carbon emissions, and to assist them in understanding global trends and meeting the growing expectations of stakeholders,” Harbison added.
Key findings of the CAPA-Envest Airline Sustainability Benchmarking Report 2021 include that the next three to five years could see failures of multiple airlines that do not have the financial strength to invest in decarbonization, and/or misjudge the need to accelerate their climate mitigation plans.
Key stakeholders, including corporate customers and investors, increasingly will demand more reliable data on decarbonization and proof of meaningful action, to make informed decisions on purchasing or investment.
There is insufficient carbon offset data reported by airlines to enable any meaningful assessment of their source, location, and validity.
In the next three to five years, carbon offsets for airlines will likely become uneconomic, unavailable, or unacceptable, with offset prices rising with broader demand for decarbonization, and tighter criteria for legitimate offsets.
Envest Global Executive Director, Advisory, David Wills on the other hand said that historically, the environmental performance of most companies had been driven by the need to comply with regulations.
“What we’re seeing now is that pressure on companies to improve their environmental performance is coming from their customers and investors, to line up with their own commitments. The airline industry is facing a real challenge here as those pressures increase,” Wills said.
Wills bared that they’ve looked at over 100 corporations which are among the biggest corporate travelers globally, and there is a very consistent pattern that’s emerging that about three quarters of those companies have made some net zero emissions commitment, and those commitments are typically in the timeframe of 2025-2030.
“But if you compare that to airlines that have net zero commitments, they’re typically in the 2050 timeframe – a 20-year difference. About 40 per cent of those companies also have specific travel carbon reduction goals, in the order of 30 to 50 per cent from a 2019 base,” he went on.
If airlines can’t better align their actions with corporate customers, then there will be a reduction in corporate travel, or a shift of business to more sustainable airlines, to enable those big customers to meet their own climate goals, Wills warned.
Other key findings include the role of procurement departments within customer organizations will broaden to consider not just the cost of travel, but also selection of the most suitable and sustainable airlines and flights, based on cost, emissions, convenience, and COVID-19 drivers.
Aircraft fleet age has a clear impact on aviation emissions. If the average age of aircraft deployed in 2019 was reduced by one-year, total CO2 for the whole airline industry would have been reduced by about 40 million tons, or 4.5 per cent, the report said.
Cargo data is largely absent from sustainability reporting, even though it accounts for about 12 per cent of the air transport industry’s total load tonnage.
According to Brett Mitsch, Envest Global’s Executive Director, Investment that in many cases, the investor community had developed strategies on climate change mitigation which went well beyond the positions adopted by governments.
Mitsch said the number of signatories to the United Nations’ Principles for Responsible Investment (PRI) exceeded 4,000 which collectively managed approximately USD120 trillion in assets.
“Stakeholder or shareholder activism is on the rise. We’re seeing a concerted effort by the investor community to understand where their risks are from a greenhouse gas emissions perspective. They’re also demanding greater disclosure and transparency by all of the companies that they’ve got stakes in,” Mitsch stated.
He added that in many cases, shareholder activism has forced changes to corporate sustainability strategies, and even to the composition of boards in companies deemed to be laggards on climate change mitigation.
Mitsch believed this is truly an existential threat. Even though aviation is a hard-to-abate industry, there is a demand for doing better. “We’re seeing from the investor community a far greater expectation on airlines for better monitoring, reporting, and truth in advertising, as it were, of their operations.”
Mitsch went on that investors recognized that many airlines were investing heavily in carbon offsets. But the investors are also starting to say ‘Well that’s great, but it’s only netting off emissions. What are you doing to get to absolute zero, not just net zero?’
The airline industry, still reeling from the financial shock of the COVID-19 pandemic, is now facing another critical challenge as global pressure increases to accelerate net zero emissions, to exceed the targets set out in the United Nation’s Paris Agreement.