27 Air Transportation - Airlines

This table shows a list of topics identified as relevant by different stakeholder groups. They can be considered as stakeholders suggestions or requests for topics to be monitored or disclosed by organizations. Additional information about the project can be found at https://www.globalreporting.org/reporting/sector-guidance/s- Research/Pages/default.aspx 27 Air Transportation - Airlines 22 s Companies providing primarily passenger air transportation. Sustainability Economic Carbon offsetting A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e) and may represent six primary categories of greenhouse gases. The categories include: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), and sulfur hexafluoride (SF6). 266 Business The industry is responsible for 2% of global CO2 emissions and is committed to carbon neutral growth. In order to close the gap, 90 million tonnes of CO2 will need to be offset by 2025 to mitigate emissions to 2020 Sustainability s for Sectors: What do stakeholders want to know? Page 1 of 18

Economic direct and indirect benefits Employment, accessibility and mobility Jobs and economic multiplier effect levels and achieve carbon-neutral growth. Airports affect local development, by providing direct or indirect employment and increasing accessibility and mobility. Direct Economic Contribution: Air transport services deliver the final product of civil aviation industries to customers around the globe. To provide passenger, freight and mail services, air carriers, business aviation and other commercial operators purchase a wide range of products and services from airports and air navigation service providers, manufacturing and service industries, which in turn depend on numerous suppliers. 548 Mediating Institution 12, 279 Business Multiplier effect: Beyond the direct economic contribution of civil aviation industries, there are multiplier, or ripple, effects with a wider or narrower spread throughout an economy depending on the circumstances (for example, countries with significant aerospace manufacturing will show a wide spread, while those with limited air transport services may have a relatively narrow spread). Multiplier effects of nondirectly generated output and employment are assessed by combining what is referred to as catalytic and induced demand effects. Catalytic demand effects include offairport expenditures directly related to the use of air travel and shipment of freight and mail, notably travel and tourism businesses (such as hotels and restaurants, travel agencies, tour operators and retailers) as well as the whole spectrum of freight business activity. Induced Sustainability s for Sectors: What do stakeholders want to know? Page 2 of 18

demand effects are consumer spending from income earned through direct and catalytic economic activities and public expenditures from related tax revenues. Environmental Materials sourcing and use Plastic products The contribution of air transport and related civil aviation industries to local, regional or national economies includes the output and jobs directly attributable to civil aviation as well as the multiplier or ripple effect upon other industries throughout the economy Plastic, a valuable material, can generate significant positive, or negative, impacts on economy, environment and society. Plastic should be treated as a resource and managed judiciously. 353, 367 Civil Society Organization A disclosure on management approach for plastics, including governance, strategy, risks, opportunities, considering: opportunities for product redesign, increasing recycled content, implementing reclaim and/or reuse which could attract economies, brand loyalty, investment, employee goodwill, and; risks to the business, stakeholder health, environment and society (including reputational/social license to operate, regulatory, investor, insurer, and liability risks) for plastics that are directly harmful to stakeholders, or indirectly through plastics being wasted/littered. Performance indicators regarding the types and volumes of plastics being used, collected and/or distributed downstream; the portion that is made of post-consumerrecycled, bio-based, biodegradable, compostable, and/or oxobiodegradable material; the ratio of expected life- Sustainability s for Sectors: What do stakeholders want to know? Page 3 of 18

span of plastic products/packaging in contrast to the duration of their intended use; these volumes broken down by end of life disposition. Most of this disclosure can be captured through the existing GRI framework (e.g. GRI G3 EC9, EN1, EN2, EN22), but commentary is needed to ensure disclosers appreciate the materiality of plastic; other questions can be added to the framework. Refer to the Plastic Disclosure Project ( www.plasticdisclosure.org ) for more details on the suggested questions. PDP will align its questions to GRI G4 once finalised to assist organisations in disclosing to PDP and GRI easily. Plastic are in high use in these "activity groups", and can have significant positive, or negative, impacts on the economy, environment and society: Economics: There are significant cost savings available to organisations that treat plastic as a resource (e.g. through redesign, use of recycled content, reclaiming, etc.) and risks of increased direct costs (regulation, liability, cost of capital, insurance) to organisations that do not lead in this area as well as indirect economic costs to impacted industries (e.g. food production, tourism) Environment: Plastics that are wasted or littered become extremely harmful to the environment, which will have a material effect on biodiversity and the global food chain, both nearby and far outside the local area of operations Society: Some plastics are harmful to stakeholders during manufacture, use and/or disposal (e.g. due to Sustainability s for Sectors: What do stakeholders want to know? Page 4 of 18

phthalates, BPA), impact the wellbeing of society (e.g. effect of litter on community spirit and their interest in sustainability). While a valuable invention, which benefits society in many ways, the negative impacts associated with society's growing use of plastic are not fully recognised. Roughly 85% of plastic used in products and packaging is not recycled, and most plastic produced in the last 60 years still remains in the environment today. Approximately 70% of discarded plastic is from single-use food and beverage containers. Discarded plastics persist in the environment for dozens or hundreds of years, accumulating across the globe, often out of sight of the producers and users. The direct physical impacts of plastic are significant to the organisation in increased costs or missed opportunities, and related economies (e.g. over $1.2bn in annual damages to ocean-related industries in Asia-Pacific), the environment through harming habitats and species, and to stakeholders health when exposed to the chemical ingredients; and are magnified if fragmentation of the plastic occurs, making it available for ingestion to additional species, who adsorb the chemical ingredients and/or the toxins carried on the plastic. These negative impacts could be avoided and turned into positive impacts, if plastic was treated as a resource to be managed judiciously (e.g. the US economy lost $8.3bn worth of plastic packaging in 2010) - "It is not good business practice to throw away valuable resources". Sustainability s for Sectors: What do stakeholders want to know? Page 5 of 18

Renewable/alter native energy sources Biofuels KLM s official introduction of cooking-oil based biofuels for regular commercial services between Paris and Amsterdam marks an unequivocal step in its commitment to renewable energies. The move is symbolic of the shift in the sector as it continues to target two goals: 1/ cutting GHG emissions ahead of the increasingly tight regulations facing airlines; and 2/ reducing its energy bill. Given the ongoing controversy over biofuels and the fact that they are in limited supply, there are clearly issues surrounding the capacity of biofuels to supplant traditional fuels for the automotive sector, and of kerosene in the aerospace industry. It is hard to see how the crops traditionally used in the production of fuels for road transport (rape seed, corn, palm oil and sugar cane) could be employed to manufacture bio-kerosene. Not only are these segments already under strain, they are also highly controversial given their contribution to food shortages and price volatility, their negative carbon profile and their role in deforestation. In the face of this opposition, some airlines have committed to not using biofuels that could impact on crops designed to meet food requirements. This looks like a pre-requisite to ensure the acceptability of this new industry. The emergence of a third-generation biofuel based on seaweed, and in compliance with sustainability criteria, could be a solution to ethical considerations and airlines quantitative needs. Total, however, sees no potential in this field, at least in the short run. 389 Financial Markets & Information Users Sustainability s for Sectors: What do stakeholders want to know? Page 6 of 18

Energy efficiency initiatives Fuel use efficiency In June, the European Commission, Airbus, some airlines (including Air France, British Airways and Lufthansa) and biofuel producers launched the Biofuel Flightpath initiative, which is aimed at promoting the commercialisation of green aircraft in Europe. The aim is to produce 2m tonnes of biofuels on a sustainable basis for the aviation industry in 2020. But these sustainability criteria will need to be detailed quickly and be resolutely restricting if they are to fend off criticism. Under this European initiative, it is aimed to use 40% sustainable and low-carbon fuels by 2050 and 10% biofuels by 2017. Thus, the 10% bio-kerosene, plus the conventional biofuels provided for under European regulations (mandatory blending targets) cannot be produced from the same crops and will have to use non-food sources. Although European regulations include a series of sustainability criteria in their targets, we do not believe these are sufficiently restrictive (minimum reduction of 35% of CO2 emissions relative to conventional fuel for 2015, 50% for 2017 and 60% in 2018) for the aviation industry to add production capacity without it resulting in additional opposition. The airline industry has started to recover from its extended slowdown. In recent years, declining business travel and rising fuel prices have put pressure on companies to reduce costs, redesign route networks and increase fuel efficiency. Regulatory pressure continues to force airlines to reduce their CO2 emissions and invest in fuel-saving measures such as refitting airplanes with winglets, light-weight materials and advanced route- 460 Financial Markets & Information Users Sustainability s for Sectors: What do stakeholders want to know? Page 7 of 18

Weight of flight load planning technology. Through increased cooperation with governments, aircraft manufacturers and developers of alternative fuels, airlines can reduce their exposure to rising fuel prices and improve their environmental performance. Airlines may attain energy-efficiency by operational weight-reductions, such as lighter trolleys, lighter chairs 571 Mediating Institution and carpets. Energy consumption, total 153 Financial Markets & Information Users Air quality Airports Local air quality concerns concentrate on effects created during the landing and take-off (LTO) cycle as these emissions are released below 3,000 feet (915 metres) and releases from airport sources (such as airport traffic, ground service equipment, and de-icing). The contaminants emitted by aircraft and airport sources can affect human health and the environment. 280 Business Due to the increasing amount of residential development surrounding airports and the continued growth of commercial air travel, air pollution surrounding airports has become a significant concern Emissions to air Aircraft Aircraft engine emissions: The formation and discharge of gaseous and particulate pollutants into the environment, especially the stratosphere, chiefly from airplanes, helicopters and other high-altitude aircrafts 262 Business Aircraft engines produce emissions that are similar to Sustainability s for Sectors: What do stakeholders want to know? Page 8 of 18

Emissions to air - GHG emissions Management and reduction strategies other emissions resulting from fossil fuel combustion. However, aircraft emissions are unusual in that a significant proportion is emitted at altitude. These emissions give rise to important environmental concerns regarding their global impact and their effect on local air quality at ground level. Total CO 2, NO x, SO x, VOC emissions in million tonnes 153 Financial Markets & Information Users A great deal of the environmental damage is caused by 479 Business the way we do business. Governments have recognised this and are working to reverse some current trends. Achieving this will depend on rebalancing the focus of taxation increasing taxes on economic negatives, such as pollutions, while reducing them on economic positives, such as labour. The European Union s contribution to a balanced carbon world includes the Emissions Trading Scheme (ETS), which is a mechanism to cost the price of carbon (negative externality) into those industries that are the highest greenhouse gas (GHG) emitters. In the short term, carbon pricing will change the cost structure for many companies and the relative competitiveness of carbon-intensive business sectors. Over the long term, if unchecked, the changing climate could do severe damage to the economy, undermining the ability of pension funds and other longterm investors to finance their liabilities. While some commentators have argued that investors should preferentially invest in companies with low GHG Sustainability s for Sectors: What do stakeholders want to know? Page 9 of 18

Emissions to air - GHG emissions and other emissions Noise Management and reduction strategies Aircraft and components emissions, the prudent investors will also consider the likelihood that the company will be required to reduce some or all of its GHG emissions, the timeframe over which the emission reductions are required, and the cost to the company of reducing or offsetting its emissions. The airline industry has started to recover from its extended slowdown. In recent years, declining business travel and rising fuel prices have put pressure on companies to reduce costs, redesign route networks and increase fuel efficiency. Regulatory pressure continues to force airlines to reduce their CO2 emissions and invest in fuel-saving measures such as refitting airplanes with winglets, light-weight materials and advanced routeplanning technology. Through increased cooperation with governments, aircraft manufacturers and developers of alternative fuels, airlines can reduce their exposure to rising fuel prices and improve their environmental performance. The EU objective is to halve, by 2020, carbon dioxide (CO2) emissions and perceived noise pollution, and to reduce nitrogen oxide by 80% from 2000 levels. Aircraft noise is noise pollution produced by any aircraft or its components, during various phases of a flight: on the ground while parked such as auxiliary power units, while taxiing, on run-up from propeller and jet exhaust, during takeoff, underneath and lateral to departure and arrival paths, over-flying while en route, or during landing 460 Financial Markets & Information Users 479 Business 265, 267 Business Sustainability s for Sectors: What do stakeholders want to know? Page 10 of 18

Social Labor conditions Workforce turnover and restructuring Aircraft noise can be a nuisance to local communities near airport Noise is another major pollution and there is ongoing pressure to reduce the level impacting areas in the vicinity of airports. Aircraft are 50% quieter than 10 years ago. However, there are often trade-offs in new technological developments. For example, open rotor technology, which can provide a 15-20% reduction in fuel consumption, is noisier than current turbo jets. Restructuring is another important issue in ESG, as a number of sectors are experiencing mergers, downsizing and delocalising to emerging countries. Shrinking markets and downward pressure on revenue have put pressure on many industries in our coverage to undertake significant restructuring over the past twothree years. The number of jobs lost was a striking feature of our analysis, leading to heightened community tension and adverse relationships in some industries. The responsibility of some sectors is quite pronounced as their workforce is made up of the vulnerable communities in which they operate. For example in the mining industry s precious metals subset, there was an average of a 10 percent decrease in employees globally from 2008 to 2009. We accept that restructuring and reduced capacity can lead to recovery for companies, however it can also have a negative impact. 479 Business 479 Business Airlines were badly hit by the economic downturn, with IATA reporting a 25% fall in intra-european premium travel, which remains weak (economy travel only Sustainability s for Sectors: What do stakeholders want to know? Page 11 of 18

Labor management relations Strikes and/or lock-outs dropped by 3.2% during 2009). This affected the traditional premium market carriers. The fall and continued weakness in yields could not be offset by other costs, notably airport and navigation charges as well as fuel costs. During the course of 2008-09, the AEA (Association of European Airlines) reported some 35,000 job losses among its members. Management s ability to convince their labour unions to adapt to new realities is critical in this restructuring. The breakdown in labour relations and rise in union opposition can lead to recurring strikes and significant bottom line and reputational impacts (especially at traditional carriers, which have strong union structures), as evidenced by British Airways. Airlines were badly hit by the economic downturn, with IATA reporting a 25% fall in intra-european premium travel, which remains weak (economy travel only dropped by 3.2% during 2009). This affected the traditional premium market carriers. The fall and continued weakness in yields could not be offset by other costs, notably airport and navigation charges as well as fuel costs. During the course of 2008-09, the AEA (Association of European Airlines) reported some 35,000 job losses among its members. Management s ability to convince their labour unions to adapt to new realities is critical in this restructuring. The breakdown in labour relations and rise in union opposition can lead to recurring strikes and significant bottom line and reputational impacts (especially at traditional carriers, which have strong union structures), as evidenced by 479 Business Sustainability s for Sectors: What do stakeholders want to know? Page 12 of 18

Cabin personnel health and safety Risk assessment and mitigation British Airways. The aircraft environment poses specific and unique situations in which the health and safety of workers in such environments may be extra sensitive. Identification of these risks and measurements to prevent or mitigate their effects are the responsibility of the airlines. 77 Mediating Institution Cabin air quality On-board health and safety conditions These include (examples of measures to mitigate/prevent effects): - Unruly or disruptive behaviors (policies for the denial of boarding) - Unanticipated turbulence (Handrails, no angular surfaces on board) - Fatigue on long flights (mandaroy rests) - More flight crew than legally necessary Air quality is affected by recirculation of air, air intake from outside the aircraft, and other sources of possible contamination. Contamination may take place due to activities outside the aircraft before or after take - off, lubricants and oils in the engine; accidents and incidents inside the pressurised cabin; or from the hold 171 Mediating Institution Unlawful sex tourism Human trafficking risks and child abuse Several potential hazards, some of which have been implicated with significant sickness, can affect air quality, and certain types of aircraft have been identified as posing an increased risk, specifically where engine bleed air is used to supplement cabin air. Adherence to the Code of conduct for the protection of children from sexual exploitation in travel and tourism (http://www.thecode.org/) 304, 499 Mediating Institution Sustainability s for Sectors: What do stakeholders want to know? Page 13 of 18

Policies and management systems related to the Code. Breach of the code leads to violation of the following human rights: Universal declaration of human rights : articles 3, 4,5, 12 and 13 Convention on the rights of the child: articles 3, 6, 9, 11, 19, 32, 34 and 35 Persons with special needs access to services and facilities Emergency preparedness Fleet technological improvement Travelers with disabilities and medical conditions Noise, energy efficiency, emissions See section 3.3 as example on Kuoni human rights impact assessment covering children http://www.kuoni.com/docs/assessing_human_rights_i mpacts_0.pdf Policies put in place by a dedicated governmental department to ensure assistance and safety of travellers with disabilities or medical conditions "Ensuring that all passengers, regardless of their personal situations and needs, are treated equally and with the dignity, respect, and courtesy they deserve" Airlines may be subject to a wide range of emergencies, including terrorist threats, natural disasters, aircraft incidents, and outbreaks of worldwide viruses. Fleet technological improvement: At Airbus and Eurocopter, 80% of the R&D budget is devoted to environmental innovation. New aircraft have achieved a steady reduction in noise and emissions over the past 40 years. EADS has set the 2020 objective of reducing its energy consumption by 30% (compared to 2008 level). 515 Mediating Institution 549 Mediating Institution 479 Business Sustainability s for Sectors: What do stakeholders want to know? Page 14 of 18

Other Corporate governance Gender participation on governance bodies GOVERNANCE / EUROPE: boardroom lady boom: is it possible without quotas? On 22 June, the CapitalCom agency published its 2011 survey into the boardroom gender mix of CAC 40 companies, with fairly encouraging results: the proportion of women on the board has doubled in recent years, from 10.5% in 2009 to 20.8% in 2011. 389 Financial Markets & Information Users In January, the French parliament adopted legislation imposing quotas for the proportion of women on the board of major companies. Under the measures, the development of female board membership is mandatory and gradual: 20% for listed groups, public companies of an administrative, industrial and commercial nature by January 2014, rising to 40% by January 2017. The law also stipulates that companies with no women present on their board must appoint at least one within six months of it being on the statute books (voted on 13 January 2011). In France, some 2,000 companies are affected (the 650 largest listed firms and companies with more than 500 employees and those generating sales in excess of 50bn). In terms of sanctions for noncompliance, appointments that run counter to the parity principles are to be declared null and void and attendance fees are to be temporarily suspended. At the European level and at the instigation of the Vicepresident of the European Commission, Viviane Reding, the European parliament will decide in March 2012 on whether to adopt common legislation on this matter (a Sustainability s for Sectors: What do stakeholders want to know? Page 15 of 18

mandatory proportion of women in decision-making positions of 30% in 2015 and 40% in 2020). This will depend on the level of improvement seen based on the selfregulation of European companies, in accordance with the equality initiative adopted by the European Commission in December 2010 and the European parliament resolution of 17 January 2008 calling for the Commission and member states to promote a balance between women and men on company boards, particularly where member states are shareholders. Sourcing strategy for aircrafts and components Sourcing standards on aircraft energy efficiency Europe as a whole illustrates the degree of hesitation between a soft-law approach and conventional legislation (quotas in this instance), but it is clear from the experience at national level that the second method tends to get much better results. Airlines may attain energy-efficiency by choosing to operate energy efficient aircraft. Procurement practices of new aircrafts and parts of these, such as engines, that include specific criteria regarding energy efficiency may have effects on energy efficiency 571 Mediating Institution 1 All references can be found at https://www.globalreporting.org/reporting/sector-guidance/s-research/pages/default.aspx References Sustainability s for Sectors: What do stakeholders want to know? Page 16 of 18

All references can be found at https://www.globalreporting.org/reporting/sector-guidance/s-research/pages/default.aspx 12 Airports Council International (ACI), 2007. Climate Change, Geneva: Airports Council International (ACI). 77 153 171 262 Civil Aviation Authority of New Zealand Health and Safety in Employment Unit (CAA HSE), 2009. Occupational Health and Safety for Cabin Crew and Flight Crew - A Guideline for Health and Safety Onboard Aircraft [Draft], Wellington: Civil Aviation Authority of New Zealand Health and Safety in Employment Unit (CAA HSE). European Federation of Financial Analysts Societies (EFFAS) and Society of Investment Professionals in Germany (DVFA), 2010. KPIs for ESG - A Guideline for the Integration of ESG into Financial Analysis and Corporate Valuation, Frankfurt am Main: EFFAS. Expert Panel on Aircraft Air Quality, 2009. Contamination of Aircraft Cabin Air by Bleed Air A Review of the Evidence, Canberra: Civil Aviation Safety Authority (Australia). Intergovernmental Panel on Climate Change (IPCC), 2007. Climate Change 2007: Synthesis Report, Geneva: Intergovernmental Panel on Climate Change (IPCC). 265 International Air Transport Association (IATA), 2004. Noise Certification Standards. IATA Environmental Review, p. 9. 266 267 279 International Air Transport Association (IATA), 2008. Aviation Carbon Offset Programmes - IATA Guidelines and Toolkit, Geneva: International Air Transport Association (IATA). International Air Transport Association (IATA), 2011. Balanced Approach to Noise Management around Airports. [Online] Available at: http://www.iata.org/whatwedo/documents/balanced-approach-to%20noise-management-around-airports.pdf [Accessed 6 March 2013]. International Civil Aviation Organization (ICAO), 2000. Economic Contribution of Civil Aviation - Ripples of prosperity, Montréal: International Civil Aviation Organization (ICAO). Sustainability s for Sectors: What do stakeholders want to know? Page 17 of 18

280 International Civil Aviation Organization (ICAO), 2011. Airport Air Quality Manual, Montréal: International Civil Aviation Organization (ICAO). 304 353 International Labour Organization (ILO), 2013. International Programme on the Elimination of Child Labour (IPEC). [Online] Available at: http://www.ilo.org/ipec/lang--en/index.htm#a1 [Accessed 26 March 2013]. Kershaw, P., Katsuhiko, S., Lee, S., Samseth, J., Woodring, D., & Smith, J., 2011. Plastic Debris in the Ocean. In United Nations Environment Programme (UNEP), UNEP Year Book 2011 (pp. 20-33). Nairobi: United Nations Early Warning and Assessment. 367 MacKerron, C., 2011. Unfinished Business: The Case for Extended Producer Responsibility for Post-Consumer Packaging, Oakland: As You Sow. 389 Natixis, 2011. Strategy Note Equity Research - Strategy/SRI: Monthly review June 2011, Paris: Natixis. 460 Robeco SAM, 2012. The Sustainability Yearbook 2012, Zurich: Robeco SAM. 479 Société Générale, 2011. SRI: Beyond Integration, from satellite to core, Paris: Société Générale. 499 The Code.org, 'Code Of Conduct For The Protection Of Children From Sexual Exploitation In Travel And Tourism', 2004. 515 548 Transport Security Administration, 2013. Travelers with Disabilities and Medical Conditions. [Online] Available at: http://www.tsa.gov/traveler-information/travelers-disabilities-and-medical-conditions [Accessed 27 February 2013]. US Department of Transportation, Federal Aviation Administration, 2011. The economic impact of civil aviation on the US economy, Washington, D.C.: US Department of Transportation, Federal Aviation Administration. 549 US Department of Transportation, Federal Aviation Administration, 'Airport Emergency Plan', 2010. 571 World Bank, 2012. Air Transport and Energy Efficiency, Washington D.C.: The International Bank for Reconstruction and Development/The World Bank. Resource available on request and/or for a fee. Sustainability s for Sectors: What do stakeholders want to know? Page 18 of 18