Why a Resilient Sustainability Management System is Essential for Airlines

For airlines, resilience is no longer a matter of choice but part of their license to operate. That means being sustainable in all operational matters, from finance through labor relations to compliant waste management. Sustainability management is essential to navigate a rapidly evolving aviation landscape.

All aspects of aviation undergo constant evolution to counter the unpredictability the industry endures. Sustainability is no exception. Although the drive toward net-zero carbon emissions by 2050 remains the overriding goal, there have been numerous developments in the scope of sustainability.

Industry trends affecting sustainability management

Four industry trends are of note:

1. Collaboration, always of note when it comes to sustainability, has become even more important. Increasing complexity means no one organization can achieve meaningful gains alone. Cabin waste provides a good example. Alongside airlines, caterers, cleaning companies, and airports have a role to play. How do cleaning companies segregate waste? What facilities do airports have for recycling? Best practice is therefore nearly always about collaborative thinking. Partnerships can bring about organizational progress with costs and benefits shared equally. This approach also makes it easier to identify competency gaps. Partners can assist airlines in areas where airlines have no or little visibility. The gap between ambition and maturity is just a capability and organizational design problem that can be resolved by training, along with the correct investment. Learning to work within a management system in an integrated fashion produces the transparency required of organizations.
2. Reporting requirements are growing. Although sustainability may not be making headlines in a turbulent geopolitical environment, it is still high on the agenda. Transparency—enabled by technologically inspired real-time reporting—is critical as sustainability rating agencies grow in influence. A robust sustainability management system not only assures compliance but also identifies potential areas of internal development. A single sustainability management system avoids duplication and becomes a resource for an entire organization. Reporting on ad hoc basis is no longer feasible and so a means of producing integrated reports and measuring progress is essential.
3. Financial risks are becoming more prevalent. The cost of non-compliance is increasing. As regulations ramp up, including emissions trading schemes, the Carbon Offsetting Reduction Scheme for International Aviation and sustainable aviation fuel (SAF) mandates, so too does cost exposure. Insurance, the cost of capital, and the loss of reputation are all part of this cost element. So, too, are such operational costs as extreme weather and turbulence. Airlines must look at SAF procurement, fleet renewals, and operational efficiencies as well as climate risk resilience plans, including the safeguarding of assets. It is vital to train how to integrate into exposure into existing risk frameworks. Financial exposure needs to be expressed in a language that leadership understands. It is equally crucial to reduce the noise surrounding risk and identify what is really important to an organization.
4. Environmental mitigation has evolved into Environment, Social, and Governance (ESG) frameworks and proactive engagement with ESG rating agencies has become standard practice. ESG includes direct components, such as carbon emissions from flights and indirect effects, such as supply chain risks. To meet these emerging needs, airlines must consider internal and external audits and surveys, including follow ups to address identified shortfalls. Procurement activity and supplier management are of special interest as is the integration of various management systems, such as procurement, quality, and safety.

Studies show a 3.5% drop in market value within 11 days if an ESG sanction is announced publicly. Moreover, the value of the drop in shares is approximately three times larger than the regulatory fine.

An announcement by regulators disclosing ESG wrongdoing prompts cumulative abnormal losses of 5.43% in share price on average in the two days following the announcement.

The importance of environmental, social, and governance in aviation

ESG measures a company’s sustainability, ethical impact, and risk management practices. Aside from such environmental influences as carbon emissions and waste, ESG examines social relationships, including labor, diversity, and safety. The final element, governance, covers items from ethics to board diversity.

ESG’s influence is such that it has become a market differentiator for airlines. During an unexpected crisis, companies with better ESG performance display greater stability. Organization leaders should therefore incorporate ESG strategies into their business not only to promote sustainability but also to maximize shareholder wealth.

How can airlines build an ESG and achieve sustainable operations? 

A good ESG framework relies on a robust sustainability management system like IATA’s Integrated Sustainability Program (ISP). The ISP enables integrated operations and risk-based prioritization, helping airlines assess risks and financial exposure and providing leaders with insights for better strategic decisions.

Standardizing ESG practices among airlines through the ISP, moreover, could accelerate industry progress, as collaboration is key to solving complex issues.

Three areas in particular should be noted:

1. Supply Chain Integrity. Internal development alone is not enough. It is essential to monitor the sustainability progress of key suppliers to ensure a solid sustainable procurement strategy. Rather than cost alone, this involves auditing Tier 1 and Tier 2 suppliers for ethical labor practices and their own carbon footprint. So doing avoids any reputational risk through association.
2. Waste management. Supporting the circular economy has become vital. The industry generates approximately 3.6 million tonnes of cabin waste annually. About one-third of the recyclable waste is lost due to fragmented management systems as are the cost-savings associated with recycling.
3. Social issues. Labor relations and safety oversight are now core components of an audit-ready system. With more than 53% of all aviation ESG violations tied to social and labor issues, putting social and governance higher on the agenda is essential to avoiding audit failure.

What role does training have in building an ESG framework? 

The evolution of a sustainability management system combined with the growing influence of ESG makes training more important than ever. But it is vital that improvements are structural rather than episodic. This means that lessons must be learned by an organization as a whole and not simply embedded in certain individuals. In the latter case, then knowledge can easily be lost should relevant personnel move to new jobs or retire.

Rather than look simply to compliance with existing regulations, therefore, training should be about future-proofing an organization. Training becomes a roadmap of the skills needed in the coming years.

To get to this point, the notion of a tick-box exercise is being consigned to the history books in favor of creating awareness and growing capabilities. The “why” of a particular best practice is as important as the “how”. Real world problems are the key learning tool in this regard, and these continue to feature more heavily across all courses. Solving problems and answering questions in a way that offers practical insight demonstrates impact and provides true capabilities.

Finally, to capture the changes in training and to understand if further iterations are necessary, some form of measurement is essential. If training results in measurable improvements, then this could be an indicator of better future behavior and enhanced ESG ratings.

Learn more about IATA's Sustainability Solutions

• Environmental and Sustainability Certifications: Gain credibility and make a positive social and environmental impact.
• Environmental Management Systems (EMS): Drive environmental performance and regulatory compliance though better design and implementation.
• Design a Sustainability Strategy—Fundamentals: Identify measures that achieve short-, medium-, and long-term benefits from a social and environmental perspective.
• Sustainability Consulting: Develop the tools and knowledge necessary to make informed sustainability decisions.