Strategic Management and Sustainability #69
Airline horizons : Strategies and Sustainability practices for Airlines Post-COVID.
Good morning,
Today’s newsletter is about how the airline industry is integrating management strategies and sustainability measures for a greener future !
The global aviation industry faces a complex dilemma of balancing immediate economic demands with long-term environmental sustainability policies. The study "Stepping up and out of COVID-19: new challenges for environmental sustainability policies in the global airline industry" highlights the importance of adopting environmentally friendly practices, such as eco-friendly aircraft acquisition and carbon emission reduction, while also considering economic pressures, threats to the industry's survival, and regulatory changes. The study emphasizes the need for a delicate balance between environmental sustainability and economic survival in the post-COVID-19 aviation industry.
Click here to access the full research paper.
Editorial : Kent Business School
Written by Violaine Chabanne, Sarah Sillis, Nina Amar, ans Rania Nassan Alabed.
Today's newsletter is 1 397 words, a 7 minutes read.
Key Findings
Green business practices and sustainability: a review
Companies around the world are adopting green business practices to reduce pollution, waste, energy consumption, the use of renewable materials and resource conservation, either voluntarily or by virtue of regulatory and external requirements. Active stakeholder engagement has greatly facilitated the promotion of sustainable practices, particularly in product design and manufacture, leading to greater environmental awareness within organizations. External pressures are driving the adoption of sustainable practices, which in turn enhances market competitiveness. However, long-term sustainability requires the development of a "green" culture to reduce waste, conserve resources and cut operating costs. Consequently, in ever-changing environments, companies must strike a balance between environmental sustainability and economic survival in order to meet stakeholder demands and concomitant economic pressures.
The global airline industry, eco-friendly policies and COVID-19: an overview
The emergence of "open skies" agreements after the 1944 Chicago Convention liberalized air transport by favoring low-cost airlines, but the growth of aviation has a significant impact on the environment, prompting the industry to adopt sustainable practices and reduce emissions.
But following the Covid 19 crisis, the airline industry has suffered significant losses due to the pandemic and needs government help to balance environmental sustainability and greenhouse gas emissions.
The EU ETS plays a key role in the fight against climate change by limiting greenhouse gas emissions and imposing taxes. The EUETS aims to reduce emissions by 43% by 2030, making it the world's largest carbon market.
Green business practice challenges in the era of COVID-19
COVID-19 has posed many challenges to the aviation sector, demanding transparency in business practices. Increased carrier data on noise, carbon emissions and ozone oxide levels has led to financial pressures and existential threats, preventing some airlines from fully committing to environmental sustainability.
Governments are temporarily imposing environmental regulations to prop up companies in difficult times, stressing that social priorities are becoming more important than environmental initiatives due to the pandemic. The US Environmental Protection Agency recently adopted certain pollution regulations to improve the chances of survival for certain companies.
Greenwashing" is a problem in which companies claim to be environmentally friendly without external verification. Despite the difficulties, consumers continue to support sustainability-focused companies and brands, enabling them to continue adopting genuine business practices.
Critical Commentary
Stakeholders including investors, society and governments are paying more attention towards the environmental sustainability of industrial organizations. New challenges such as COVID-19 make it hard for companies to highlight environmentally sustainable policies or strategies. Many measures were also being imposed on a political level during the pandemic including the closure of borders and social distancing measures led companies to ask for governmental help through subsidies which aligns with the economic and political factor of the PESTEL-framework.
Consequently, COVID-19 also affected the policies airlines were managing. Especially low-cost airlines that compete on prices were affected by not being able to use the full capacity of the airplane.
The EU has imposed regulations and objectives amongst them the EU emissions trading system which is regarded as a central pillar of the EU’s approach to combating climate change. In addition, the EU has set a number of objectives that should be achieved by 2030. Due to COVID-19 companies prioritize their financial stability and short-term survival over cutting their carbon emissions and they are putting pressure on the government to adjust the policies. Indeed, it is completely understandable to put forth this request considering the hard times they have experienced. However, there is also a valid reason to question the companies’ priorities of achieving the 2030 objectives.
An ecological aspect related to aircraft is the consumption of fuel and the emissions of an aircraft. These things have an impact on the environment and climate. Technology is used to change this. In the paper there is a table that shows how different airlines try to adjust their policies. They all try upgrading to environmentally friendly aircraft and adapt fuel-efficiency technologies to minimize fuel consumption and the cost of running aircraft. This part of the aspect fits both the technological and ecological aspects of PESTEL. Although they still have a long way to go to achieve the desired objectives with the technology, they are already well on their way. In recent years they have made it possible to reduce their emissions and slightly reduce their impact on the environment and climate. However, we can deduce from the paper that they are currently still investing a lot in the technology and are therefore still a long way from being climate friendly.
Innovating in new technology and new aircraft designs costs companies a lot of money. However, there are numerous advantages. As mentioned earlier, investing in new aircraft designs will contribute to a lower impact on climate. In addition, by simultaneously pursuing internal and external organizational changes to improve product design and pursue green agendas, organizations are better able to accrue the full benefits of GBPs (Green Business Practices). Allocating resources to adopt innovative technologies can enable companies to penetrate into new market segments. This strategic approach has the potential to expand a company’s market share with lower-unit costs leading to possible higher revenues. These revenues can then be used to defray costs and invest in innovation. It therefore does bring something to the companies and can act as an incentive to motivate companies to make essential investments in environmental sustainability. This aspect aligns with the economic dimension of the PESTEL framework.
Conclusions
Major social events, such as COVID-19, have introduced additional challenges for companies. Before the pandemic, they were well on their way in transitioning to more environmentally-friendly aircraft. However, due to the pandemic’s disruptions, they had to request the authorities for a postponement of the climate change’ objectives. The EU has set a large number of objectives to become greener by 2030, although companies have doubts about meeting these targets. Nonetheless, they have already significantly reduced their emissions over the years, primarily through investments in technology they created aimed to reduce air and noise pollution. Nowadays, airline companies continue to invest in technology to become a leader in the industry in reducing their environmental footprint. By innovating and investing in technologies, they can access new market segments and thus increase their revenues. The extent to which today’s airlines are fully committed to achieve the set goals remains uncertain, given the challenges they are facing.
The paper indicates that airplanes are actively engaging in innovation and directing their investments toward the development of environment-friendly and fuel-efficient aircraft designs. This approach aims to increase their competitiveness in the market and align with the climate change target set by the government. We believe innovation is key for airline companies in enabling airline companies to expand and thrive while complying with regulatory requirements. Further, we think that companies must maintain their commitment to achieving the sustainability goals by 2030, given stakeholders, such as the society and government, are caring more about a company’s environmental priorities. Failing to do so may result in the loss of potential customers, which might impact their revenue.
References
Amankwah‐Amoah, J. (2020). Stepping up and stepping out of COVID-19: New challenges for environmental sustainability policies in the global airline industry. Journal of Cleaner Production, 271, 123000. https://doi.org/10.1016/j.jclepro.2020.123000
https://www.airbus.com/en/innovation/low-carbon-aviation/hydrogen/zeroe
https://www.colorado.edu/ecenter/2023/03/14/issues-greenwashing