Essay, Pages 11 (2623 words)
Customers, NGOs and governments put high pressure on firms to act socially responsible. Also a lot of competitors are engaging in CSR actively and it can provide your firm a new, more positive, image and by this way financial benefits. The issues that are relevant in the context of your airline are environmental pollution, noise pollution and waste management. These issues are already part of CSR strategies of competitors and governments and institutions are generating regulations to decrease these kinds of pollution.
The strategy is based on the three issues, but first the firm needs a general code of conduct about CSR followed by specific policies with solutions to tackle the specific issues. For each issue challenging but feasible goals are set in accordance with industry guidelines and in line with competitors in order to catch up with them. But this brings large investments in short-term and it is crucial to prevent negative and manipulative attention about the quick pace of adapting CSR.
In this report a new CSR strategy will be presented for a large Dutch airline company. The main activities of the airline are worldwide passenger and cargo transport. The firm has been found in the Netherlands and its headquarter is still located there. They have a fleet of 120 airplanes and fly to 145 destinations worldwide. They have operations on every continent of the world. The gross revenue in 2016 was 9.8 billion, which has been accomplished with more then 35,000 employees. With this revenue the firm is the fifth largest airline in the world based on revenues.
Business rationale for engaging in CSR
There are several important reasons for engaging in CSR in general and specifically as a firm in the airline industry. A division can be made between external societal pressures and internal opportunities. To start with the first there are a lot of reasons to name. The first aspect is the fact that firms in today’s world need a so-called social license to operate. This means that only acting in accordance with the rules and laws of the government is not enough. Firms nowadays also need an informal approval of society to conduct their business. Therefore it is necessary to according to broader societal expectations to get acceptance within the community a firm operates. This phenomenon is especially important in countries such as the Netherlands were the society can easily make its voice heard. Besides getting approval from society there are also more active external pressures on firms that make engaging in CSR inevitable.
These external pressures are demands from the different stakeholders a company has. One example are the customer demands of firms, as customers get more conscious about their consumption, they demand the same consciousness of firms they are buying services and products of. Besides the individual customer there are also more organized stakeholders that can put pressure on the company. The most known are the NGOs (Non-Governmental Organizations) such as Greenpeace and WWF. These organizations strive for a sustainable world and engage in a lot of protests against firms that act against the environment and society. These protests put firms in a bad light. Also governments and International institutions actively follow firms on their practices and have set a large set of rules in order to control the negative results of firm activities affecting environment and society.Another simple reason to actively perform CSR is competitors. A lot of airlines have put CSR high within their organization.
A few examples of airlines with extensive CSR strategies are: Emirates, Turkish Airlines, British Airways and American airlines. All those firms are leaders in the airline industry and have a large influence on the way the industry is formed. As a large player your firm also needs to have a clear CSR strategy in order to stay competitive and even more to become a front-runner on CSR within the industry.As said before, there are also internal opportunities for the firm to seize by engaging in CSR. Nowadays firms that have a good CSR strategy and implement this strategy well have a competitive advantage, so CSR can become a competitive weapon for firms as well. It can differentiate its brand as a responsible firm. Also different CSR activities can have direct financial benefits. An example is the concept of CSV (Creating Shared Value). Within this concept a firm performs business activities that are both beneficial for society and for the firm.
Strategically relevant CSR issues
In the previous chapter the main reasons for firms to engage in CSR are explained. But CSR does not mean the same in every industry, for each industry there are relevant and irrelevant CSR issues. In the airline industry there are some major CSR issues and some minor. In this chapter we are focusing on the major issues your firm needs to prioritize.The first point is the environmental impact of airlines. Airlines use fuel in their aircraft and given the fact that there on some days with more than 100,000 flights they are a major polluter of the environment. Different harmful gasses are emitted, with CO2 as the most important one. The total emission of CO2 by flights is 781 tonnes (ATAG), which is 2 percent of the total emission. This figures seems low but the crucial point is that aircraft emit the gas directly in the troposphere and stratosphere. Those are the most sensitive parts of the atmosphere and are the zones where changes in climate and ozone are most directly effected. Regarding the relation of this pollution with CSR we see that a lot of competitors have already put this issue high in within their CSR strategy and activities (Turkish Airlines, 2016; Emirates, 2016).
Besides competitors that are actively trying to promote themselves with efforts in decreasing pollution international regulations and agreements push airlines to reduce their emissions. Also the topic of ‘environmentally friendly’ is gaining popularity on a high rate as stated in a Guardian article: “British shoppers are three times more likely to choose environmentally friendly products than they were in 2011, despite the squeeze on their incomes.” Therefore environmental responsibility is a key aspect of CSR to take into account.Another major issue is the noise pollution of aircrafts. Aircrafts cause high degrees of noise while taking off and landing. This especially damages the health and life quality of locals that live near to airports. Noise mitigation costs government and other institutions large amounts of money. This issue is also noticed several times by different governments.
For example Dutch politicians discuss this topic a lot and the government has a special webpage about this issue. This website shows the activities of the government on this field and how locals can file complaints. For your firm the noise pollution around Schiphol airport in Amsterdam is of high relevance as this is your global hub, which processes the most of your flights. Considering the efforts of the Dutch governments and the complaints of Dutch locals this issue is important for your CSR strategy and profiling within society. It can help to give your company’s image a boost in your home country, which can make your airline more accepted between locals.The last CSR related issue within the industry that is strategically important for your firm is waste management. Two types of waste exist within airline companies, namely hazardous and non-hazardous waste. Regarding non-hazardous waste airlines use non-reusable cups and plates during their flights to easily clean and prepare aircrafts for their next flight.
Therefore each flights causes large amounts of waste that is not reusable and only partially recyclable. Hazardous waste consists of waste oil, fuel wastes and other harmful substances. If not handled correctly this type of hazard can have a large impact on the environment. It is especially seen that premium large airlines (e.g. Delta airlines and Qatar Airways) have extensive policies regarding this topic and present this on their websites and in their reports. Another issue that has been in the media frequently is the labour standards within airlines. But we consider this as less important for your airline as this problem is more related with low-cost airlines (e.g. Easyjet, Ryanair). We did not see these problems at your airline or at other premium airlines. Therefore our recommendations are focused on the first three issues: Environmental pollution, Noise pollution and waste management.
Embedding CSR in strategy and business practices
For a successful CSR strategy the start is to get your ideas, believes and norms on paper. Therefore the first step is to produce a mission statement and a code of conduct. The code of conduct is an outline of principles, values and standards of behaviour you will follow on different aspects such as your relation with the employees, society and environment. Setting up a document with principles is the basis for a good CSR strategy, but such a document cannot stand-alone. The mission statement and code of conduct needs to reflect your business practices and corporate strategy. The firm must not set up statements that are contradictory with business or they should adapt their practices according to the statements. The documents should be based on the widely used United Nations Global Compact principles, which are used by competitors in the industry and are accepted as a reliable standard of reporting on CSR.
These documents are on a general level and do not explicitly state what actions the firm will take on different aspects, but more the rules you will adhere to. The specific goals about CSR issues a firm wants to tackle need to be stated in policies.Three policies are needed for your firm for each of the CSR issues. One should cover environmental pollution. This will include a statement of the CEO about the mission of the firm on environmental level and what you as a firm want to achieve, (e.g.: We want to be the environmental leader within the aviation industry.) After the statement this policy has to explain how the firm will achieve this goal. An important point to take into account is that a CSR strategy can only be embedded within the firms’ strategy if the policies are adopted firstly by senior managers and after that by the complete organization. The policy should also include how the development of the goal is controlled and monitored within the firm. For control the firm has to create control mechanisms that periodically controls the improvements.
What the policy does not include are specific targets regarding environment. It does not state that the target is to reduce CO2 emission by 20 percent in 10 years. Specific targets need to be further developed in association with internal and external experts on each field and presented in the first CSR report. The CSR report is a yearly report that shows the activities of the firm on this field and the improvement on given goals and targets and what new targets of the firm are.Next to statements and policies it is useful to appoint a CSR manager. His role should be to monitor and advise managers about their CSR activities. Besides this a CSR manager can ensure that CSR keeps it importance within the firm and the set targets can be achieved. Starting with the CSR manager on top a governance framework should be developed with committee for each key CSR issue. The committees’ roles will be closely monitoring the practices on the specific issues and ensuring alignment with the statement and corporate strategy.
Strategic goals, objectives and KPIs
To not only talk about CSR and to effectively reach the CSR vision and tackle the three key issues specific targets and objectives must be provided in order. This chapter provides for each of the issues (Environment- and noise pollution and waste management)Environmental pollution. For this issue the main target should focus on reducing CO2 emission, as this is the main polluter between the gasses of aircrafts and the most hazardous one. The first step should be to adopt the goals of IATA (International Air Transport Association) on this field. This includes increasing fuel efficiency with 1.5 percent until 2020, Carbon neutral growth from 2020 and reducing CO2 emission till 2050.
Besides the goals of IATA one should also develop own mid-term targets on this field. One needs to be reducing CO2 emission with 20 percent until 2025 and reducing the use of fuel with 10 percent until 2025. The targets can be achieved through different activities, such as renewing the fleet or route optimizations. It is useful to set the same time horizon for the target in order to create a coherent strategy and more sense for the workforce to focus on one year. Noise pollution. Concerning noise pollution there are less regulations from governments. The main reason is that rules differ by country. The ICAO (International Civil Aviation Organization) has noise certification standards measured in chapters with chapter 4 as the best noise with less then 85 decibel. After a measurement of the current noise of the fleet a feasible target in chapters can be set to achieve by 2025. Dialogue with local communities and municipalities are key to present your willingness to solve the issue and discuss possibilities. Locals can be a source of information regarding the times where the noise pollution is highest. This shows which aircrafts have the highest noise.
As waste will always be there, the key objective should be to make it largely recyclable. It is not feasible to cut off all the generated waste, but reducing waste is possible. The non-hazardous waste mostly consists of paper and carton utensils used during flights. Examples show that this type of waste is easy to recycle and considering target of competitors (Air France, Emirates) non hazardous waste must me recycled for 90 percent in 2025. Food waste can be reduced by effectively using statistics about on flight consumption. Of the hazardous waste a goal of 60 percent recyclable is feasible, based on prior achievements of competitors. The recycled waste can be used for producing new stuff for the firm such as blankets and pillows. In this way you are also able to say that used products are made from recycled waste.Generally speaking it is also crucial to get certified for your CSR activities by organizations like ISO and Dow Jones. This provides the firm recognition of the CSR activities and draws a more reliable image.
Challenges and pitfalls
The CSR strategy of quickly catching up with the competition and implement key CSR activities in the firm brings several challenges along. At first, there is a fact that the competition is engaging in CSR for almost decades and already did extensive investments on areas such as emission reduction and waste management. To be able to catch up with them a large investment is necessary within a relative short time period. Another issue that has to be thought of is the announcement of the strategy to stakeholders, as there is now a passive strategy with less focus on CSR. Therefore the reasons for actively engaging in CSR have to be explained comprehensively in order to prevent negative attention and reactions. As it is not the meaning to create the idea that you will engage in CSR to detract attention from other problems or issues.
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